Podcasts about michael awesome

‍Did you know that up to 40% of calls could be going unanswered even during working hours in your practice?In this Monday Morning Episode, I chat with Miles Beckett from Flossy, whose challenging the status quo with an audacious question—should you fire your staff to make way for cutting-edge AI technology? We explore the persistent staffing hurdles in dental offices and unveil how AI can redefine efficiency and service quality. Miles introduces us to Flossy's AI receptionist, Fiona, who skillfully handles appointment scheduling and patient inquiries while significantly reducing no-show rates. This conversation promises a riveting insight into the practical and financial advantages of incorporating AI into dental practices.We examine how incorporating AI like Fiona not only economizes but also enriches team dynamics, fostering a more cohesive and productive work environment. With Miles' expert insights, we tackle the looming question all dental entrepreneurs grapple with: How can AI propel my practice forward while maintaining high standards of human interaction? As we explore the potential future developments in AI, Miles provides a visionary roadmap that could very well be the blueprint for modernizing your practice. Get ready to rethink your staffing strategy, elevate your service offerings, and embrace the future of dentistry with open arms.What You'll Learn in This Episode:The rationale behind considering AI technology in dental staffing.Challenges faced by dental practices regarding staffing and scheduling.Insights into Fiona, Flossy's AI receptionist, and her functionalities.Strategies for integrating AI to enhance team dynamics.Potential future developments of AI in dental operations.Tune in now to discover how AI could augment your dental practice operations!‍‍You can reach out to Miles Beckett here:Website: Flossy.comTwitter/X: x.com/mbeckett‍Other Mentions and Links:‍AI Tools:ChatGPTGeminiDeepSeek‍Education:Board Exam‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Miles, so talk to us. What's one piece of advice you can give us this Monday morning? Miles: Thanks for having me, Michael. My piece of advice that's controversial is fire your staff. Michael: Interesting. Fire your staff. Why so? Miles: I'm obviously being a little bit facetious, but I think you should raise your bar.I know that one of the biggest issues in dental right now is staffing challenges, both finding good staff, retaining staff, dealing with churn. And you know, it's oftentimes a rotating door at dental practices. And the way we think about things at Flossie is that we can help bring AI workers to help you out.And those AI workers really make you reassess How good is this person doing? Do I really need them on this task? Maybe I can have them do something else instead. Michael: So then what was the specific problem that you saw in practices that inspired you to create? I guess or the suite of it, right? Like Fiona and how does AI solve challenges that traditional front desk systems can't?Miles: the new technology around generative AI, which is really the most recent type of AI that we're seeing out there. We've had things like machine vision and learn machine learning and stuff for a while now. It's created voice technology that allows you to build these agents that really sound like you're talking to a human.So I would say over the last year the technology has improved dramatically such that a year ago we were looking at some of this stuff and it didn't really work. But within the last six months or so, all of a sudden, you could really build these agents that you could talk to that sound like you're talking to a human.So we were kind of playing around with this technology. We had already built out a dental discount network that was kind of our core business before. so we were looking at it for some of our own uses. And we sort of had this aha moment where so many of the dentists that we work with were complaining again about this rotating door, particularly with the front desk.And we were like, wow, actually, we could build a receptionist that would sound and function basically like a human. And so that was the first pain point that we really wanted to solve. And it's kind of shocking the amount of calls that go unanswered. not just nights and weekends where typically people are just getting a voicemail that kind of just goes nowhere.But also during the day, about 30 to 40 percent of the calls coming into a dental practice during the day actually go unanswered. Michael: Really interesting, yeah. That's a good, stat right there. Now when it comes to that, did you kind of see, okay, hey, these calls that are being unanswered, the nights and weekends and everything, it can kind of cover all this?Or was there hiccups, problems with that? I mean, I would assume there's like a ton of questions that AI has to be prepared for, right? That a human can do, but I mean, how did you kind of overcome that? Miles: it already works for nights, weekends, overflow. We have practices that, are starting to use it to fully replace the voice reception duties and to be able to have that staff focus on people that are actually in office.And oftentimes front desk workers aren't just answering the phones. They're usually doing a ton of other things. So, I mean, the short answer is that there's an approach in AI development called rag, which basically allows you to marry, Specific proprietary technology databases to the LLMs that are already out there.So things like chat, GPT or Gemini, for this new model that China released deep seek, these are all generic models. And then there's other. Companies that have built specifically models that generate voice for the conversational aspect of the call. But obviously they don't know anything about dentistry.They don't know anything about your specific practice. and they certainly don't know anything about scheduling or scheduling software. So a lot of what we've built is leveraging those generic LLMs. And then adding in dental specific knowledge that comes from, hundreds of thousands of data points that we have from patient visits and patient interactions with dentists over the years.And then also with the practice, ingesting their data to fine tune it even further to their practice. Both in terms of taking, like all their call log data and actually use that as part of the training for the model, and then also basically taking their rules around scheduling and their rules and information about the practice when they're open, when they're not, when the dentist is there.And all of that is loaded into a database that is available to the AI in real time as a person is talking to Michael: them. Have you seen any. Like hesitation on this as far as people taking it on were you kind of hesitant a little bit as far as taking it on And then like it, blew your mind out of the water kind of a thing Miles: Yeah, I think definitely there's a lot of interest.So, you know, we immediately had people signing up for the product right off the bat. However, in the initial conversation, for sure, there's a lot of skepticism. Part of that is because the technology is so new that if I were to tell you what I'm telling you now, that There's an AI you can talk to, and it knows everything about your dental practice and can book you.Sounds a little bit science fiction. And then second, there are, you know, a lot of people broadly in the industry saying, Ah, we have an AI receptionist for this vertical or that vertical, for dentists, for doctors, for plumbers, blah, blah, blah. And frankly, a lot of that technology is not very good, so if people have had some prior experience, they've maybe had sort of a negative experience.And the big reason for that, again, is that if you just sort of slap together a receptionist on top of a generic model, it's not going to work very well. You have to train it on the data brought for that industry. And even specific, like, the model that we have for a pediatric practice is different than the one for an orthodontics practice, as an example.And then again, Providing other data, that is specific to that practice itself. So there's some like initial skepticism, but once they hear it, once they interact with it, once they talk to other customers that have been using it, they're like, Oh, wow, this is pretty awesome. And then once they actually get it live, you know, they're pretty blown away.Michael: Yeah. So patients now expect, and you've seen this I'm sure, 24 7 communication, right? Right. Whether it's like, but on their time. Like, hey, I need it now, emergencies, whatever. So then, how does Fiona personalize patient interactions to improve that satisfaction of patients? And also, how does it help reduce no shows, or does it do that?Miles: Yeah, no, for sure. Yeah. So I mean, there's kind of a few ways that she works. So, most calls coming into a dental practice are for scheduling. majority of the calls are about I need to schedule an appointment. So the primary use case for Fiona, In general, but then really specifically for after hours and overflow is There's a huge amount of call volume that dental practices are getting that literally goes unanswered and goes to voicemail. And what is that person doing? They're calling the next dental practice. That's what we all do. You don't get an answer. You go to the next one. You go to the next one. And so it's giving these dentists an opportunity to actually capture that patient and book them for appointment.Yeah. And she can perfectly book appointments for new patients, answer questions about the practice. Again, it's, uncanny. The second is, as you're saying, no shows. So, people call in a lot and say they're running late or saying they need to reschedule or whatever. typically, that, happens during the day.It also happens, interestingly, a lot before the practice opens in the morning. So, practices will often see a lot of morning no shows and it's because they didn't, hear from the patient. So, She's also capturing those and rescheduling the patient, and so when the doctor gets in, their calendar is actually correct.So I would say those are kind of two of the main use cases. And then there's a lot of question answering, right? So there's, in a pediatric setting, there's, know, how's the first visit going to be? Is it going to be painful? What's it going to be like for my child? They've never been before.If it's a person that has like an immediate issue, can you get me in today? What is your schedule look like? What's the procedure going to be like? I've never had a root canal before. And she can answer all that. So she's actually trained on again a massive clinical data set as well.In fact, she technically passed the board exam. so she's very knowledgeable about dental information as well. Michael: Wow, that's incredible, man. So then I can see how this improves the call, right? It also, I'm assuming saves the practice owner, the business, a lot of money. in some many ways. So can you share a quick example of numbers that illustrate how fast practice could see the ROI?With Fiona. Miles: Yeah, I mean, the ROI with Fiona, literally, if you get one patient booking that you otherwise would not have gotten, she pays for herself that much. Okay. also to give you another example, Fiona costs about one tenth of What a human employee would cost, okay, to answer the phones.So we're talking about a massive cost savings. Above and beyond even the alternative that some practices do, which is like outsourcing to other countries. It's less expensive than that as well. So, the ROI is effectively immediate, especially given the are getting such a large percentage of calls going unanswered.Michael: Interesting, man. So is it like tiers? So, Miles: yeah, we, and again, we really think About these A. I. S. As employees as co workers. And so it basically comes down to like hours of utilization effectively. But you know, like the lowest here is basically nights and weekends and overflow coverage. The middle tier is sort of during the day in a copilot capacity.And then the highest here is just fully taking over all the calls being the first point of contact broadly. That's how we sort of think about it. Yeah. And as we think about all these agents too, I mean, the thing that's kind of cool is that you can interact with them as well. So you can actually have a one on one with Fiona, just like you would with an employee where you can provide her feedback in chat or in talking to her.And then that feedback that you give actually gets incorporated to how she functions going forward. Michael: Interesting. I like that. So then how does this, I mean, maybe you might've seen it miles. Maybe you haven't, does it improve like the team dynamics? Is it more like, Hey, this may take over your job and then the team members are iffy about it, you know what I mean?Miles: Yeah, no, I think it's been fine. I mean, we think of each of these A. I. S. as being co pilot to the workers that are there. And I think the reality is for any practice in particular that's growing or if you're buying other locations, you're constantly hiring more staff. You also, again, there's, a huge amount of churn with dental employees.So oftentimes you have people quitting and then you're hiring new people. So I think what this really lets you do is have a leaner team, not because you're firing people, but because you don't have to hire quite as many people. And for the staff that's there, they can focus on what they, you know, ultimately got into the business for, which is on patient care.You know, most of the staff in the practice are dental techs or hygienists. And oftentimes even front desk people like might even have a credential like that, and they're sort of doing double duty. And so now they can really focus on delivering patient care and also the in office interaction.So talking to the patient that's actually there at the front desk and that you know is getting a treatment, right there in the practice Michael: Yeah, I can definitely see this also a benefit for the startup practice, right? Like somebody who's on a lean budget starting up and then They just need to have someone in the front right now, kind of covering, maybe somebody last minute didn't show up for work because that happens quite a bit.They ghosted him, right? Or something like that. Yeah, right. They just show up and this, is a really good, do you feel like this can a hundred percent replaced? The front desk or more like, Hey, no, we're still going to need somebody there. Miles: I would say that within six months, 99. 9 percent of the phone calls will be able to be handled fully by Fiona.cause she's already can handle. 80 percent of the use cases right now, because again, most of the calls are scheduling related. There will be some edge cases, of course, and those edge cases will require a person, but it's going to be very few and far between. I think it'll be a question of how the practices want to use her and some may be.Just want her in an overflow capacity, regardless of her capabilities. And that's fine. And obviously there's very large DSOs that have call centers. I think we're going to see heavy adoption by them. You know, we're talking to all the major DSOs, rapidly. Yeah. And I think as we think about these other agents that we're building, we really think of it as a suite.Of AI agents for dental practices that all work together. So as a simple example, we'll be launching an insurance verification AI that will automatically verify insurance either through direct connections with insurers, or actually by calling, because sometimes you still can't get the data via their APIs or publicly available sources.And you actually need to call well, great. We have call technology where that AI can just call. The insurance company and now get the verification. And so you can imagine where a patient calls. They talked to Fiona. They're booking to give their insurance info now behind the scenes. Our insurance AI is verifying that data and providing it to the dentist.So they now have a package all ready to go for when that patient shows up. And so for each of these different ones, we're thinking about them working together. And I think in different domains, they'll be able to do, you know, more or less of the work. Some things are more complex, the one that we're thinking about for helping you run your practice, which is kind of like, Sort of a business intelligence product.But again, in the form of like an AI that's actually giving you recommendations, it's not going to be perfect and you're still going to have to run your practice, but it may actually take over the work of, you know, some of the consultants that you use and maybe you can do it a little more efficiently.Michael: Wow, man. Oh, so you guys got a lot, got a lot going on, which is great. It's exciting. So for practice owners who want to explore this further, where can they learn more about Fiona and Flossie? And do you guys offer any type of like demos or trials? Miles: Yeah. Yeah. So they can just go to flossie. com F L O S S Y.com. there's a bunch of info about Fiona on there right now. We offer demos. And we have like Sort of a trial period that we can offer people in, some cases as well. Michael: Awesome, Miles. I appreciate your time. And if anyone has further questions, you can definitely find them on the Dental Marketer Society Facebook group, or where can they reach out to you directly?Miles: I am on Twitter or X, I guess it's called. I feel like we'll always call it Twitter. Um, and my handle should be M Beckett on Twitter. Michael: And so all that's going to be in the show notes below. So definitely check it out. And Miles, thank you for being with me on this Monday morning episode.Miles: Awesome. Thanks so much, Mike. I really appreciate it.

‍Is your dental practice ready to break free from the ordinary and embrace new marketing strategies that truly make a difference? This episode features Shane Simmons from Crimson Media Group, who walks us through unique approaches that transform how dentists connect with their local communities. By leveraging the power of local Facebook groups, Shane shares the secrets to building meaningful relationships and promoting dental services through community engagement. Whether it's through exciting collaborations like organizing yoga sessions or axe throwing events with fellow local business owners, the insights shared in this conversation will open your eyes to the potential of grassroots marketing.But it's not just about joining any group—it's about authentically positioning yourself as a part of the community. Shane shares the value of engaging with these groups using a personal profile to foster trust and connection. These small steps can lead to significant benefits, including cross-promotion with businesses boasting strong social media influence. To cap it all off, Shane extends an exclusive offer to the audience—a complimentary marketing analysis aimed at unveiling the intricacies of local advertising and helping you position your practice for maximum impact.What You'll Learn in This Episode:Innovative marketing strategies tailored for dental practices.How to effectively use local Facebook groups for community engagement.The benefits of collaborating with local businesses for mutual growth.Why personal profiles are better than business pages for building trust online.How Shane's marketing analysis can help you understand your local market.Discover new marketing insights that could reshape your dental practice—tune in now!‍(This episode originally aired on December 26th, 2022)‍‍You can reach out to Shane Simmons here:Website: crimsonmediagroup.comFacebook: facebook.com/crimsonmediamarketing‍Love the Podcast? Let Us Know How We're Doing on Apple Podcasts!‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Shane. So talk to us about uncommon marketing methods. Tell me one or a couple tactics or strategies that will help bring in new patients. Shane: Yeah, so Michael, we've got one that a everybody can do. So if you've ever been in, you know, these local, like Facebook groups in your communities, you'll find that there's a Facebook group for everybody, moms, dads, but one in particular is small businesses in the area, and it's usually like shop small business or shop, you know, the community that you're living in.And one of the things that we're starting to have clients do is get into these groups and find someone who has a small business in that group that's in your community that could come to your office and do some sort of, Event or just like team building exercise at the practice. so I'll get where, how this kind of comes into getting new patients in a bit.Mm-hmm. . But the first way that you can look at this, is like as a team building opportunity. So think of people like, Yoga instructors or think of someone who maybe teaches people how to meditate. Invite that person to do a session at your office for your team one day. And one, it's gonna be a great team building exercise.It's gonna be something that's beneficial to, you know, everybody on the team. But what you can then do is say, Hey, we would love for, you know, you to post this on your Facebook and your Instagram account. You know, talking about how you had this session here. We'll share. To our audience that way in case you know, people can go check out your yoga studio or whatever the case may be, but then if they're sharing that they came to your practice, they're going to be putting your practice in front of their entire audience too.So it's obviously ideal. To find somebody who has a decent social media following, like, you probably wouldn't wanna do this with a yoga instructor, or somebody who teaches medication who's not on social media. Mm-hmm. . But, finding someone who has an audience and, and cross promoting with each other, um, through that.But then the second piece of this, which is, you know, really the cool thing is if you're in with the Facebook group where you found that individual, you can then, Pictures and videos of that day where that yoga instructor or whoever came to the practice and give them a shout out and tag them in their business in that post saying, Hey, we wanna thank, you know Michael's yoga studio for coming to our dental practice and Rancho Cucamonga and doing a full day, you know, or a half day session or whatever the case is.It's like definitely go check them out. And oh, by the way, if you guys need a dentist in the area, we would love to, be your dental home. So it's a way that you can promote yourself, but while doing so, you're promoting another business and you're not going to get kicked out of the Facebook group because it's not like you're just going in there.And dropping a promotion, it's like you used somebody's services in that group. You supported another local business. So it looks, you know, it shows that you're supporting the community while also just putting yourself out there that, hey, you know, we're also here. We would love to, to help those in the community.So that's really what we're starting to find is Almost like a ground marketing technique really, but just doing it through these Facebook groups, and again, there's so many different options that you could do with this. You could do an onsite, somewhere else where you actually go and do like, a obstacle course.You know, somebody like that owns like an obstacle course thing in the area, whatever it is. I know one thing that's like really popular right now in the Midwest, I don't know if, it's like nationally. Ax throwing is like a thing Okay. That a lot of people like go and do now. So, you know, it's, it's all about just how can you get and support other businesses in the area and then talk to that person and ask about how can we, cross promote each other to our audiences to drive more business.And the great thing about it is, it's free with the exception of whatever you may pay to get the person to come out and do the event, or if you go do. , activity at their place of business. Yeah. Okay. Michael: So then how would you recommend we go about doing this? From step one, we're going inside the Facebook group.We're looking betting, and then we're like, okay, let's see who has a good following. So would that take some time, I would assume, right. . Shane: Yeah. So, yeah, it's just a little bit of groundwork at the beginning. Mm-hmm. . So the first thing you wanna do is, you know, go to Facebook and search small business and then type in whatever, city, town you live in.That's the first thing. And join all of those groups, um, and you would join those from your personal, profile, your Facebook profile, but make sure it has. Listed on your profile, owner, dentist at such and such practice, so that that's listed in there. So first thing you wanna do is join the group.Once you've joined the groups, you can then search the group members. And the first thing that I would personally do I would scroll through the Facebook group and look at. Who's actively posting in there? You know, who are people that are regularly posting or promoting something in that group and looking at what it is that they, do.Are they real estate agents? Are they gym owners? what is it that is their profession? If you find somebody who's really active and you can. , that person could really benefit. my team, we could do something fun with them, have them come out to the office, do a day session, whatever the case is. Then that would be the person, you're trying to, reach. So I would just scroll through the group, look at, see who the active posters are, and then just make a list of, how could we use this service? Could we use this service? And, and then, you know, from there you can check out their.Page profile and see how many followers they have, and then it's from there, Michael, it's just about sending a message to them, on that group and introducing yourself as a fellow small business owner in the community who had saw one of their posts and was like, Hey, I would love to, do this or have my team do this.How can we, get set up with you guys and maybe promote each other, um, in the community. So it's really kind of three steps joining the. Researching the group and finding out, who would be a good fit to kind of partner with. Mm-hmm. and then just reaching out to that person and so far the offices that have done this that we work with, nobody's been turned down because everybody wants to partner with another local business if they can to help mutually benefit each other. Michael: Yeah. Do you think they should also kind of like once they come in, let's just say it's like the ACT's throwing, right? You go to them. We ask like, Hey, is the manager here or the owner here, kind of thing. Like that. Or, Shane: that's a great question, Michael.Usually what we're finding as of right now at least, is it's usually the owners or like the main, manager, branch manager, who is like the member of these groups. Mm-hmm. , um, because they're the actively, the ones that are trying to. Grow their, footprint in the community. So if for these smaller businesses, it's usually, you know, the owners that, that we're seeing in the groups.So it's a lot easier to, you know, be talking to the, the main person rather than going to their website and then having to see, you know, hey, who's the owner or the manager and contacting them. That way you may have a hard time getting through. that initial gatekeeper, but if you're reaching out to the owner directly on Facebook and you'll be able to find that out, you know, obviously by clicking on their profile and it should say if they're the owner slash operator or whatever the case is of mm-hmm.such and such business. Michael: I like how you mentioned join from the personal Facebook because that, I mean, I get that question.Everybody gives that question like, should we, they wanna join with their like business Facebook? Why is that Shane: not a good idea? Yeah, because I think we're the business. if you create, you know, business page and you try to join through the business group, it just doesn't have that personal connection that, you're looking for.And it can sometimes raise red flags with group admins. I mean, you know, Michael, you're group admin. It can raise red flags of us. This person just gonna come in and spam the group, nobody wants that who's running one of these Facebook groups. So when you join in from your personal profile, it's showing that you're actually there trying to. Meaningful connections. You're not afraid to hide your face right, or hide behind the business, and you're just more likely to be looked at as like a legitimate person or poster contributor to that group, rather than going in and joining through the business page where in that case there's just no personal, touch to that.Michael: Yeah, I can see that a hundred percent. Awesome. And then so when we go in there, we're talking to them, let's just say we're going in there, talking to them and then, The owner's like, Hey, yeah, yeah, come on in. Should we do something where're like, Hey, if your employees Or like, wait and then have them, you know, until you guys interact more.What? What do you Shane: think? Yeah, no, I'm glad you asked this because we would, suggest, or the way we're suggesting it right now is go in, you know, u utilize their service, whatever the case is, kind of use that the first time. And, and that's kind of it. but then follow up, a month down the road and saying something like, you know, Hey, we just wanna say how much we appreciated you guys.Maybe you drop off. to go whitening boxes, you know, crest whitening strips, something along those lines to the, business and to the group, and put some membership. If you have a membership plan, which hopefully you do in the practice, practice, put some membership plan, graphics or a QR code that goes to your membership plan in that gift box as well.And so when you give that to the, the manager there, let them know, you know, Hey, we just really enjoyed, you know, utilizing your service. Obviously, you know, we're another small business in the area. If you don't have, currently any like dental insurance that you're offering your team, because, you know, we understand small businesses, a lot of them don't have that.here's an option for the people who work here where they can come to our office and join this membership plan. And so that's a way where you can then start to. Build that, relationship a little bit more, taking it to the next level and kind of showing them how you can, you with their team and, and provide those type of benefits.But I would say wait at least a month after you've kind of really connected with that person, utilized their services already. That way it doesn't look like you're trying to get something from them. and that's it. You know, you want to look at this as, you know, how can we show them we're wanting to utilize their services as much as possible, we value them. And at that point, reciprocity just comes into play where they're gonna wanna be able to do whatever they can for you to help promote you and your business, um, because you've shown support to. . Michael: Yeah. Awesome man. Awesome. I appreciate this, Shane, and I appreciate your time and if anyone has further questions, you can definitely find 'em on the Dental Marketer Society Facebook group, or where can they reach out to you directly?Shane: Yeah, no. So they can, uh, always find us@crimsonmediagroup.com. It's a great way to reach out to us, through that platform. And yeah, we'd be happy to answer any questions you have about your current marketing or what marketing maybe we, you wanna explore doing, you know, definitely reach out to us and we'd be happy to be a resource.Michael: Yeah. And real quick, you, y'all still do the free analysis, right? For. Shane: Yes. So we do, just for Michael's audience here, we do a free marketing analysis for, any practice owners in this group. So we'll go through, we'll look at, what people are looking for when they're, when they're searching for a dentist, who's advertising in the area, what are they advertising? That way you get a really good glimpse of the kind of landscape in your community, and it's just really great insight, if anything. So, yeah, if you wanna check out. what that's all about. You can reach out to us through, again, crimson mediagroup.com and just let us know in the comments that you'd like to request a marketing analysis and, uh, we'd be happy to to do that for you.Michael: Awesome. So guys, that's gonna be the first link in the show notes below, so go check it out, get your free analysis and shin. Thank you so much for being with me on this Monday morning marketing episode. Thanks Michael.

Can focusing on just ONE aspect of your life or practice truly enhance your overall fulfillment and success? Join me as I delve into a fascinating conversation with my return guest Dr. Avi Patel, an expert in the concept of singular focus. Avi eloquently unpacks the transformative power of honing your energy on one dimension of your life or practice. From personal anecdotes of bettering his marriage through therapy to using this single-minded approach in his dental practice, Avi provides a fresh perspective on achieving unparalleled results through the art of simplification.As we explore this captivating topic further, Avi demystifies the age-old conundrum of juggling multiple goals. His advice? Shift the lens from defining a myriad of large objectives to establishing non-negotiable standards. By laser-focusing on mastering one skill at a time and leveraging consultants or mentors who've tread the same path, we can optimize our efforts and enhance our personal and professional lives. Avi shares his current focus which involves expanding his scope beyond the clutches of conventional dentistry and into the intriguing realm of content creation in the dental industry.What You'll Learn in This Episode:How channelizing your energy and resources into one facet of your life can reap more fulfillment and success.The power of simplifying your goals into non-negotiable standards.The benefits of seeking advice from consultants or coaches who have experienced similar situations.The importance of focusing on one KPI at a time and allowing your brain to problem solve and improve other areas organically.Avi's current career pivot - stepping away from clinical dentistry and moving towards content creation.Ready to dive in and discover the untapped potential of singular focus? Tune in now!‍(This episode originally aired on February 5th, 2024)‍‍You can reach out to Dr. Avi Patel here:Instagram: https://www.instagram.com/doctor.avi/Avi's Clear Aligner Course: https://www.clearaligneradvisor.co/launchpad‍Other Mentions and Links:‍Podcasts/Publications:438: DR. AVI PATEL | CLEAR ALIGNER ADVISOR‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Avi. So talk to us. What's one piece of advice you can give us this Monday morning? Avi: So I, my piece of advice would be to kind of simplify, I. Everything you're doing and focus on one thing. And I think a good place to start is with yourself. So, and then even with yourself, right? There's different aspects.There's your mental self, your physical self, your emotional self. And I think if you first focus on your mental self and you do what you can to get that in order and get that into a place where. You have more control. Uh, I'm not talking about mind control, but something, something close to that. But if you, if you focus on your mental self, everything from that point I believe flows.So, um, for example, myself, about two and a half years ago, I started doing therapy. I was doing it because I wanted to improve. Um. My relationship with my wife. Mm-Hmm. And I just wanted to be a better person. I wanted to be able to support her better, but then also myself, just be better. I think that was like the goal.Mm-Hmm. And what I noticed from that point on was I started creating these habits because my focus was on improving. Essentially my mental health or myself. I started creating a morning routine. And so that morning routine was journaling, meditating, stretching. That then led to me being more organized, more focused during the day, uh, less stressed.so that's kind of how it went into the business way of how it helped me in life. But then physically, um, I got into the best shape of my life. I started being more intentional about what I was eating, what I was kinda spending my time on in terms of working out movement, stuff like that.And so just by starting on focusing on one thing by myself or on my mental health rather, all this stuff flowed. And I think you can translate this to other aspects of your life, your business, and everything. Because whenever you're focusing on too many things, right, and I think especially this time of year in January, everyone's got a million goals going on.Probably by the time this thing airs, most people won't have any of their resolutions continuing. But, ' cause I made the same mistake, right? And everyone hears it. Mm-Hmm. And I think I, I felt. So much relief when I looked at the multiple goals that I wanted to basically achieve this year personally and business-wise.And, uh, I felt so good when I eliminated like 90% of them because. I think people get confused on like, having a goal and then actually having something to do, right? So when you have too many goals, then there's so many things to do to achieve all of those goals. You're never gonna get it done. Mm-Hmm.And I kinda just went back to my roots of like, when was there a time in my life where I was growing rapidly, feeling good about myself, achieving a lot of success, and it's back when I was just doing, or focusing rather on like one thing. and so. I kind of remembered that and then I went back to it. Uh, simplified the morning routine again, these days to we're not trying to do 10 things before I start.It's more so just keeping it very simple, very efficient, because what happens is when you start getting those wins, those wins start to stack, and then next thing you know, when you look at it, you know, a year in review, you've achieved so much more just because you were focusing on one thing at a time and kind of chipping away at it.Michael: Gotcha, man. So right now you're kind of mentioning or you're letting us know that have one thing to focus on. Mm-Hmm. so in a specific aspect, we have to have one thing to focus on or like just in general, like, I want a better life, Avi: I would say. So if you are someone who is trying to, like, if you feel lost and you actually don't have a sense of direction or whatnot.Yes, only one thing because what's gonna happen is you're gonna pour, you know you're gonna pour more resources, more time into that one thing, your one big thing, and then from that other things will flow. Right. So if you wanna have a better love life, if you are spending a lot of your free time, you know, focusing on your business, focusing on your health, and like having all these diets working out and all that stuff, and then you're then trying to find time to like do things that would help your love life, you are, it's gonna take you longer to achieve that.Where is, if you say okay. The priority for right now is my love life. That doesn't mean don't do anything for the rest of your, you know, the other aspects of your life. Yeah. But that should be the thing. That should be the main thing. And then once you have that, you, I. We'll find that when, if that is truly what you want to accomplish and like improve your happiness, and there's almost gonna be like a spillover effect, right?Because we're human beings, we're dynamic. It's things are not just, you know, in solitude, but when you're able to focus on one thing, you're able to see, um. More results in that area. And then from that there will be an overflow. Because if you feel more fulfilled in your love life, you are gonna probably have higher energy levels.When you have higher energy levels, you're going to be able to probably do more things, whether it's in your business or for your own health. but it all flows from that one thing where if you're trying to take your limited resource, which is energy, and then spread it out all over the place, a lot of things are just not gonna really move.Yeah. Michael: Could I ask this this year? Like what is it? You're, the thing you're focusing on. Avi: So it's, right now it is, I'm doing it kind of in, in chapters or phases. So we're expecting our first kid in two months. Oh, nice. Okay. Yeah. So I know that's gonna be a huge change.Um, yeah, so basically I was like, cool, well, since life is gonna look different after that, what do, what do I need to do now to be in a place to where I can, 'cause my big thing is all about optionality. I love having optionality. I love, you know, not having to be limited by things. And so the biggest thing that I hear from parents is, you know, the biggest thing that.They get a a, there's a big crunch in time and your energy because now you are kind of giving to this human being. and, and you, you also, and everyone also says it's the most rewarding thing and it's, they always wish they had more time when their kid was younger and they could be there. So I'm like, cool.I need to simplify. Other things in my life to create that space so that way when the baby is here, I can receive that. So for me, from a business standpoint, I have, or I'm trying to currently simplify all the processes in the business. So right now, um. My business is the online ClearLiner Education Program.and a big arm of that is supporting the doctors in the program, but then also creating content on social media to provide free value for people. So I am working on simplifying the content creation part and also simplifying, um. The program itself, so that way it provides the most value for doctors in it.but then also doesn't take up, an extraordinary amount of my time to deliver that support and that value. Gotcha. Okay. Michael: So this, are you only doing now the online Uh, course, yeah. Or are you also working at a practice still? Avi: Nope. So I, I stepped away from clinical dentistry back in September. I was doing it full-time and then slowly went down to part-time, and then with the growth of the program and I.Content creation, social media and all that. I decided to go all in on it because it's just, it's the passion of mine and it's, I feel like it's my calling to help innovate and, um, help move the industry forward And, mm-Hmm. I feel like a quote that kind of stuck with me, or I don't know if it was a quote, but basically someone told me it's like you're either working in an industry or you're working on an industry.Mm-Hmm. And it's hard to work on an industry when a lot of your time is kind of. While you're working in it, right? Mm-Hmm. I think there's kind of like a balance. So I'm kind of using this chapter in my career to kind of step away from the chair and, and dedicate more time and resources into ways that I can help kind of work on the industry.Michael: Yeah. Okay. Man. I like that though. I like that. Um, part of simplifying goals because I feel like goals is like a, sometimes like a shiny, fast, cool word, right? Like, Hey man, I wanna have these goals when it's more, um. Non-negotiable standards. Right? That's what it is. Like I wanna have a non-negotiable standard.This is it. And then I gotta reverse engineering on how to make it happen. And it's easier to do that if you have one, right? Mm-Hmm. One specific one. Boom. Did it next. Right? But if you have all these big, shiny goals and you're like, man, I wanna lose a ton of weight, and you don't know how to do it kind of thing, right?Avi: Correct. Correct. And even just like. Relating it to dentists, right? Like if you've got a practice and you, you have a goal if you want to increase the revenue, right? Mm-Hmm. Where then it's, everyone always tells you, okay, well cool, you pick a number, then you reverse engineer it. How are you gonna get there?Um, from my personal experience, when it came to just like leveling up as a clinician, I found that when I was trying to learn how to do multiple procedures clinically at once, like when I wanted to become a better clinician, I wasn't like. Immersing myself in it, so I wasn't actually able to get as good as I wanted to.The example here is when I started with like implants and aligners, I pretty much learned them both at the same time. and so I was splitting my time between it. Implants. It was a little bit longer for me to kind of get going just because it is surgery and it just, you know, it's very, I mean, it's surgery, so it's, it's, it's pretty crazy.Mm-Hmm. Yeah. Um, but then with aligners I also just started to see, um, more success with it. And then I slowly started to like, immerse myself in that. And so when I was focusing on that one procedure, it wasn't just about moving teeth. It's how do you talk to the patient? How do you get the team on board?How do you schedule them? What do you do? So I was able to like work through all that by being focused. Where if I was trying to like iron out implants, learn it, implement it, and do aligners and like, you know. Do other procedures and, and work with the team and all that, it would be too much. And I know a lot of dentists probably feel that way, but I think the answer is, is like until you're like proficient in something, you should pick like one skill, whether it's business right, or clinical, and focus on that for the year to grow.You will know when you get to a point where you can kind of now choose a different area to focus on. So that's why it's like. I think a lot of dentists, right? Stress comes into play. There's always a lot of hats to wear. but I think kind of taking the pressure off yourself by just wanting to focus on one thing, knowing that other people are going to tell you, oh, you need to look at the KPIs.You need to look at this. You need to look at that. Yes, you do. But what you have to do in the beginning of anything new is focus on one thing. Get good at it and then move on to the next Mm-Hmm. Gotcha. Michael: So then how does that kind of play a role in, for example, software? Right? They're like, Hey, all these features and everything like that, and you're gonna be able to look at your dashboard and your analytics and then you're like, cool.'cause that contributes to the goal that I wanna make more collections. I wanna make a million dollars this this year, right? Like I wanna be Mm-Hmm. A million dollar in collections this year. And then you look at it. I feel like there's too many features of everything. You know what I mean? To just be like, uh oh, we'll focus on this one thing.'cause then like, what if your new patients drop 'cause of the time, or you know what I mean? And all this other stuff. How do we, I guess, keep our blinders Avi: on? So I would say the best thing to do in that situation is talk to someone who's done it before. Right? Talk to the, there's a bunch of dentists, coaches, consultants, people out there who already know what these like successful practices look like.Talk to them, ask them, Hey, if you were to start over again, or if you had to go back, what is one area that you would focus on for 90 days? What is one KPI metric that you would focus on that you feel like has the highest leverage? Right. When you say that, now you're able to lock in for 90 days, you're able to see that metric.And the thing, what's gonna happen is once you go down that rabbit hole, you're gonna find all these other things along the way. So it's not that other things are gonna drop off, you're just, you're shooting your shot. To get better at one KPI, but then when you're doing that, your brain will start to problem solve for ways to improve that KPI.And when you're doing that, you're gonna touch other parts of your practice. Does that make sense? Yeah, that makes Michael: a lot of sense. I like that question. What's the one thing you, you know what I mean? Like for, for you looking back, right? Starting out? Yeah. Because I think you told me one time we in one, a previous episode, and I'm gonna put a link to it in the show.It's below, but. You were looking to do practice ownership, right? But then you're like, uh, I don't know. Or kind of thing, right. Or an acquisition, I wanna say Avi: no. I don't know if I went that route. I think it was more my, my story kind of high levels. I was always an associate, but I'd worked in a bunch of practices and so it was like I was looking at okay, like what can practice ownership give me that I don't currently have?Mm-Hmm. And also like. Is it worth for me to go down that route with all the resources, time and everything like that? And I think, I don't have a knock on practice ownership. I think it's great if you're, you know, doing it the right way. But for me, this route of going into like education and like uplifting other doctors to learn this procedure was like the bigger kind of pull for me in terms of my career story.Yeah. So Michael: looking back. What's one metric you focus on for 90 days? If you had to start over, Avi: uh, as a dentist wanting to like do aligners or just as like a dentist in general, Michael: as a dentist wanting to do aligners, like what you're doing, education. Going down that route. I Avi: would, yeah, if I knew, if I started back and knew nothing, I would get with somebody that knows how to do it.Pick their brain to know what cases are easy to treat, what should you not do, right? And then, um, how to get patients to do it. I would focus on those three strategies. And then the actual, like metric, I would hold myself accountable to the point where every week I would start tracking how many patients did I talk to about it, and how many patients said yes.Like very simple. And then. I guess over time I would see like how many patients on average am I talking to a week? How many you're saying? Yes. And then from there, try to figure out, okay, why aren't they saying yes or how can we get more patients to say yes, or how can I talk to more patients, you know?Mm-Hmm. Like that's how I would do it, but how many people I talk to and how many people said yes would probably be the two metrics I'd focus on. Michael: Nice. Okay. Awesome. I mean, thank you so much for being with us on this Monday morning episode. If anybody had any questions or concerns, where can they reach Avi: out to you?Uh, Instagram is the easiest. My handle is doctor.avi and uh, yeah, just shoot me a DM and I'd be happy to chat. Michael: Awesome. So that's gonna be in the show notes below. And Avi, thank you for being with me on this Monday morning episode. Avi: Thanks Michael.

‍Having trouble hiring and retaining GREAT hygienists?In this episode, we're exploring how to redefine your approach to attracting and retaining valuable team members like dental hygienists. I'm here today with Kari Carter-Cherelus, who shares transformative advice for creating more welcoming and inclusive work environments. By advocating for flexible work schedules, Kari sheds light on how dental offices can better accommodate the diverse needs of their staff, particularly women navigating caregiving responsibilities. From job sharing to customized shifts, our conversation delves into practical solutions that satisfy both employee and employer needs.Kari brings a wealth of insights drawn from her interactions in various professional online communities, where she observes the power of communication and fairness in fostering productive workplaces. She emphasizes the importance of respecting cultural diversity and personal commitments, encouraging dental practices to embrace policies that are not only beneficial but also compassionate.What You'll Learn in This Episode:The impact of flexible work schedules on staff retention.Practical examples of successful job-sharing arrangements.The role of open communication in creating a fair workplace.Strategies for respecting cultural diversity and personal commitments.How to cultivate an inclusive and supportive office environment.Unlock strategies for a happier, more cohesive dental office workforce by tuning in today!‍‍You can reach out to Kari Carter-Cherelus here:Website: Bit.ly/burnoutdentalhygienistEmail: cherelussmiles@gmail.comLinkedIn: linkedin.com/in/kari-carter-cherelus-rdh-da-65094b49Instagram: instagram.com/kmc.smilesFacebook: facebook.com/kari.cartercherelus‍Other Mentions and Links:‍TV/Characters:Michael ScottThe Office‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Carrie, so talk to us. What's one piece of advice you can give us this Monday morning? Kari: I'm going to say that if offices can be more flexible with their team members, then they probably will be able to attract more and retain more team members. A lot of dentists complain about not being able to find a dental hygienist.Where, statistically speaking, most hygienists are women, even though it is a diverse field, so there are different genders in the field as well. However, that's just the fact of the matter, and most women are caregivers, they may have children they have to take care of, or someone in the house that they have to take care of.So if they can actually make that schedule more flexible, instead of just being straight eight to five or eight to whatever it is, or whatever that time is, and actually maybe job share, then they actually will probably be able to fill that position that they've been trying to fill for a year or two.Michael: Job share. You mean like sharing the position? Kari: Basically. Yeah. for example, I'm a mom. My child is three. I have to drop them off to preschool and pick them up within a certain period of time, or I would have to pay for aftercare before here. And so there's many people in the same positions and they would dream of having a schedule from eight to three where somebody else would like to have a schedule where maybe they could work.12 to five Or seven. So you would be able to have someone who could fill that initial bulk of time that you need. And then if you're trying to accommodate patients by having the office open to a later period of time, then they may be someone who is actually looking for that schedule.Michael: Hmm. Okay. Gotcha. So can you share examples of flexible work arrangements that have resonated most with team members you've worked with or your team members? Kari: Online, I have a Facebook group of about almost 10, 000 people, but I'm in a lot of Facebook groups, and a lot of hygienists would love to have that schedule from like 8 to 2 or 8 to 3, whereas other people need more hours, and so they would like to have a longer period of time I've worked All different types of schedules.And so maybe I've worked full time five days, six days a week sometimes, or I've only worked three days a week. And then there's been times where I had worked from eight o'clock to five. And times when I worked from 11 to seven, sometimes that was broken up throughout the week, and sometimes that was consistent. So when you have different changes in your life, such as being a Becoming a mom or some are widows or different things, then they may need some variations. So not having that cookie cutter schedule, of course, a dental office is a business and they need those hours filled and patients need to be seen. However, just finding something that works. For everyone really has helped a number of hygienists that I've spoken with and dentists have been happy that at least they have someone filling their Chairs, and they're not just having to continue to have temps or to not have patients being seen They're not turning away patients because they have no one to see them.Michael: Got you. sounds awesome would a practice owner or someone be hesitant to do this? Kari: Probably because they just want someone to feel that time. So they just, you would have to be open minded and sometimes in dentistry, not all dental professionals are open minded. They want a certain person to fulfill that job, or sometimes it's a certain look, or a certain gender, and so you would have to actually be open minded to be willing to have a schedule that isn't the normal schedule, and then also we're open Sometimes they're afraid of other employees being upset. Recently I had someone upset in my Facebook group because they had kids and they had to negotiate that schedule. So they felt that the hygienist who had negotiated that schedule, who got off at two 30 to go pick up her kids was a slacker and lazy, so they may not do it because they may feel like other team members may feel jealous.So why does this person get to get off? I have family too. I have kids too. So they're. Jealousy or just treating everyone the same, but in that sense, then you don't have someone who's filling that chair. Now, some practice owners have seen that if they don't do this, then that loyal employee who's been there for a long time is going to leave.They're going to find other employment or they're just going to choose the temp. So it really behooves the office to come up with different ways to make everyone happy, which is pretty, pretty important. Difficult to make everyone happy, you know, that's very hard to do, but to think of different ways to be able to attract and retain team members, because that is hard.People constantly complaining about the dental shortage. instead of just complaining about it. And complaining about maybe having to pay more in wages or not being able to find someone or name calling, actually coming up with different solutions that are going to help the office out as well as the team member and showing that you care that you actually would work with someone allows them to be more loyal to the practice because they see that the office bent over backwards to really help them to maybe have that flexible schedule for whatever the reason is that they've had it.Michael: Yeah, that's true. That's a good point. What happened in your Facebook group too, because I feel like if that starts happening, you start noticing disunity, right? Like, Oh man, the one person's like angry at another person. Is it just because of this reason?Or was there an underlying solution there? Did y'all guys really not like each other this whole time? Kind of A thing, right? Kari: I mean, The whole post got deleted because so many people were like do you just not like the person because of the schedule or are they actually slacking?Like, What is the actual things? Because some people said that's my exact schedule. That's the schedule I have. My doctor bent over backwards. I do a lot of remote work now. And all the different things that I do. So I temp because of having my child, you know, it's very hard to find that schedule.It's very difficult to find it. When I do look online like, what will happen if everything falls apart and I need to get a clinical job? The jobs, they want you to work four or five days a week from eight to seven. So how am I going to raise my child? And that's one reason there is a dental shortage among hygienists because of that offset of the work life balance.Many people feel that they are not actually paying attention. playing an active participant in their child's life or in their own life. So they're wanting to have more balance. So somewhere we got lost in the profession. Quite honestly, I've been in a dental profession for 25 years. One of the reasons I chose it is because it was built to me as a great job for moms.So if everyone wanted to have a kid, then, it was flexible. I can maybe work three days a week and somewhere, maybe because of the insurance industry, I don't know. We kind of lost sight of that and that we are trying to cater to patients so much that we're not really allowing the team to get what they need out of life as well.Michael: that's Something we've been seeing a lot too, but I feel like whenever we talk to a lot of practice owners, hygienists, things like that, right? And dads too. Dads too, but like moms specifically there's a lot of that. Have you heard of mom guilt? Kari: Come on, don't mansplain it. I just gave a course on mommy bird out from mommy dentist and business.Yes, mom guilt is thing, You they have a special thing for my son Friday at his school, he didn't go to school the other day, but I saw the volunteer thing, and they only had three volunteer slots, and it was already filled, and I was like, I would have wanted to go to that, I wish I had, So yeah, we deal with a lot of guilt and a lot of moms who are dentists or hygienists or assistants or whatever, they're missing out on key things with their kids lives.So key events that the office is saying they can't go to, or one dentist she wrote in a Facebook group when I was doing some like research she wrote that she missed the kid's first day of school. And so she asked the kid, how was your first day of kindergarten? And then you're like, Oh, I told dad already, ask him.Michael: no, yeah, you miss out those key moments. You're absolutely right. So then you have to have a team that also wants to support that as well. Not just for the practice owner, but for like the hygienist for even assistant for everybody. Right. Like Understand Hey man, that's, She has to go see her child or something has to happen right, with the child.So how do you train them to be like leaders, to truly support an inclusive and flexible work environment? Kari: It's gonna have to be really having that flexibility. Open communication and then making sure that everyone is on board. So having a positive office environment, does have to be fair, so if other people aren't able to leave or they can't have that schedule, then what are you doing for them?So if they don't have kids, it's not fair that they never get to leave early sometimes too. So how are you allowing them to leave or allowing them to take PTO and things? So that's what's important, making sure that you're there for everyone. Because when I didn't have a trial, sometimes I face like discrimination in a way at the office.Because maybe I didn't get to see a patient that was as productive and I'm, if I'm being paid base and on bonus structure, I was told well, you have a husband, he's got a good job. It's like, what does that have to do with anything? Or I'm a single mom. So it has to be fair because that coin can go both ways.So you have to be able to understand how someone can feel that it's unfair that someone gets to leave every day. But at the same time, do they ever get to leave or can they come in later? How are you accommodating everyone in the office, which although difficult to do, with good communication and making sure that the team, feels that they are part of the practice.They all want the practice to do well. They're invested in the practice almost like an ownership, then they're going to be more inclined to support one another. Michael: Okay. I like that. So then how do you make sure, I guess your diversity and flexibility policies. Are truly felt by the team and not just formalities.Kari: That takes time. So it may be having someone like a coach or consultant come in and make sure that you're actually implementing those different policies, because I'm sure we've all worked in places that said that, Everyone has that little federal guideline that they're supposed to acknowledge as far as we don't discriminate against race or religion or everything like that.But I've been on plenty of interviews where it's not said, but you know, oh, that is actually discrimination going on. So for that to actually not happen or for it to be a diverse environment, then they have to make sure that they're recognizing all the team members. So Think about the holidays.So not just recognizing one particular religion's holidays, recognizing that other team members may celebrate different holidays. If the office has someone, let's say, who's Muslim and they're, dealing with Ramadan, then are you respecting that and what takes place during that time or Jewish or Christian, whatever.So making sure that you're respecting everyone in their Particular beliefs making sure that you're giving people grace just constantly learning about it. One thing that the office could do is to take continuing education courses together, and that way it's not just put all on one person and everyone's not.Awkward and everything, ideally outside of the office, probably, unless you have someone who's training that to come in, you don't want it to be like the office situation with Michael Scott and how it like goes, I love that show, but how it goes contrary to the whole thing. It's like, this is worst uh, example.So actually making sure that everyone feels supported and included. I know even yesterday. I saw on a Facebook post about is it okay for people to take the day off or a mental day and everything? And so sometimes people need to take a mental day. Sometimes what may be affecting one person isn't affecting the other person. Or you may not understand what's going on. you know, there was a lot yesterday since it was the day after election. So just seeing that there are so many different, Thought processes. So recognizing that obviously not everyone may feel like you feel. Just giving everyone grace and being kind is important.So fostering that team is important. Sometimes having team building exercises can definitely help. Going places as a team conferences are the best, making sure that the office is supporting the team. If they're mandatory going somewhere, they should be paid so that you don't have people who are resenting this mandatory.Event is important as well. Michael: Interesting. Okay. Yeah. When you were mentioning the example of different, make sure you acknowledge it. I thought of the office to media was like, Oh yeah. And Michael Scott. So that brings me to one of my last questions besides like the holidays and stuff like that, how do you celebrate different cultures while making everyone feel equally important?Kari: I guess bringing it up, but not bringing it up. I don't know if it's done regularly, then it's not going to be cringe. Because we know it can be cringe around like certain months it's Black History Month. It's like, uh, you know, so why aren't we just doing it all the time?So why are we just celebrating everybody all the time instead of waiting to a particular month and week and it's like, okay, we got that checked off and everything. We got Asian American month checked off. So it's like, stop just checking boxes and actually just living it. So regularly doing it.And One cliche way is to do potlucks, but I don't necessarily like potlucks, honestly, because see on Instagram and TikTok, not everyone has the same standards. So one way is to maybe go to different restaurants. Yeah, you know, they're, the Board of Health has to come in and everything like that.But at least talking about the differences the food and exploring talking about differences and how ones grew up is a way that can be helpful. I think talking about different culture, I've learned from, different colleagues and, talking about different languages, talking about different places that we visited.So just actually being open to having different conversations where we can talk about things that aren't going to be controversial, but just respecting one another, because when we do that, then we can see things from other's side of the coin or different opinion or perspective. Michael: Awesome. I appreciate your time.And if anyone has further questions, you can definitely find her on the dental marketer society, Facebook group, or where can they reach out to you directly? Kari: Social media is really the easiest thing. So they can follow me on Instagram. KMC dot smiles. My name, Carrie Carter Shirelles is on LinkedIn, Facebook, all those different platforms. And then my email is shirellessmiles at gmail. com. And my link is Bitly Burnout Dental Hygienist. Michael: Nice. Okay. So that's going to be in the show notes below. And Kyrie, thank you so much for being with me on this Monday morning episode. Kari: Thank you for having me.

‍What happens when patients don't pay their bill? In today's episode, I'm diving into a revealing conversation with Andy Grover Cleveland, the expert behind Collection Agency Ninja. Forget everything you've heard about the conventional timelines for involving collection agencies. Andy advocates for a proactive approach, suggesting engagement as early as 60 to 90 days post-EOB. This strategy not only streamlines financial operations but also nurtures patient relationships through clear communication.Andy reveals the secrets to choosing reputable collection agencies that enhance, rather than hinder, patient rapport. You'll learn why early intervention is a game-changer in maintaining your practice's financial health without compromising on patient satisfaction. From identifying common pitfalls in the collections process to crafting effective patient communication strategies, this episode equips practice owners with pivotal insights for balancing financial well-being and patient care.What You'll Learn in This Episode:Why early intervention with collection agencies can benefit your practice.The importance of notifying patients about balances promptly.How to choose the right collection agency for positive patient interactions.Best practices for encouraging patient payments gracefully.Common mistakes dental practices make in collections.Strategies to balance financial health with patient relationships.Listen now to master the art of patient payment collections in your practice!‍‍You can reach out to Andy Grover Cleveland here:Website: collectionagencyninja.com‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Andy, so talk to us, what's one piece of advice you can give us this Monday morning? Andy: I'm going to give something that probably goes against everything that everyone has ever heard in the dental business. I Believe you should use a collection agency at 60 to 90 days. After the EOB, which is probably very unpopular, but it's really crucial in the business of dentistry.Michael: Interesting. there specific communication strategies that we should implement at 30 or 45 days mark or to avoid escalating to the 60 days? Andy: Yeah, great question. Of course you want to notify. You don't want this to be blind. you do want to notify them that they owe the balance.And even before that, you want to try to collect it at time of service so that you never create the problem. However, you know, you have a real world and you have the perfect world. And sometimes those planets are just not aligned. So if someone does not pay that full balance, After that service is provided, you definitely want to notify that patient at least a couple of times that they owe, letting them know to please pay, but about 60 or 90 days, that's when the tide turns, Michael.That's when people decide, Hey, I'm either going to take care of this obligation or I'm not. So that's the ideal time to use it. Now, if you had interviewed me five years ago, Or 10 years ago, I wouldn't be as staunch on this opinion. It's kind of like merchant services. I don't know if you've seen this trend where now merchant services fees are being passed on to the patient.Have you been keeping up with that? Michael: Yeah, I've seen that. Andy: Okay. So if you asked me five years ago, I would say that's the worst idea. It's cheesy. Don't do it. It totally devalues your practice, but guess what? Every time I order tacos, every time I go to the doctor's office, every time I go to the car dealership, and now every time I go to the dentist, it's passed on. So we're in that kind of spot where it was unpopular, but now everybody's doing it. So why shouldn't the dentist? Michael: Okay. Interesting. So then three steps points or takeaways that you have to streamline this or make it easier, smoother. What would be number one then? Andy: one of the first takeaways is by implementing some type of collection agency strategy that's going to reach out.Number one, it doesn't make you the bad guy anymore. When you think about it, do you want to be known for chasing people for money or do you want to be known for treating patients with clinical excellence? So it's nice to have a scapegoat that you can blame for reaching out for the balance because it's strictly a financial driven practice.So I guess the number one is, it's much more convenient to blame your billing company. Then is for people to complain about someone in your office reaching out too frequently. I think we can both agree the optics aren't that great. Michael: Yeah. I think that's where I guess the patient relationship can get iffy, right?how do you do that then Andy? How do you balance maintaining patient relationships with the need to use a collection agency? Andy: there's no one right answer, but at the end of the day, if you hire someone to help you with the financial part of the practice, you can basically, just stay out of it.So if you're clinically driven, to help patients. That's your focus. Let someone else basically deal with the headache. Now, another part of how that works is it will motivate a certain part of your patient base to come back to be a patient of record. So a lot of times when dentists are doing these procedures, patients will say anything to get out of pain.So once you make that pain go away, it's sometimes could be a little too convenient to not pay. So by having a company reach out, you can actually help motivate that person to communicate with the practice and pay. And ultimately, You want that patient to be a valuable member of your clientele. So you have a divide where you can motivate people who generally value the service you're providing and keep them as a good patient of record. Also, if people choose not to pay the bill, they probably don't value the services that you rendered anyway. And arguably they're going to go somewhere else. So that kind of helps push them in another direction to maybe go down to the practice down the road and not pay them rather than come back for more service and not pay you.Michael: Does that make sense? yeah. So then I guess break it down for me. How does it motivate the patient versus sometimes like, stress them out or irritate him or anything like that? Andy: So it's pretty simple, Michael. If you, you got two phone calls today, once from someone, you owed money to.And it's just their office calling you, Hey, Michael, please pay. And then you get another phone call, Michael, from a collection agency. Again, same thing, you know, you owe the bill, but the collection agency is calling. Who are you going to pay first? Michael: one's a friend and the other one's the collection agency. Andy: They're both the same. you owe two parties. You have no preference one or the other, but one is that business calling you for money, the other one is a collection agency calling the question is, who are you more inclined to pay first? Michael: Oh, I don't know. That's a good question.What are the, data show?Andy: Generally speaking, people are going to pay the collection agency first. Middle class America wants to protect their credit. Michael: So Andy: generally speaking, people are going to pay the agency first. They're going to give it more importance because there's nothing negative that happens if they choose not to pay that original vendor, they'll get another statement or call next month and they'll address it Michael: Interesting. Okay. I like that. So then can you walk us through the process of selecting a reputable collection agency? Like What key factors Should we consider? Andy: Yeah. I mean, You really want to, interview multiple agencies. I would say the number one most important thing that you can do, assuming that people are being ethical, providing good service and being cost effective, which most are is having an agency that works directly with. Your practice management software. So we're in, a digital age and the collections business as a whole has done a very poor job on getting involved with technology. So I would definitely steer any dentist to work with the company that works with the technology. Well, You might ask, why is that important?There's numerous reasons. That's important. Number one. You're going to ensure safe and secure and rapid exchange of information. So accounts will be sent by their team by pointing and clicking, not manually updating a web form. The second thing it's going to do is it's going to tell who's paid. So in the collections business, Michael, and it's obvious you haven't been in collections from some of your responses, which is great.We don't want that for anybody. But sometimes the patient will actually pay as a result of that collection company contacting them. So with companies that work within the software, they should be notified when that happens. So let's paint a picture. Let's just say you're working with a collection company manually. Okay. You've sent patient ABC over for collection and the collection company has been calling them and they will call them incessantly to motivate that person. And let's just say that person paid the bill. Well Guess what? If your front office doesn't contact that agency by logging into the website, calling them, emailing, however that feedback loop is. That agency is going to continue to call that person for money. And it's going to further damage that relationship when they did the right thing and paid. So you want to have like an automatic feedback loop so that if someone does pay, it's automatically reported to the agency. So the agency doesn't cause any further harm. Those are probably the two top biggest reasons. There's many more. Michael: Gotcha. Okay. So collection agency is just essential to have in this process, So number two, what would that look like? Bullet point number two. Andy: Yeah, so that was identify and motivate your ideal patients coming back into the practice as opposed to people that are just dentist shopping So we want to motivate people to pay and also be a patient of record. So when you turn people over to collection Granted, they're not happy about it, but it will motivate people that value that relationship with you to communicate and pay the bill. It will also motivate some people to leave the practice because they had no intention of paying to begin with. Michael: Okay. Got you. Got you. Now, how do you measure any of the success of a collection agency? What benchmarks or KPIs do you track? As a practice owner. Andy: So any agency that has technology to support you is going to give you metrics on how you can judge their efficacy. I will share with you as weird as this is, it's not all about the money. I specialize in working with independently owned dental offices. So it's a little more holistic and how they judge you. I would say that most independently owned practices, it's not about the money. That's more of a group practice thought process.Yes, money's important, but not the most important thing. Independent dentists, they don't compete. With corporate offices on cost, right? They can't, the economies of scale are not there. The flip side is also true. corporates can't compete with independent dentists on culture, right? They have turnover, you're getting new associates every six months. It's just a constant churn. So they don't really compete with one another, but at the end of the day, I think most dentists, will gauge the efficacy of their collection company, not only on the money recovered. And of course it has to be cost effective, but even more importantly than that, does it generate negative reviews?Does it motivate people to accept treatment? Does it allow their staff to focus on other things that are more important? So there's an opportunity cost To chasing your own accounts receivable. So it's much more multifaceted than just dollars in dollars out. Most dentists will hire a collection company basically to make their office run better.Michael: Have you seen that a lot, Andy, where some are hesitant to, bring on or call or ask about, money more for the review. Like, Oh man, I'm going to get negative. Andy: Yeah, of course. But in my experience, if you continue to chase your own money, you're much more likely to generate a negative review for yourself.If you hire somebody else to do it for you, they can give a negative review on that collection agency. Michael: Yeah. Andy: And certainly they could tie it back to you, but you can always, claim indifference, right? Hey that's what our billing department's for you know, you need to deal with them and it absolves you from some of that responsibility. Michael: Interesting. Okay. So then what are the financial risks and rewards of sending accounts to collections at 60 days versus waiting longer or not using collections at all? Andy: Great question. So you have this kind of traditional paradigm with collection agencies working with dental offices and that one is a very traditional approach where the office will work the account for months and months and months and years and years and years. And then they turn it over to collections, and then that company's working on a percentage basis. That's the way it's always been, but that is just not an effective way of running a modern or contemporary dental office. Sometimes you cause more harm than good there because if you wait that long, the accounts aren't collectible anyway. Right. If you wait a year or two, they're basically uncollectible. So I'd recommend just writing the accounts off if you're going to do that. The advantage to turning it over at 60 to 90 days is that's a very fresh account. It's still top of mind for that consumer and from a statistical perspective, it's much more collectible than something if you wait a year or two down the road to go after.So it's more about being proactive with that balance. The other thing you also have to measure in here, Michael. is a lot of times these practices are already getting hit with the PPO fee and basically reducing their billable amount. So they're already losing 30 or 40%. And then if you let that patient balance go unpaid. You're losing the rest. So in this environment, it's just too competitive to run a business like that anymore. You have to be responsible with not only the insurance portion, whether you're in network, out of network fee for service, but you also have to address that patient portion. It's crucial because again, you're taking such a big write off a hit in the beginning. It's really not cost effective for you to take another hit later down the road. You're essentially giving it away. Michael: Interesting. So then what common mistakes do practices make that you've seen when sending accounts to collections and how can they avoid these pitfalls? Andy: one of the things that clouds all of our judgment is emotion.So a lot of times, People get upset, and listen, if someone owes me money, I get upset about my own business, right? It hurts, but people still have that mammalian part of their brain that wants revenge, or maybe the patient was really rude last time they came in. So you have this, Emotional part of being owed money that clouds our judgment.that's a big mistake I see some practices, they just want revenge. That's usually where bad things start to happen when you think along those lines. So as a practice owner matures and goes through practice ownership, there's developmental stages where right in the beginning, it really hurts. Then you can start to kind of objectively step back and look at things more objectively. But at the end of the day, recommend the practice owners look at this from a very non emotional, like a CPA would, right? If you're producing a million dollars in revenue annually, and you have less than 1 percent of the people that owe you money, not pay you, write it off.You're collecting 99%. No one gets a hundred percent. I don't care how cool it is to say in the Facebook groups, nobody gets a hundred percent. There are times where it makes sense to write things off rather than pursue it. Especially if those services are disputed or you're dealing with a really difficult person, a lot of times it's just not worth it and you just have to let it go.Michael: Interesting. I love that. Thank you so much, Andy. I appreciate your time. And if anyone has further questions, you can definitely find them on the Dental Marketer Society Facebook group, or where can they reach out to you directly?Andy: Probably the best way to do it is going to my website. collection, agency, ninja. com spelled just like it sounds. Michael: Awesome. Collection, agency, ninja. com. that's going to be in the show notes below. So if anyone's interested, want to pick Andy's brain a little bit more and so forth, definitely reach out to him there and Andy.Thank you so much for being with us on this Monday morning episode. Appreciate you having me. Thank you very much and keep up the great work. I'm honored to be here.Andy: Thank you.

‍How can you transform problem-solving into an art in your practice?In this Monday Morning Episode, we welcome Dr. Pauline Le, who provides a fresh perspective on common dental practice challenges. Dr. Le reveals how universal these challenges are and how essential it is for businesses to identify and candidly discuss them. With a focus on collaborative environments, she delves into the power of professional groups and demystifies the often-tricky realm of team dynamics.Dr. Le breaks down the renowned three-step problem-solving process from the book "Traction," offering listeners a foolproof approach to untangling business issues. By fostering an environment where discussing issues is not only encouraged but expected, businesses can distinguish between personal and professional problems and maintain focus on solutions. With actionable tips on nurturing a transparent culture and keeping an up-to-date issues list, Pauline's advice is invaluable for practice owners seeking to empower their teams and effectively address persistent hurdles.What You'll Learn in This Episode:Strategies for tackling common business issues in dental practices.The significance of open discussions in resolving workplace challenges.Benefits of joining professional groups and improving team dynamics.How to implement the three-step "Traction" process for problem-solving.Techniques for creating a safe environment for issue discussions.Understanding personal versus company issues in a business setting.Importance of maintaining a consistent issues list for effective meetings.Tune in now to uncover transformative strategies for overcoming dental practice challenges with Dr. Pauline Le!‍‍Sponsors:‍‍Oryx: All-In-One Cloud-Based Dental Software Created by Dentists for Dentists. Patient engagement, clinical, and practice management software that helps your dental practice grow without compromise. Click or copy and paste the link here for a special offer! https://thedentalmarketer.lpages.co/oryx/‍You can reach out to Dr. Pauline Le here:Website: ledentalspa.comInstagram: instagram.com/drpaulineleOther Mentions and Links:‍Books:Traction: Get a Grip on Your Business‍Software:ClickUp‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Pauline, so talk to us. What's one piece of advice you can give us this Monday morning? Pauline: I would say that we all have issues. Michael: Interesting. Can you expand on that a little bit more? What do you mean? Pauline: In any business, we all have the same exact issues and the sooner you will admit that you have issues and identify them, we can discuss them and we can solve them.That's Michael: Okay, so then many practice owners feel they have challenges that are one of a kind, right? at what point did you realize that the issues you were facing were not unique to your practice? And then how did this change your approach to solving those issues?Pauline: When I started joining different groups of other dentists, other practice owners, and a lot of the Facebook groups are really helpful. I just started seeing a trend where people were posting the same questions, the same issues, the same problems and grateful for this community, right? But what I was finding was some of these groups can become where people are just coming in to vent and they weren't necessarily actually solving the problem.issues. So that's when I started noticing that, okay, it's the same recurrent problems. And I grew up where my parents owned businesses. And although different businesses than mine I started seeing things parallel, people have the same complaints, whether it be about patients. People, your team or procedures, right?So processes people always end up having the same types of issues in whatever business they have. So I just started seeing things parallel. Michael: Interesting. So then in these groups specifically, what were some of the things where you feel like. Man, you're just venting like this is a common thread where people just vent and vent and vent Pauline: I think the most common one lately has been what they can't find hygienists.They can't find quote unquote good people good employees It's the same vent. It's the same complaint that all business owners want to fall victim to Michael: Let's just talk about that, fixing that specific problem that everybody's complaining about. I can't find a hygienist or a team member.Pauline: in the general idea of issues, first off, I think it's a mindset thing. We need to own that. We all have issues. Every single one of our businesses will have issues and we should actually welcome them and we should foster a culture where your team can openly talk about issues, right?It's not a safe environment to bring things up, then you're just going to have an ongoing nagging to do list or unresolved issues. And that's just going to slow down the growth of your business. So the sooner you can build this. Culture, and it starts with your leadership team of having open, honest conversations about issues.The sooner you can actually solve them and save energy, save time. So when it comes to issues, there are three main steps that we take here at Laudanusvall, and we learned it from the book Traction. So first step is you want to identify the issue. And really every single business. There's really three main types of issues.it's either going to be a true problem that actually needs to be solved, it can be information that needs to be communicated or agreed upon by the team or an idea and opportunity that needs feedback, brainstorming or insight, right?And once you actually identify the issue, then you can move on to the next step where you discuss it. This is where you're probably going to spend the most time in your meetings is discussing the actual issue. And then when you are discussing, you'll find that sometimes you go off on tangents and then sometimes other issues.arise from these discussions. So it is really important to foster a culture where you can talk about issues, but you can also say, tangent alert, or can we put a pin in that? Or can we just list it on our issues list and then get back to it, right? So it's not gearing you away from discussing that one issue that was first brought up.And then, You would go into solving the issue. So this is the main point, why we should be having an issues list, right? Because we need to solve things and keep things moving. And what I find in these dentist groups and, you know, being around my other colleagues, is sometimes they don't actually want to solve things. Pauline: And sometimes people just want to vent or feel like okay, there's other people like me going through this, which, there is importance in that. But at the same time, we need to be leaders and we need to solve issues and keep things moving for the rest of our team and the rest of our practice.And you'll notice as you start solving issues, you don't want to make the mistake by solving just the very top issue down. You need to prioritize issues. So you'll notice that as you start solving the bigger issues that hold higher priority, your other issues below it start diminishing, start disappearing.Because really, you're already solving it when you solve the bigger issue and all these other things start being like, oh my gosh, that makes so much sense now. Okay, that already got resolved because we talked about this bigger issue. So I think regarding the hygiene problem that a lot of practices are having.identifying the actual issue, right? My issue might be different because I'm a fee for service office, might be very different than an office that is PPO or an office that's HMO. Even though the chief complaint would be we can't find a hygienist, Identifying the actual issue is going to be so different in each of our practices, So my practice we are a fee for service office, you know, we ask a lot from our team members because we deliver a very, patient centered type of care. We data collect, we scan, we are very thorough and comprehensive. So that's not for every hygienist out there, and so that goes into being very clear with your vision and your expectations and your hiring process is going to be a lot longer, than.most practices, I would say. So like I said, actually identifying the issue and then discussing it and then how you're going to solve it is going to be so different between the three different types of practices, even though the chief complaint is the same. Michael: interesting. Okay. So then if we rewind a little bit, you said you want to foster an environment where it's safe to discuss about issues.How do you know you're in an unsafe environment? Pauline: Based off feedback, right? So a lot of leadership. Isn't true leadership. I would say some practices. I think some business owners already know how they want to answer without even involving, I guess, their leadership team and discussing the actual issue. when people bring up ideas or they bring up An issue, like how you respond to it, is so important. If you shut down your team member or, you know, you're blaming it on them no one's going to want to keep coming to you with an issue then, because that's just how you're going to react.Versus We all make honest mistakes here and communication is the biggest of it all in order for us all align and be on the same page right where one person might be only looking at it from one viewpoint and another person might be looking at from a different viewpoint like oh my gosh I didn't even see that what you saw thing.by discussing it you're actually able to then solve it and that's really important. An open communication a safe environment talk about things versus oh you didn't do this. This wasn't done Versus the understanding the why maybe this happened or that happened And that's why the issue was there in the first place Michael: I like that.So let me paint you a scenario like we talked about hygiene, right? you ever had issues with like team members, Like a team member. All the time. Every single business. Yeah. So like let's just say team member A has an issue with team member D and you're listening. You're like, talk to me about team member D then team member A, right. and you're listening and stuff like that, but they continue to bring you with issues that team member D is I guess creating happening or whatever. Do you start prioritizing team member A saying like, Hey, We need to sit down all three of us and discuss and then team member D is like, I didn't even know there was something wrong.I'm sorry. I didn't know I was rubbing you the wrong way. And then, you know, when you confront it, it's like nothing's wrong. But then two days later, it's like something's wrong again. How do you handle that? Pauline: the first example you gave where team member A is. listing all these issues they're having with team member B, right?And then you're asking do we put us all three together to resolve these issues? I think You're making it now a personal problem versus every week we have department meetings and every team member is to bring An issue to the meeting and we have in our click up.a list. It's our quote unquote issues list and it may not necessarily be an issue. Like I said, it may just be an announcement. It may just be a discussion that we want to have that we were trying to resolve. If you don't. So comfortable bringing it to that meeting where it could be discussed whether it's operations meeting, sales meeting, admin meeting, then it doesn't really sound like it's a company issue then, right?And sometimes it may be very well a personal issue. Then that goes on to, okay, are we spending our resources and our company time resolving this when we're all adults here? Could they have resolved this on their own? Or is this actually a true company issue? If it's a true company issue, now what department does that lie under and what department is tackling that issue then?Michael: That makes a lot of sense. So then if it's a personal issue though, Isn't that just as much as a red flag? Cause it's like, Hey, there's no unity in the team. What the heck? how do you handle that? Pauline: So that now goes into like the people portion of your business, right? Like I said earlier, there's going to be like.Your patients, your people, and then like your processes, So now you're now going into the people portion, which is your team members, your employees. So that goes back to having the right people. So what does that mean? We use the people analyzer here and including me, the business owner, you should have your employees also rate you and analyze you as well.So they have to align with our core values. You have to define the metric that you want to analyze people on for that. We only have three core values, so you have to have all of them, not just two out of three or one out of three. So it has to be a plus or minus there. And we need pluses there.And then it goes from core values. It's either you get it, you want it, or you have the capacity to do it. And that's just now analyzing the person. Okay. Right In that position, and that will then start resolving a lot of that. And then you're able to remove that personal aspect out of it. So like when we have leaders, who are onboarding and training, and I see them getting frustrated with team member B, I asked them to start dissecting down.Is it any of the core values that they're having issues with? Or is it? They get the assignment, They get the job, they get the expectations, but do they want it? Some people don't want it, right? Going back to hygienist position in my practice, we scan every single patient here. Not every hygienist wants to do that, and that's okay, but we need to know that when we're hiring, right?And then do they have the capacity to do it? Okay, if I'm asking them to take x rays, scan, 2D photos, Am I giving them enough time in their appointment slot to do that, So that just now allows you to start dissecting all the different compartments of it versus just taking on this, Oh, this person doesn't want to do their job, or they're not, doing a great job.Then they start taking things personally, or she's giving me an attitude when I'm asking her to do this, right? It's okay. Well, Maybe they didn't get it. Did we lay out clear expectations? Of needing a scan on every single patient. Did we lay out clear expectations that I expect an updated scan every year?Was that on us? Did we clearly convey that? Did we communicate that? Okay, if they get it we communicate all that. So that part is checked off. Now, do they want it? And that was where, Okay. We identified the issue here the hygienist did not want to do that. So then it comes down that it's not oh, she's giving me attitude when I asked her to scan that becomes personal, right?Michael: Makes a lot of sense So then one of the last questions I want to ask you is when you guys are discussing the issue And you mentioned that lot of times we go on tangents, right? And you're like, Hey, tangent alert. Does that make the issue list grow? Is it an ever ending?Pauline: So there has to be a time limit for sure. So our meetings every week are only an hour. we start with a segue personal best business best five minutes. And then patient employee had headline five minutes and then rocks review five minutes. And then our issues list. the bulk of your meeting is going to be that issues list. And like you said, when you start going off tangents, it keeps growing, but you're not just like adding to your issues list and expecting to tackle it, that meeting. So throughout the week, for instance, let's say suction is down in room four.We're not just like. panicking and, alerting the rest of the team this is the issue. If it's something that needs to get resolved, but it can wait until the weekly meeting, put it on the issues list. And we know that it's going to be spoken about during our weekly meeting.So that issues list is constantly growing but it's also constantly getting resolved. And when we onboard people, we also have them like, Hey, go through our issues list that we've solved in the past, because the questions that you're having probably have already been asked and we've already discussed it and we've solved it.So go through and read all that because the same issues you're having, we once had as well. Michael: Awesome. Pauline. I appreciate your time. And if anyone has further questions, you can definitely find her on the dental marketer society, Facebook group, or where can they reach out to you directly? Pauline: My Instagram, Dr.Pauline Le. Michael: All right. That's going to be in the show notes below. And Pauline, thank you so much for being with me on this Monday morning episode. Pauline: You're so welcome. Happy Monday.

‍Imagine a dental practice where team well-being takes center stage, resulting in enhanced patient care!In this Monday Morning Episode, Josey Sewell reveals groundbreaking dental practice management strategies, particularly focusing on effective recruitment and retention of hygienists. Emphasizing that the team's wellness is as crucial as patient care, Josey shares how attending to the needs of your dental staff can transform your practice. We get an insider's view into the common pitfalls in leadership that often drive valuable employees away and discover Josey's transformative "Connect, Measure, Coach" framework designed to uplift leadership and engagement.Dive deeper as Josey introduces her comprehensive five Ps framework—Purpose, People, Power, Prosperity, and Performance—where each facet plays a pivotal role in creating a thriving work environment. By setting and tracking goals within these realms, leaders can mitigate burnout and boost workplace satisfaction. Josey also shares valuable insights on how the delicate balance between vulnerability and authority can cultivate trust among the team. This episode empowers dental leaders with practical tools to enhance their leadership skills and build a dedicated, satisfied dental team.What You'll Learn in This Episode:Innovative strategies for enhancing dental practice management.Key leadership mistakes that lead to high employee turnover.Insights on the "Connect, Measure, Coach" framework.An introduction to the five Ps framework for improved engagement.Techniques for reducing burnout and boosting workplace satisfaction.The role of balancing vulnerability with authority to foster trust.Dive into today's episode to learn more about team growth and the team-centered approach!‍‍You can reach out to Josey Sewell here:Instagram: instagram.com/joseysewellEmail: josey@joseysewell.comOther Mentions and Links:‍People:Simon SinekJohn C. MaxwellBenjamin HardyDan Sullivan‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Josie. So talk to us. What's one piece of advice you can give us this Monday morning? Josey: Oh, I'm so excited about this. My piece of advice is that your number one customer is absolutely your team. Over your patients. And I know a lot of dentists probably panic when I say that, but we spend a ton of time and effort and energy on marketing and taking great care of our patients.But when we take great care of our team, that's going to translate to great patient care. And today I'd actually like to talk in particular about recruiting and retention of hygienists. Having been a hygienist myself, been a hygiene director, I've been a COO of a dental group. And what I will tell you now as a coach helping people across the country is that every single one of the clients that I work with, they are struggling with finding and retaining dental hygienists.And what I find is that a lot of people typically use COVID as an excuse. They'll say, Oh, COVID happened. It shut the world down. And we saw hygienists leave the profession. And we know that about 10 percent of hygienists did leave the field. And I think that that's really unfortunate. But now what we hear is that people just say, there's just not any hygienists available.They just don't want to work. They don't want to be in clinic. And what I would say from being a hygienist and being in the hygiene community is actually that hygienists do want to work. They do love clinical, but the reason that we've seen some of them leave the field and the reason that we see a lot of hygienists who have chosen A permanent job as temping is because we have a leadership crisis.And what I mean by that is hygienists are choosing not to work in your company because you're not leading them in a way that is meaningful to them. Michael: Okay. Gotcha. So then what specific leadership behaviors have you observed that push Hygienist and team members to leave and how can practice owners correct these behaviors before losing valuable staff?Josey: Yeah So I have a very simple framework That I find works really well for you to remember when you're thinking about leading and that is connect measure coach and so what I mean by that is to connect with people in a meaningful way and I mean trying to get to know them as a human being understand what's going on in their life even You Taking time to find out what their dreams and their goals and their aspirations are.So that's connect. Measure is how do we appropriately measure success. And that includes utilizing key performance indicators or KPIs. But with hygienists in particular, sometimes they're afraid of numbers and metrics. So they feel like if a practice is asking me to be a high producer or to track my numbers, that means that they care more about money than about patient care.And so what you have to do in helping hygienists understand metrics is you have to connect Those metrics to patient outcomes and to clinical care. And you also have to teach them a little bit about the business of dentistry, because when they have a greater understanding and they know how these numbers fit in, they absolutely will engage and appreciate those numbers.So there's a special nuance into introducing numbers and metrics. And the last one is coach. I love the quote by Dan Sullivan, that he says, people don't want to be managed. People want to be coached. our team members, whether they are hygienist or not, have a very different expectation in what they want from us as employers and in our work environment.And they want to be coached. It is not just about their job. It is about their life. And so we need to coach people up into a position. So maybe I'm a front office person and I'm growing into a manager position or I'm a hygienist and I'm going into a hygiene lead.That's up in my position is primarily what we do in dentistry is we're helping people achieve mastery over time. But so many hygienists feel like there's a very short ceiling to their career. I will tell you, I left clinical because I thought there's nowhere for me to grow. And yet I was motivated and excited about advancing what I did as a clinician, but I felt limited because my doctors did not actually engage in the same CE or passion that I had.for prevention or treating periodontal disease. So providing a pathway to grow. And then sometimes, Michael, we have to coach people out of our business. Because sometimes our business outgrows our people and sometimes our people outgrow our business. For those of you who are especially getting started in dentistry, some of you have this expectation that I'll graduate from dental school.I'll have my practice and I'll find this amazing team. And this amazing team is going to be with me forever. However, lifelong employment is a thing of the past. And a lot of people don't. grow up as a little girl or a little boy dreaming about answering the phone at her front office. And so we have to just know and recognize that people are going to come and go in our business and our relationships don't have to be dependent on an employment agreement.So again, connect in meaningful ways, measure performance, be very clear what your expectations are, and then coach people up in or out knowing that sometimes it is better for them in their life to move on. And that doesn't mean we can't still remain friends. Hmm. Michael: How would you connect in meaningful ways?Josey: Great question. So we actually have a framework that we've developed after working with literally thousands of employees and helping hundreds of managers grow. we call it the five Ps, and that is the various different parts of their life where we will have people.Take a look at these five important critical areas of their life and challenge them to set a vision for themselves and then also to set 90 day goals. So a very specific example is we have one of them that's called power and power is my physical, mental, and spiritual health. And it's encouraging people to have healthy habits for how they take care of themselves.In dentistry in particular, one of the saddest things that I see is when clinical careers are cut short due to different musculoskeletal things or injuries, and so Are we encouraging our people to have regular habits of exercise or mindfulness or whatever that is? And so we have a framework that we have people fill out what their goals are.And we sit down within the first 90 days of employment and we go through that and we just get to know our people in a meaningful way. And then we check in on them occasionally about every 90 days on their goals. So some people, it makes them feel really uncomfortable to think am I really going to ask?My people about their personal goals. And the answer is yes, you are because they are a person with dreams and goals and aspirations. And the more that you understand who they are and what's important to them, the more that you can connect those goals to what the business goals are. And then we can win together.Michael: So you said there's five P's, right? Josey: Yeah. You want me to go through all five? Michael: Yeah. Real quick. That'd be Josey: great. So the first P is purpose. And that is like your personal Y or your personal core values. And so this one is probably the toughest one for to define a vision for themselves or their 90 day goals.But what I have seen after working with so many incredible entrepreneurs, and I'll speak to you as the owner dentist for just a second. Is dentists have been successful their whole life. They probably did well in high school and got great grades. They got them into college and then they did well in college and they got into dental school and then they get out and they buy a practice.And so often I see people attach their personal worth. To their practice and yet the practice is going to struggle. Not if it's going to struggle, it's when it's going to struggle. So things like struggling to make payroll or having a team walk out or not being able to fix, you know, marketing, your practice is going to struggle and you have to have a purpose in your life beyond what your practice is.So that's what we help people do in purpose. The next one is people. So people is about relationships. And our relationships really are the greatest indicator of longevity and health. And what you will find is that when you're struggling in your relationships, whether it's with a spouse or a partner or with kids, or your people are, they're not going to show up as a 10 at work.And so how can we encourage people to take care of the people that they love and to have positive relationships. Number three is power, which is physical, mental, and spiritual health. The fourth P is prosperity. And so prosperity is going to be, it might be wealth, especially for you as a practice owner, but for some of your team, prosperity might be more autonomy of their time, or it might be saving for something like a house or a car, or, preparing for something in their life.And then the last one is performance. And that's what connects this personal stuff to the professional stuff. So performance is how are we doing in our job? How are we performing in our position? And that is a critical part of having this whole life. We talk about how everybody has one life space.And if we're not minding those five different areas, we will struggle. Now I'll quickly say, we hear a lot about burnout. We hear a lot about overwhelm and most people are blaming that burnout and their overwhelm on work on what they do on a day to day basis and they're quitting their job and they're hopping around searching for greater work life balance, which is the lie.right? There's no work life balance. It's work life harmony. And what I find is actually that burnout may not be happening from what we do every day in the dental office. It may be because I'm not minding my relationships or I'm not taking care of my physical health I'm not in alignment with my personal values.So what I find is as you utilize these five P's and helping people set goals, Long term and short term, you might find that there's decreased overwhelm and burnout because they're actually taking better care of something that's going on in their life. Michael: Interesting. So I feel like that's so complex though, Josie.every 90 days, do you follow up and be like, where are we deficient on which P Cause I feel like it would always change, right? every level. Josey: absolutely changes. So first of all, if you are a manager or a practice owner, it is not your job to ensure that your employees are checking off the boxes and achieving their goals.So you're not going to like, Hey, you set a goal of saying, saving 5, 000. Why are you still getting Starbucks every day? That is not what we're going to do. It's actually just about creating a safe place where people can verbally share their goals and feel as though they're seen as a human being. And so I do it once a year.I'll really just dig deep into their goals and I'll ask them questions. Then every 90 days, I recommend doing what we call a quarterly check in. That is a structured conversation where we use this idea of connect, measure, coach, and on that connect part, I just simply say, how are you doing on your goals?You know, How are your five P's? You said last quarter you were going to call your mom once a week. How's that going? So I check in so that they feel heard and seen, but it's not my job to track. To manage, to ensure that they get it done. It's really just about seeing and knowing who they are. And it's incredible.The experience that the employee has, I've had many people come back and say, I was shocked, Josie, how many tears there were. And not that it was tears of sadness or discomfort. It was that nobody had ever asked them what their vision for their life was. Michael: Yeah. Now that's interesting. I like that a lot. it opens the door a little bit more, So Josie, in your experience, how do leadership blind spots practice owners contribute to team frustration and disengagement and how can owners uncover and address these blind spots? Would it be? doing this? Josey: This is one great way to absolutely uncover those blind spots.I think that in many ways if we're a dentist and a practice owner, so much of what is happening is about achieving our goals. The practice is mine. This is, my business, my dream, and everybody's helping me. And that's actually not what most employees are excited about is helping you build your dreams.They want to build their own dreams too. they want to help you win, but they also want to win. So I think that that is a blind spot that sometimes we can be very self centered as an entrepreneur. And that is not shame or judgment. I am an entrepreneur myself and totally know. But the other blind spot that I would say is that we just don't have a good system for this and you need a good system for leadership.And so I'm sure if you're listening to this podcast, you're probably also a pretty avid. Reader or listener to other podcasts and there's incredible people who talk about leadership like Simon Sinek or John Maxwell or, Ben Hardy. There's all of these authors that we love, but how do we take the idea of what it means to be a leader and how do we actually execute on it?And that's where you need a system. And I think that's what I've seen. spent the better part of the last 10 years of my career doing is how to create a systematic leadership approach, meaning how do I do this connect measure coach, but how often should I be meeting with my employees? What should we be talking about?How do we have difficult conversations and how do we align with what I need in the business and what you want with your life? So I think that one of the blind spots is there's not a good system or there hasn't been a good system. And that's what we're trying really hard to build. Michael: I like that. I like how you mentioned how can I, ask these difficult questions, talk to them, play like, just for example, when you're approaching them and asking them about, did you call your mom this week?Kind of a thing, right? It's kind of weird asking your employee, right? So I guess, how can owners or leaders, right? Balance vulnerability with authority to foster a culture of trust and support, especially during times of high stress or change. Josey: Yes, I love that. That is the constant need of how we do. I love that you called it out vulnerability and authority.what I share is that I want to help you create an environment of high love and high accountability. a lot of people think those are two things on the opposite end of a spectrum. spectrum, but we can't have high love and high accountability. Now there is absolutely an important nuance and that is that I can love and care for you as a human being without being your buddy, where it's like not appropriate for us to go out on the weekends together or us to go on vacation together or, doing things like that.There absolutely has to be a professional line in how much we're sharing our life, but I do think that vulnerability. allows other people to be vulnerable. So a specific example is where business owners or managers feel like I have to have all of the answers and I can't tell people that I'm struggling.And yet, when you're real about the struggle or real about the fact that you don't have the answers, it actually gives your team permission to do the same. And we create an environment where it's a greater partnership and we work together. So, There is absolutely a nuance in understanding who people are and what motivates them and not getting like too involved in their lives, right?Not inserting ourself or feeling like we know too much or ask too many questions. Michael: Awesome. Josie. I appreciate your time. And if anyone has further questions, you can definitely find her on the dental marketer society, Facebook group, or where can they reach out to you directly? Josey: So my email is just Josie at Josie Sewell.com. Make sure you spell it right. j O S E Y S E W E L L. And then on any social media platform, you'll find me at Josie Sewell. Really happy to answer any questions that you might have on how to create a healthy, happy team. Michael: Nice. So that's going to be in the show notes below. And Josie, thank you so much for being with me on this Monday morning episode.Josey: Thank you.

‍Balancing life and business can often feel like a precarious tightrope walk, but Dr. Desiree Yazdan shares her personal journey of mastering this art. In this episode, Dr. Yazdan opens up about her transformative shift from a demanding workaholic schedule to a more sustainable, lifestyle-friendly business model. After becoming a mother, she realized the need to create a professional life that reconciles with her personal values and priorities. Dr. Yazdan candidly discusses the trials and triumphs of setting new boundaries, the pushback she faced from her team and clients, and how she triumphed by maintaining a steadfast positive mindset. Learn how Dr. Yazdan adheres to her revamped work hours and maintains her productivity without compromising her well-being.What You'll Learn in This Episode:How to build a business that aligns with your lifestyle priorities.The challenges of setting and enforcing new personal boundaries.Strategies for handling resistance from peers and clients with grace.The impact of a positive mindset on achieving work-life balance.Ways to maintain well-being and productivity through effective time management.Dr. Yazdan's personal tips for prioritizing mental health in business.Don't miss this chance to learn about balancing your business and your lifestyle—tune in now!‍‍The Pediatric Dental Marketing Course is open for enrollment!This comprehensive course, developed by Minal Sampat and myself, is tailored specifically for pediatric practice owners and their teams. It is designed to turn your pain points into stepping stones for success, and to help you become the trusted dental home for countless children in your community. Head over to our site to enroll now! pediatricdentalmarketingcourse.com‍You can reach out to Dr. Desiree Yazdan here:Instagram: instagram.com/dryazdanEmail: drdyadzan@gmail.com‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Desiree, so talk to us. What's one piece of advice you can give us this Monday morning? Desiree: I would say the piece of advice is to build your lifestyle first and then build your business around that. Michael: with that being said, what if we want to grow in our community that we are at, or we decide to listen to the demographics and think, Hey, this is the best ratio to patient.Okay. Thanks. Let's move here. And then later on, we realized we don't really like where we're at. Desiree: Yeah. So obviously you have to like, look at what's around you and what you're doing. But, when I said that, I think because I'm a mom, I have two little kids. And before I had kids, I was working always kind of at the expense of myself.I was open all the time, like 12, 13 hours a day. If somebody needed me in the middle of the night, I was available. Like, and I thought that that is what I needed to create a successful business. And then once I had my first daughter, I was like, okay, this just isn't sustainable. And so I started to analyze, what can I do to.Make my patients still feel like they're being really well taken care of, but also make sure that I'm taking care of my family. that's when I started to think how do I want my day to actually be? And yeah, you can't just be open for like three hours a day and then expect to have a super successful business, but you can decide what times you want to be working, what days you want to be working and then build your success off that.I just.Requires you to be much more efficient with the time that you are working. So like understand business, you have to know your numbers, you have to learn how to have a positive mindset consistently, take yourself out of the negative spirals quickly, and then just get yourself to a place where you could be really efficient in a smaller amount of time.Gotcha. So then how did you realize this wasn't sustainable? Yeah. I mean, I was just working so much. I was always working and I thought it was like a good thing. I would pride myself on like, Oh, I'm like a workaholic. And then, I think one of the times that really stood out to me, it was Thanksgiving and I just pulled up to my parents house with my husband.And I had a phone call from a patient who broke a temporary. And she wasn't even like super concerned. She was just like, ah, is this okay? And I remember walking upstairs to my parents house. And then being like, oh, I have to go. There's like a patient that broke a temporary like I'll go in and see her and whatever.and then I remember when I was driving there. I'm like, why would I do this? the patient's not in pain. And I understand it could be an emergency but it's also like it's thanksgiving and you know I need to change my boundaries And I think that moment was one that I was like, okay Like I don't know if I want to do this forever And then once I had my first daughter that just like really solidified it because you know when you have a newborn They really need you especially as the mom and so I was like, okay, we're just gonna change things up Michael: So then what efficient systems did you have to implement in order to actually change boundaries? Desiree: Yeah. So it always starts with mindset. I always go back to this. Anything that you want as far as streamlining your practice growth changing your boundaries always starts with your mindset first.So you have to first get really comfortable in your mind with your new hours and whatever it is that you're wanting to change. And then when you go to implement that, like there's no gray area. So it's like, Hey, I'm done seeing patients by this time and I need to leave at this time. And then you do that, right?So when your office presents to you, Oh, this patient just called and they want to be seen for an emergency and it's a new patient. And you're like, Oh, well, I need to leave in 30 minutes. You know, It's really hard to say no, because you're leaving money on the table andyou know, it's your practice and you're trying to grow and build it.But when you take your boundaries seriously, then you say, Ooh, I can't give good care in the little time that I have. let's see if we can get them in tomorrow instead. And the patient might not want to be seen tomorrow. They might call somewhere else and you just have to be okay with that.Michael: Gotcha. Okay. So then how did patients or your team react when this started happening? Desiree: Oh, personally for me, my team was very unhappy with it. you know, cause they were just used to me saying yes to everything. I was a big people pleaser. I was like, yeah, sure. Yeah.I'll stay late. Yeah. It's 7. 00 PM. And I've been here since, 00 AM. Yeah, sure. Let's just do it. Or somebody would call it 10.they were like on board with that. They were like, Oh, we are available all the time. But like,now what I say is what's best for the doctors best for the practice best for the business owners also best for the practice.So like.when I was working that way, I didn't want to be there. So it's a difference.Whereas when I had my daughter, I didn't want to be there as much. I wanted to be there and enjoy the work that I did, but I didn't want to do it at the expense of my newborn. when you're working against yourself and you feel obligated, you're taking that in the treatment room with you to the patients.even if you're not saying it, even if you think Oh, I hide it really well. There's some level of annoyance or obligation that you have that does come off, whether you like to admit it or not, to be honest, nobody wants an overtired, overworked, stressed out doctor working on them.Right. So like, I always think if I was going to go get a nose job and the surgeon was like, if I heard what's going on in his head, he's like, I'm just so tired.I haven't slept. I'm like, so over being here, I'd be like, let's just not do the surgery, you know, so I think the same as my patients don't want me, they want me when I'm happy and I want to be there and I'm excited about their treatment, right?Even if they're not excited about it, I need to be happy and excited doing it. Right. So, What's best for you, it's going to be what's best for your patients and your staff. And I think over time, once I stuck to the boundaries and they got used to it, and I think that's why I said. You have to be really firm in your own mind about it because there's going to be pushback when you're implementing change.but when you're really sold on it, then it's easier for other people to get on board eventually. even the patients that originally were like, what, she can't see me at that time. Like, and I would to them, I'm so sorry. I just had a baby.And I do have to be home and, I'd love to see you, but, you know, it's not like I'm abandoning you. I just also need to put my priorities now is like my children. Michael: Interesting. So then how do you take yourself out of the negative spiral that you mentioned? Desiree: Yeah, that's a good question.I have learned a lot of really amazing life coaching tools and I think that's the way I'm able to do it. But to explain to others, you have to be really aware of what you're thinking and how you're feeling. And I think a lot of times we don't really know what we're thinking. We can tap into how we're feeling like we feel bad about something.And it's important to like pay attention to that feeling and then try to identify the thought that you're having that's creating that feeling because every feeling is created by a thought. So you have to just be like, okay, what am I thinking that's making me feel anxious or that's making me feel stressed or nervous or whatever it is.And then you have to like analyze, is that thought true or is it serving me? So sometimes we think things that may or may not be true, but like, it's actually not serving you like somebody might look at their, statements or their reports at the end of the month and be like, Oh, I made no money this month.And then they might be stressed and that might be true, they might have not had enough take home to pay their bills. But is that serving you know, it's just making you feel worse. And so you have to really be conscious of how you're thinking and what you're thinking. I think honestly that's the hardest part because we just go about our day thinking and feeling how we think and feel and then to just realize that you have to be conscious about it, and really train your brain to think differently.That's hard to do on your own, but it's well worth it. Michael: Yeah. No, that's interesting. Especially when like a negative situation kind of arises, right? Interesting. Awesome, Desiree. Thank you so much for being with us. It's been a pleasure. But before we say goodbye, can you tell our listeners where they can reach out to directly?Desiree: Yeah, absolutely. So you guys can find me on Instagram. I'm just at Dr. Yadzin, D R Y A Z D A N. And then you can also send me an email at D R D E Yadzin at gmail. com. Michael: Awesome. So that's going to be in the show notes below and Desiree, thank you so much for being with me on this Monday morning episode.

‍Can a dental practice function on a NO-hygienist model? In this Monday Morning Episode, I sit down with Dr. Ron Schefdore, a trailblazing dentist who dared to challenge the conventional hygienist-dependent model and hasn't looked back since. He bravely shares his transformative journey, detailing the hurdles and victories of running a practice without hygienists. By prioritizing time with patients and refining diagnostic capabilities, Dr. Schefdore not only enhanced patient care but unveiled significant financial benefits. He offers a candid look into the operational dynamics of his practice, demonstrating how a focus on customer relationships can complement financial growth in the dental industry.Further into the conversation, Dr. Schefdore delves into practical strategies for managing the shift, particularly in scenarios involving the exit of hygienists. His methodical approach includes a gradual dropping of insurances to attract and maintain loyal and high-quality patients, while emphasizing the pivotal role of training and teamwork. Ron passionately challenges the traditional mindsets that dominate dental practices and invites you to do the same!What You'll Learn in This Episode:The compelling advantages of a no-hygienist dental practice model.Steps to overcoming operational challenges without hygienists.Financial benefits of spending more time on patient diagnostics.How to navigate network transitions for retaining top-tier patients.The critical role of training and teamwork in a restructured practice.Strategies to shift the mindset of traditional dental practices.Tune in now to explore the no-hygienist model with Dr. Ron Schefdore!‍‍Sponsors:‍CareStack: Modern, Secure, Cloud-Based Dental Software for Growing Your Practice! With state-of-the-art features including Online Appointments, Integrated Payments, Text Reminders and more. Click the link here for a special offer: https://thedentalmarketer.lpages.co/carestack/‍You can reach out to Dr. Ron Schefdore here:Website: https://www.pharmaden.net/Facebook Page: https://www.facebook.com/dentalcoachingsystems/‍Mentions and Links: ‍Education:Loma Linda University‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Ron. So talk to us. What's one piece of advice you can give us this Monday morning? Ron: Don't worry about not finding a hygienist or having hygienist issues because I did a no hygienist model very successfully for decades. And I teach that to dentists now and how to do the same thing.Michael: Interesting. Okay. So if you can a little bit expand on, how did you first transition to the no hygienist model and what were the biggest operational challenges you faced? Ron: The first 17 years in practice, we built three practices. I owned the three buildings. Staff of 36 associates out of network financially.It was fantastic. It was like every dentist's dream, right? And what I realized after that long of managing people that that is not my forte drove me nuts somebody offered me some stupid money and I took it And thank God because it gave me an opportunity to grow up now being a dentist and say, you know, what do I really want to do?Why am I here? What excites me? And for me, it was spending more patient time, which a lot of doctors want to do. So I says, if I want to spend more doctor time, and I really want to help people with their perio, get them cure basically of perio, get them to look better, the things that excited me and the work I wanted to do, that means that I can't be chair hopping.Forget the chair hopping. I don't know a dentist that likes it. I mean, There is some weirdos that like it, but who the hell wants to keep jumping from chair to chair? This never excited me, never interested me. And not getting paid, they're all joining these cut rate insurances.Why you went to all the schools, spent all this money and you're an expert. Why are you doing that? I never bought into that and I had, a bunch of money. So I didn't really need to worry about the money when I opened up the second practice of a new hygienist model. we figured it out and very quickly in today's dollars, we got up to doing a million dollars and bringing home ham and I did that for a couple of.and I had six weeks vacation, sometimes a little bit more, took a month off. A lot of times, it was the best of all worlds. And so once I retired the second time, five years ago from clinical dentistry, I started getting on Facebook and just telling dentists, Hey, you guys could still have it all.It works out really good. You're having so many hygienist issues. You don't need those anymore. Hygienists are valuable. However, they're getting theirselves. Out of the market, they're pricing themselves out of the market. They have quite an attitude. So many of them think they're doctors and it's like, no, you're an employee.You might be a colleague, but you're still an employee. So let's not cross that line, it's just a weird dynamic. Now, I've met hygienists that are awesome. I'd hire them in a second. That's 5 or 10 percent of them that I've met. And this is a real problem with most dentists that I've talked to.Don't do a hygienist model. Get out of network or minimize the PPOs. Keep just the best ones. You only need 400 active patients. For this. That's it. If we all only had 400 active patients, there's plenty of patients to go around. All these dentists are fighting over. I need 1, 000. I need 2, 000. I need 3, 000 patients.That's crazy. No, you don't. You know, just, Just stop the nonsense already. So that's my advice. Michael: Okay. Okay. So then when you apply this or what systems or workflows did you have to adjust to maintain or improve your patient care without a hygienist? Ron: One column, see one patient at a time, minimize the amount of re cares that you do, and it's assisted hygiene.No, it would be stupid for a doctor to do hygiene all day long. Get that out of your brain. Oh, I'd rather do something else where I make more money. I could prove to you, any dentist can make six to seven hundred dollars an hour doing a re care visit. I've done this on dozens of practices.How many doctors are making 700 an hour without even breaking a sweat? I mean, That is about the easiest appointment you could do. Why not have some appointments during the day that are easy on us both emotionally and physically? There's nothing wrong with that. So, you know, 800 an hour and you get a 50 percent overhead, that's a million a year and bringing home 450, 000 pace.Why do we need a hygienist? Most dentists, if they made a half a million dollars a year take home, they would be very, very happy with that. I did that for decades, took six weeks off, and it was, dentistry's still hard, but you know, I only had three cross trained staff. So when you're doing hygiene, you minimize the amount of re care that you do, and you use a great cross trained assistant with you.That's all you need to do, and you fit those half hour appointments, it's half hour doctor time, half hour assistant time on the recare, that time that you spend with them is so much more fun, and it's relaxing in between all the hard work that we have to do, look, I don't have any physical problems, it didn't burn me out, it was so much easier than what dentists are doing.Please do this, please look at this. Michael: Gotcha. Yeah. if we are already, we have a hygienist our new patients are coming in, we're pretty bustling office, right? And then right now our hygienist left. We're listening to this episode and we're thinking, man I, I want to do this, but we just have too many patients at this time.would you recommend in that situation? Ron: That's when you strategically over 18 months get out of network and half the patients will fall off, which is fantastic because the ones that stay will stay pay and refer because they like your service, but you got to change the mentality of a PPO doctor to an out of network doctor.It's a big change and you need some coaching on it. If it's not me, get a successful other network doctor to talk to you on how to treat, how to present treatment to patients, how to make the appointments in your schedule. It's. It's way different than a PPO. You can't expect a network patients to get the care that they receive in a PPO setting.It's much different. So you gotta learn that. Michael: Okay, interesting. So then, how have the dentists you've taught responded to the model? Like What are the most common difficulties or misconceptions they have when transitioning? Ron: Number one, oh, it's going to cost me money to do a recare visit because I could make so much more money by going and doing blah, blah, blah, blah, blah.And that's their belief. And I say, well, why are you making half the income that I am? And I'm seeing half the patients. I had to change their belief system. And it's the common belief with dentistry that they miss. The biggest reason they missed that is because. Where do we make our money in dentistry?Every dentist misses this. It's the diagnosing. The PPO doctor spends two minutes diagnosing. Why would you do that when I could spend 30 with the patient? If I spent 30 minutes with the patient and you spend two, who's going to diagnose more work? Who's going to get more acceptance? Who's going to do bigger cases?Me, all day long. the thing that makes dentists the most income and the most fun is the diagnosing and helping the patient get through that process. They're not doing that. So when you get the hygienist out of that, and the doctor does more of that, it's great. Keep your hygienist. Keep her doing the scalings.Most of the office I see, 16 percent to 10 percent of their patients are going through scaling and replanting, or less. Where 50 percent of the public has periodontal disease. If you don't have at least 30 percent of your practice going through scaling and replanting, there's a lot of bloody profits being done.It's just a fact. And your two minute exams, I'll fly anywhere in the country. I'll follow you around, doctor, after you do the exam, and I'll find five to fifty thousand dollars worth of treatment every week that you didn't even diagnose or talk to the patient about. So don't give me that bullshit.Thirty seven years, I can't be bullshitted. There isn't nothing you're going to tell me that I haven't seen in dentistry in thirty seven years. I challenge any doctor at that one. I've done this already. Michael: Yeah. Okay. So then how has the dynamic when this happened your team changed the removal of a hygienist?Like, did you need to train your dental assistants differently? And how does this affect the efficiency? Ron: Yeah. I mean, You have to spend time with the hygienist, which was a lot of fun teaching them dentistry. My assistants knew almost as much as I did, and technically with their hands, geez, I had two assistants.They were better with their hands than mine. You should see their temporaries. Their were awesome. They were very good with their hands. So you might be surprised that one of your team members might be just as good, if not better than you. And they're quick. they come up with ways to make things more efficient.So you just spend time with them, nurture them. And there are a lot of smart people that really appreciate that can really help you, but yeah, you have to train them and be patient. It's like a child. You know, If you're at home, what are you going to do? Scream at them all day? You got to be very patient.Michael: Yeah, no, that makes a lot of sense. So then, did you communicate the change to your patients? Or, like, did you face any resistance? if so, how did you overcome that? Ron: At first I did, there's always remarks and dentists, this is one of the things the challenges they have is the patients will mentioned something about the hygienist and most dentists look like, oh, you're doing so bad that you can't even get the hygienist.I flipped that around. I said, look, I spent eight years in school. Would you rather have somebody clean your teeth that's been in school for eight years or somebody that's been in school for two years for the same money? And I had to shut up. Every patient then laughed and says of course, eight years.I go, good. Then you win me today. All right, let's go. And that was the end of it. You built more of a concierge service and a better service. It's like, holy cow, no doctor in this community spends this kind of time with their patients. That's what made us unique. And those are the kind of patients that you're willing to attract, that are willing to pay your fees.Most of my patients were not rich. They were middle class America, but they were looking for better service and they found the money or payment plans in doing a treatment in stages. Michael: I like that. So then is there any fear, Ron, where it's Oh man, I don't ever have time off almost a thing, right?Like I'm going to be called for emergencies for any little thing, for cleanings, all these stuff. It's too much on me. I want to start delegating these things that I kind of don't like like pro fees and stuff like that Where does that mentality go? Ron: Okay. The mentality is Doctor do you like to make money?Well, Of course Well, then you better find a way on how to do a recare and do part of the pro fee You're not doing the full pro fee you're doing part of it. So my sonic cleaner I thought of it as a perioprobe, it just wiggles up and down, because I go through every pocket and look at every tooth and take pictures along the way.To me it was a diagnostic tool. So doctors, it's how you look at things, I looked at it as this has given me an opportunity to find the work that I want to do. All of a sudden I'm doing cases I want to do. So it's the bad attitude that they have, the belief that they have. you got a lemon, make lemonade out of it.It was great. I'm lemonade all day long like this. I was in such a saturated market in Chicago that there was like 15 doctors within walking distance. I was always busy. I made more income. I took more time off and they all were doing the opposite of what I was. And when I told him about it, I go, no, that'll never work.Okay. You keep doing what you're doing, because others clean up here. Michael: Yeah, Ron: works. It works every time. You just have to change your belief system and I'll prove it to him. I've been doing this for so long. Michael: Yeah, no, that's wonderful. Now, real quick. One of the last questions is this model.Cause you mentioned where you were at in the location. Is it scalable for practices in different settings, like urban, rural, large or small, what adjustments would need to be made? Ron: It's easier to do in the rural area because you're the only one there. And if you give better service than any dentist, within 30 miles, 40 miles around, holy cow, they immediately drop all the insurance.They can't believe it. I can give you a bunch of names of a bunch of doctors that haven't to in urban areas where there's a lot of competition. New York City, Chicago, big cities that are wealthier. This is perfect because you don't need a lot of patients. There's patients that want good service in urban areas, period.you don't need a lot of them because it's so condensed. It's not that difficult to find 400 patients. you gotta get a really good marketer, but you gotta learn how to answer the phone. the doctor has to present treatment and treat people well.You have to learn those leadership skills and those presentation skills too. Michael: Awesome, Ron. Thank you so much for this. I appreciate your time. And if anyone has further questions, you can definitely find them on the Dental Marketer Society Facebook group, or where can they reach out to you directly? Ron: Okay.DRS Coaching Systems, Facebook page. Just go there. You'll hear what a bunch of doctors are saying about the coaching. And go to make an appointment with me at pharmaden. net. That's P H A R M A D E N dot net. Yep, at my calendar. that's my nutraceutical company. we figured out at Loma Linda, we did a double blind test and figured out the periodontal disease.If you give them a certain nutraceutical during treatment the outcomes are much better. The bleeding pocket depth was much better. We created that 20 years ago, used that on so many patients. go to there, go to the website, go to the calendar, make an appointment. I'll talk to anybody for free.I'm not an expert, I'm just going to tell you what worked in our office. what worked really well and what we achieved, most dentists are trying to achieve. So I'm not saying I'm some guru, I'm just going to tell you what worked for me. and I'd be happy to show you exactly the same way.I got no special skills. If I could do it, you guys could do it. Michael: Nice. Awesome. So that information is going to be in the show notes below and Ron, thank you so much for being with me on this Monday morning episode. Ron: Thank you very much for inviting me.

Imagine enjoying the freedom to focus on visionary leadership while your business runs like a well-oiled machine. This Monday Morning Episode dives deep into the art of systemization in business operations, partnering with systems expert David Jenyns to reveal transformative strategies that liberate business owners and team members from monotonous daily tasks. Discover insights behind legendary organizations like McDonald's and Netflix, as David sheds light on the benefits of implementing documented processes. This episode not only highlights how these processes lead to career growth, job security, and streamlined workflows but also tackles the common hurdle of team resistance, providing actionable advice on engaging early adopters and ensuring positive introductions to new systems.David emphasizes the importance of clear communication and tailored processes that strike the ideal balance between systemization and empowerment. He discusses how business owners can remove non-compliance excuses, set clear expectations, and build a team of systems-driven individuals, paving the way for sustainable success. Tune in to learn how to transform your business into a systemized powerhouse, where creativity and structure coexist seamlessly, all thanks to tried-and-true methodologies.What You'll Learn in This Episode:Benefits of documented processes for career growth.Strategies for overcoming team resistance to new systems.How clear communication and setting expectations lead to smoother workflows.Techniques to remove excuses for non-compliance.The impact of surrounding yourself with systems-driven individuals.How renowned companies like McDonald's and Netflix utilize effective systemization.Tune in now to transform your business with expert strategies for systemization!‍‍You can reach out to David Jenyns here:Website: https://www.systemology.com/‍Mentions and Links: ‍Accounting Software:MYOB‍Brands:McDonald'sNetflix‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Dave, so talk to us. What's one piece of advice you can give us this Monday morning? David: When it comes to stepping out of the day to day operations as a business owner, you've got to capture your systems and your processes. And most importantly, you've got to get your team on board. And I feel like that's probably the biggest challenge for a lot of business owners.They try to systemize, they try it for a little bit, maybe one team member follows, maybe most of them don't, and then before they know it, everybody's forgotten about it, and it's just back to the way that things have always been. And it really, this one piece of advice I've got centers around how do you get your team on board?How do you get your team to follow process? And even. resistant team members. How do you get them to go, Oh, this is how we do things here. And key here is the way in which it's introduced to your team. A lot of business owners, when they go, Oh, we're going to start documenting our process. And we're going to have a particular way of doing things.The team member in their brain, they start to think, Should I be worried about my job? Is he trying to document what I'm doing so that he can replace me? Is he going to take my job offshore? I kind of like having this little black box where no one really knows what I'm doing because. It creates some level of job security for me.I don't want to capture my process and have that available and accessible for everybody else. So that's some of the things that go on in their head and that's what can make them resistant and then fall back to the ways that they may have done things in the past or not even want to share what it is that they're doing.So the bit of advice and the secret here is to really think about How it's going to benefit the team member. rather than just introducing it where the team thinks, Oh, the business owner is doing this to replace me, or maybe they want to go on a holiday. And, don't want to support that.Show them how, hang on, if you document your process or capture the way that you're doing things, this can help you move up in our organization because, by documenting process, we could delegate down to some newer team members. And that doesn't make you less valuable. It makes you more valuable because now you can work on higher value tasks.You can start to work your way up and work on these higher value activities. That's might appeal to some people. For other people, you might need to say, Hey, when you go on holiday and you tell me you want two weeks off and I say fine, but then I call you up every second day to go, Oh, where's that client's file up to?Oh, is that job up to? Do you remember where we saved that thing? And I'm on the phone calling you every second to try and find out what's going on. By documenting our process, it means that other people can step in and do some of those tasks, and the team can keep things moving while you're on leave, so when you come back, those things are done, and you can have a proper, restful holiday.So that might appeal to someone else, or, maybe it's, hey, there are going to be times when you're going to need time off for family. So, having process and the enable systems just means that people can step in and keep things moving. And that makes your job more secure and this business more secure.So again, a lot of it has to do with how you frame it and how you let them know this is going to benefit their situation. That'll dramatically increase the adoption of a systems culture. Michael: Gotcha. Okay. So then, David, can you share specific communication strategies you've used to address this type of resistance?How do you ensure the message is understood and embraced by team members? David: Well, The first thing to do and it's a little bit counterintuitive, is you actually don't think about who's going to resist it up front. Think about who's going to support this initiative. So when you first introduce the topic and you say, Hey, we're going to look to build a systems culture and want to capture some different processes.Hey, I've got, this book or this podcast that I want to share with you, just that talks a little bit about what we're doing and then see who resonates with it, who listens to it, who gets it and say, Hey I'm looking for some people who want to help me drive this forward. Who sticks their hand up.And then start off by leaning into them. So that's kind of step number one. You start to empower them, you get the first set of systems down and then you start to celebrate system wins. when a team member does something, you go, Hey, we just documented this new process. Jenny did an awesome job over here.Hey, Sarah, we normally have this frustration when someone goes on leave, but Sarah documented this process. And then we had John step in and do the task. Hey, Sarah, you're awesome. And you shine a spotlight on that. Maybe you give out a monthly most valued player award to the person who really embraces this idea.that's the best place to start because then you start to go, Hey, we're going to celebrate and showcase, and this is what we want more of. So that's the first step. And then you start to watch out for the. resistant team members. Now, the best thing that you can do for them is firstly lead by example, and then by shining a light on the people that are, doing it.And then you want to give those team members every opportunity to jump on board because new things you have to figure it out. And some people are going to embrace change more than others. And you try and support them. And then you need to really think about every team member and their situation.And the real key is a lot of times team members, their default excuses. Yeah, but I didn't know how, or I didn't know that was expected of me. So one of the first things that you need to do is. To remove that. So by capturing a system and a process, you're then saying, Hey, well, we have a way of doing things.You want to make sure that's never more than one click away from when they actually are doing the task. So if it's, setting up something in the dental practice, we'll have a QR code that they scan on their phone. Maybe it's on the printer or something, and it jumps to the. System or the process after scanning that QR code, or maybe it's setting up the dental practice in the morning and here's the 10 point checklist that needs to be done.It's got to be so obvious. So front and center. So you can remove that. And then the conversation can start to change. Okay, you did know we've got a process. It's listed out here. My expectation is that you follow the process. I don't care if you've got it open or not, if you're doing it right, but since you don't yet know the process, you've got to have it open, but once you get it right, then fine.You don't have to have it open every single time, but at the start, this is my expectation. And that's kind of just the start of how you address it. You've got to remove excuses. Michael: so then what consequences do you implement for team members who continually resist systems? Even though you've, done these systems, you've,Remove the excuses or try to, have you found incentives to be effective in encouraging this type of adherence? David: you can, like I said, have something like the MVP where you might reward the system wins and shine a spotlight. You can even link it towards KPIs either the generation or the following of process.can do a few things like that. I think the reality is. A lot of business owners don't realize up front how important it is to have someone who follows process. And it's not something that they've, incorporated into their recruitment process. Once you get this moving forward, it actually gets a lot easier.Because you look for people who will adopt this way of doing things right from the get go. The challenge is always the existing staff who are used to doing things a certain way, who there may actually be some people in there who aren't processed people. you'll need to navigate through that.Am I saying that you might need to jump in and do a whole bunch of, layoffs? that's definitely the last resort. And I know in certain different industries, finding labors can be challenging, but the reality is a business is infinitely easier when you surround yourself as a business owner with systems driven people.And that goes double if the business owner, or maybe the. dental practitioner owner isn't a systems person. If you don't see yourself as a systems person, then you better make sure that you're surrounded by systems driven people. Because again, business just works better that way.So do have to navigate through it. I've not seen, incentives. work amazingly well, generally you want people to do it, who do this naturally and then naturally organized people and you giving everybody the chance to jump on board and then addressing the ones that don't, oftentimes you're the employer, like the person listening to this, you're paying, they're there to do a job and it's okay for you to have, A set of expectations around the way that you want things done.That's your right as a business owner. But just persist with it. Cause it's, challenging at the start, but you get over this hump and then business just gets so much easier. Michael: Yeah, I like that. Okay. So then you mentioned KPIs to like, do you track and measure whether team members are following the systems specifically as a leader?Like what role do you personally play in and ensuring systems are followed? David: there's a couple of different ways that you can do it depending on the task, depending on who it is. If you've got some sort of project management software in how tasks are signed out, you can look at how they complete the tasks many times they're checking certain things off.You can have a look at error rate depending on if certain tasks causing you some challenges because people aren't following process and it's causing errors. So you can track that error rate and you're looking for reduction in that by following the process. it comes down to this whole idea that, to improve something, you have to track it.So you just have to think about what is it that you want to improve? If you want to improve the fact that they're. Opening the process or successfully completing it. Maybe there's some final step that they have to complete, which confirms that they have reviewed and followed the checklist.And then you're monitoring how often they're doing that, or are they doing that? depend on the situation and the task. Michael: Gotcha, gotcha. I like that. that in mind, like at the end of the day, make sure you're,you let me know, or you send me an email or you do this checklist.And then office manager at the end of the week, we'll look at how many people did this. How do you balance being hands on with empowering your team to take ownership of these systems versus it's seeming like, man, he's just micromanaging everything. David: Yes. Yeah. The main thing there is depending on what the work is, you've got to Systemize all of the things that need to happen in business.There are certain things that kind of just need to happen a certain way. patients will need to be checked in a certain way or they have to fill out certain forms, maybe The practice or the studio needs to be set up a particular way, try and systemize all of the mundane pieces or parts of business that just need to be done a certain way.And sometimes leaving out the creative part or doing those types of systems a little bit more high level, You, you've got to think about who's doing the task and documenting to the level that's required for that person. If they're a skilled operator, you don't need to tell them well, here's exactly how you log into MYOB.Here's the exact buttons that you need to check. it can feel, like you're micromanaging at that level. It's art and science, to try and find the right balance for this. look at something like McDonald's, And McDonald's has systemized every possible aspect down to the minute detail, but they're also running a hamburger business that is taking very unskilled operators, flipping hamburgers.So they've got to go down to that level and it can really feel. Like micromanagement, whereas a lot of people are going to be running, a successful business with high quality team members, and you've mightnot need to get down to that level. A quote that Reed Hastings said from Netflix and he said, when we started systemizing, we wanted to systemize every possible aspect of the business. We wanted to make sure our business was dummy proof. The only thing was once we got it to that level, only dummies wanted to work there. Because they'd gone too far on the systemization spectrum.So again, lot of this has be with, thinking about the situation, the individuals and what they need to do a great job. If it feels like micromanagement chunk up a level, have a higher quality or higher level checklist that has, key milestone levels instead of these super micro details.Michael: Nice. Awesome, David. I appreciate your time. And if anyone has further questions, you can definitely find them on the Dental Marketer Society Facebook group or where can they reach out to you directly? David: Yeah, best to just go to systemology. com and there's some links through to, all of the ways to contact us or follow us on social media.Michael: Awesome. So that's going to be in the show notes below. And David, thank you so much for being with me on this Monday morning episode. David: Pleasure. Thank you.‍

Is sobriety an all-or-nothing proposition in dentistry? In today's Monday Morning Episode, we've brought on Laura Nelson to uncover the nuanced conversation around alcohol use in the dental industry. Laura challenges the common perception that only those classified as "alcoholics" need to consider sobriety. Through personal insights, she stresses the importance of making conscious, sober decisions and explains how even social drinking can impact professional performance and practice culture. Dive deep into the pressures dentists face that often push them towards alcohol, and learn why open conversations about this topic need to happen more frequently and with less stigma.As the discussion unfolds, Laura passionately advocates for a supportive work environment, highlighting how unaddressed stress can erode a team's ability to thrive. She sheds light on the critical role leadership plays in maintaining mental well-being by demonstrating vulnerability. By setting the stage for honest, stigma-free dialogues, leaders can foster a space that encourages healthier lifestyle choices. The episode wraps up with actionable insights, including how individuals can connect with Laura and her community at Sober Life Rocks, to access peer support and resources for alcohol-related challenges.What You'll Learn in This Episode:Understanding the spectrum of alcohol use beyond alcoholism.The impact of alcohol use on dental practice culture and performance.How to cultivate a supportive environment for discussing mental health.The role of leadership vulnerability in promoting workplace well-being.Strategies for addressing stress and burnout in the dental industry.Ways to engage with communities focused on sober living.Tune in to uncover empowering perspectives that can redefine your approach to sobriety and well-being in dentistry!‍‍Sponsors:‍CareStack: Modern, Secure, Cloud-Based Dental Software for Growing Your Practice! With state-of-the-art features including Online Appointments, Integrated Payments, Text Reminders and more. Click the link here for a special offer: https://thedentalmarketer.lpages.co/carestack/‍You can reach out to Laura Nelson here:Website: https://soberliferocks.com/Facebook: https://www.facebook.com/soberliferocksprofessionalsInstagram: https://www.instagram.com/soberliferocksdental/TikTok: https://www.tiktok.com/@soberliferocks‍Mentions and Links: ‍People:Dr. Brett Kessler‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Laura. So talk to us. What's one piece of advice you can give us this Monday morning. Laura: You don't have to be an alcoholic to stop drinking. Michael: Interesting. Can you expand a little bit more on that? Laura: Yes, for sure. I was one who was the typical casual drinker through my life, conferences, events, mommy wine culture, growing up, the whole thing.And couldn't see life without alcohol because I thought to stop drinking, first of all, I wouldn't have fun. Second of all, I had to hit rock bottom. Like I would, didn't consider myself an alcoholic. And I think there's a lot of people who are in that same space that I was in. But I wasn't educated in this area, and so it's important for me to talk about this because I want to make a difference in dental because there's a lot of people who choose not to drink, who feel the pressure to drink alcohol, and don't realize that you can choose not to drink, and it's okay.We can normalize sober choices in our industry. So. Alcoholism is not a yes or no. it's a spectrum. And if we understand wherever you are on the spectrum, it's your decision, what you want to do with your life and it's everybody else's decision. And we need to stop peer pressuring each other into the need to drink alcohol.Michael: Interesting. So on the spectrum here, where do you kind of see most in the industry as far as when it comes to like events and things like that? Laura: Sure. Yeah. So, Alcohol use disorder, if you've ever drank for the wrong reason, drank too much, or woke up in the morning and regretted drinking, you are on the spectrum, because alcohol is an addictive substance and it doesn't usually serve us well.long term, right? So if you ever regretted drinking at any point or drink for the wrong reason, you're on the spectrum. Now, where is everybody in our industry all over? But the thing about alcohol is it is the number one self prescribed way to celebrate or numb feelings or emotions.And it is the most standardized use of drugs that we use our life. we celebrate with wine, we go out for champagne, we have beer tours, we go on wine tours, we go to conferences, it's all about alcohol. So it's so prevalent in our life that when somebody is questioning their use their,relationship with alcohol, or they're at events and they feel the pressure to drink, that's where it goes too far in the spectrum where we're really pushing in on each other.So, In our industry specifically we have an issue in the sense that we have lots of people who are licensed professionals who worry about their license who Have a lot of stress in their lives running practices and alcohol is where we tend to lean When we're dealing with the hard stuff and so, you know, I would say for that regard.There's probably a few who are secretly having the discussion in their head, based off of what they have in their life Michael: What psychological barriers do you think prevent? Practice owners or dentists from admitting to or seeking help alcohol use as a coping mechanism And how can leaders effectively dismantle those barriers?Laura: Yeah So the number one reason isas a society for a long time, it's been something that you hide if you have concerns about your relationship with an addictive substance, with alcohol specifically, in the past, there was a stigma around if you were in recoveryit was real, but it's not like that anymore, Overcoming an addiction, especially with alcohol, it is a personal battle that many people do privately, and we're already shaming ourselves enough when you are like, I don't understand why other people can drink and don't have a problem, but I do, and it's already something you're beating yourself up about.And then as a society and in our industry and with people in our circle. there's the shame of like, what are people going to think about me? What are people going to question? and so it's just, prevalent and everywhere. it's such a personal decision and conversation and a lot has to do with the shame around it and the fear.Michael: Okay. So then when it comes to that, especially when it comes to the burnout and stress and your experience, how does unaddressed stress and burnout. Silently erode the culture and performance of a practice over time. Laura: Oh, the fact that we can and we do go to other ways to forget about or numb the bad stuff Doesn't have us deal with the actual issue at hand. So stress depression suicidal thoughts Yeah. you know, All of the things that we deal with as humans, because at the end of the day, whether you're a dentist, a hygienist or a receptionist, you're human. And if we are using a substance to numb the pain, what ultimately happens is we're not dealing with the true issue and we're not dealing with the real emotion.And because we're numbing the pain with a substance that is addictive. Everybody will get addicted to alcohol at one point or another. When do you get addicted? Depends on so many variables. But when we know that we're leaning in to using the alcohol for the wrong reason and not actually dealing with the true stuff going on, that's when it becomes a problem.Michael: What would be using alcohol for the right reason then? Laura: well, To be honest I could sit on a soapbox now and tell you how alcohol is not good for us, but there are people who are in their head right now, they're like, Oh gosh Laura's, reading my mind, right?Having a glass of champagne to celebrate a wedding, you know, having a one glass of wine with a friend, once in a while, alcohol is it's been in our society forever. It's not going away. But if you start with one and now you're, instead of one glass of wine, you're a bottle of wine.Instead of one glass of champagne, you did drinks before you went to the wedding and at the wedding, and then you're post drinking, like there's lots of, we all have stories, right? But research shows the first 20 minutes of alcohol is fun. The first 20 minutes of alcohol, you have the endorphins, you have the dopamine.It's great. But then your body suffers for the next two to three hours. if you're drinking for the 20 minutes and you recognize the next two to three hours and your body is recovering from every glass of alcohol that you have, right? So I could talk about where alcohol is not actually serving you.But if you're using it to numb the pain, if you're using it to get away from true emotions, then that's where I would question why you're drinking the alcohol. Michael: Yeah. Cause I've always understood it in the sense of nutrition, right? Protein is, one gram is four carbs. One gram is four fats.One gram is nine calories, right? But alcohol, one gram is seven and our body doesn't utilize it, right? It doesn't need it for any building blocks or anything like that. So we're just literally poisoning our body, uh, to the sense of that But now we're talking about the psychological part and mental health part, which is increasingly important.Laura: Now, when it comes to this, What are the long term psychological and cultural implications, maybe in a practice that ignores mental health issues, particularly around burnout and depression? Alcohol use. not to get extreme, but we know suicide is a significant issue in our industry.Depression is a significant issue in our industry. And alcohol is usually tied to, a lot of the problems that people have. And soWhen you're suffering, people have a glass of wine when you're upset, let's have a drink.Let's meet over the bar and talk about it and have a drink. And so it's just that it's used so much, and that it's pushed so much. It's just our societal norm to lean into alcohol. I mean, I went to the doctor recently and he's like, how much are you drinking before I stopped? And, I told him what I was drinking.He's like, that's normal. That's not normal. Like we shouldn't normalize that alcohol is our friend. And so when it comes to the stress in the practice, the realities of what's going on, we need to recognize that that is an issue in itself, working on the depression, the stress, the financial issues, your relationships, your whatever it is.if you're band aiding it with alcohol, using that as the crutch to get through life, that is the problem, and the longer you do that, the higher chance you have of bigger problems in the long run. Michael: Interesting. So then how do you ensure. That discussions about alcohol use in the workplace go beyond surface level awareness and truly shift the mindset and behaviors of your team and leaders.Laura: Yep. My bandwagon, my thing I talk about is alcohol others. It's, suicidal thoughts. It's depression. It's divorce. It's financial problems. Like we all have life things. We all have our own dark places, whatever it is. What we need to build and can build is an environment where people can just be okay with what they have.we know our own secrets. We know what's going on in our head. We know the things that have happened in our life, the things we've done. And we always compare the worstof us to the best of other people. Right. The Instagram side of what other people are.If we could actually just build an environment, build a team where people can just have the space to be okay, to communicate their issue, to be allowed to feel, we are humans, you know, no matter who's on your team, we all have real things going on. And if you can build a space that it's okay to Be transparent, be vulnerable and allow somebody to be able to talk about their thing, whatever it is.And so like for me with alcohol, my whole goal in this conversation is just to get people talking. Because if we can't get people talking, we're not going to help people. And so normalizing the okayness to talk about whatever your issue is. Find people who have dealt with what you're dealing with and lean into that because The more we can fill the gap between people who need help and the people who can give help By getting rid of that gap of shame and fear and allowing people to just be vulnerable and be real will change lives and change your practice Michael: Yeah, I agree getting people to talk about it is huge, then I feel like there's that fact of like vulnerability, especially if you're a leader.So I guess, in addressing alcohol use and burnout, do you balance vulnerability and leadership strength, especially when,you may be struggling with similar issues Laura: as a leader. Your team is going to follow you if you set examples, right? So being vulnerable is a completely agreat leadership skill to be able to say, I don't know.Now, I'm not saying that as a doctor, you need to tell everything going on in your private life and in your brain and all of the stress that you have, but To be vulnerable with your team to say, you know, I have some mental health issues. I have some personal concerns I'm dealing with. I have some things and be real with your team.They're going to respect you follow you that much more than trying to fake. that you have it all together because nobody has it all together. And then going and getting the help that you need. Like again, when you can lean into getting help, you can see how it improves in your life as a doctor and as a leaderand then be able to offer that to your team, talk about turnover that we have if your team knows that you really trust and believe in them and you're vulnerable and you're real and you care about them, they're not going anywhere, They're going to be on your team forever.So just be real. It's all we really want. Michael: Yeah. And so that shows strength. Okay. Gotcha. So then, in your work, Laura, how have you seen unresolved personal struggles with alcohol among dentists affect their ability to deliver patient care and are there any interventions or what interventions have proven most effective in these situations?Laura: Yeah, the reality is when I started this journey of sharing my storymy story is a little bit easier than a dentist and a hygienist, cause I'm not licensed. So I can stand on the mountaintops and say, I'm happy to be sober. And this is why I chose it for my life. but for a dentist, there's a real reality of, your team.Your license your patients. And so, the reality is there's a lot of licensed professionals in our industry struggling, struggling with mental health issues, struggling with addiction issues, and they're not getting the help they need. I actually have a hygienist that I'm affiliated with. she was more worried about losing her hygiene license than she was about getting a DUI when she was actively drinking because.That's her livelihood. Many team members are dentists. We know that they're suffering and that's our livelihood. If our dentist has to go to recovery or rehabilitation or, take time out of the practice, what about our jobs? Right. And so it's the reality of what's going on. Luckily I've become really good friends with the incoming ADA president, Brett Kessler, Dr.Kessler, who that is what he wants to change for our industry isto allow and have support for. Licensed professionals. They're bringing in a third party company where you can actually call and get help. You can have real conversations because our jobs are our jobs, but our life is way more important, right?So I'm hoping that the worst cases that I know and the things I've seen, we can make a difference by just starting the conversation. Michael: Awesome. Laura, thank you so much for your time. And if anyone has further questions, you can definitely find her on the dental marketer Facebook group, or where can they reach out to you directly?Laura: Sober life rocks that is our new Community and group sober life rocks find me on all the social channels or just come to our website sober life rocks Michael: Awesome. So that's going to be in the show notes below and laura Thank you so much for being with me on this monday morning episode.Laura: Thank you

Is your dental practice running smoothly without your constant supervision? In this enlightening episode, we delve into the heart of effective leadership with Dr. Sarah Blair, a seasoned expert in guiding dental practice owners toward efficient and engaged management. Dr. Blair candidly discusses the pitfalls many leaders encounter when they aren't actively involved with their teams, especially when it comes to key responsibilities like patient interactions over the phone. Through her insights, you'll discover how attentive leadership can turn potential lost opportunities into lasting patient relationships.Dr. Blair also shines a light on the often-overlooked back-office inefficiencies, using supply management as a prime example. Drawing from years of experience, she shares practical strategies to bolster team performance by focusing on comprehensive training, streamlined systems, and the critical importance of setting clear expectations. As the episode wraps up, Dr. Blair invites listeners to connect with her for more tailored advice, ensuring that leadership gains aren't just theoretical but actively applied to foster a thriving dental practice.What You'll Learn in This Episode:The impact of active leadership on team performance and patient engagement.Strategies to enhance patient communication over the phone.Common back-office inefficiencies and how to address them.Importance of clear expectations and consistent training for team effectiveness.How to transform practice management with effective systems and leadership.Tune in now to unlock revelations that will transform your dental practice's leadership dynamics!‍‍Sponsors:‍‍Oryx: All-In-One Cloud-Based Dental Software Created by Dentists for Dentists. Patient engagement, clinical, and practice management software that helps your dental practice grow without compromise. Click or copy and paste the link here for a special offer! https://thedentalmarketer.lpages.co/oryx/‍You can reach out to Dr. Sarah Blair here:Website: https://www.indiepractices.com/Sarah's Facebook: https://www.facebook.com/sarah.blair.961993Indie Practices Facebook: https://www.facebook.com/IndiePracticesTop 10 Team Management Solutions: https://www.indiepractices.com/digital-resources‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Sarah, so talk to us. What's one piece of advice you can give us this Monday morning. Sarah: All right. So my piece of advice is to be aware that the work that your team is doing when you're not around probably isn't as good as you think it is. That's a little controversial to hear. It's not what everyone wants to Michael: So, well, First let me clarify a few things. first by not around. I don't mean you're on vacation. I mean that you're just not present. So it means you're busy, you're distracted, you're not paying attention. that's what I mean by when you're not around. And I also want to clarify that this is not anti team by any means.Sarah: We are super pro team. We love teams. it's just that there, is a disconnect between what the leader should be doing and should be providing and what the team is actually receiving. So I've been a team member myself. I was a dental assistant. I worked at the front desk. So again, we're super pro team.This is more of a leadership concept here. Michael: Okay. Gotcha. So is it more in the sense of like, Hey, we're doing what we're supposed to be doing clinical work, right? Talking to the patients, being with patients, but then we don't know, really know what the front office is doing. They're doing busy work, but not productive work.Sarah: That's a great way to put it. Yeah, the truth is that your team is almost certainly underperforming some areas if you're not engaged managing. So as coaches, we get to see and hear this a lot. owners don't always want to hear this news, but we get to look at the metrics and we get to listen to the phone calls and when we look at these data points, we can see that the team is not performing as well as The way that the practice owner has been hoping or the way that they have always believed that their team is performing.Michael: So why does this happen? Is it from the beginning, from the get go, is it happening like that? Or is it more like they fall into a lull and now they're not performing as good, but they figured a way to, make it look like you are. Sarah: We actually have the top 10 list of all of these key areas.The ways that teams typically underperform, and the ways to address it. And we're going to have that on our Facebook page. It'll also be on our website and under the resource library. So we probably wouldn't get through all 10 of those today. And like you said, some of them do apply early on. Some of them can apply to long term team members that have maybe started out super energetic and fired up and things have drifted off into a different place at this point.So basically as leaders. We're failing our teams if we don't provide guidance, AKA training and systems, clarify expectations, monitor the results and hold the team accountable. So as we like to say inspect what you expect. Michael: Okay. So then What would you say are the most common that you've seen time and time again?Sarah: primary one that I would say is on the phones. So we're seeing, really common things happening on the phones that owners are totally unaware of. They're trusting and hoping that their teams are doing a great job. In fact, sometimes they genuinely. Believe that their team is doing a great job and it can be really frustrating and disappointing for them when they find out that's not the case.So I would say phones and what's happening on the telephones is One of the biggest areas, and luckily for us as coaches, one of the areas that we're able to document and observe the most closely is the way, especially incoming new patient phone calls are handled Michael: So then when you're listening into these phone calls, where do you see them drop the ball the most?yeah, so the most common theme is just Reactively answering the first question of course is usually do you take my insurance or how much does this cost? And so they just go directly into the nuts and bolts of answering that question without building any connection building trust without building value for the practice and talking up the doctor in the practice and why you're going to love it here.Sarah: They go right into the nuts and bolts of complicated insurance plan, something like that. So not taking control of that phone call right from the beginning is where we see team members fall off the tracks most often for this. And again, this is a, leadership issue because the team members don't have the training, the systems in place.to have those successful conversations with new patient callers to get them into the schedule. So it's not a team problem. It's a doctor problem. Michael: Providing the guidance. Could you Sarah give us like a script to that reaction? So like let's just say it's super common, right? Or it's hey, you take my insurance Sarah: usually people it's a lot of nose. It's a lot of going down rabbit holes and oh we don't play some plants here. You'd have to go see a Surgeon, it's a lot of roadblocks You And a lot of denial. So I think a lot of team members are afraid. To give unrealistic expectations so they shut things down right away and consequently the patients are like, okay, I guess not coming in.it's so sad and I hear, we just hear hundreds and hundreds of these calls all the time where it's like a dead end. It's a roadblock. It's a bottleneck in the conversation. So instead, so we have to take that tough question. Sometimes I like to envision it as a brick or something that if somebody's handing you this object, you have to take it.It's not what we're going to deal with immediately. We're just going to set it right here. And then we're going to draw the patient in by connecting. And by building value for the practice before we get to that tough thorny question that we're going to deal with soon. So it could just be something like, First off you answer, you know, hi, my name, practice name. How can I help you today? And then they're going to give tough question. They're going to hand you the brick and you're going to say, awesome. That's such a great question. I'm so happy to help you with that today. Let me just get a little bit more information so I can help you out with that.And then you just go right into, get their name, use their name through the rest of the call. And then you're going to ask, find out why they're really calling. So patients are asking about insurance and pricing because they don't know what else to ask. But what they really want to know is, are you guys nice?Are you guys good? So you got to build that connection. You got to build a value. So you're going to say Oh, you just moved here. That's awesome. Welcome to the area. You're going to absolutely love it. And you're going to love our office. Dr. Jones is amazing with whatever it is that you wanted.So if you asked him how to crown, he's awesome at crowns. you're already building that value and that connection. And team members invariably think that's a waste of time. We don't take their insurance. Let's just end the call, but you're going to lose a hundred percent of those callers. If you at least build a connection and you're building trust, you're building value, so much more likely that you're going to schedule and that that patient's going to actually show up.Michael: like that. I like the way you put it like as a brick. I remember there was a, thing where they said like in different cultures, more like Japan, Japan. When you bring a gift to them, it's considered rude to open it in front and be like, Oh my gosh, compared to here, like in America, right here, we want to open it immediately and we Sarah: expect, Michael: but over there, they say like, put it to the side and acknowledge the person.Don't worry about it right now. Sarah: That's great. Think of it as a gift that someone just handed you because the gift is they're presenting themselves to you as a potential new patient. This is not some. Terrible problem that someone just handed you. It's a potential new patient and it should be the most exciting and important thing in your entire day.But sadly, team members don't get the training on this. They don't know how to take that call and take control of it and turn it toward the things that really matter. Of course, we're going to answer that tough question. We're not going to be evasive. We're not going to be dodging questions. We're going to deal with it, but we have to build that connection first.Michael: I like that. And then real quick for the back office where do you see it? Where it's like, Hey, you guys are being busy, but not productive. Sarah: Yeah. A couple of different areas where your team is probably not optimizing and they're underperforming in certain areas in the back. one area that we've seen recently, a lot of supplies.if the team member is ordering supplies. they probably don't have designated time set aside for themselves to do that. They're just fitting it in wherever they possibly can around a busy schedule. They probably don't have a system, so they're just ordering whatever's easiest with no way to price shop and look for the best possible options.we had a client recently who is.Supply costs were almost 20 percent of their revenue their minds were blown when we shared this data with them because they hadn't looked at it. with just three simple changes, which setting aside time for clinical assistant to actually do this task,training her on how to do it and what system they were going to use, and setting a budget and setting some really clear expectations.They cut their costs dramatically without sacrificing one bit of quality. And in fact, it's actually much easier for everyone on the team now. that's just an example of where if you're not paying attention, if you're under managing and not inspecting what you expect, you're going to get a result that is really out of line with what you're hoping.And you're going to see it in the numbers. Michael: I love that. Inspecting what you expect. Awesome. Sarah, I appreciate your time and if anyone has further questions, where can they reach out to you directly? Sarah: Yeah, absolutely. So you can email me directly. It's sarah indie practices.com.That's I-N-D-I-E practices. or you can check out our websiteor just chat with me on Facebook. So just reach out to Sarah Blair on Facebook and message us on in practices on Facebook. We're always putting out new content and you can check out what's going on.Michael: Awesome. So that's gonna be in the show notes below. And Sarah, thank you for being with me on this Monday morning episode. Sarah: It was a pleasure. Thanks so much, Michael.

Are traditional retirement plans holding you back? In this eye-opening episode, I dive into a conversation with Kyle Christensen, where he disrupts conventional financial strategies queued up for dentists. Rather than funneling earnings into several miscellaneous traditional retirement savings like 401ks and IRAs, Kyle introduces the novel concept of "fake assets" that might not serve you as you imagined. He advises dentists to channel their investments into their sphere of expertise—into themselves and their practice—in order to craft paths towards abundant wealth genuinely.Kyle breaks apart the paradigm of diversification and advocates for other arenas like real estate, intellectual property, and personal development ventures such as coaching. Discover the lengths to which specialization can forge wealth without waiting decades!What You'll Learn in This Episode:Why 401ks and IRAs might be considered "fake assets" for dentists.The importance of investing in one's expertise and practice for optimal wealth creation.Strategies for maintaining high liquidity to seize strategic opportunities.Understanding the value in real estate, IP investment, and self-improvement coaching.Kyle's take on why diversification strategies might be outdated.How specialization, rather than diversification, leads to increased wealth.Ready to reshape your financial future and mastering the art of specialization? Dive into this episode now!‍‍Sponsors:Studio 8E8: Dentistry's story-driven marketing agency. Traditional marketing repels. Story-first dental marketing attracts.We bring your story to life in a way that captivates and connects: https://s8e8.com/affiliates/tdm?utm_source=tdm&utm_medium=affiliate&wc_clear=true‍You can reach out to Kyle Christensen here:Website: https://uniqueadvantage.biz/Kyle's Book "Principals Based Planning": https://a.co/d/8576RD3Instagram: https://www.instagram.com/unique_advantage/Facebook: https://www.facebook.com/profile.php?id=61558072766116LinkedIn: https://www.linkedin.com/company/uniqueadvantage-planning/‍Mentions and Links: ‍Terms:Fica Taxes‍People:Bill GatesElon Musk‍Books:FAKE: Fake Money, Fake Teachers, Fake Assets: How Lies Are Making the Poor and Middle Class PoorerThe Autobiography of Andrew Carnegie and the Gospel of Wealth‍Videos:Why diversification is for suckers: Warren Buffet and Mark Cuban‍Businesses/Brands:MicrosoftAppleBerkshire HathawayWalmart‍Places:Wall Street‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Kyle. So talk to us. What's one piece of advice you can give us this Monday morning? Kyle: My advice is to don't gamble with your financial future. And there's a reason I'm saying that. Michael: What's the reason behind it? Kyle: I think most of your listeners are probably being pressured, by the conventional wisdom out there to start quote, saving for retirement.And basically the way I look at that is they're divesting money from their control and their use and their expertise, and they're putting it in things that they have no control, expertise or use. And that's generally encouraged by the financial planning industry. Okay. Michael: So would you say, Don't start putting funds into that. Kyle: I know. Sounds crazy. Doesn't it? Yes. That's exactly what I'm saying. The financial institutions that are promoting the philosophy of retirement and retirement planning, they only have one objective, and it's actually a huge conflict of interest.Their objective is to get asset center management. Their objective is to get your audience to send them money on a regular and ongoing basis and not touch it for decades and not receive any income for decades from those supposed assets, Robert Kiyosaki in his most recent book called fakecalls 401ks and IRAs mutual funds.He calls them fake assets. And the reason is he says a real asset is something that puts money in your pocket. And a liability is something that takes money out of your pocket for years. And that's why he calls those kinds of things, fake assets. Michael: So then from your expertise, where should we be putting our money then?Kyle: They should be putting it in what they're experts in. I've been to plenty of dental industry events, conferences. throughout the country. And I can tell you by looking at all the exhibitors of these events, there's plenty of opportunity for, dentists to invest in themselves and to grow and to expand.They're being convinced, however, to, move their money and invest in things that are not in their expertise, which I just finished reading Andrew Carnegie'sautobiography earlier this year. And in his book, he talks about that exactly. He says, I've never seen a man be embarrassed by investing in anything other than things outside of his expertise.his recommendation, which he's the richest American thatthat's ever lived. You know, we think, Bill Gates is super rich and Elon and they are, but comparatively Andrew Carnegie would be worth 300 billion in today's dollars. So he knows what he's talking about.And I think there's some wisdom in what he's saying. He's saying that, look, you should be investing in thethings you can control, and influence. Michael: Interesting. So then what are some strategic investments specifically for dentists that they should be investing in?Kyle: Yeah. So number one, I would say, don't be afraid of having cash. Don't be afraid of accumulating cash because cash means opportunity, think everybody's heard the phrase cash is King and there's truth to that. The people who have cash have opportunity. I'm sure most of your audience has dealt with loans, practice loans, or equipment loans, or things like that, right?What if you could get to a point in time when, you're only using loans strategically. You're not using them because you have to, but you're using them strategically. Maybe when the interest rates are really great and you're making more interest in where your cash is at, right?So at that point in time, it might make a lot more sense to just maintain the cash, take the loan, right? But in most people's cases, they're taking loans because they don't have the cash. So I would say, don't be afraid to build and maintain high levels of cash because cash equals opportunity. I'm thinking about one of my dental clients that's in Oklahoma.I started working with him whenhe bought into his first practice and he was making about 250, 000 a year. so that was in about 2014 when I started working with him this year.in fact, a conversation that I had with him last week, he's buying in three more practices.So he'll have a total of six practices. He has over 10 doctors working for him, his annual income just from what he does managing the practices, he makes over 2 million per year. That's where people should be investing right in their own ideas, in their own business, in their own property. Investment, for a dentist could be, investing in coaching.That's a great investment. In fact, this particular client, that was one of the first big investments that they did is they invested into coaching for their practice. And the amount of increase in efficiency in their practice went through the roof. So those are the kinds of investments that I think that your audience should be considering and, should weigh heavier than things that they have no expertise in.Michael: Yeah. Interesting. was that revenue profit or cash? Kyle: That was net profit per year for him. Michael: Oh, interesting. I like that, man. So then how would you plan for long term, I guess, like financial security and wealth building Kyle: So one of the things that you can do is you can start to invest into real estate, right?For example, maybe the property that your practice is in, that's an opportunity, right? And that's actually a way to, change the character of your income. Let's say that you're paying 20, 000 a month in lease, for your office lease if you were to own the building And now you're practice is paying that to you that twenty thousand bucks a year.You're Recharacterizing two hundred and forty thousand dollars a year now. It's not going to be subject to fikaSo you're saving fifteen point three percent of that money in taxes And now you're going to pay ordinary income tax, which you would have anyway, but you save a huge chunk of money over time if you sell that practice in the future, you could still Keep the building, it's a cash flowing asset to you.You can look at investing in other, what I would call real assets. Real assets are basically things that financial institutions can't sell you. So real assets might be owning a franchise. It might be owning, other real estate property, intellectual property. I think about the inventions that have taken place in the dental industry in just the last 10 years.And it's incredible. If you've been to the dentist regularly, you've seen it, the way they take x rays, the way they do imaging, everything. It's amazing how much technology, how much improvement has been made. What's the genesis of most of that improvement? Is it somebody who's not in the dental world or is it somebody that's in the dental world that came up with those things?And I would say it's mostly things that were brought up or invented Or at least thought of by people in the dental industry. Your audience might be, as they go along, be coming up with ideas that are multi million dollar cash flowing ideas.And what I'm saying is, that's the sort of thing they should be investing in. Michael: Gotcha. Okay. So then how do you balance reinvesting in the business with diversifying your portfolio for long term wealth here? Kyle: So diversification, just submit is a marketing idea. Really? Michael: Okay. Yes. Kyle: in fact, I would encourage everybody to look up what Warren Buffett says and Mark Cuban says about diversification on YouTube.Diversification is an excuse for lack of knowledge. So specialization is what creates well, it's having an inch wide. Knowledge, but it's a mile deep, versus the Jack of all trades that has a mile wide basis of knowledge. And it's only an inch deep the whole way.People get paid for what they know. this idea of diversification, it's wall street. Wall Street is encouraging diversification because an excuse for their inability to pick winners and losers, which all the research actually says that they cannot do. And so we pay all these mutual fund managers and these money managers a lot of money right, every year, so that they can pick winners and losers, and yet all the research says that they can't, and what do they tell us we have to do?Diversify. We have to diversify. We have to asset allocate, We have to change that so that if something goes down, which is out of our control, which is a key point, I think then not all of our money will go down. So my question is. Should Bill Gates have diversified out of Microsoft should Steve Jobs have diversified out of Apple should Warren Buffett diversify outside of Berkshire Hathaway, I would say no, I think that those guys know exactly what they're doing.And they're investing in the things that they know that they're experts in. Michael: Interesting. Okay. So then if we do have a portfolio and our consultants are, are, you know, financial advisors are telling us like, yeah, you need to diversify. We did it already.How can we start scaling back? Or do we just take everything out of our mutual fund 401k RAs and stuff like that? Or, Or what are your thoughts? Kyle: Here's my question. How much controller influence do you have over how that performs?Michael: None. Like If I bought Walmart stock, how much influence do I have over that? buy something at Walmart, but nothing happens. Kyle: But it's not going to move the needle, right? It's not going to change the stock price, right? So I have no influence over that. So in reality, if you look up the definition of the word invest or the word gamble, What is that more like, Is it really investing or is it really gambling? I think that's the first thing we need to do. Let's call it what it is. And some people like to gamble and that's fine. for some people it's exciting. It's a fun game, but I don't think that people want to rely, put their entire financial future on gambling, right?But they're being told that that's what they should do. So what should you do if you already have, most of your investment in that kind of situation? Well, number one, does it make it better to put good money after bad? in the business world, don't put good money after bad, right?So if we're already doing something and we realize maybe this isn't the direction I want to go, then don't keep putting money in that direction. Does that make sense? So that's the first thing I would stop contributing If you realize that, hey, you know what? I really do have more confidence in what I'm doing than I do in putting it into something I have no clue and I have no control, no influence over the outcome, right?I'm actually penalized if I touch my money, Here's the other thing. Don't let the tax tail wag the dog. So what I mean by that is, taxes, yes, are an important factor to keep in mind, But they shouldn't be the sole deciding factor, if my entire goal is to avoid taxes, you know what the easiest way for me to avoid taxes is?Don't make money. And I don't know of anybody who has that as a goal. That's not a goal for anybody. It's not a good goal. I don't think to not make money. So avoidance of taxes isn't really the goal. Financial freedom is your goal. It should be your goal. And I think that's what most people have in mind when they think about retirement, even though that's not what the word retirement means.I think that they think about financial freedom, you know, I want to be able to do what I want to do when I want to do it. Well, The problem with retirement accounts is that they don't provide you with any. income. They don't provide you with any velocity. That's the principle. It's called velocity of money.So you put money into a retirement account and you can't touch it for a long time. Michael, you seem like you're in your thirties, maybe. Are you in your thirties? So if you're in your thirties, when can you touch that money without paying a penalty? 30 more years. Yeah, it's 30 more years. And who benefits from that?Is it you or is it the financial institutions? Michael: I don't know if I'll be here in 30 more years, even like so. Kyle: that's true. It's absolutely true. There's no guarantee that you'll live that long. Here's the thing. Those products, those accounts are not designed for financial freedom. They're designed for retirement, which is an age.Retirement doesn't mean capability. And so here's the question. Would you rather pay the tax? And maybe even the penalty. Right now we're at, the market's still at, near it's all time high. It might make sense actually, to cash out. And pay the tax and the penalty. Which seems totally crazy. I'm the only financial planner that you'll ever hear that suggests that that might be a good idea.And here's why. Because I believe in you. I believe in you more than I do Wall Street. They have a conflict of interest actually. Their conflict of interest is this. If you take out your money, they make less. That's the reality. that's an actual financial conflict of interest. So when do they want you to take your money out?Never. Michael: Yeah. Kyle: Yeah. It's never. that's the game. They're just pushing it down the road for 30 years. And if you've put money into the retirement accounts, you've agreed to that condition that you won't touch your money for 30 years. Which only benefits them. It doesn't benefit you in any way, but they're trying to convince you that that's true And then when you get to 30 years from now because we just said what's their conflict of interest?They don't ever want you to touch your money. They get financially injured if you take the money out when you hit 30 years from now, do you think they're going to still want you to take your money out at that point? Nope. They're going to give you every reason why you shouldn't because you might outlive it.It's not enough. it didn't grow as much as we thought it would and so on. I would rather you have half of that money in your full control and your full use. Michael: Love it, man. Awesome. I appreciate your time. And if anyone has further questions, you can definitely find them on the Dental Marketer Society Facebook group, or where can they reach out to you directly?Kyle: You can go to my website, uniqueadvantage. biz. And the last letters are B I Z, Boy Island Zoo. Our email addresses are on there. You can, reach out. I'd love to answer any question.Michael: couple other ways you can find out more, right? You can go to amazon. com and you can buy my book, principles based planning, a better approach to financial planning. The other ways you can find us we're on Instagram.Kyle: Facebook and LinkedIn. So we'd love to have you follow connect. We'd love to see on there. Michael: Awesome. Yeah. So that's going to be in the show notes below Kyle's book. I saw social media handles. Please reach out to him if you have any questions and Kyle, thank you for being with me on this Monday morning episode.Thank you.

Are you chasing a purpose needlessly? In this episode, I chat with Adrian Dray, who experienced precisely that. Adrian dives into his personal journey from an emotional and financial low in 2017, a time that challenged his to-the-core beliefs about the conventional pursuit of purpose. Through exploring and mastering the unknown, Adrian's life took a complete 180° turn when he embraced GDPR legislation, achieving an invigorating career refresh and unraveling new practical wisdom about mending a personal series of setbacks.Join us for a raw, authentic conversation that breaks down mainstream self-help myths whether diagnosing the necessity of a life purpose or managing emotional downfalls deftly. Adrian's narrative accentuates the power of focusing on courage and mastery instead of living in perennial perusal of one's ''why''. Plus, get insights about the tools and strategies he implemented to keep pushing forward even after debilitating outages like an illness and emotional burnout, culminating in career growth he had never imagined before - at CareStack, where they make the practice management simple for dentists.What You'll Learn In This Episode:How Adrian's journey from rock bottom shaped a thriving career pathWhy courage might be a better strategy than seeking certainty in lifeThe significance of mastery and novel explorations over finding a predefined purposeTips for sustaining motivation and positive thinking through tough timesStrategies Adrian used to bounce back from severe setbacksAn in-depth understanding and appreciation of GDPR and its career cultivation mechanismHow to maintain a balanced mindset in the spin of adverse circumstancesInsights and advice related to emotional regulations amid reconstructing from failuresStay inspired to break myth-ridden limitations by tuning in with us and learning from Adrian's unique journey!‍‍Sponsors:‍CareStack: Modern, Secure, Cloud-Based Dental Software for Growing Your Practice! With state-of-the-art features including Online Appointments, Integrated Payments, Text Reminders and more. Click the link here for a special offer: https://thedentalmarketer.lpages.co/carestack/‍You can reach out to Adrian Dray here:Meet Adrian at CareStack Inner Circle: https://carestack.com/en-GB/company/events/inner-circle-2025Book a Demo: CareStack.comFacebook: https://www.facebook.com/AJ.DrayLinkedIn: https://www.linkedin.com/in/adrian-dray-carestack/‍Mentions and Links: ‍Organizations:GDPR‍People:Abhi Krishna‍Studies:31% More Productive with Positivity‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Adrian, so talk to us. What's one piece of advice you can give us this Monday morning? Adrian: My piece of advice, and thanks ever so much for having me on, is really around some of this mainstream self help advice that you often hear inside, outside of dentistry, which is you have to start a project or start a particular path with knowing your why.Or there's this overemphasis of the pursuit of purpose. My advice, and this is from a story that I can give, a bit of a painful story is that advice from my perspective is a bit a fallacy. And that holding fast to that, level of thinking can actually be quite limiting for people. I am not a life coach by any stretch, but I think that maybe sharing what I've been through might give people a perspective and hopefully free them from what I see a lot of people who are imprisoned by this pursuit at the moment. Michael: Interesting. So why, what, if you can break it down to us. What went on or why should we believe that it's a fallacy?Adrian: my story started in, late 2017 is before dentistry. And I came to the realization the paycheck I was expecting to receive after working for a family run business, which I'm a member of that family wasn't actually going to come through and I was already in a bit of a financial pickle.Difficulty, that's very English word there. And I really struggle with that. Now. I happened the year before to nurse my father who unfortunately died. He'd had secondary liver cancer. And this kind of moment that I had, this paycheck not coming through was a sort of a trigger for me to suddenly think about all that last big stress in my life that I obviously hadn't dealt with.What this did is it threw me a bit of an emotional breakdown. I stopped working. I just basically watched cartoons in bed for weeks. I was self employed at the time as well. And so my financial situation was just getting worse until, a family member who depended on me said to me, Adrian, you need to fix this.problem is at that particular time I was horrifically sad. And I've recently heard the best definition of sadness that it is the perception of a lack of options, which leads to hopelessness. So for me, I had an option to stay in bed I had a second option to go back and work for the family business, which I didn't want to do.But other than that, I didn't really know what to do. So I made the Option to find an option, right? So I did that and I came across a really weird thing It's called gdpr for u. s listeners that may have heard about it, is a piece of data protection Privacy legislation that was coming into the uk affecting businesses at that particular time and I thought well, maybe I learned this Maybe I just go all in and learn this and see where it takes me.So I learned I listened I watched You I did courses on everything I could do. And it was a fantastic distraction. It got me out of bed and I joined privacy professional Facebook groups, which are, a riot, but I came across one called GDPR for dentists. It's the UK dentists. I joined that. And over time I helped grew that I'd started answering people's questions as I was learning.I started posting content and therefore my confidence started to build from this courage that I built. Was starting to generate right because this was a very uncertain time for me And as I reflect back on it, I realized that the opposite to uncertainty is not certainty. It's courage You need to have the courage just to move out to get out of that state of feeling uncertain and that courage served me quite well because After a few months, I got a job as a gdpr consultant Which paid better than what I was in the family business for the last few years You I then became in a few months after that in a very senior role that on paper was like five years ahead of me on my career path, but I managed to get this kind of just living off this rocky montage of listening, learning, answering, consulting, training, just seeing where it took me.And I got this kind of passion for working dentistry and being with that community. Now all things were going well, had the experience, thought I'd set up my own business, I'd got And I got a, a good six months of selling out training courses, speaking events, consultancy. And then I got COVID.I got COVID in July 2021. And I got it bad, like hospital bad to the point where consultants were having conversations with me, such as, we're doing everything that we can do, Adrian, so you don't die. And my family were being told to prepare for the worst. Now, the spoiler alert on that is I survived but when I came out of this, they call hypo oxygen room, when you're on your own, it's just about to die kind of room and went back to the main ward.I look out to the people around me, suddenly there was a couple of nice guys, but some of these guys were so aggressive and rude and abusive to the nurses swearing. And I thought, you know what? I'm just gonna be as nice as I possibly could. I had a long road of recovery. And I thought well, you know, in my side personally, I know who I am, but you know what, I came out of there feeling quite lost professionally.Because I had to start again. I couldn't run my business. I couldn't do the training courses. I couldn't do the speaking events. I couldn't do the consulting because I couldn't finish a sentence because I was wheezing. lungs were shot to pieces. And so I had to start from scratch. I I had to do these menial, basic junior data protection roles. That I could have thought were beneath me. And as I recovered physically, I moved back up, I put the reps in the effort. I was actually working in a bank, I wasn't even working in dentistry, but I kept like a foot in dentistry because I knew that through this whole journey that had been a passion of mine that had weirdly come out of, this whole thing.And in 2022, late 2022, I met Abhi Krishna, who's the CEO of CareStack. And I saw there an opportunity to get back into dentistry, to work with a company that is very input focused, that's all about hard work, that presses through, and is just looking to break through to the next thing. And there's no purpose washing And I found really encouraging. And as I look back on this whole journey that I've been on, I realized that back in 2017, if I had that emotional breakdown, if I had tried to conjure up some sort of purpose, then find a why I would have just hit another emotional breakdown I think unless you're prepared to break down that, purpose and the actual behaviors and the actions, you're just going to come up disappointed.And so many people I see have these big whys and purposes that are typically created and crafted because of expectations from families, friends, their environment, that they end up getting there, hitting the peak of this mountain, and realizing actually they don't really like the view. So I've changed my whole view of that to thinking that the best mountain to climb is the one that doesn't have a peak.Just keep on climbing. See what passions and purposes come out of it, and enjoy it. Don't be held and imprisoned and shackled by this, overemphasis of a pursuit of purpose. Really lean into mastery, exploring, and opportunity. It is a far better way of fulfilment. Then having to fall into mainstream, conventional self help and development around knowing your purpose, knowing your why, I've learned the hard way.It's not worth buying into it. Michael: I appreciate that man. So lean into mastery, exploring, and it sounds like throughout this process, you first had to figure out your options, right? Then develop courage, To do that. Then you joined a group of like minded individuals. Throughout that process and then a passion grew you remained humble in order to continue to do what you're doing And then things started changing, but if I can ask you Adrian such a moment when you're, down emotionally, do you look for options when you're like, man, I'm trying, I'm looking for options and there's nothing?Adrian: It's a really good question. I think that maybe I was very fortunate to have that kind of intervention. Those five words, you need to fix this. I realized that particular point I had responsibilities. And I was being very good at sulking and being sad. And there's some people that are hit, in a really bad way.They're going to need medication and counselling and that kind of thing. I totally get that. But for my particular situation, which I think speaks for a lot of people that get to that point, is that you become comfortable with that way of feeling. something to point to, it's something to blame.And I was blaming the family business that I work for and this kind of stuff. I had to point back at myself and think there's got to be a way out of this. Now, as I've got older, I've realized, I've heard of different things. There is one where there's a Harvard business study which shows that You're 31% smarter when you're in a positive frame of mind, which means when you're in a negative frame of mind, you're dumber.Now, if you are sad, you don't wanna be dumb. would quite be happy for someone to say, you're quite sad at the moment. I don't wanna say it's from saying to me you're being dumb at the moment. So a lot of this is reframing your thinking and the fact that the thoughts that you have that make you sad are often created by ourselves.And they are just thoughts. I've learned as I've got older to try and see them as a tangible thing. A little bit like when you get mail in your mailbox, if it's from the IRS, you're probably not going to ignore it. But if it's a pizza delivery menu, and you're on a diet, and you don't want that, you're just going to chuck that into the bin.Thoughts can often be like that. And I've so many times when I felt down, I've tried to view them in my head as a tangible thing to know whether actually I need to lean into it. And look at it or whether I can just discard it because if you know this formula that performance equals potential minus interference, often the thoughts that we conjure up in our heads that can have this emotional response that we work ourselves up about is just interference.And if you really do want to unlock your potential so that you can perform better, you have to have behaviors which give you much better control over your thoughts. And naturally that can remove you from a sad state has been my experience. But of course, other folks have it harder, but deep seated trauma, which needs a little bit more attention.But I think for a lot of us, they're probably in the same situation as me when we're feeling sad. Michael: That's brilliant, man. I appreciate your time, Adrian. And if anyone has further questions, you can definitely find them on the dental marketer society, Facebook group, or where can they reach out to you directly?Adrian: Facebook's pretty good. Adrian, Dre. LinkedIn as well. So one of the directors here at CareStack and all of what we're trying to do as well is to make life easier for dentists and dental practices. Take away the interference they're currently suffering from their existing practice management systems maybe it's not throwing them into an emotional breakdown You know some monday mornings it could be like that So if you're looking for something that's different check us out on carestack.com book a demo Carestack we're all about putting the hard work in to take the hard work the difficult hard work away from practices and their teams Michael: Awesome, Adrian. Thank you so much for being with me on this Monday morning episode. Adrian: Thank you so much

Trying to decide whether to purchase a practice or a home first? In this jam-packed episode, I sit down with Morgan Stump to unravel this complex decision-making process. With 15 years of diligent industry experience, Morgan delves into a point-by-point comparison of these life-altering choices, examining the ramifications for your long-term financial health, risk profile, and adaptation to shifting market conditions. Whether you're a first-time buyer or reconsidering your next investment step, this episode is brimming with expert advice tailored just for you!Morgan doesn't stop there. To help doctors looking to relocate, he dishes out practical tips to ease into new markets while understanding the challenges posed by mortgage lenders. He explores why top-notch financial health and liquidity remain crucial, sheds light on economic telltale signs, and navigates the turbulence of market fluctuations. Wrap up your listening with direct access insights from Morgan—offering personalized advice just when you need it most.What You'll Learn in This Episode:Detailed comparison between buying a practice and a home.Key factors in assessment: financial health, risk, market conditions.Practical tips for medical professionals relocating.Tackling mortgage lender challenges.How to maintain strong financial health amid economic uncertainty.Interpreting economic indicators for informed decision-making.Take a deeper dive into financially transformative decisions and smart relocation strategies by tuning in to Morgan's episode today!‍‍Sponsors:‍CareStack: Modern, Secure, Cloud-Based Dental Software for Growing Your Practice! With state-of-the-art features including Online Appointments, Integrated Payments, Text Reminders and more. Click the link here for a special offer: https://thedentalmarketer.lpages.co/carestack/‍You can reach out to Morgan Stump here:Website: https://www.getprovide.com/Phone: 503-686-3284Email: morgan@getprovide.com‍Mentions and Links: ‍Terms:Escrow‍Communities:Dentaltown‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Morgan. So talk to us. What's one piece of advice you can give us this Monday morning? Morgan: Sure. Thanks for having me, Michael. I really appreciate it. So the one piece of advice is surrounding a question that has been brought up over and over again during my 15 plus years in the industry.And that question is, should I buy practice or should I buy a home first? So what do you think about that? Michael: Interesting, man. I think a lot has to go into that like, the financial health of the person, risk assessment. Economic market considerations, right? All these things. But what are your thoughts?because we see this a lot on the forums, Facebook groups, even downtown, right? They want to do one or the other. Morgan: Well, I see this specifically come up a lot when a doctor is looking to relocate to buy a practice. And, the housing market, the rental market is really crazy.And a lot of folks that are especially going to be larger earners, a lot of folks that might already have a family or be married, they don't want to put off buying a home for two years, Pretty much every bank, every mortgage bank has required that you own a practice for two years before they're going to lend to you to buy a home.The really cool thing is that some banks have adapted to that. And that includes us. In a practice scenario, we're able to actually use the target practices historical cash flow to qualify the new buyer for a home. So as soon as you close on the practice, you can close on the home simultaneously.There still are a few mortgage lenders don't go that route. And so to speak to your larger audience. while it might be a little bit painful to think about renting for a couple of years and then moving again, one of these assets is going to earn your household money.The other is going to be your largest debt. So if it comes down to one or the other, I would always go with buying the practice first. Usually when you're buying a practice, you're buying it for a reason. The demographics fit the procedures that are being done in that practice fit.You might have a good relationship with the seller. And I would argue even in times like this, where, the housing inventory might be a little bit light, I would say the practice acquisition and target practice. Inventory is even lighter. Particularly if you're looking for the right fit, we see doctors have all sorts of, different risk tolerances, where some folks just say, Hey, do you know what?I'm going to buy this practice. I'm going to invest in myself. I see that the seller is somewhat declining. Maybe they're referring out a ton of procedures, that the buyer is going to be able to capture. So now they're not referring out that business, and they're keeping that revenue in house. But I would say eight out of 10 times, nine out of 10 times a buyer is buying that practice because it's a really good fit for them.And that is not an easy thing to find. So I would typically default to buying the practice before you buy the home. Now just to kind of, Back up a little bit. The reason why it is so difficult for mortgage lenders to wrap their head around financing a new buyer is mortgage holders and mortgage banks are much more comfortable underwriting to W 2 or 1099 income.So if you absolutely need to buy that home first, And the bank that you're working with, the practice finance group that you're working with does not offer the option of closing them simultaneously, then your best bet is to qualify for that home as a W 2 or 1099 associate. That's going to allow you to get into the house.And then once you're in that house and it closes, you are free to go, because you've already bought the home. As long as you're making payments on time, there's not going to be any issues with your mortgage. So that's my advice there, but I am very encouraged that banks are starting to adapt and recognizing the difficult situation that this puts doctors in.So this is a topic that has gotten easier to answer over time. Michael: Nice. Okay. So then what would. Those conditions look like where you tell them like, yeah, can see why you do that. Morgan: where they want to buy the home before the practice?Michael: Yeah. Morgan: So in that scenario, they're already making income as an associate in the area that they want to practice. That is really key because if you are trying to buy a practice and you know, okay, we've got 90 days to close. But it's out of state or more than a couple of hours away from where you currently live, then the mortgage bank is going to be collecting bank statements.They're going to be collecting paycheck stubs. And if you're trying to buy a house in another state, but you're showing bank stubs, and paycheck stubs that are out of state or hours away, it's going to raise some red flags saying, Hey, why are you living? Here, meanwhile, you're working hours away or in another state.So you really got to be aware of that because you don't want to put yourself in a really bad position of getting far down the road in the mortgage process, the home buying process, and all of a sudden you get qualified and these questions start coming up, which could really blow up escrow, really, Kind of turn things a little bit sour.So that would be my one big piece of advice to look out for if you are trying to buy a home before the practice, utilizing your W 2 or 1099 income from a job that you know you are going to have to leave. So out of state or multiple hours away, You're not going to have too many options unless you secure some sort of associate position closer to the home that you're buying So be very aware of that And if you are going out of state and the practice finance group that you're working with doesn't have this Mortgage option for youunless you've got a spouse that also makes money might be able to qualify for loan on their own Then you're probably looking at a situation where you are going to have to rent for a couple of years before you buy that house Michael: So when it comes to the mistake here, your eyes, it's like, Hey, you should have gotten the practice first. Right.assuming they're not an associate there. Is it more an emotional decision?Morgan: It's absolutely an emotional decision, especially people with families. You know, If you're married, you've got kids, you want a stable home, and you've also got a partner that's probably pushing for you to buy a home. The flip side of this is, when you're qualifying for a practice, the liquidity level, so the cash in the savings account, cash in checking, stock market, life value life insurance.All of those are considered liquidity. And that is a very important metric when you're buying a practice, most lenders want to see that you've got at least seven, sometimes 10%. If you're buying a big practice. They're wanting to see that you've got 7 to 10 percent on hand that you can show as verifiable liquidity when you're qualifying for that practice.So the banks aren't typically going to take that money, I want to point that out. They just want to verify that you've got it. That makes the bank feel warm and fuzzy, that you've got some reserves sitting there, that you've been reasonable, saving your money with your eye on the prize of buying the practice.So Usually buying a home, there's some good docker loans out there that have very minimal money down, but oftentimes you have to put 10, 15, or even 20 percent down to secure the lowest interest rates. So that's another thing to consider because if you're trying to buy a practice, but then you want to buy the home beforehand, let's say you're looking to buy a million dollar practice.That's a pretty standard average number. In that scenario, most banks are going to want to see that you've got about 70, 000 liquid. So using this example, if you're buying a home that is. 500, 000 and you're trying to put 20 percent down to secure the lowest interest rate in the best terms for yourself, then that 500, 000 home is going to cost you 100, 000 of your liquidity.So you really want to avoid a situation where you're buying a home, you put money down, which completely drains your liquidity position because that is going to then put in danger your ability to buy a practice until you build that back up to about the 7 percent range of the practice that you're looking to acquire.Michael: Okay, so when it comes to that liquidity and financial health, what advice do you give? about maintaining financial health and liquidity when taking on significant investments like a home or a practice and how can they avoid overextending themselves? Morgan: That's a great question. And to be honest, the answer is pretty nonsensical.I grew up on a farm in Oregon, right? Pretty conservative, from a fiscal standpoint where I was raised to not carry debt. That was just, How it was, you pay your bills on time, you don't accrue debt. And we're seeing the average dentist and doctor come out with 400, 500, 000 of student loans, sometimes six, 700, 000 for specialists.So a lot of people have that mindset of I've got to pay this down, that's how they were raised. That's the mindset that they have. If you're looking to buy a practice. Well, and a home, I guess you're looking to buy a practice, soon after graduation, maybe you're going to associate for six months, a year, two years.You've got to put yourself on that income based repayment program. I know it's painful. sometimes you're going to watch the balances rise during that short period, but it's a means to an end because you need to start stacking your liquidity, stacking cash. To get to that 7 percent mark. So let's say you come out of school, you've got 400, 000 of student loan debt.It's stressing me out, but you do know that, Hey, I've got my eye on the price here. I know that making 150, 000 as an associate is not going to, pay down that debt quick. It's going to accomplish my goals of, saving liquidity to be able to buy a practice. Because if you buy that million dollar practice, now you're looking at income levels, likely of 300, 000 plus.So the way I talk to my doctors is, put that out of your head, right? When you get out of school that, Hey, that loan balance on the student loan might be growing a little bit, but this is a path to being able to get out of debt sooner because I'm going to put in a position to be earning more money.Then I'll go pay down those debts as I'm bringing in more income for me and my family. So that'll help you accomplish not only the goal of buying a practice quickly, But also buying a home because liquidity is the name of the game for both of those products. Michael: Gotcha. Okay. I like that. So given like the fluctuations in real estate and business markets, how should practice owners weigh the timing of these purchases? Are there economic indicators that should heavily influence their decision? Morgan: I try to stay away from looking into that crystal ball because this is such a unique time, with so many homeowners holding on to their houses because they're, in a 30 year fixed rate at 2.675. That's what I got in at back in 2018. If I was to try to sell my home and buy a similar house at today's rates. I've been taking on an extra 1, 500 to 1, 800 a month in monthly payments, So my advice to doctors is look at their current situation, prioritize what is the most important thing for you and your family.Is it buying a home? Is it buying a practice? Do I need to relocate? I also try to tell my doctors to go back and look at history. I'm kind of a nerd when it comes economic history. So if you look at the prime interest rates in 1980, 1981, they were upwards of 20%. So I think that a lot of us got very spoiled, coming off of 2008, 2009.Coming off of the pandemic, lenders and the Fed were basically giving money away. The cost of funds for banks were down near zero. So you were seeing people secure these mortgages at two and a half, three percent, three and a half percent, which historically is just. Not relevant, nor is it sustainable.So if you're able to get in right now, The fed just came out and said, Hey, the indicators are that inflation has slowed. He's indicated that we are going to be lowering rates. The prime interest rate, maybe multiple times this year and into next year.So if you do have a little bit of time to wait, I am a believer that interest rates will be coming down a little bit, but at the same time, if you're able to get a 30 year fixed interest rate, or maybe you're confident that rates are going to go down in the future. You could get a 30 year amortization that keeps your payment low, but only lock that rate for five years.So you would have to refinance before five years. But there's usually as much as almost a full percent discount to that interest rate, if you're willing to take that shoulder money. So right now you can likely get into a home for five, five and a half percent interest on one of those adjustable rate mortgages, which historically is incredibly low.So I tell people to not get too wrappedup in the past or the future because all you can do is live for right now and what you and your family need to do over the next year or two. And quite frankly, in this crazy world, nobody really knows what's going to happen. There's so many, global factors involved.There's elections involved. There's all kinds of things that you can't control. So you need to focus on what you can control. And that is Hey, I found this house that I like, the mortgage rate is this, that equals this payment. Am I able to afford that? That should be the bottom line. You shouldn't start speculating about too much in the future because then you're going to get, decision paralysis, which, in my world doesn't usually lead to the best decisions.Michael: Nice Morgan. I appreciate it and appreciate your time as well. And if anyone has further questions, you can definitely find them on the dental marketer society, Facebook group, or where can they reach out to you directly? Morgan: I try to make myself super available. So, Name of our bank is provide.My email address is just Morgan at get provide. com. You're also welcome to text me. I don't mind giving out my cell phone number. Set up a time to speak that's five zero three. 686 3284. Michael: Awesome. Thank you so much. That's going to be in the show notes below. And Morgan, thank you for being with me on this Monday morning episode.Morgan: My pleasure, Michael. Thanks so much.‍

Are you feeling burned out or stuck in your profession? In this Monday Morning Episode, we're sitting down with Don Barden, an esteemed economist with over 25 years of experience on Wall Street who now dedicates his expertise to the dental industry. With a Ph.D. and deep understanding of financial markets, Don shares his unique perspective on the mental roadblocks that dentists face. He introduces a compelling framework that categorizes dentists into four types: failures, frustrated, traditionally successful, and transformative practitioners. Don's goal? To guide dental professionals in shifting their mindset, reigniting their passion, and paving the way for enduring success and fulfillment in their careers.Drawing from his vast experience, Don lays out concrete strategies for developing the right mindset while steering clear of unproductive social expectations. He talks about the transformative power of focusing on personal and professional growth and stresses the importance of a self-managed practice. The discussion is packed with valuable advice for dentists aspiring to elevate both their career satisfaction and financial success. By the end of the episode, you'll be equipped with actionable insights to embark on a journey toward a thriving and lucrative dental practice.What You'll Learn in This Episode:The four types of dentists and where you might fit in.Why mindset is critical for overcoming frustration and burnout.Practical steps to shift your thinking and reignite your passion for dentistry.How social frameworks may hinder your progress and how to block them out.The benefits of committing to continuous personal and professional growth.Strategies for developing a self-managed, successful dental practice.How to unlock potentially lucrative opportunities within the dental industry.Let's listen in to these transformative insights with Don today!‍‍Sponsors:For DSO integrations, startup solutions, and all your dental IT needs, let our sponsors, Darkhorse Tech, help out so you can focus on providing the amazing care that you do. For 1 month of FREE service, visit their link today! https://thedentalmarketer.lpages.co/darkhorse-deal/‍You can reach out to Don Barden here:Website: https://donbarden.com/Email: don@dwbarden.comLinkedIn: https://www.linkedin.com/in/donwbarden/‍Mentions and Links: Books:The Self-Managing Company: Freeing yourself up from everything that prevents you from creating a 10x bigger future.‍People:Dan Sullivan‍Places/Economy:Wall Street‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Don, so talk to us before we jump into the one piece of advice. If you can give us a little bit about your background, who you are. Don: Yeah, I appreciate this. First of all, before we even get going, I want to thank you for what you're doing. I tell you, this show is as good as it gets for getting people pumped up and ready to go and getting that information out quickly to people who need it the most.So forget about me, man. I just want to thank you for for what you're doing. And yeah, I'll give you a quick background I'm a classically trained economist, Ph. D. S.25 plus years on Wall Street. I know economics inside and out, but I'm really a frustrated anthropologist.So I care more about the decisions people make I care about yield curves and interest rates. So we can talk about that, but it's boring. What's important and I think this is so applicable to the dental industry. is what's happening. How does it make you feel? And most importantly, what do you want?And I think that's one of the big struggles right now in dentistry. I've worked with dentists literally all over the world. It's my favorite group to work with. And for a couple of reasons one, most dentists out there are very frustrated right now. And they're frustrated because they fallen out of love.With their first love or their first career love and that's dentistry and they didn't fall out of love with the active dentistry. They fell out of love with all the crap that comes with it, Cause nobody tells dentists how to run their business and what to do. money comes in, money goes out, you keep what's left over.but then you wake up one day and you don't feel good and you're frustrated. But here's what I've learned is why I just love dentists. Dentists at their core are caregivers. They got into it with some unique path. Every dentist has got a cool story. But at the end of the day, when they get into it, they are caregivers and dentistry is a way to continue to care for people and the better they are at it and the more excited they are about it, the more the universe gives them opportunities and new patients and things to go out there and help and serve people.Dentistry is a self fulfilling prophecy. for a love and it's a love that dentists have for their craft and for caring for people. Dude, of all the people I work with around the world, they're the best because they have that thing, that just makes them special. So, I've had a good career as a professor, as a consultant, as a wall street guy.And at the end of the day, if I could just spend the rest of my days with dentists, I'd do it. Cause they're, that cool. Michael: So like, what would be the one piece of advice you'd like to give us that can move the needle here?Don: Yeah. When I say dentists are frustrated, a really unique proposition because there's only four times a dentist out there. There's the failures, the frustrated, the traditionally successful, and then transformatives. most people in the consulting world or whatever, they prey on. vendors are the same way that people are trying to sell you folks stuff.They go after the failures because you're drowning and you'll do anything not to drown so they can sell you more stuff or they go after the traditionally successful. And those are the dentists that are just sitting around. They got a good, you're a member of the country club. Kids are in a private school.You feel good about your spouse. Everything is good, but you're not going to do anything to disrupt that. Those folks take no risk. But what's interesting is where the market goes. Cause they think, everybody knows you, or, oh, you have a thousand new patients a month, or, oh, you got this. We need to do it.The reality is you're not gonna do anything. It's because you're traditionally successful. You made it. Okay. You're not going to do it. The two types of dentists that I like are the other two, the frustrated, who are folks that are just raising their hand saying, I need help, but I don't know where to go.Can you help me get from here to here? And then the transformatives. Those are the dentists that are always looking forward, always saying, I want to try something new. I want to continue to grow. I want to serve more people. How do I continue to transform? So I think the first thing dentists have to do right now is ask themselves, Are you a failure?Or you're just frustrated. Are you a traditionally successful person, which means you're pretending, you don't want to risk anything. You're just going to pull up in your cocoon or are you transformative?either way, the dentists that are going to survive and be happiest in the future or the frustrated and transformative, it's not going to be traditionally successful. It's certainly not going to be the failures. So if somebody's listening to this, they're like I'm a little frustrated.Okay, let me tell you what to do. Or even if you're transformative, I'll give you the same advice. You might want to have to write this down. You need to change the way you think about how you think, about the way that you think about your thinking. You got that? So don't change your mind on something.Change the way you think. About how you think about your thinking. And then what happens if you look out there and you realize, I need to get rid of all this social construct, this framework of what I read and what my buddies are telling me and what I see these other people who aren't even in the industry doing.Forget that. Here's what dentists really want, whether they're frustrated or whether they're transformative, they want the same thing. They just don't know how to voice it. And this is what we try to help them go, wow, you're right. So many dentists right now are frustrated. They want out, they want to just quit.They want to dump, they want to say, I'll sell it. I'll make a few bucks and I can brag to the country club that I sold my business and my spouse will be fine. And my kids will be okay. I'm not going to do the math about being broke when I'm 75 or 80, but we'll figure it out. I just want to go.That's what the industry is telling you to do. You need to change the way you think about that. Maybe your frustration doesn't warrant selling and then transforming is the same way. When you're transformative, the universe brings every opportunity possible to you. And when that happens, you're going to get some people coming in and going, we love you.We want to be a part of you. We'll pay you X amount more than what you're worth because we like what you build. And frankly, we think we can do it better. Yeah. Don't fall for that. So here's what I tell people when you're frustrated or when you're transformative, what you really want is a choice.You don't want to say I can sell out and just put some money in my pocket. You want to commit to changing the way you think about how you think about the way that you think about your thinking and say, look, if I can roll up my sleeves and over the next 12 months, I really get back into this. I really put my head down.I really start focusing on team development. I start focusing on the economics of what's happening. I start looking into the future and create a plan. First thing that's gonna happen is you're gonna fall in love again with the craft. You're gonna fall in love and say, Oh my God, when I start blocking all the noise out, I stopped worrying about the social construct or the framework about what everybody else is saying and doing.I forget what my buddies at the country club are saying. I commit with enormous amounts of courage and capability. I commit to 12 months of real focus. Which means I'm going to become self managed as Dan Sullivan said. So I'm going to be a guy or lady in this business who I can walk away for a month, take my kids to Europe and Asia and Australia and come back and I made more money than I would have made if I was here.That's what you want. But to do that, you got to change the way you think about how you think about the way you think about your thinking. what happens if you roll up your sleeves for 12 months and really get in, you're going to get some help. Sometime bring in people who are going to help you out.Here's what's going to happen. You're going to wake up in 12 months. And 1st of all, you're gonna be in love with the business again, which is a beautiful, wonderful feeling. But number two, you're going to find that that choice has two sides to it. And it's both in your favor that you sit there and look at it and go, Oh my God.Thankfully I've spent 12 months getting my life back together, focusing on my practice, team development, everything I need to do. I've got so many new pages coming in. I'm frankly in love again, and I'm making so much money. Why would I sell I'm making money when I'm not even here.Why would I sell? Or when opportunity does knock, guess what? You're going to sit there and go, yeah, man, we're making a fortune. You don't even need me. This is a self managed practice. My name's not on the marquee. This is a machine that is just pumping out money. I'd sell it to you, but how serious are you?And now you're gonna see a premium kick in. So imagine that in 12 months you went from frustrated or transformative to so unbelievably happy that you have a choice. I love my business again. I'm making so much money. It's crazy. I can take months off and make more money by not working than working.I am in love and I'm making a lot of money and there's no end in sight to it. Why would I leave? Somebody might come up and offer you so much money. It's ridiculous. Real money, adult money, because you've created a self managed business that runs on its own. It's growing and it's got so much enthusiasm that it's contagious.That gets you a premium. So don't think about what am I going to do to sell. Don't think about what am I going to do because I'm miserable. Think about how can I change my thinking? How can I commit with courage to seek the capabilities necessary to go out and just rock it? And when I do, I'm going to have some ups and downs.during this next 12 months, and I always tell people this, if you're really committed to doing this, You're going to learn the art of being a successful manic depressant. Because one minute you're up, one minute you're down. One minute you're up, one minute you're down. But then it starts shortening and then before you know it, you say to yourself, holy cow, these swings aren't like they used to be.My company's running on its own and it's great. And you sit back and you're in love again, you're making money again, and now you have a choice. And I think that's the biggest thing dentistry is facing right now is they don't think they have a choice anymore, but the only person that owns that is you, the dentist.And if you say, I'm willing to change the way I think about my thinking and I'm willing to commit with courage and I'm going to go for these next 12 months and roll up my sleeves. So I know in 12 months I'm either going to be making so much money and it's crazy that I wouldn't ever want to walk away from my first true professional love.dentistry or because of that, these folks that are throwing money around and throw real money around and when they do, that's a good day too. But either way, you now have a choice. You've got the high ground and you're driving it, but it comes from commitment and courage to change the way you think about how you think about the way that you think about your thinking.And it puts a bogey out there that if you do it, man, it's just like working out, 90 days. It's going to be better if you focus on yourself and your business to drive not to sell Not to not feel miserable, but to drive to a point of nirvana where you have a choice Dude, there's nothing wrong with that And I see dennis all the time And it usually changes the mind when I just say the one thing Would you like to fall in love again with your career see men and women tear up because the real answer is yes I All right, it's going to take some work.It's going to take commitment and courage. We're going to get the capabilities out there. dude, in the blink of an eye, it's going to be 12 months down the road. And since you had the courage to change the way you think about how you think about the way that you think about your thinking, you now have choice.And both those choices are good. And the ultimate scenario is when you're in a position where you can't make a bad decision. You stay and keep it? Great. You sell it for a super premium? Great. They're both good decisions. So that's it, You know, Change the way you think about how you think about the way that you're thinking.Be honest with you. Am I a failure? Am I frustrated? Am I traditionally successful? Or am I transformative? Either way, if you're honest, and you say, I want to fall in love with it again, change the way you think about how you think about the way you think about your thinking. Have commitment and courage and go out there and rock it.And there's so many scholars out there, Dan Sullivan, all of them, who talk about that. You get out there and do that, you'll be in love again, and that's all anybody wants, right? Michael: Yeah. Don: It's a great thing. And dentistry is set for some big economic upturns right now. But it's going to be those who follow that path.there's nothing wrong with having a good choice. Michael: Yeah, to change the mindset of it. Awesome, I appreciate your time. And if anyone has further questions Where can they find you? Don: Yeah, they find me on LinkedIn. Just say, Hey Don, I heard you on this show. Anybody who I do a podcast for, and I'm happy to do this for your listeners.we wrote a book years ago that's, I think in 39 countries that talks about this type of mindset. I'll send anybody a free eCopy of it if they want, but they can reach out to me on LinkedIn or you can just send me a direct email at don@dwbardon.com. It's DON at dwb. A. R. D. E. N. dot com. I answer every email myself.I talked to everybody. We got a great team here, but man, I'd love to help anybody out if they want to reach out and you just need a kind word. I'll be happy to move you from failure to frustrated. Or if you say I'm stuck in this loop of being traditionally successful, and that's not really me, but I'm stuck.I want to get back to being transformative. Love your work, man. And I really appreciate what you're doing here. Michael: Awesome. So that's going to be in the show notes below and also on the dental marketer society, Facebook group. And Don, thank you so much for being with me on this Monday morning episode.Don: Hey man, keep it up. You're doing great work and just thrilled and honored to be here. So thank you.

Could Instagram ads be the key to effectively marketing your practice? In this conversation, Dr. Anissa Holmes uncovers the secrets to leveraging Instagram ads to attract new patients and build a thriving practice. With her expert guidance, you'll learn how creating strategic video content, such as showcasing your practice's unique features and sharing compelling patient testimonials, can drive local traffic and convert viewers into loyal patients. Dr. Holmes makes it clear that with even a minimal ad spend, you can achieve significant results that benefit your practice.Dr. Holmes also takes you behind the scenes of her marketing agency, Digital Floss, and shares practical advice for dental professionals operating on a tight budget. From building a community of brand ambassadors to utilizing interactive quizzes and landing pages for effective lead generation, this episode is packed with actionable tips. Whether you're new to digital marketing or looking to refine your existing strategy, Dr. Holmes provides the blueprint for success!What You'll Learn in This Episode:How to use Instagram ads to attract new patients to your dental practiceTechniques for creating engaging video content that highlights practice differentiatorsThe impact of patient testimonials on local traffic and patient conversionBudget-friendly strategies for running effective Instagram adsHow to build a community of loyal brand ambassadorsUtilizing quizzes and landing pages for effective lead capturePractical marketing advice for practices with limited budgetsDon't miss out on these expert tips – tune in to hear Dr. Holmes' invaluable advice today!‍‍Learn More About the Ground Marketing Course Here:Website: https://thedentalmarketer.lpages.co/the-ground-marketing-course-open-enrollment/‍You can reach out to Dr. Anissa Holmes here:Website: https://www.digitalfloss.com/‍Mentions and Links: Tools/Resources:Instagram AdsBoost PostGoogle AdsUpworkSquarespace‍Brands/Products:Invisalign‍People:Dr. Ashley JovesRussell Brunson‍Community/Groups:The Making of a Dental Startup Group‍Books:Expert Secrets: The Underground Playbook for Creating a Mass Movement of People Who Will Pay for Your Advice‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Anissa. So talk to us. What's one piece of advice you can give us this Monday morning? Anissa: Yeah, absolutely. So first of all, thank you for having me. so one thing that a lot of people are not aware of are the power Of Instagram ads.this is something that I have been using for quite some time. I do have a marketing agency that focuses on social media, but what's really powerful about Instagram ads is that it's almost like when Facebook just got started and nobody knew about Facebook ads. Like it's literally happening right now.And many of you early days of Michael's podcast, you know, you've heard me speaking about social media and Facebook, this is better than when I was teaching Facebook guys, the results are insane. what you're able to do If you have videos that you're putting up, so these are going to be.Reels, where people can go and see that you're an expert or what makes your practice different, or maybe it's going to be a video testimonial, but putting a little bit of ad spend on it, So going in and boosting that video. And again, it's just going in following the prompts. But once you're doing that, a couple things happen, You're able to have people on your team helping you. Thousands and thousands of views. For example, in our agency, Digital Floss, we had a client who was not an extrovert, Very quiet, very humble very, kind, very shy, almost ish. And being able to have those videos. highlight the sweetness of this particular doctor and how they were there to really serve the community and the things that they were working on in terms of Invisalign and those things.So anyway, you put the Instagram ads in and you can literally spend about 5 a day. And with that over a month, we were able to get about 30, 000 of views on her video of people that were five miles from her practice. Now, this is huge, but it doesn't stop there. All The other powerful thing is that when you're running.Instagram ads. You have the ability within the ad itself to be able to drive visibility or traffic, if you will, to somewhere else, whether it's going to be your website, whether it's going to be your online booking link. My favorite is actually a digital marketing funnel, So imagine now having a quiz where people can see if they are a candidate.For clear liners, or they are a candidate for dental implants, or if they qualify or pre qualify for financing right now, all of that traffic can go to that website where you are able to also collect email addresses if you have the right internal processes or team. Or agency and process to be able to call those leads to get them pre qualified to give them book the sky's the limit.But again, being able to spend, that amount of money, a dollar or less per click to your website is huge. So again, imagine spending, like 5 a day or even committing to, you know, 100 budget. Being able to get a hundred people to click to your website and being able to get, 000 views is huge.So that's the biggest thing that no one is talking about. There are definitely some people that are talking about Instagram out there that are teaching Instagram. If you go and look at their individual Instagram pages, though, there's typically, you'll see 300 views on their videos or a thousand views on their videos, right?Maybe. Maybe, that allows me to really understand that that's not being done. it's all about getting people in your local market to see it. Compiling that with what Michael teaches, right? With all the ground marketing. It's really powerful. Google's great. But what can we do on the organic side so that people in our own neighborhoods, in our own communities are talking about us.And so going into Instagram ads, compiling with that ground marketing guys is like game changer. Michael: So if we wind a little bit, how can the community, see that they're an expert, for example, the videos that they boost, how do we know post is boost worthy or we're looking at it and we're like, that wasn't the best post.Anissa: Yeah, so definitely there's some strategy behind it. I've seen lots of things again, just evaluating, but what works really well is utilizing the three opportunities at the top of your reels or your actual posts to be able to pen. Okay. And so what I recommend, whether it's either a photo post or a video is that the first real estate, the first post that you have pinned on the left.Is going to be, what makes your, practice different? So what makes Glee Dental different, why are our patients choosing us, The middle one should be your focus, So if that quarter you want to focus on clear aligners, so you want to focus on all on four.What do you want to be known for, Whatever that is, That video needs to be in the middle and the one all the way to the right is going to be a patient testimonial. So now within one quick glance, they're able to see that you're the expert why people are choosing you or what sets you apart.And at the same time, have an actual patient validating or vouching for your practice. I actually recommend to just have an ongoing budget of five dollars a day. And those will ultimately with that strategy will wind up having before, you know, at 100, 000 views, 200, 000 views.And again, being very strategic and, putting in the address of your practice location. And that allows you to, again, be able to target people that are five miles for your practice. And then. If you have an ongoing content strategy, which I 100 percent recommend, and you've got a video that's coming out every week or multiple videos, at least one of those videos every week, putting that 5 on.And so if you've got that ongoing budget in addition to again, once a week, putting a 5 on it for those, I typically say, let's just do 5 for 7 days. And then next week we choose another video and we do it 5 for seven days. And that way you can stay within budget. I know there are different people that are listening to this podcast, a lot of, young practices and a lot of startups I know really listen to this as a huge resource.And so as you're trying to really, modify or really stay within budget or like really tried to juggle a lot of things that strategy works really well. You know, The three at the top or every day and then once a week choosing one and then pushing it out for seven days and then it'll auto expire and then you just keep boosting the next one.So there's lots of strategies and again, you can incorporate this in with funnels and call centers and all of the things, but this is something that people can definitely start utilizing where they can see some immediate results. Michael: Nice. Okay. Great. And so I know you also mentioned.There's a lot of views that start coming in right when we do this. So out of the views that happen, how many are like cheeks and seats? How many patients actually come in? Anissa: Yeah. So there's two things that happen here. Okay. So number one is we're building a community of ambassadors. That ultimately you will not be able to turn off. So one of the things that I did for my practice if you remember, Michael was like, how did I get the 50, 000 people follow me? Like when my community started marketing for me, here I am now. 10 years out, 15 years out. I've got three associates and we don't have to do the Google ads and all of the things we just brought the practice in to do the social now.Cause it's really cool. A lot of things that are happening, but the reality is we don't have to because our entire community now sees that we're an expert. And so if you commit to the strategy, even for a year, it will pay you forever. Imagine now everybody's talking about you. So it's not a short time.Oh, I need to have five patients tomorrow. More powerful strategy than that, And so that's the 1 thing that happens, The 2nd thing that happens When we attach it to a funnel, is that now we're able to have the ability to collect email addresses to collect phone numbers, and now we can contact those leads immediately. The third thing that happens. Is that we have the ability once people are going to your funnel to actually have a tracking pixel there.And so if you're looking at doing Facebook ads again, if you're using an agency for that, or you're doing it yourself now, you have the ability for those Facebook ads to now be seen to people first who have visited through either people watching your videos or going to the landing page. And so you're going to have higher convergence as well.Michael: Interesting, I like that, building a community of ambassadors, you have a marketing engine from that point on. So then I know you mentioned the landing page that we can send them to. What should the quiz look like or do we do this? Anissa: Yeah, absolutely. So once they are going to The landing page is typically a page that has Information about the service.So for example, they're coming from an Instagram page Video or even a post, They go to a page and it'll say maybe it's going to be about pediatric dentistry. Is your child at risk for cavities? Take this quiz to find out. Or are you a candidate for dental implants? And so they go ahead and put in their information.There could be information about the doctor. They could be some Google reviews on there. And again that's one way to be able to build it. But again, the power there is to be able to get the results. Now they put in their phone number, they put in their email, and the beauty of that is that now you have those email addresses.We have a doctor within digital floss, where we're doing this with Instagram, also doing this with Facebook ads, and they now have an Invisalign day that's actually happening next week. And so what we're able to do for them. Is we're able to build out an email campaign to people who have previously gone in and taken the quiz some of them have become patients. Some have not but giving them that opportunity to come in and participate in this clear aligner day. Some of you guys know Ashley who has her startup Facebook group. This was literally the funnel that I built for her prior to opening.But it was a startup funnel and what we're giving away was a chance to win a thousand dollar gift card or free teeth whitening for life. And so this could actually be put out before you even open up your appointment book. And now the beauty and benefit of that. Is that you have those emails so that when you're ready to actually start taking patients, which is what she did, she's able to email them and say, okay, we're now making appointments, or maybe even in that funnel, having the ability for them to be able to get an online booking link and start prebooking appointments.If you don't have a back end team or agency to be able to help you. And so definitely, not just creating awareness, but creating that engine where you have the multiple touch points is going to be really powerful. Michael: Gotcha. Okay. And then one of the last questions. let's just say our budget is like, oof, to the itty bitty.Right. I know some people say like Instagram is a different type of audience than Facebook and then Google ads is like an overall kind of thing. What would you recommend? Would you just stick with Instagram? Anissa: somebody has a very little budget. you know, I love to do Google ads and Facebook ads and funnels.And I just need to start with something. What I would say is just pick up your phone guys, pick up your phone and figure out how to do stories, right? It's not hard. You've just follow the prompts, Because the power of stories is that you're getting into people's feeds.You can download. The story, you can use it as a real then when it's in storage, you can put captions on there. You don't have to have an external software to do that. Now that can be a real and you can literally boost these videos yourself, an again, small budget. Huge impact, Once you get that going, then now it becomes, okay, great. This is going now. I'm busy you know, or I don't have time for this, or I don't want to be the person having to remember to do this. And at that point, you can look at bringing in a local photographer, a videographer to get videos for you, whether you're going out on Upwork or online jobs, or, finding somebody to be able to edit the videos and all of the things.Or again, if you want to have an agency that can do for you, I own an agency is, for example, there are people that can literally fly in, do all of that stuff for you and you show up and the posts are there. But again, the thing is just don't not do it because you think that you need to have.An agency or a big budget or all of those things, like my first website for my dental practice guys, I built it myself on Squarespace. Mm-Hmm. .. Same thing for my coaching program. Like I built it myself, right? And then now, it gave me some insight and when I realized, you know what, it's not as good as somebody else will do it, or, I just put a little bit more money and, and then I had somebody to help me with it.And that's really the premium where you're gonna get to that point. But the point is like, do something. Don't not do anything. Right? Michael: I love that. Yeah. And then real quick, digital floss. Talk to me about that. Anissa: So I'm pretty excited about digital floss. Many people knew me from teaching Facebook and teaching funnels.I've worked with Brunson for seven years one on one. He's spoke about my Invisalign bundle and his book, Expert Secrets. And so after so many years about a year ago I was with Russell and I was like, I'm finally going to go ahead and say yes. I actually co founded a marketing agency with my business partner who is a pastoral assistant also agency owner Vemul we formed an agency that did not exist.And so we literally go out and we film content. You speak with a premium copywriter, my copywriter who gives you really heart centered copy. We do the editing, we post for you, we build the funnels. And then now we can retarget with those Facebook ads. We do Google ads and it's really high touch again, clients saying, Oh, we've got an Invisalign day.And the very day we're like, okay, here's some flyers that we've designed for you. ahead and print these out and put them at your front desk, right? Or we're going to email your, leads list. And then being able to have that call center that can get people pre approved for financing for you and put them right into your schedule.So, that's our niche. We are, focusing there, but we're really excited about being able to help practices to do social correctly. And it's not about, followers. It's about actual patients that will come in and building the community to be that marketing engine for you.Michael: Awesome. That's going to be exciting in this. And I appreciate your time. And if anyone has further questions, you can definitely find her in the dental marketer society, Facebook group, or where can they reach out to you directly? Anissa: Yeah, absolutely. So digital floss is the best way to connect with us.And what's really cool is that, we have calls and some people it's just social. Some people, they're like, I don't want to be on social, but I need help. And so we're able to help them on the Google ad side. And sometimes, honestly, it's just telling you strategy and say, you know what?Let's start first with you doing it on your own and do this and do this well, and then reach out to us. we're just there to be a resource. My partner and I are practitioners first in the dental field, and so we're just really here to try to help give you strategy and help get you so that you can build that impact.Michael: Awesome. So all the links are going to be in the show notes below if you want to reach out to Anissa. Anissa, thank you for being with me on this Monday morning episode. Anissa: Thank you so much for having me.

Have you been wondering how AI could revolutionize dental practices and patient care? In this Monday Morning Episode, we chat with Mike Buckner from Pearl, an AI company dedicated to transforming the dentistry landscape with cutting-edge technology. I begin by asking for insights on integrating AI into dental practices, Mike emphasizes that, despite the confidence many experienced dentists have in their diagnostic skills, patients increasingly expect advanced technologies that offer precision and unparalleled care. He delves into how Pearl's AI assists by marking pathologies on dental x-rays, making dental issues more comprehensible to patients and boosting acceptance of recommended treatment plans.Mike shares compelling statistics from the CDC on undiagnosed conditions and highlights how AI offers a valuable second look, ensuring no critical details are overlooked. He discusses the reliability of AI, acknowledging its occasional false positives or negatives but likening it to a TSA scanner that identifies areas warranting closer dentist inspection. Throughout the conversation, he emphasizes that AI aids rather than replaces dentists, providing them with robust tools to enhance diagnostic accuracy. A deeply personal story about his wife's missed breast cancer diagnosis underscores the broad potential of AI to elevate diagnostic care across medical fields. As the episode wraps up, Mike encourages listeners to explore Pearl's offerings and consider a demo to experience AI's benefits firsthand.What You'll Learn in This Episode:How AI is transforming the field of dentistry and patient expectationsThe advantages of using AI for diagnosing dental issues through x-ray analysisKey statistics on undiagnosed conditions and the role of AI in mitigating theseThe limitations and reliability of AI in diagnostic proceduresPersonal anecdotes highlighting the broader significance of AI in healthcare diagnosticsDon't miss out on discovering how AI can elevate your dental practice and ensure the best patient care – tune in to this episode now!‍‍Pearl AI: The Future of Dentistry, Powered by AI: https://hellopearl.com/ (Don't forget to mention you heard about Pearl AI on the podcast!)‍You can reach out to Mike Buckner here:Website: https://hellopearl.com/Can You Beat AI? http://play.hellopearl.com/‍Mentions and Links: Podcast Episodes:402: DR. KYLE STANLEY | BEVERLY HILLS DENTIST – THE DENTAL MARKETER PODCAST‍Products/Brands:iPhone‍Sources for Referenced Stats: Development of a Deep Learning Algorithm for Periapical Disease Detection in Dental RadiographsDiagnosis of Occlusal Caries: Part I. Conventional MethodsProducts - Data Briefs - Number 307 - April 2018‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey Mike. So talk to us. What's one piece of advice you can give us this Monday morning? Mike: A little background. I work at a, an AI company, right? Pearl. and so what we're doing is we're helping dentists see and analyze everything that's on the x rays that are taken.And oftentimes, you know, it's really interesting, but oftentimes talk to dentists who say, you know what, I've been looking at x rays. for the last 20, 30 years, I don't need help. I don't need technology to help me look at or diagnose or find things on x rays. I never miss anything on my x rays.And I guess a piece of advice that I would give is that it's not necessarily about. You know, that sounds really bad, but it's really about the patient and what the patient is expecting. oftentimes we get an influx of patients that reach out to us at Pearl are asking us, Hey, can you help us find a dentist in the area that we live in that utilizes artificial intelligence?because they've been burned before. They've had bad experiences before they needed to go and get a second opinion before. And so it's really about what the patient's expectations are. What is going to give your patients the peace of mind that they are going to a practice that leverages the latest and greatest in technology so that they are going to someone who's going to provide them with the best oral care available.Michael: And so you guys have been bumping into this a lot with regular population, general population asking. Mike: Yeah. So we, we get a lot of patients that,have an interest in what we're doing with artificial intelligence and highlighting all of the pathologies on the x rays because really what it does is it's giving the patients as a patient's in the chair.It gives them the opportunity really for the first time to kind of see what the clinician's seeing, to see what the doctor's seeing. The dentist can look at the x rays and he can see and analyze almost everything that's on there. But when he's pointing out the treatment to the patient, the patient's like, I'm sorry, everything looks Kind of gray or this dark color gray, because the doctor's like, do you see this area right here? That's a little darker and for them. They're not seeing it But when AI can come in and highlight all of those areas on the x ray it breaks it down for them It helps them see it and understand it and when they see it and they understand what's going on in the x rays it makes sense to them.It truly leads to an increase in case acceptance. Michael: Do you, Mike, by any chance have stats on how much missed things have happened you know what I mean? like my own self trust. I got this. Don't worry. I've been doing this for years. Compared to AI. Mike: I do. In fact, I'm glad you asked that. We did not rehearse this before, but I actually have some stats up that I wanted to share.this is right off of the CDC website. are some studies show that 43 percent of carries in x rays are undiagnosed. 20 percent of carries diagnosed in patients are not actually carries. here's the big one, 49%, almost right down the middle, almost a coin toss 49 percent of periapical radiolucency and x raysare undiagnosed.That's huge. Yeah. That's massive. And even if it's just one that's missed, now, unfortunately we're seeing it more than ever. We're seeing, law firms that are advertising to patients. saying, Hey, did your dentist miss this or miss that? Cause if so, click here and submit a claim and we're going to go after him and get you some money.It's, unfortunate, but that's really the way that things are going. So, This just allows that second set of eyes, that peace of mind, especially as you have associates, you've got other people working with you in the practice to make sure that everyone is seeing all of the detections.It's not diagnosing. But it's just helping highlight and find things earlier or sooner than human eye might be able to. Michael: the human eye can only see between 30 and 50 different shades and tones of gray, artificial intelligence, it has the ability to really pick up and highlight between 500 and 700 different shades and tones of gray, it really is able to catch things earlier than what a dentist might be confident in finding diagnosing. Gotcha. Okay. now this is a question I've seen floating around. Can AI make mistakes? Mike: Absolutely. In fact, what I would say is that when you do install or implement AI, there will be times that you'll look at it and it might be a false positive.It might be a false negative. And here's really kind of reasoning behind it. if you go onto your phone, your iPhone. And they have that search in your photos, you can go to your photos and you can search and type in something fairly generic into the search. You can type in like a dog or a cat and it's going to go in and it's going to give you all of the pictures, all categorized, all bunched together, all the pictures of dogs in your phone.But you might have a couple of those that are going to be cats or might be deer or might be something else, but it looks very similar to that. Now, this is where it's not a replacement for the doctor. It's not a replacement for the human eye, because if you look at that, you can easily see, Oh, you know what?It's actually a deer. It looks like a dog, but I can tell that it's a deer. The same thing applies with the x rays. Sometimes the x ray might be taken on a poor angulation or with a lot of overlap and it might pick something up. But looking at it, oftentimes the doctor will say well, yeah, I can see why it might be highlighting or showing that as carries.But I know that there's just massive area of overlap or something else that, they can easily see and pick up. Michael: So would you recommend if we're utilizing Pearl or AI, right? We use it Hey, this is our first round and then I will double check it as a doctor and make sure it looks good.Or the other way around,Mike: because it works instantaneously, I would almost suggest look at the areas that the AI is saying, Hey, there might be a curious lesion here. Very similar, Michael, when you go through like TSA at the airport, you walk through that scanner.And when you walk through, there's a little box that it shows kind of an outline of a person and it shows a little box to the TSA agent saying, Hey, you should probably check this area. And that's very similar to what the AI is doing. showing you the areas to the dentist that saying, Hey, you might want to check this area based upon the pixels on the x ray in this area.There's a high likelihood that there's, radiolucency that's found within this area. Michael: Gotcha. it's really good. To always keep that alert on this thing. And so with AI, you mentioned that patients reach out to you. Is there a specific thing that you guys do where you're like, Hey, there's doctors near you who have, you know,Mike: So we don't have anything that's programmed yet that we, have released, probably coming soon, kind of a little teaser there but, is something that AI is huge in medicine. we talked about this, right before this podcast where, it affected me as well. In fact, my wife's breast cancer was missed on a mammogram. And I started researching where is AI in mammography we're seeing more and more of it, but patients are aware of this.Patients know that AI is here to stay. It is really elevating the standard of care because humans are prone to mistake. Humans are prone to errors and missing things. And the AI is really kind of that, unbiased, able to just highlight all the data that's shown and let the clinicians, let the doctors make the final decision.Michael: Gotcha. Can I ask Mike, what made you, when it came to the breast cancer with your wife, get like a second opinion and not just depend on that one doctor and say, Hey, cool. Mike: Yeah. It's funny. there was a phrase that was shared with us when the oncologist, showed us the mammogram and then he said, we can do an ultrasound.We did the ultrasound. Same thing. It's not really typical to what we see with breast cancer. And then he said, we can watch it. you're young, I wouldn't worry about it. You can come back next year. We'll get another mammogram.We can see if it's changed in size or anything. I'm like, there's no way there's no way I'm watching it. Cause I know what that means. What are we going to watch it do? We're going to watch it get bigger. I don't want to play with that. that's really where I thought, you know what? kind of. wanted to research where is AI in mammography? Because this all happened while I'm working at Pearl, while I'm working at a company that is bringing artificial intelligence, aid or detections to x rays. those words, we can watch it. To me, it was like, okay, the doctor sees something there, but is not certain enough.To give a diagnosis. went ahead with the biopsy and the biopsy came back positive. She's doing well now, but the biopsy came back positive and I went home and I was like, Oh my gosh, of course. humans make mistakes.don't blame him because here's the thing that I don't know. Was that his first mammogram that he looked at on Monday, or was that his 500th mammogram that he looked at on Friday and where everything is kind of all blending together, can't blame him for that, humans just make mistakes, but that's really where after we got the results back from the biopsy, I went back and I started researching this.And, AI in medicine is making massive strides all across all the different fields in medicine. And it's exciting because I do think that it will improve the overall standard of care. Michael: That's interesting. Man, that you mentioned that because for a lot of patients. Dental or not, like this is their, visit, whether they're in the chair, right?And then they're getting checked up on and stuff like that, that could be their first most terrifying experience ever. But for the doctor, it's it's Friday, my last pay, I just want to get out of here kind of thing. Right. I have stuff to do. And so the doctor could be super experienced.But the time of day and how they're feeling and everything plays a huge factor, and that's what can miss it, right? And so I guess we're not really thinking of, oh, this is the patient's first and most terrifying experience ever here with us. And they're depending on me to get everything on point, but I'm like, I gotta get Mike: out of here Michael: kind of thing, right?Mike: Yeah. you look at those x rays, we've been looking at the same black and white and gray technology for a long time now oftentimes it is kind of on the fence, like, should we treat it? Should we not? We don't want to be too aggressive. But I remember I've been to the dentist before and the dentist has told me like, ah, there's something here, but might want to just keep an eye on it.And I'm like either there is, or there isn't. Can we stop it? Can we do something to remineralize whatever? But don't just let me walk out of here. If you see something there let's take care of it. I want to fix it. Michael: Yeah. A hundred percent, man. That's true. Awesome. Mike, thank you so much for your time.I appreciate it. But if anyone has further questions or concerns, where can they reach out to me? Mike: Actually you can go to our website. Hellopearl. com. If you go to our website, you can sign up for a demo of Pearl. see how the AI interfaces with your x rays.what it can do for your practice. So we really have designed different features and different tools for all areas of the practice, whether it's front office, whether you're a hygienist, you're a dentist. We really have, explored ways to leverage artificial intelligence to really increase overall efficiency and the standard of care in the practice.Michael: Awesome. So that's going to be in the show notes below. So you can reach out to Mike and get that free demo. Mike, thank you so much for being with us on this Monday morning episode. Mike: Thank you very much.‍

Have you ever considered how vulnerable your practice might be to a cyberattack? In this episode, Reuben and I delve into the alarming issue of cybersecurity threats targeting the dental industry. With recent warnings from the FBI about credible threats, it's clear that dental practices need to take cybersecurity seriously. We explore the potential consequences of these threats, the crucial need for comprehensive security awareness training for staff members, and essential steps to prevent email-based attacks.The conversation goes in-depth into why using Microsoft 365 for enhanced email security is a game-changer for dental offices. Reuben also discuss the importance of working with IT experts to set up robust cybersecurity measures. Whether you're a dental professional or someone concerned about the security of sensitive patient information, this episode offers loads of practical advice. Don't miss out on this vital information that could protect your practice from devastating cyber attacks.What You'll Learn in This Episode:What are the credible cybersecurity threats currently targeting dental practices?Why is security awareness training crucial for dental office staff?What steps you can take to prevent email-based threatsHow Microsoft 365 can enhance your dental practice's email securityWhy should dental practices consider consulting IT companies for cybersecurity solutions?Take action today to secure your dental practice's email communications and protect sensitive patient information!‍‍Sponsors:For DSO integrations, startup solutions, and all your dental IT needs, let our sponsors, Darkhorse Tech, help out so you can focus on providing the amazing care that you do. For 1 month of FREE service, visit their link today! https://thedentalmarketer.lpages.co/darkhorse-deal/‍You can reach out to Reuben Kamp here:Website: https://www.darkhorsetech.com/Email: sales@darkhorsetech.comPhone: 800-868-4504Facebook: https://www.facebook.com/DarkhorseTech‍Mentions and Links: Businesses/Services:Henry ScheinAspen Dental‍Organizations:HIPAAFBIChange HealthcareUnitedHealthcare‍Software/Tools:DentrixEaglesoftOpen DentalChatGPTOutlookMicrosoft 365G Suite‍People:Bill Gates‍If you want your questions answered on Monday Morning Episodes, ask me on these platforms:My Newsletter: https://thedentalmarketer.lpages.co/newsletter/The Dental Marketer Society Facebook Group: https://www.facebook.com/groups/2031814726927041‍Episode Transcript (Auto-Generated - Please Excuse Errors)‍Michael: Hey, Ruben. So talk to us. What's happening right now for this Monday morning episode, we're going to be talking about something specific when it comes to security, Michael: What's going on? Reuben: Emergency pod. First of all, emergency pod, Michael. Michael: All Reuben: right. You know, those, uh, Reuben: those sirens Instagram are overused, but in this case it Reuben: does apply. FBI warns of credible cybersecurity threats of the dental industry. that's why we're talking today. Michael: Okay. So what's happening. This happened. One of the articles we're looking at is on may 8th, so Michael: like not less than a week ago, less than a week, a couple of days ago, something's going on specifically with this cyber security threat. To all Michael: dental practices everywhere in the nation or Reuben: yeah, so it is morphed into that over the last few days. So basically, uh, the FBI was monitoring, uh, a hacking group, Reuben: connected to change healthcare, connected to United Healthcare, connected to Henry Schein, connected to Aspen. You know, all these groups have obviously made the Reuben: headlines in the last uh, year or so uh, change healthcare, obviously being uh, most recent, Reuben: they were actually investigating a threat because they were attacking the plastics. Surgery market. And Reuben: then they shifted their focus to Reuben: oral surgery. And that's kind of, that was the, the Reuben: splashy update from last week, right? Reuben: May 6th, May 8th. And now the FBI uh, FBI is Reuben: basically saying general dentistry is now being targeted as well. So, Reuben: See, it went from outside the dental industry to a dental, you know, specialty. And now to the majority of dental practices out there are you Uh, actively being targeted. Michael: So then a couple of things, I mean, we Michael: obviously want to know what to look out for, but what's the consequences here? Michael: If let's just say. We did end up accidentally doing something that we weren't supposed to do, like Michael: opening up an email or clicking specific Michael: link, you know, stuff we don't really know. Reuben: Yeah. Let's all the way to the end is you're bankrupting of practice, right? We Reuben: go back one step that is, you know, uh, the Reuben: overwhelming majority of practices that suffer a cybersecurity attack go out of business. All right. So we're starting at the end, we're working backwards. So that, that means. you, Or if you are a doctor or a staff member, you Reuben: clicked on a staff member, clicked on it. an email, a link that downloaded a payload to your office, right? Ransomware is, is most of what we're talking about here. Reuben: And that ransomware, let's say you're running Dentrix or Eagle software, open dental, one of these, uh, you know, server based practice management Reuben: softwares, that ransomware was able to embed itself into your practice management software, right? Patient health information, Reuben: uh, x rays, uh, social security numbers, medical history. You know, all the stuff that we call protected health information or EPHI electronic protected health and Reuben: they get that data and they exfiltrate it or take it out of the office, that is a Reuben: breach, which then feeds me into most practices that go through a breach, go out of business, and then you're, you're no longer an owner of a practice, you're an associated at another practice. I guess that is actually the last step. And that Reuben: is why this is so important is because Reuben: it's so darn easy to protect yourself from this Reuben: happening. But only 6 percent of the dental offices out there are HIPAA compliant. So hackers go, wow, we have a 94 percent Reuben: chance of getting into this office. Thank God. But, and that's why, Reuben: Honestly, it's like Dennis and the, the only really industry Reuben: less compliant the dentistry, Reuben: you guys can make fun of them is chiropractors. Reuben: So, Hey, those are the industries that, that are go after because of the lowest hanging fruit. if you Reuben: have dogs at your house, and Michael, you know, Reuben: I have, you know, 10, 000 dogs that live with me, Reuben: a robber does not want to come rob my house, because they're going to be attacked by a bunch of dogs. they want to attack the house. That the owners are on vacation, there's no animals, it's dark, you know, they Reuben: are opportunistic just like any other profession. So Reuben: that is why they're going after the dental industry specifically. Michael: Gotcha. Something you mentioned, man, where you said staff members click on it. I think the most common Michael: thing. I mean, one of the practices I worked at the actual doctor clicked on it and Michael: ended up paying. But like with, when it comes to the staff members. Do they need to receive specific training for this? Or Reuben: yeah, we call it security awareness training or SAT for short. Uh, not to be confused with the test Reuben: that is, it is coming back now. turns out it's a great predictor. If you're going to be okay at college, Reuben: um, I digress. So basically security awareness training trains your staff. who, You Reuben: know, you got to give to them. They're Reuben: busy. They're your phone calls. There's patients in front of them. They're scheduling, their billing, they're checking people out. There's Reuben: a lot going on. So you kind of have to, you know, if they do have an email come through Reuben: and it looks like it's from UPS, or it looks like it's, you know, from a Reuben: credible source and they don't, they don't have their guard up and they click Reuben: on it. It's Reuben: really hard to come down Reuben: on that person right? Reuben: You're expecting a lot out of them. And, and, and also, you know, be, have your, you know, your hat on your cyber Reuben: hat on and be vigilant at all times for through. So it's really important that you set up like. Let's not do a free Gmail account, right? That Reuben: has no security protection. Reuben: It's really important that you have an email system. I recommend Microsoft Reuben: 365 for all businesses that will stop those emails from coming in to begin with, because it never made it through Reuben: the spam filter. Right. Uh, the phishing filter. Reuben: So what's it worth that your staff. Doesn't even have to see that email that's worth a lot, right? Reuben: And then secondarily, let's say it is something that's more sophisticated, right? AI is obviously Reuben: playing a huge role in these emerging threats because it's no longer, you know, Prince of Nigeria Reuben: asking you for money who doesn't speak good English. It's like a perfectly crafted Reuben: email that's written by, uh, Beauty. so what security awareness training does is it, uh, it's a campaign. So like, if Reuben: I set this up, I'll randomly send out emails to your employees, right? If they click on a message that they Reuben: shouldn't have. have. Reuben: They are forced Reuben: down the training loop of, okay, Reuben: you have to go to school to realize like, what does a real email looks like? You know, is this Reuben: an external sender? Is it an internal sender? So it Reuben: really, it's just another, uh, training element, but you know, we're in the prevention business, right? I don't, I don't want Reuben: to clean stuff up. I want to play default. I want to block stuff from happening. And Reuben: of course the client wants that too. Michael: Gotcha. Okay. So then right now, what steps can we do or what to look out for? What can we look out for? What steps can we do when it comes to preventing this threat that's happening today? Absolutely. And Reuben: I'm going to focus on email because that is, the Reuben: FBI is, the warning is specifically tied to email. It's the easy, again, we talked about ease of Reuben: access is the easiest way to get into a Reuben: business is to send someone email. I can Reuben: send Bill Gates an email right now. Right. It Reuben: It doesn't matter. I have his email. I get sent to him. and so there's hundreds, thousands of practices out there that use Reuben: friendly smiles at gmail. com. So the Reuben: to action is sign up for a Microsoft account. It's Reuben: going to do two things. One, uh, it's going to give you that increased protection we talked about. Reuben: Two, It's more professional, right? It's more professional to receive an email, not from friendly smiles at gmail. com, Reuben: but office at friendly smiles. com, right? You're using your domain name. Reuben: tied to your website. It's professional. Maybe you have a signature. It just gives your, the people you're communicating with Reuben: patients, staff labs. an air that, you know, you are a professional Reuben: business. So, it Reuben: just have to be for cybersecurity. It can be to kind of raise your professionalism as Reuben: a business. Gotcha. So get that first. Microsoft three, six, five. Reuben: Microsoft 365. It's a, it's a suite of products, right? We use Microsoft 365 Reuben: for open dental cloud hosting, but we also use Microsoft 365 for email for Microsoft teams, for one drive. So Reuben: there's a lot to it, but we're really specifically talking about, email or some people refer to as outlook, which Reuben: is a specific email product that Microsoft offers. Okay. Michael: Okay. So we do that next steps. Would that be the only step or that's it? Reuben: We're only going to focus on. Protecting yourself from the credible threat Reuben: the FBI, we can have a hour long about all the other stuff you need to do, but please, the takeaway from this is really bolster your email security. Michael: Gotcha. Okay. So get that So if we have it already, we don't got to worry about Reuben: IT company check it your it company, check it out, Ask them a question. Hey, am I doing Reuben: I need to do? If you don't have an it company, I run one. I Reuben: can help you out, but there's a lot of companies out there. So, either, you know, if you have an incumbent IT company, just reach Reuben: out to them, say, Hey, Can you guys get me set up with this? Or hey, I'm running this. Is there anything better we can do? Cause Reuben: there are some nuances there that are a little technical, but you know, you as the, uh, you as the client really shouldn't really have to worry about setting that up. Gotcha. Michael: Awesome, man. Any other pieces of advice you wanted to mention in this episode? Reuben: The FBI got involved, so they don't just like, Reuben: uh, creep into the dental industry, Reuben: uh, just cause they get bored. Reuben: So this is, it's a credible threat and just, it's a great reminder to just do the, Reuben: honestly, I'm just asking you guys to do the bare minimum here. Reuben: it's just sign up for secure email, which is also a HIPAA Reuben: compliance requirement, just. Just for the record. Yeah. Michael: Is that the only option? Microsoft Office Michael: 365? Or we can go with another one? Reuben: I mean, G Suite is also an option. So there is free Gmail right at gmail. com. And G Suite is Google's business version. And Reuben: that, that does have a much higher level of security than the free Gmail. You Reuben: do have to add, uh, an encryption element to it to make it HIPAA compliant, but I Reuben: just bring up Microsoft 365 because it is the lowest expense, easiest way to do this. Oh, lowest expense. how Michael: much is it? Reuben: Four bucks an email. Man. Yeah. So it's Michael: pretty easy. It's Reuben: cheaper than G suite. Yeah. It's, it's just, and then you don't have to worry about the whole. Encryption piece, uh, like you do with G suite. So Reuben: that's why I mentioned Microsoft 365 and also most it companies have a relationship with Microsoft and they can set this up for you. Gotcha. Michael: Awesome. Ruben, thank you so much for this. We appreciate it. Anybody listening go take action right now. Michael: And if anyone has further questions, where can they reach out to you? Reuben: Hey, sales at dark horse tech. com. I'm all over Facebook. You can bother me Reuben: on there or 800 868 4504 be happy to help anybody out. Thanks Awesome. Michael: that's going to be in the show notes below and Ruben, thank you for being with me on this Monday morning episode. Reuben: Thanks Michael.

This episode features the masterminds behind Roofstock OnChain, Geoffrey Thompson, and Sanjay Raghavan. We discuss the revolutionary product of tokenized real estate, how it works, the problems it solves, the incredible scaling power of this new technology, and who it is for.   Geoff Thompson built his career at top-tier law firms practicing in the areas of capital markets, banking and credit, structured finance, private equity, and cross-border transactions. Geoff's prior role at Roofstock was as general counsel where he advised on partnerships, product innovation, fundraising, deal structuring, real estate matters, securities law, international expansion, and all other legal and compliance matters. Sanjay Raghavan is the Head of Web3 Initiatives of Roofstock onChain where he leads the real estate investing platform's blockchain initiative. After being accepted into Cypher Accelerator, Sanjay continues to build connections between real estate investing and blockchain. Sanjay is also an advisor at Pudgy Penguins NFTs. Roofstock onChain is the Web3 subsidiary of Roofstock, the leading digital real estate investing platform for the $4 trillion single-family rental home sector. Relevant links: https://mobile.twitter.com/eth_sanjay https://mobile.twitter.com/_gthomps     Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone, Michael Albaum here from the Remote Real Estate Investor, we're actually in the midst of a pivot and so we're changing the name of our show to be the SFR show. Reason being is we really want to double down on the single family rental industry as a whole and so we wanted to pick a title and a name that's reflective of that. So join us here on the new show, the SFR show where we're gonna be bringing you everything you need to know about SFR investing from what the market is doing at the micro and macro level, to what the factors are influencing and changing the space. So let's kick it off with this first episode. We hope you enjoy.   Hey everyone, welcome to the SFR show. We're going to be talking today with Geoff and Sanjay on Roofstocks web three team about cryptocurrency tokenization, alternative investments, portfolio theory and risk management just to name a few. So with that, let's just jump straight into it.   Geoff and Sanjay, good to see you both. How have you been?   Sanjay: Great. Good to see you again and, Michael, you look really different from the last time we spoke and so much younger and much more refreshed, I think after the holidays.   Michael: Thank you. Yeah, I came back from the holidays ready, you know, cut, put some 10 pounds on and took 10 years off my face. So I'm doing the best I can, so…   Geoff: That's it.   Michael: That's it. So for anyone who didn't catch our prior episode together, I'd love if you could give a really quick intro who you guys are and what is it that you're doing here at Roofstock.   Geoff: So yeah, we are co leading the web three business unit every stock. I'm Geoff Thompson, this is Sanjay Raghavan and we have been at Roofstock for several years and over the last year, we've spent all of our time focusing on how to use blockchain and web three technology to improve the real estate transaction process and to generally make single family rentals more accessible and asset class.   Michael: And for anyone who isn't familiar with what web three is definitely go back and give that prior episode a listen. Sanjay gets into it and kind of what the technology is. So I'm curious gents where we are today, where are you seeing blockchain and tokenization playing a role in the single family space.   Sanjay: So first of all, we had a sale of our Genesis property in mid-October. So for your audience who may have read about it on crypto Twitter or on media publications, that was a very successful launch of this product, we spent about 10 months working on legal and tax analysis of how to structure this product so that it would be compliant and when somebody was purchasing this property in a web three as a web three home, they were in fact getting, you know, ownership of the underlying assets. So that took us about 10 months to engineer and the sale. The first sale that happened in mid-October was a huge success, went viral on crypto Twitter, and was picked up by all the leading crypto and non-crypto publications and the reason for that was because for the first time, what really happened in crypto and blockchain, which, if your followers are looking at the market, in general, this has been a really particularly bad year in the industry for the stock market. Inflation has been at a 40 year high feds have been drastically, like we went to 475 basis point interest rate hike and so, you know, we're going through this very tumultuous time in the industry and crypto has not been an exception, either, they've, you know, Krypto has been having an unprecedented winter, where either like Bitcoin and Aetherium lost 60% of their value since last year to this year and then a bunch of crypto companies went insolvent, because of various either it was just poor risk management or just, you know, for whatever other reasons, you know, they didn't have the capital to withstand the, this bear market. So during these times, you know, this was sort of like a ray of light in this industry, because we had successfully demonstrated that it was actually possible to sell a single family rental property, which normally is a three four week closing process was done instantaneously using battery technologies. But we were also able to find a leverage partner who was able to provide a loan for that property at a 65% LTV and so the combination of all of this really was a very positive thing in the industry, and we got a lot of outreach because of that.   Michael: Hopefully it wasn't FTX, right…   Sanjay: No, the leverage partner was not FTY, it was Dehler finance. But specifically, you know, about your question about, you know, with respect to blockchain tokenization, what does that really mean for real estate is that, you know, we've been able to now demonstrate that it is possible to have a better sale experience, right? When you typically look at the three week closing process on a real estate transaction, there's a bunch of contingencies on an offer, both the buyer and seller are extremely nervous about what happens during the diligence period in those three weeks. You know, like, for example, as you're aware, you know, the inspection results come in, and then you find out something about the property that you were not aware of before and then there's typically some kind of negotiation that goes on the offer price after the fact. There's an appraisal, contingency financing contingency, and, you know, so anything can happen during this three week period, the seller and buyer, even though an offer was accepted, may have a disagreement later on, you know, based on the results of further analysis, and sometimes the offer can be rescinded and then you're back to the drawing board trying to relist the property and sell it. So it's a particularly stressful time, both for the buyer and seller and doing it through this web three mechanism essentially allows us to take a lot of that diligence, which still has to happen, but we're just moving it, you know, upfront in the process, so the buyer and seller have access to the same information about the property, and the buyer is able to perform all of their diligence upfront. The way Geoff talks about his experiences, you may spend a week or two looking at Amazon Prime to figure out what you want to buy for Christmas. But once you've made that decision, you want it to be delivered, you know, on Amazon Prime, same day or next day, you don't want to wait four weeks for it to be then shipped from China to you know, get to Los Angeles, and then from there to be transported to, you know, San Francisco. So, you know, we really want to make this process easy for people, right. So you do all your diligence upfront, but when you decide to make that purchase decision, it happens instantaneously and on top of that, when you add that financing in a way that's asset based and not based on your personal credit underwriting, you're not trying to find a lender and you know, sending them two years of tax returns and bank statements and as you as you're aware, Michael, what happens in this process is you send all this information, you get a pre underwriting approval and then as you're getting ready to close on the property a month or two have elapsed, and all your information is outdated, and you're resending all the information back to the lender. So you know, you want to avoid all of this as well, because that's also incredibly stressful as you're going through a purchase process and here, because it's a rental property, it's cashflow generating, you based on the value of the asset, you can actually underwrite the loan and say, you know, it's a $200,000 property, I'm comfortable giving you $100,000 loan against it and that makes the lending paradigm a lot simpler as well. So overall, it's generally a better experience, both for the seller and the buyer, when you bring in the battery technology into this process.   Michael: This is mind blowing, you guys. So, I'm curious, like, how are you seeing really or rather, are people doing this at scale? I mean, is this we did it once we've, we've proven that it can be done once. But what is the scalability factor look like here? For both buyers and for sellers?   Geoff: It is yeah, I can jump in here. It is scalable. It's scalable in the same way that buying and selling homes today can be done, you know in bulk, or you can assemble your own portfolio over time. It's not you know, there isn't a delayed production process in creating these and preparing them to be sold on the blockchain. We do get that question a lot. Well, how much does it cost to mint a token? You know, is it 10s of 1000s of dollars? No, that's, that's essentially free. How long does it take, it's essentially instantaneous. The work that we do to prepare this to be sold is, is what Sanjay alluded to the diligence and inspection making sure everything photos have been taken, taxes have been paid HOA square all of those things. That's what we do up front, which has to happen in any real estate transaction, we just package that up in a very short timeframe of you know, call it five or 10 days, once the home has been purchased, and rehabbed and you know, it's ready to be listed for sale. So this can be this can be scaled and then once the home has been put on chain, then this is where the seller really is going to feel the scalability and the ease of interaction because imagine that you own five or 10 or you know some number of homes, you want to rebalance your portfolio. Maybe you want to get into one market and get out of another market. Right now you know, you'd have to do that through the traditional process. It might take a few months and involved a number of different intermediaries. In our case, if you if you own those homes as tokenized properties, we can get them ready for sale in five or 10 days, and then they can be listed immediately and once they've been listed on an NFT marketplace, the sale can happen with one click. So you don't as the seller, you don't have to go through a you know, a prolonged and painful back and forth with the buyer countering after they get the inspection and you know, trying to haggle on the price or trying to get a discount here, whatever it might be. That's all taken care of up front. So in that sense, it's it does make this much more scalable and much more liquid than the traditional process.   Michael: Should audience and listeners be thinking about crypto almost like a foreign currency and so just quick anecdote. So I've invested in Portugal, I signed my purchase agreement to purchase the property in Portugal back in 2020, just before the pandemic, then where the dollar was really strong against the euro than the Dollar tanked against the Euro and so I changed money after the fact and just got totally hosed on the exchange rate. How should people be thinking about exchange rate, if you will, between cryptocurrency and whatever currency there?   Sanjay: Yeah, that's a that's a really good question, right and when you think about a cryptocurrency, like Bitcoin or Aetherium, these are the two sort of more commonly discussed cryptocurrencies, in a way it is, you can make the analogy that these are almost as though they are, you know, sovereign currencies of their own and there is an exchange rate between the US dollar and Bitcoin or Aetherium. The only difference here being that, you know, unlike Euro, or the British pound, where they have their own fiscal and monetary policies that, you know, determine what happens to their bank against the dollar, in the case of cryptocurrencies, they are highly volatile and we see that there's, they're very, actually strongly correlated to the stock market today. So, when, for example, the, there was an indication that the feds might slow down the rate at which they're increasing the interest rates and I think the expectation for, I believe this week the Fed is meeting and the expectation is that this week, it will be a 50 basis point taken sort of a 75 basis point high, the stock markets rallied and sorted Bitcoin with that and however, even though they're kind of strongly correlated, they're also highly volatile and so when we talk about people having cryptocurrencies that they can use to buy these properties, we actually suggest that they buy and keep their money in stable coins, which are pegged against the US dollar and there are companies such as circle which have USDC, and Paxos which has its own version of dollar pegged stable coin. And having your money in stable coins means that you're not subject to the same volatility, as Bitcoin or Aetherium might be which can drop or go up in value by 20-30% in a single day and that's, that's how we will really think about it. If people want to, you know, have an allocation, if somebody is really long on Bitcoin or Aetherium, and they want to have an allocation in that asset class, that's fine. As long as they're aware that those are highly volatile and in the short term, they could be, you know, fluctuating quite a bit.   Michael: Yeah and that makes sense and so when are you seeing people make the change from the stable coin to whatever coin they're going to be using to purchase the properties?   Sanjay: So the stable, you can actually purchase properties with stable coins and because, you know, we have a way to when we received those stable coins, for example, if we are the seller of the property, and, you know, property is purchased using, let's say, serpents, USDC. Once were paid in USD C, we have a way to convert that back into US dollars. So that's, you know, it makes essentially, you can think of the stable coins as programmable money meaning this whole transaction is happening on the blockchain, and it's happening through a piece of computer code, there's no you know, you and I are not sitting across the table signing documents and you know, giving a check and receiving title and in return. So, this is all happening because a piece of computer code is transferring money from you to me and transferring the, the LLC through the NFT giving you the LLC that I own, which has this property and since this is all being executed by computer code, this stable coin is really, you know, we refer to it as programmable money because a piece of computer program is able to move money from you to me, and, and allow this transaction to happen in that one click process that Geoff was talking about earlier.   Geoff: You know, it feels like this is the way things should work, right? If you think about the system that we have right now for closing property transactions. It's basically inherited from England 800 years ago. You know, we've made small advancements, but not really and it shouldn't you know, it all of everyone who is involved in these transactions, and every step that's taken is taken for a reason it's solving a particular problem. But if you stop and rethink how this is done, you realize that by reordering some things, and maybe, you know, using a splash of new technology here, you can actually dramatically change the experience for everyone and it's not necessarily, you know, a zero sum game, I think it's best, it's better for everyone, everyone who's in the industry is going to be better off, there will be more transactions, because it's easier to transact, there'll be more demand because people are interested in getting in, if they know they can get out easily, right? Right now, you know that if you're looking at buying a property, you're probably going to have to hold it at least five years to recover your closing costs and wait for it to appreciate a little bit and you know, it's going to be a headache, when you do have to sell, if you don't have those constraints, you know, transaction fees are less and the time involved is less, you'll be more inclined to get in the market, because you know, you can get out when you need to.   Sanjay: And, you know, I'll also add one more thing to that, right. So Michael, if you think about, you know, back in the day, when there were these kind of all day, buyers, a lot of them were like businessmen that, you know, one year, they might have made half a million dollars, but you know, then another year, it was only 150, or something and so it's very hard to underwrite those types of folks through a traditional underwriting process, because you're looking at two years of, you know, income and tax returns, and all of that, and a lot of them may not can qualify for more conventional financing. However, in an asset based lending type solution, you know, as long as you have the money, and, you know, you're not constrained by, you know, your income for the last two years or three years, as long as you have the money to buy the, you know, to put in as down payment on the product, and the asset itself has the value, you're able to borrow against it much more easily. So, you know, we just talked about the complexity of closing a real estate transaction, in general. But once you add in the financing layer, on top of that, it gets even harder because, you know, there's, again, in a in a, you know, when the market is going up, you just, you just don't know, if you know the max, you want to make the best offer, you can but at that offer, you don't know if you will qualify for the loan, because the also the rate might have moved since the time, you initially got underwritten and suddenly, with the new rate, you don't qualify anymore for that and you have to find that little bit more down payment to offset it or buy some points. You know, you and I have gone through this numerous times in our lives. But you know, you can avoid all of those types of issues because in an asset based lending program, you know, that when you buy this asset, which is worth $200,000, there's a lender, if they're willing to come in at 65%, LTV, you know that based on the value of the asset, you're going to get that loan.   Michael: And if we just decouple the crypto piece of this and blockchain piece of this, I mean, asset based lending, is that available for regular folks?   Sanjay: So in the traditional finance world, it is available, right, but it becomes it becomes harder, because when you're buying an investment property. As you know, Fannie Mae puts limitations on how many investment properties you can get financing for as an individual. Once you get past that limit, then you're looking at pretty much private money, hard money type lending solutions, until you can get up to a scale where you have enough properties where Citibank or Wells Fargo or Goldman Sachs might be interested in working with you. But there's this pocket where after you know, your first 10 properties till you get to a few 100, we are primarily working with, you know, non-bank lenders who are generally, you know, where the rate could be 10 or 12% and then, oftentimes, some of these lenders will also ask for a personal guarantee on top of it. So it's not, you know, while it is possible to get financing on investment properties in the traditional finance world, at some point, it doesn't scale very well and, you know, you're sort of in that desert for until you can somehow figure out a way to get to 200 properties when suddenly the larger lenders are willing to talk to you. So that problem goes away when you're using Blockchain, and specifically decentralized finance or defy as we refer to it, because they're incrementally each property that you're buying is getting financed based on asset value and so you know, you're able to get a much more sort of a pleasurable experience to get through the lending process on the blockchain than on the traditional work.   Michael: Let's pivot just a little bit and talk about risk management and portfolio theory and as folks are starting to scale their portfolio or really as institutions have already a sizable portfolio, where does tokenization fit in to their playbook? When's the appropriate time? When should people be thinking about it in general?   Sanjay: The way I like to answer this question is if you as an individual, if you went to your financial advisor, and said, okay, you know, I have, you know, a million dollars, I want to invest, and I want to make sure there's, you know, come up with a portfolio allocation, that makes sense for me, typically, they're going to, like, in the old days, it was just a sort of a 60,40 rule, there was 60%, in stocks, 40%. In bonds, yeah, but I think people have gotten smarter over the last 10 years and nowadays, when you go to a financial advisor, they're going to say, some allocation in stock, some allocation in fixed income bond products, and then an allocation to alternative investments, because that's where, you know, you can get non correlated yields, because the stock market moving in one direction should not and like, you know, God forbid, if you have an emergency, and you need some cash, like this would be a, you know, if you bought at the height of the market last year, this would be a really bad time to sell, you know, your S&P 500 shares to, to, you know, pay for whatever you had to write, whether it's a wedding, a doctor's thing, education, whatever it is. So, generally speaking, financial advisors these days suggest that you should have an allocation in alternative investments that are non-correlated to the stock and bond markets and, you know, you can access that pool of capital, you know, when you need to, right. So from that, from that perspective, diversification, and then when you talk about alternatives, there's, obviously, there's a wide range of assets there. But real estate is on top of mind, for almost all the, you know, anytime we talk about alternatives, real estate, sort of is one of the top things people talk about. So from that perspective, you know, almost every investor should probably be looking at some allocation, and it will depend on their individual circumstances, whether their age, their income, their marital status, and you know, their need for cash there, this cauldrons and all that, but, you know, advisors might ask you to put five to 10% or, or more into alternative asset classes and so the same financial hygiene should also be applied by corporations and institutions, because you're sort of being asked to manage the treasury of your company, let's say you are a venture funded company, and you just raised $100 million, well, you are going to keep a good portion of that money in cash and cash like instruments, money market, and so on, because you have working capital, you have other things that you need to be spending on. But some allocation of that you might put in US Treasuries, for example, right and in the crypto world, crypto institutions may keep some allocation in Bitcoin and Aetherium and other protocols that they have high conviction and but nevertheless, whether it's a web two institution or a crypto institution, it's just basic financial hygiene to have an allocation in alternative asset classes and specifically, with our product, being a web three product, you know, that money can stay, you know, essentially, the token they're purchasing is a is an NFT and it is part of the blockchain ecosystem, so they can keep their assets within the crypto world without having to continuously off ramp into US dollars and then on ramp it back into crypto when they need to switch back and forth with respect to how they receive rental income, of course, you know, if your properties are managed by a property manager, which they should be because institutions are not in the business of managing properties, you can collect your rent in cash if you have, you know, if you have to, if you have expenses that need to be paid out in US dollars, but also if you want to collect your rent and USDC or DDM, you have the option to do that as well.   So whether you're a two institution or a web three institution, depending on your cash needs and your crypto needs, now you can have a yield generating crypto asset, and the yield can be collected in Fiat or in or in cryptocurrency. So, you know, it is good financial health to do it. We encourage everybody to have some allocation, whether it's through Roofstock, or through any other channel channels that they would like to pursue, but they should have some allocation and alternatives if it just makes sense. Geoff, if you'd like to add something back?   Geoff: No, that's it. I mean, in our case, because we've designed a solution that allows you to transact with crypto natively. This is something that we've heard from a number of crypto or web three institutions that it's potentially very interesting for them, as opposed to maintaining all of their assets in a cryptocurrency or a stable coin, this isn't a way to get access to, you know, a diversified asset that does create yield and it does have a price appreciation component. So there are a lot of, you know, we've heard from the web three community in particular that this is a perfect diversification play.   Michael: And if I'm someone that owns a sizable portfolio, maybe I own it all in cash, because that's been my mantra and I do need that quick capital injection. I mean, could I tokenize these properties and then go get asset based lending and convert that into cash very quickly.   Geoff: Yes, that's your thinking ahead, I like that. Yes, the properties can be tokenized. Basically any point in their lifecycle. If you own them, now, you bought them through a traditional sale and settlement, you can, you know, basically what it means is you have to drop it into an LLC and the LLC has a particular structure that we've worked out, it is very particular. So you know, we'll work with you to set that create that LLC, to help transfer the property into the LLC. In most states, I think the vast majority of states that transfer from an owner to an LLC that's owned by the owner doesn't create transfer tax obligations. So there's, you know, there's a little bit of the traditional closing costs, recreation fee, or whatever that might be part of that. But it is perfectly possible to onboard existing assets that you own into the system and similarly, for if we're talking about other points in the lifecycle for builders, we've had a few builders reach out and say they're close to completing a community and they might want to try to sell some of these as in an NFT form, those can those new assets as new properties that really have never been titled before, those can also be titled directly into an LLC. So it's a very flexible structure, it accommodates property at whatever stage of the lifecycle it's in.   Michael: Anyone who's got conventional financing experience under their belt might be listening to this and saying, Well, you're talking about lending or talking about LLCs. Those two things often don't jive play nice get in the sandbox. So the acid base lender that we're working with, or that we are going to be working with, I would imagine has no issue lending to an LLC. Is that right?   Geoff: Yes, that's exactly right. The lenders that we're working with are the web three lenders, we have talked to numerous traditional lenders, and some of them expressed a lot of interest in digital assets and maybe they've even created a team. But in most cases, the underwriting aspect of it isn't, isn't there yet. They're not ready to take this to credit committee and make a loan on the structure that we're proposing here but that's okay because there are there's a lot of money that's available in the web three space, and it is more flexible in terms of what it requires. They don't necessarily need to have all of the same checks and balances that a traditional lender would be in terms of underwriting against the individual. They can be comfortable underwriting against the asset, because they're comfortable that in the event of default, that asset, it is already in their vaults. So it's in the lenders wallet at the time of default and because we're building this system where you can sell them through an NFT marketplace, there is liquidity that there wouldn't otherwise be if you were holding this you know the traditional way so you to your to your question. Are Trade Fi lenders, the traditional finance space interested? Yes, we've heard some say they're interested we haven't seen anyone actually show up to engage in detail. But there is an entirely separate pool of capital into web three space that's much more flexible and willing to work with Blockchain structure.   Michael: I think my last question, guys before I let you out of here is like I'm sold this sounds obviously like a really great product, like a really cool technology that exists. Who isn't this for who, who listening to this should think about that. It's not a good fit for me because XY and Z.   Sanjay: Yeah, I mean, I can start with a couple of things and then Geoff, you can add to that as well. So if the property already has financing in the Trade Fi world, this structure is hard, because we can't really transfer unencumbered property into an LLC and then tokenize it right because there's a traditional mortgage on the property and there's a whole kind of thing that's a fillip off chain, in terms of financing. So it's not going to work. If primarily you're looking to get off chain financing, then this is not for you. You have to you know, sort of follow the traditional sense. But anybody that's open to purchasing this as a web three property and open to looking at web three financing alternatives. For those people, this absolutely should be something they should consider. The one kind of drawback or question we've heard from a lot of people as they need to become familiar with how to use crypto wallets and how to essentially convert money into USD C or some stable coin, and then use that to go and make a purchase. We're here to help with those types of Q&A, right? The, you know, until you do it for the first time, it's hard, but after you've done it, then it's you know, it's easy, right? Just like when we, the, you know, iPhones first game, and people didn't know, you know, how do you which way do you swipe to do what, but then over time you get used to it and so we're absolutely happy to help anybody that's staying in the sidelines, purely because they don't understand the technology aspects of it, we can help them out. But for people that have financing constraints or other things, and you know, for them, it is until they can, you know, overcome those issues and look at sort of a pure web unencumbered property in the web three world with, then financing added to it on the blockchain. So for those audiences, that might, you know, until they figured out that, it might be a challenge.   Geoff: I'd also add for owner occupants, the financing isn't fully worked out yet. So the financing that we added to the initial home sale a few weeks ago, that was very much geared towards an investment property, and for the immediate future, to the extent that we're building out the different options for defi lending, it looks like most of them will be focused on these as investment properties, as opposed to owner occupant properties and that's for lending law reasons, not wanting to cross over into a mortgage lending licensing requirement and it also just dealing with, you know, the people that are different in the, at that point, the underwriting is different as well, because it's not as easy to necessarily sell that asset if the owner is living in it and so that type of thing. So for at the at the moment, we're thinking of this mostly for investment property, use cases.   Michael: Really, really cool stuff. For people that have questions that want to reach out that want to learn more, what's the best way for them to do so?   Geoff: Reach out on Email or Twitter. We're, we can drop our emails here, but it's: gthompson@roofstock.com or is it sraghavan, right?   Sanjay: Yeah, it's a sraghavan, so: S R A G H A V A N @roofstock.com. I'm also @eth_sanjay, Sanjay, Y on Twitter, so you can also reach out to me there. One thing before we sign off for today, we're super excited to say that we are in the process of closing our second property, that's going to get tokenized. Soon, this one's going to be in Georgia, at CES Atlanta suburb and we'll be going through the process as soon as this is closed in the next few days, we will be going through the process of documenting what the property looks like when we bought it and any Rehab we end up doing on it and you know, they'll be you know, talking about it on social media quite a bit as well as people who are new to real estate investing, maybe this is an opportunity for them to understand, well, you know, what are the kinds of things people should be looking at when they're analyzing a rental property and so as we go through the process of rehabbing this will sort of document that a little bit. But that, you know, once the rehab is completed that that'll get, they'll get tokenized soon, but once the rehab is completed, we'll have it available for sale.   Michael: Awesome, we'll definitely have to keep my eyes peeled for the process and for the property once it's finished. That's super exciting. Well, guys, it's always a pleasure, great seeing you both. Thanks for hanging out with me.   Sanjay: Thanks for having us.   Geoff: Always great to chat.   Sanjay: Bye!   Michael: Take care and talk soon. Hey, everyone. That was a wrap to our show. Thank you so much to Geoff and Sanjay. Super, super, super interesting stuff. Definitely leave us a rating or review wherever it is you get your podcasts and definitely reach out to those guys if you have any questions about web three, about tokenization about cryptocurrency home purchases. Again, really cool stuff. We look forward to seeing you on the next one. Thanks so much for listening. Happy investing…

Being only an employee leaves you vulnerable to the ups and downs of the market. Real estate investing is one powerful defense against job loss and economic downturns. In this episode, Neil Timmons provides insight into the real estate business and shares his experience with overcoming economic adversity to secure a robust financial position. Neil Timmins is the CEO of Legacy Impact Partners, where they invest in real estate opportunities ranging from houses and apartments to industrial and medical offices. In 2021 Neil published his first book, Unicorn Hunting for Real Estate Investment Companies: How to Easily Attract, Screen, and Land a Unicorn. The book is tailored to helping real estate investors find and retain top talent through the strategic systemization of hiring. Neil also hosts his own podcast, “Real Grit” where he pulls back the curtain on real estate investing through interviews with industry titans. “Real Grit” provides listeners with the tools they need to secure their lasting real estate legacy!   Episode Links: https://legacyimpactpartners.com/ https://legacyimpactpartners.com/podcast/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me I have Neil Timmins, who is an author, a podcast host, entrepreneur, real estate investor and he's gonna be talking to us about going from an agent and employee to building a significant business in the real estate space and what it takes to do so. So let's get into it.   Neil Timmons what is going on, man, welcome to the podcast. Thanks so much for taking the time to come hang out with me today.   Neil: Good. It's so good to see you again. I appreciate the invite. Looking forward to this for some time now.   Michael: No, likewise, the pleasure is mine. I'm super excited. So you and I of course know each other. We were chatting offline just before we hit record. But for anyone who doesn't know Neil Timmins, give us the background quick and dirty. Who you are, where you come from, and what is it you're doing real estate.   Neil: High level out of Des Moines, Iowa, born and raised, started as a residential real estate agent built a built a brokerage there on to REMAX for a number of years was a top REMAX guy with my 20s and then eventually found my way stumbled into investing worked my way through single family investing, we still do a little today but morphed into commercial investing. And that's a primary focus today.   Michael: Love it and I hear this this theme so often with agents start as an agent, got my teeth cut, then went into the investment side. My guess if you're a top performing agent, in your local market, you're making a lot more money on an annual basis than you would if you're investing. So why did you make that transition? Why'd you make that jump?   Neil: Yeah, no good question. Well, the not so fun story is I was probably 31 ish at the time. Maybe 32, I came home one day to my wife of a decade in our three little kids, all about five or younger, and my wife had them all packed up and said she was leaving, leaving for good. I had spent the better part of seven years or so working like a dog every day of the week, I worked. My second year in real estate, it worked 355 days. So that business was built, ultimately, you know, I was able to put his team in place and that business, but it largely was built on my back and my effort and so it was at that point that, you know, I had an ultimatum and I begged and pleaded with her to go, you gotta give me give me an opportunity. I understand. So give me an opportunity. She did thank God. 45 days later, I sold my REMAX and took a whole bunch of time off to decide, well, how am I going to how am I going to do this? How am I going to make a living in contribute because I like doing what I was doing and not the not to the degree in which I did it. But I enjoyed real estate a lot, right? The people, all the fun things around it. So it took some time off to evaluate things and then ultimately plugged back in largely on the investment side.   Michael: And today you own a business around the real estate investing space. Tell us about that.   Neil: Yeah. So I own a couple of things. On the on the investment side of things. We're primarily focused on commercial investing, right, we buy by multiple asset classes, you're on a primary ladder, Des Moines, Iowa, we still do fix and flip in the office. Although I'm not largely involved, we've got a nice little machine that runs that really good. Contractor base in place, literally same contractor. Don't quote me on how many but we've done probably nearly 200 with the same exact crew. So it makes running things and the efficiencies there of all awfully simple. I love talking to people going you know what I don't like flipping because then I gotta go pick the carpet, I gotta pick the paint whatever else I'm like, What do you mean, you have to do that we picked it once. It's the same carpets, the same paint, same countertops, the same appliance, nothing, nothing changes. You're not doing a whole block of these things. It's not like anybody notices. You just pick it once yeah and so then also, I run an education business, which we launched this year, which has been very well received from folks who want to make that bridge want to leap into commercial real estate and, you know, figure it out either how to do their first deal or how to do their next deal.   Michael: And I'm curious, Neil, because I also come from the education space, and the folks that you're working with, are they the DIYers or are they the folks that have heard of commercial and want to get exposure to it in some form or another are a mix of the two?   Neil: Yeah, no, it's really DIYers. Yeah, that's not largely the passive investors, if you will, it's people who are active in real estate like, like using… if you will, you know, in my career was it just laid out you know, as well cradle to grave if you will, coming through I'd like if you were to go, how should someone progress? Although most don't do that, you know, they end up in one thing and often stick there, but I kind of work my way through that. Is this constant evolution of how do we elevate oneself and one skill set to take it to a to a new level and that's where these folks are they know they've done, they've done single family, they've largely been exposed to it, maybe they've been exposed a little commercial, but just haven't gotten to the results. They haven't they haven't been on a foundation, a legacy had been on a foundation of financial freedom and, you know, arguably, in mice that that commercial gets you there faster and easier.   Michael: And within commercial because it is such a diverse asset class and really name where do you see folks going that are having the most success?   Neil: Oh, good question there. You know, we bring people in, and we do a lot of things from a training standpoint, want to be in an asset class exercise to go alright, well, fill this little asset class matrix out, we have my hand if answer a handful of questions to go, you know, do you resonate better? Would you rather work with people or businesses, and we just bring them through a series of questions, and that lines it up to go well, top to bottom ranked, we focus on six level six largest asset classes, there's top to the bottom, here's what here's what it looks like and then my encouragement from there is, Listen, if number two resonates a whole lot better with you than number one on that list, that's what you should do, because it's just easier and you know, this, if we were to go work on something you can get passionate about, it's a whole lot simpler, then put a little more effort into it and something you're just like, huh, maybe?   Michael: Totally, totally and, you know, I'm curious, so many folks, I think can go invest in single family on the side as a project as a test as an experiment, the DIYers that are doing commercial real estate, are they doing it on the side? Are they really jumping in with both feet, kind of like you did, and making this their full time gig?   Neil: Yep, great question most are doing on the side, most are either stacking it on to their single family business or, you know, if they've got a day job and several folks do is they're doing this, you know, in the evenings, nights and weekends, side hustle, if you will and you think about you know, from makeup, a number of you were to go market to single family or markets or commercial just by being in commercial, the number of available prospects has been largely diminished. It's a much more manageable group of makeup, an asset class, let's say self-storage, you're going to go market self-storage is in your county, well, in comparison to houses, it is a mere fraction. So your ability to call text or you know, mail somebody or connect with a broker, perhaps it's very manageable. You don't have to do it full time. In fact, that would not encourage it, because you're gonna sit around, you're gonna get discouraged. Because there's candidly not enough to do versus the single family side, you could always find something to do.   Michael: Interesting. Talk to us about kind of the exits and the thought process around the exit from that business. Because in my mind, and I think in a lot of other investors' minds, a house is a house is a house, you know what it is? I know what it is everybody on the street, you know, that you bump into knows what it is, and knows how to buy it, versus a self-storage unit. I could maybe Name one person that I know that's involved in that business and so if I'm trying to sell it, who's gonna buy it?   Neil: Yep, no, exactly. So that's, you know, what I do on the training side is bring people through, even if you know, largely set some goals, understand why you want to be in this business, and perhaps what you'll do get through the training go, I don't want to be in the business. And that's okay, too. That's okay because what you don't know or what you what you now know, empowers you, right? To make a better decision about what the path you should be going down. So we bring people through that large infusion for retraining to expose them to what this world looks like, and then how to, you know, identify an asset class that really resonates with you how to price something up, how do we get leads, so largely from a marketing standpoint, from a lead standpoint, what do we say then? How do we value it? How do we actually put something a price to it to go alright, this looks like a potential really good deal, then how do we put it under contract and then from there, you know, the exit plans largely are or we get to resell the property. Occasionally, we get a property that comes in our wheelhouse, what I call, it's not our perfect seller, so it's a good deal, just not for us. Now, can we move that along, so to liken that to single family wholesale it double close it novated right, do all the same things in the commercial side or, you know, we decide, hey, this is our perfect seller with the property we want to own. So how do we how do we close it up or we get to raise equity? How do we go get debt and then how do we bring the whole thing together to properly manage it? So that's what we show folks how to do and ultimately starts you know, on the front end of the process to go Alright, how are we buying this because I know what our required returns are and if it doesn't hit that I'm that's gonna lead us down a different path to either go it's either a non-deal or we're gonna get this moved along to another investor and cash up the big check that we can utilize for the next year.   Michael: Yeah, that makes a ton of sense and you use the term that I'm not frankly familiar with novate. What does that mean?   Neil: Novation is that this has become very popular on the single family side. So there's a lot of buzz on the single family side, especially for those in the wholesaling business. Okay, it is to replace one contract with one another with another contract. So essentially, if I was to, you know, say, for example, I was to buy a property from Mr. Jones, I have a contract in place with Mr. Jones, I decided I want to move this property along under innovation process, you would then provide me a contract that would replace mine, there's typically a difference in pricing, right, you're gonna pay more than what I've just paid and that delta ultimately gets paid back to me. As part of the process. I'm high level in here. There's some moving pieces but high level?   Michael: Yeah, okay okay. Great to know. Neil, I'm curious if we can zoom out for a little bit, because you went from realtor agent, which is a kind of a unique profession and that, yes, you are an employee, but also you are kind of the business owner, your own of your own little business, your own little domain, and then you went and put a team in place, and then you ultimately sold that business. But for so many people that are employees in a traditional nine to five w two employee position to make the transition from employee to business owner, I think is a big leap for a lot of people. What was that like for you mentally going from? I'm going to be an agent to now I'm going to start and run and operate a business.   Neil: Yeah, no good question in it. I think that's, it comes in incremental gains, right. So how do you how do you elephant, right, one piece at a time and so the same thing occurred from me mentally and I think that is? It's a terrific question because I think so much of this business, in business in general is mental, right? It's a six inch game in between your ears and so how do you combat that I read a book when I was probably 20 to 23 years old. The Millionaire Mind by Dr. Thomas Stanley. He wrote The Millionaire Next Door, that's probably his most famous book, The Millionaire Mind was incredible and it broke it down to, you know how millionaires think and my thought process, of course, is well, if you just think like a millionaire eventually, and then, therefore, act and operate like a millionaire, I will eventually become one, right. So it's not it's not hard success leaves clues. So there was a lot of things in there that that impacted me at a very deep level and one of them, the biggest takeaway for me was, the largest risk that one has is being an employee. They can let you go any day of the week, this is what I came to believe in, it's still my operating beliefs today are just risky, if you have no control and I, I am well aware that as a business owner, as an operator, as a real estate investor, we take tremendous risk. There's no doubt about it but I still think they pale in comparison to putting all eggs in one basket, men have an employer of someone else.   Michael: Yeah, it makes total sense. So as you started moving things along, and created and formed and founded your business, how did you figure out who the right people were to put on the proverbial bus because I think, again, so many people have either a great idea, and they're really good at maybe doing that one thing. But doing that one thing isn't a business and so how do you scale it and have a proper functioning, running operational business?   Neil: Yeah, no, great question and that's, that's probably, if I was to attribute any of our success over the course of last three ish years, two and a half years, somewhere in that range, we've had significant success in that period of time, it's largely been correlated to my evolution as a leader, knowing that the only way forward is ultimately with and through other people. And so I've had a focus internal so go back to a question you just asked earlier, from a mental attitude of taking that leap. For me, it's how do I develop as a leader how to become a better a better person, somebody that people look up to somebody that people want to be around, so many people want to listen to, and, and be on the same bus with going rowing in the same direction and so that has largely, that's been a big focus over the course the last couple of years. When I was at a spot where he's gone, it's time to grow. You can't hire and retain a player's unicorns as I call them. You can't hire and retain unicorns if you're not one. So how do you how does one improve their personal self to be able to get to that level? That other a players want to be around?   Michael: Yeah, that makes total sense. So what it what did you do? Can you open the vest a little bit, let us peek under the curtain…   Neil: Yes, you know, it's, I wish there was a silver bullet here, but it's largely just been, you know, what do they say what's mentionable is manageable and for me, it's just having that Cognizant thought that okay, well, now, I'm mindful of this and so now I need to give thought to this. How do I say things how do I handle things? How do I handle certain situations? What is the impact when making this isn't with an employee or with a team or with a customer in front of folks, how's this gonna resonate? What does this look like and then having the vision as a leader, as any leader, doesn't any organization, that vision to go, where are we going and this isn't about me, this is about us and so oftentimes you'll hear me say, we did this, I almost, you know, I try very hard to say that 100% of time, I didn't do anything. We did this collectively, all the results are collective right. It is us together and that reading, continuing to stay focused on that, stay ahead of what's transpiring, trying to, you know, hosting a podcast being around other people like yourself, other people in the industry having an understanding what's going on. So been trying to be on that curve from a knowledge base standpoint about what's transpiring that's helpful, too.   Michael: Yeah, yeah. I love that and asking for a friend. I hate people and I don't think I want to interview people and screen people and that sort of thing. Does that mean that I shouldn't start a business with my great idea?   Neil: The first part is I don't like people. So let's just call that the introverted, right? They don't want to interact with other people. My right hand gal is an introvert. She's not very gregarious as it relates to people. She's very good with people. But she wants to she's far more task oriented about how do we execute on what we're doing? I think that's terrific and now, what hadn't you hire her because she's the Yang, right? It's Ying and yang. She complements me in a perfect opposite fashion and I do the same thing. The other way around. Yeah, it's, I think that's terrific. I think it's wonderful, if you can, what you just expressed was, you know who you are, if you know who you are, you can identify a path forward and I would encourage you absolutely. Knowing what your deficiencies are is wonderful. We're all we're all given strengths someplace, just balance this balance your weakness with somebody else. Don't try to what are the what don't master in the weaknesses, right? So anytime we have a weakness here in anybody, you know, largely for me, it's going just don't do it. Don't master in the minors, because at the end of the day, you're still going to be a d minus for you, no matter how good you get at your weakness focus on your A's.   Michael: Yeah. Oh, that's such a good expression. I can't tell you how many times I've heard people say, oh, I wanted to visit with my best friend. We're so similar that I'm like, that doesn't sound like a good partnership.   Neil: Sounds like sounds like a great bar and I but not a good business decision.   Michael: Yeah, I know. Totally, yeah right.   Neil, if we zoom back into the commercial side of real estate coming from the single family space, what is it that you see is the biggest hurdle of barrier to entry for folks that want to make that leap into commercial but utilize someone such as yourself to help them get there?   Neil: You'll never guess us? Are you ready for this?   Michael: I hope so.   Neil: I know, you're it's a mental barrier. It's all made up in their head. It's they don't think they can't. Yeah, but they don't think that that is it because past that, the ability to go well, okay. Well, if you've ever let me let me liken it to single family. A duplex is like a single family rental house, right? It's just two doors and the numbers change a little bit? Well, a 20 packs is the same thing. There's largely, there's not much difference in these things you're adding some zeros are calculated a little differently, but it's pretty much the same. In fact, management, in my opinion, gets easier. The more doors you have, right, you get professional management, you get it, it becomes simpler. Yeah and then to make a change to go into some other asset class, we just have to make a bridge. What does that look like? They have to go to an industrial buildings on a triple net lease, which is probably the simplest thing to calculate and get one's head around when you're going, well, they just pay a lease rate, and then they fix all the stuff that goes wrong with it, right? That's it your true and your true and why is the rent, we've got multiple properties like that and we're the management company, which means we just get the rent and never hear Yeah.   Michael: Yeah, that's by far the easiest piece of property in my portfolio is triple net.   Neil: Yes, correct. But people are, you know, we're scared about what we don't know and that's true of all of us, right? We're scared about what we don't know, afraid to make mistake, which is totally understandable and so we just help folks, we educate them as we go answer questions as we go and show them the exact path to be able to get from, you know, I want to learn more about commercial real estate, I'd love to be able to buy a deal to actually get to a close.   Michael: That's awesome. And I'm curious, Neil, what's your favorite asset class and why?   Neil: My favorite asset class, although I own I'd have to calculate up four or five different asset classes, but my favorite today is going to be industrial.   Michael: Industrial why is that?   Neil: Yeah, industrial is in demand like crazy. Secondly, in 2021, had the second largest rent increase across all asset classes, only trailing two apartments. But in comparison to apartments, they're far easier to manage, right, I get a triple net deal, or a double no deal, there isn't much to do, there's very few moving pieces you end up with, on average, let's say a five year to 10 year lease is pretty straightforward.   Michael: Okay. So if I'm playing devil's advocate here, and we're looking at this industrial building, this is suited only for a business. This is not for people can't come live here and the type of business you might have to build to suit it out for that particular business 5-10 years down the road, that might be a future Neal problem. But let's drive down that path that tenant leaves goes out of business, what have you economy turns? If businesses aren't doing well, in the area, are you stuck with this vacant building now?   Neil: 100%. If businesses are doing well in the area, meaning they're laying off or not employing people, my thesis is you still have you still have an apartment problem relative to occupancy and or rent rates. This goes back to earlier question is, admittedly, we have to take a risk someplace, right? It's just my comfort level and I like the box, you know, not a somehow engineering building has been added on to or defined for one, one person's exact use, I like a big giant box, just a rectangle, that's it, a business of multiple businesses come into that and fill it out in which way they want to. So like the fact that if I can buy my, my preferred buying is for buying some older not buying brand new stuff, buying some older buying something with a value add or on buying at a discount of some managers, the intent is to buy it correctly. And if I can buy a property, let's call it make up a number right now 70 to $80, a square foot brand new construction is gonna be 120 to 130 a square foot, I think I'm in pretty good shape over the course of coming years, I think that my dollars, and my rent rates get pulled up to the fact that sheer cost of new construction is gonna be 60% higher.   Michael: All right, I dig it, I dig it and for anyone, I'm just realizing now, some of our listeners might not be familiar with the term double net triple net lease, can you give us a quick definition of what it is?   Neil: Yeah, it just defines what people pay for double net, for example, is probably one of the least likely terms that use but let's say triple net triple net means ultimately that the tenant pays for everything, there may be some nuances inside the lease, but taxes, insurance, repairs maintenance, the tenant pays for that. So if your releases 100 grand a year, your net is 100 grand a year before, before your mortgage, any sort of debt payment you have on it. A double net means they don't pay for everything they pay for perhaps taxes and insurance, but not all the repairs and all the maintenance, and therefore your NOI is gonna be a little lighter, depending on what you have to maintain and pay for.   Michael: Okay, perfect and I'm sure some of our listeners are hearing that and thinking like, this is the best thing since sliced bread. I'm gonna go put all of my single family homes and all my apartments on Triple Net leases. Why is it only a thing that's been heard of in the commercial space?   Neil: Yeah, no good question. You know, to liken it to single family, you're like lease with an option or a contract sale, that's probably the closest thing you get to a triple net in the in the single family house side, right? So you kind of contract sale, somebody that mean that contract buyer is now responsible for everything associated with that house, right? That's what it looks like. If you look at the closest thing, there's some differences there. Obviously, a contract sale into a down payment interest rate. That's not the same as a triple net lease on the industrial side but that's probably the easiest way to liken it to single family.   Michael: Yep. Yeah, that makes total sense and for anyone listening, like Neil mentioned, it's just the cap rate is like the easiest thing ever in the Analyze easy thing ever, you got a million dollar building cap rate 6% they're paying 60 grand a year, then bam, boom, end of discussion. You're not paying taxes, you're not paying insurance, you know, capex and maintenance. So you can calculate your true return, and then look to calculate what your debt service payments gonna look like and determine what your return looks like after that, versus the traditional single family rental or apartment or traditional residential space. They pay you a set fixed amount, the rent, and then you have to go figure out the taxes, insurance, repairs, maintenance, capex, that sort of thing.   Neil: So hey, just because I like it or you know, in other investors likes something else doesn't mean it's right. There's only what's right for you.   Michael: Yeah, yeah. I love it. Neil, this has been so much fun, man. I want to be very respectful of your time. Let's get you out of here. But before we go, like where can people reach out to you find out more about you continue the conversation if they're interested?   Neil: Yeah, no, great question. Well, if you want to learn more about commercial real estate getting rich in what I call the 20x niche, why do I call it that? Well, because our target internally is to produce in a monthly return that's 20 times that of us Single Family return so we're scaling up largely is just go to my website give you a free download free report just you can learn more about the industry getting into commercial. So www dot legacy impact partners forward slash gift JF T legacy impact partners Ford slash gift: https://legacyimpactpartners.com/   Michael: Right on thank you so much and before I let you go I mean I'm not gonna let you out of here without mentioning your podcast you're also the host of a podcast was that was a you're kind enough to have me on what is that called and what can people expect to hear on it?   Neil: Real grit is the name of it it's about the trials tribulations anybody from real estate. So we talked about single family talking about commercial talk about everything in between. But really, so that we fully admit that you know, life isn't all about Lambos and big houses on cash and checks and everything on Facebook that or social media wherever you'd see it right? That there's ups and downs there's, there's we have to go through stuff and many times to be able to find our own personal success and so we talk through that and people's personal stories and how they got there because all bunch people, they get their different ways and it's really exciting. It's, we get into some really interesting, very dynamic conversation a lot of fun, love it. You and I had a great conversation.   Michael: I had a ball. I had a ball.   Neil: It was a blast, man.   Michael: Awesome. Well definitely go check out that podcast, real grit, a lot of fun, really cool stuff going on there. Neil, thank you again. Any final words thoughts for our listeners?   Neil: No, you're going to find me you know, like I shared it though the website I'm also on all the all the social media platforms. Facebook's the best place to find me Neil Timmins, or there are many Amin just spell it right you got me   Michael: Right on, many thanks again. Appreciate you, see you soon. Bye.   Neil: Bye, bye.   Michael: All right, well, that was our episode. A big thank you to Neil for coming on the show. Really, really interesting stuff that Neil's been through seen and experienced. As always, if you enjoyed the episode, we'd love to hear from you with a rating or review wherever it is get your podcast, and we look forward to seeing on the next one. Happy investing…

In this episode, we welcome Public Adjustor, Andy Gurczak to speak about the role of PAs, and how you can make the most out of the undesirable experience of haggling with your insurance provider -- ensuring the highest possible settlement under the terms and conditions of the policy.  Andy Gurczak started in construction as a laborer and got his in as a public adjustor through a contractor he worked for.  Quickly climbing the ladder, he helped grow the business by attaining new clients and further building relationships with existing clients. Andy started his own company, AllCity Adjusting, where he and his team process over 1000 claims per year. Andy's Contact Info: https://www.allcityadjusting.com/ c: 708 655 4186 --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today with me I have Andy Gurczak with All City Public Adjusting. And he's gonna be talking to us today about what a public adjuster is, and why anyone who owns property should consider using one if they have an insurance claim. So let's get into it.   Andy, what's going on, man, thanks so much for taking the time to hang out with me today. I really appreciate you coming on.   Andy: Mike, thank you so much for having me on. It's a pleasure. It's always it's fun to do these. So I'm excited.   Michael: No no. It's truly my pleasure. You're the first like we've done I think this is episode 300 and change and you're the first public adjuster we've had on so anyone who knows me knows that I'm a total insurance nerd and insurance buff so but for anyone who's not familiar, like what is a public adjuster and kind of give us a quick and dirty of what you're doing in real estate.   Andy: First of all, Bravo on 300 episodes. Plus, that's awesome. So thanks for you guys. And I'm lucky PA so this is pretty cool. Yeah, so public adjuster is is licensed by the state, he's legally able to represent the insured in their claim process, negotiate and settle the loss for them. Whether it's commercial or residential. It's basically like having an attorney on your side or an accountant doing your books. It's the same exact thing. They're licensed by the state that they work in as well.   Michael: Okay, okay. And I mean, it just seems like kind of counterintuitive. I go and pay an insurance company every single month, every single year to give me insurance. Then when I have a claim, an insurance claim, I go to the insurance company said, Hey, insurance company, here's this claim, pay me for the claim what I'm owed. So why do I need a public adjuster? Like why does your job even exist?   Andy: Yeah, that's a that's a great question. The reason our job exists is because insurance companies don't pay claims and don't pay them fairly. We've talked about this before the show, Mike, you work the insurance side. So you know, that claims, actually two people that work in our office work the insurance side, and they've got they seen how bad a guy and came to our side. Because claims are handled, I mean, horribly every year, it gets worse and worse. And our we just had a meeting with a couple of attorneys just discussing what's going on and what we could do in some situations, because it's getting so bad, that, you know, insurance companies aren't responding for a month or two months, or just I mean, so having a PA on your site, even though it's your claim, and you think you have to remember that insurance adjuster, that staff adjuster and every one that they send out every vendor contractor they sent out, they all get paid by the insurance company. So they're all working for this one entity. And then you're by yourself. And you're thinking, well, they're on my side, no doubt on your side. It's all about profits, margins, all that good stuff. So…   Michael: Yeah, I know it's so the word of news is sick. When you find out kind of what's going on under the hood. It's really what should be a partner relationship. Like you mentioned, everyone on the same team working for the same goal can be come very contentious very quickly. So you said it's like having an attorney or like having a bookkeeper on your side? I mean, it sounds expensive. How much do public adjusters charge? Like, how does that work?   Andy: Easy. Yep, Pa is most of the time charge a contingency fee. So there's no retainer is nothing, it's all contingency on what they recover. And you know what the claim settles for. And standard is 10%. Like our company has adopted just a 10%, nationwide, whatever claim we're handling, whatever the size is now, some situations where we come in, let's just say months after a year after the claim has been paid, and we're just trying to figure out maybe another coverage or paid additional than it might be a higher fee of maybe 20-25 on the money that we recover above that amount that would the only difference,   Michael: Okay, and so just so we get it crystal clear for all of our listeners, because I just went through this on a claim to fire claims I had on a property. If the insurance company comes into my claim, and says, Hey, Michael, we're gonna give you $100,000 For your claim, and I'm like, There's no way it's gotta be worth way more than that. You will come in or a public adjuster comes in, you end up getting me a million dollars, you're gonna take 10% of that additional 900k That you got me above and beyond what I was originally awarded.   Andy: Yeah, exactly. And something in your situation. So when we have claims, and we have large investors and management companies, we have a pay scale that actually the percentage goes down once it reaches a certain amount. So reaches, you know, half a million that 10% may become nine, right for every client, we kind of work with them, just because we kind of know their position. And again, we want to create a relationship that is long term, because then we're getting called when before the claim even starts right because we want to be there. You know, another question is when do you want to hire PA for the day you have a claim, because you want to make sure if that claim is a legit claim, if you should even file that claim, whatever your deductible is, is that even a covered loss?   A PA will, you know, we do this for our clients all the time we do their policies with their claims without making any money or charging any fee. It just part of our relationship with our clients.   Michael: Okay, I'm so glad you brought that up, Andy, because I get this question all the time. Because so many people don't like, insurance, education is not something that's really provided out there. And I'm wondering if that maybe is on purpose by the insurance companies, but like, how should people if they have something happened to their property? And statistically, if you own a property or enough properties long enough, you will probably have a claim?   So what's the process? Like if you could articulate and paint us a picture of as a property owner, whether it's our own property or an investment property? What should that process look like? What should what should owners be doing? Who should they be talking to?   Andy: Yeah, if you don't have a PA, and you're kind of going to try to do this on your own, you want to first stop whatever loss happens, you want to mitigate the loss, right, you want to get first you want to you want to get your copy of your policy to you want to see if your agent because you most likely don't have a copy, because no one knows that they don't have a copy until they have a loss to be like, Oh, I have this page, I'm gonna get your declaration, you need your policy, your booklet, you know, no one gets that usually, until something happens. And then it's hard to get it from the insurance company, it's like, they don't want to give you your own policy, very normal. Then you want to mitigate the loss. So if it's a fire, you want to board it up, protect it, make sure no one can get in there. Or if it's a roof, you want to cover the roof, if it's a roof claim, and then you want to go and take pictures and document as much as you can, and then call the claimant.   And when you call on the claimant and you're trying to set the reserves high enough. So then when they come in, and let's just say you have $100,000 loss, but when you told them the claim, you might have said, well, it's a small fire in the kitchen, small smoke, they might have reset the set the reserves at 25,000. And now the claim is actually 100. So now when we're trying to fight it, we're going to five managers like what's the example at State Farm, for example, once it goes past the reserves, you're going through letters like five managers to approve one payment are one extra additional line item, it's it gets really crazy.   So the most important is mitigating, mitigating the loss, getting your policy, reserving the claim calling the claimant, right? And if you don't know the answer, when you're discussing that claim, when you're calling it in, just say I don't know, because a lot of people get into trouble by trying to say too much to be too honest. And it's not about being honest or not, or, or lying. But people say the wrong words, they might use the word like mold, I see mold. Oh, well, molds not covered. Here's a denial letter. Well, the water, you know, the water happened three days ago, we have there's mold, because you know it's wet, it's humid mold molds catch up, but there's still water damage that's covered.   So different words they use. So you gotta be careful with words you so you want to do your due diligence, or even call your agent to call that claimant for you. If you need help.   Michael: Let's talk about that for a minute. Because in the agent world, you have captive and non captive agents. And so just like you were saying all the vendors are paid by the insurance company. I mean, in a lot of instances, aren't these agents paid by the insurance companies as well?   Andy: 100%. And I have friends that are agents and I know people are agents, and agents have a bonus if their clients don't file claims. So there is a bonus, there's a perk of them if their clients don't have claims or the correct. So everyone's got a benefit if the claim is not filed, and if it's underpaid, everyone gets points on that.   Michael: So can we surmise that if you have a claim, you should just call a public adjuster immediately?   Andy: 100%. Because it's a free review, what's the worst is going to happen? He's going to come in there and say don't file it. You don't have to sign with that PA but at least get that expertise. Now you want to make sure you find the right one. But if you do you have them looked at it and in depth look at the claim inspect the roof, inspect the fire damage inspector water damage and let you know everything you should do.   Michael: Yeah, I am. I had my first big claim to have them back to back couple years ago, I had two fires in a commercial building back to back a week apart, which I used to work as a professional fire protection engineer. And it's like statistically impossible to have that happen. I'm the one exception, right? So I went through the claim process I had the insurance company come out do their inspections like oh, it's small fire just like you said, you know teeny tiny claim payout. And I'm like dude, that doesn't even cover the materials that were sitting on the roof when I had the roof fire. So I brought in a public adjuster and they know about 15Xed that claim. So I can't sing their praises enough. When someone is searching for a public adjuster and you just mentioned this, you want to find the right one, like what does that process look like? What questions should you be asking?   Andy: I've never been on the other side. When I look and talk to our clients how they found us obviously they were looking online Googling and stuff and they were doing a search engine and kind of we came up online we do a lot of blogs and stuff. So we'll come up there with a lot of tips and stuff for people so they'll find our name. Otherwise, so if you're not looking online, you know, you can check websites like patio, which is Texas associations of public insurance adjusters, California has their own, some states have their own. There's the NAPIA National Association of Public Insurance. So there's different associations that you could go on, and find adjusters pas that have been screened and have backgrounds and pay their dues, because they're part of an organization. So that would be your, you know, your best bet. Referrals. Again, if I, if I knew you, I would say, Hey, Mike, you had a couple of fires, you know, did you hire who's a PA, you have someone to recommend. That's, that's your best bet. Someone that they worked for referral.   Michael: That that has had the actual experience with them? Yep. Okay. Are there certain questions that someone should be asking? I mean, what separates the different pas that are out there? Because I'm sure if I google that would get tons of different results. Is one better than the other? Like, is it just based on the fee structure? What should people be be considering? If they're going to hire someone?   Andy: That's an awesome question. So a lot of what you should be asking, and when you go online and look for PAs, a lot of them say, you know, fire water, they do all these things. But 90% of PAs handle just roofing claims, usually residential, some commercial. So it's, you have to make sure that hey, how do you handle fires? And how many fires have you handled? Or what do you specialize in? You might say, Well, we do a lot of roofs. That's not the PA, if you had a fire, you don't want the guy that's handling roofing claims. Right? For us, we do large loss, fires, water, hurricanes, we don't if someone calls for a residential roof. We don't we don't do residential roofs, we would love to, but we don't we don't specialize it. There's other PAs that do a great job, here's a couple of names you can call or, you know, Google and and find the problem just and it's in that it's just a committed, you know, attorney, some attorneys do, you know, personal injury, some do properties. Same thing with PA some PAs are better at some coverage than others.   Micael: Yeah, that makes total sense. Andy, let me ask you a question. Because it happened to me. And I'm curious now with the hindsight, what the proper move is, so I had this fire, and it was on the roof. And it was during a reroof. So they had all the materials up there. So all the materials burned up. And my public adjuster said, Don't touch anything on the roof. He said, We got to come out, we got to photograph everything we need to take care of, you know, we need to document everything. And meanwhile, it's really windy. There's debris blowing onto the neighbor's property into their, into their, into their courtyard and their fence. And so the neighbors called me complaining threatening to sue, they got crap blown everywhere. And I'm like, I can't it's like an active insurance investigation.   So you were talking about you want to mitigate the loss stop the loss from getting any worse. But are there instances where physically mitigating the loss than is like evidence tampering is the wrong word, but you understand how it's changing the scene.   Andy: Double edged sword? Yes, a double edged sword. We walk into properties all the time. And you know, or let's say we go into a hurricane area, or right now in Florida, and we see people outside with all their contents, right? Like all their house stuff, just in a pile. And I'm like, did you guys order material? Everything's gutted? I'm like, did you guys inventory take pictures? Well, no, but the insurance company said to just throw everything up. That's the worst idea ever. That's what they want. You just get rid of all your evidence. So that's a double edged sword. So when I say mitigate, you're supposed to mitigate the loss because they can technically your duties after last say you will mitigate. So if you don't, they can deny it. But what's mitigate right? If I had a pipe burst from the third story water comes as floods my whole house right? The insurance company is going to want to send a vendor out to pull some drywall or spray everything or dry everything and leave it. That's the goal. That's mitigation. But mitigation is you turning off the water. That's already mitigation, because it doesn't specify what technically mitigation is. It just says mitigate. So by me turning off the water, I have mitigated the loss. And I will tell my insurer just leave it because it's already all damaged. Whether you dry it or not, that's just gonna go against your thing. It's already damaged. It can't be its category three water. So it's got to be all replaced. Instead of paying a vendor all this money, this has got to be gutted, all that money should just go to you instead of that vendor.   So yeah, there is instances. So in yours, just because we have insurance, karma saying any Can we start rebuilding? Well, now because we're still fighting with the insurance company, and we're still negotiating, and if you start the repairs, then you you can date that's what they want. They want to keep holding, holding until you actually accept it and start the repairs.   Now, if they don't start the repairs, then they'll go well, why didn't the insured start the repairs? Right? So it's, we're trying to keep our clients in the best situation to make sure it's the best possible outcome. But it's hard sometimes, especially with landlords when they have tenants, right? Hey, my tenant is going to sue me or my tenants gonna go this if I don't do the repairs. Then do the repairs, I guess. And this is the settlement we're getting. So an insurance company knows this. So, in your situation. That's a tough call. What do you say like either the PA say, Hey, we got to do it this way. And he was doing it the right way. Because if you did mitigate or clean up that thing? And they come in? They're like, ah. Even if you document it, I'm telling you, it's like they don't even look at your photos. They don't care. Yeah, so they did the right thing.   Michael: Okay, good. Well, that's good to hear. I'm gonna go, I'm gonna go send them another thank you text after this episode. Yeah. Andy, can you give us like, maybe two scenarios to stories that you've experienced one where things went perfectly well, or as good as they could have gone and what you you're insured what your clients did to get there. And then maybe a scenario at the opposite end of the spectrum where things just like, just like, give us like the worst thing you've ever seen happen? Just so we have a little bit of context that…   Andy: Part of like claim handling or like? Okay, so I'll tell you, we were just like I said, we had the attorney, we were kind of going over claims and we have one, and I won't say the insurance company. This is in Gary, Indiana. This this poor lady that waged her claim has been handled, and it's by an adjuster that we've seen handle bad claims for other people in that area. Whether it's color, race, area, I don't know. But the way this this claim has been handled this lady the under oath and everything she's been through, like we thought we had it all over, they finally after six months, say okay, well pay the claim. And here's the money, we got to argue with them. They started at 30,000. It's $160,000 claim. But then we have contents another 160 that we sent wants to go and now we're asking what's going on with the content. So they come back well, well, which which was the insurance and which was her daughter's. Why does it matter? If you had a fire Mike, and you have your kids and your wife stuff in the house? That's all personal property? They're not on the pile? Are your kids on the policy now? Yeah, no kids are on the policy, but their stuff is covered. Right? So why are they're asking her so now they want to examine her again and her mom. So this is going to drag on for 10 months. So this and this claim is ongoing. So to us that to me, it's like, well, now I'm powerless as a PA. But what can I do?   So the only way is the attorney can help. But again, she's still going to have to do that examination. But it just shows how long they'll drag it and try to find ways of however, to underpay or just deny that claim. So that's bad. Yeah. And we have a bunch of those. So those hurt a lot of them, we win, this one again, we got the structure paid and figured out. Now we thought the contents was going to be a slam dunk, easy. Here's everything, even your vendor said, you can't clean this stuff. Great. Here's the list. Here's the pricing age of items. And now they come back with this. So, another tactic to delay the claim.   On a good note, we had one, it was a it was from another podcast, one of the investors students called us, he got the number to us and he called us he had a 16 unit in Champaign, Illinois, burned down here to ACV policy, you are familiar with actual cash value. Your listeners might not but meaning he would not recover depreciation, he would not get that amount even if he rebuilt. So he was just getting what's what it's worth now. So that building, he had a fit 550 limit that just came in, he wrote like 560. And they depreciated and cut him a check for maybe 300,000, something like that. So when we got hired, we sent our letter representation, and the adjuster called and said, Hey, Andy, you know, I paid this, I paid this to Max, I don't know why he hired you. I'm like, Well, you didn't pay loss of rents. And also you haven't paid demolition expense, and you only paid 300 when it's a 550 policy, you stopped writing, because our estimate is like 900,000. With no like edit, like this is just it.   So then we reconcile and the insured ended up getting 100%. So 550 plus 5%, debris removal, some other endorsements, plus he maxed out everything. So he ended up walking away with another 400, like 300K. So again, when an adjuster says, you know, we don't need you. And that's it again, there's many claims like that, those are the positives, it's the ones that drag on, and that you like, you know, you're close, but they're still like delaying, delaying, delaying. And it's like they want the insurance to just finally say, Okay, well, I'm done.   Michael: I'll just throw in the towel.   Andy: Yeah, it sucks. And, you know, there is statutes in each state, which they have to follow, but it's never followed, because no one ever calls them out on it. Because unless you actually go to court or litigation, that's when they show okay, we didn't do this. They didn't do this. But other than that, they don't really know. They kind of do their own thing.   Michael: Yeah, because they're so big. And you bring up you bring up a really good point ACV versus replacement costs for anyone that's not familiar with the to give us from from like the PA side of things. What is the benefit of one versus the other? Because I'm sure your clients have seen like the reason your client probably had the ACV was because the replacement costs value on that 70 unit 50 unit was just probably astronomical. So it's often a cheaper policy to get like what's the downsides of going with one versus the other and what risks do people run by choosing one versus the other?   Andy: So the riskier is with the actual cash value policy and most most policies are RCV based. And then they have the actual cash value endorsement that says we only pay actual cash value, what happens is why you would do that policy where some people might get that policy and our insured wasn't even aware of it. But the agent sold it to him didn't explain to him the differences. He didn't know that he had that extra cash value policy. So you know, that's another story. He went on his own. But, so what happens is you, it saves you a lot on your premium, especially if you're investing you're trying to make margins and you know, it could save you on a property like that 2-3-4K a year, right? Well, it's great until you actually have a loss, when you have a loss. You know, it's especially on older buildings, it's cutting your payment by half. And you can't recover that money because it's actual cash value. So the replacement cost of you know, your home today is 300,000, but the actual cash value after depreciation, your actual cash value is 150. Well, you're only getting that 150. Even if we got the settlement of 300. With insurance, your policy will only allow for the actual cash value of 150, which will leave you with only half the money to rebuild.   So you're always as an as an insured, you should always have a replacement cost policy. And now they have you know, different like guaranteed replacement costs and all this other openly, openly insurance actually has it. They don't even have its guaranteed replacement, because they don't even have a limit. I think it's up to one like there's no limit on structure a   Michael: Holy smokes.   Andy: So there's some new carriers that are really, really, really good, actually.   Michael: Okay. And that brings me to my next point. And I'm so glad you brought it up. Like Should folks be involved in public adjusters in their insurance carrier decisions as they're looking to go place insurance on properties?   Andy: I would hope so. Because all we do is read policies every day. All I do is read policies interpret policy. So I know when I'm looking at a policy, I'm like, Well, you have a good policy, but you don't have you have a finished basement, you don't have any water backup, you your roof is actual cash value only. Oh, I didn't know that. I didn't know there's a lot of stuff you you should be aware. So yeah, our longer term clients will actually inspect their properties, look at their policies to make sure they don't have any exposed liabilities. Right. Now, it's not our job. It's the agents job. But most of the agents now are just, you know, selling policies instead of actually doing their due diligence and ensuring the claim the right way, they insured.   Michael: Yeah, I just want to echo exactly what you said, for all of our listeners, like now the public adjuster that I worked with on this on these fire claims, I sent him every policy and every quote that I get for properties, and he told me he's like, happy to do it. He's like, Yeah, this is a great carrier. But this is the other thing. And also, he can tell me like, Hey, I've run up against this insurance carrier, we see them all the time, like they don't pay claims, we're going to be working together a lot more if you have a claim if you go with this company, which is super great insight to have.   Andy: That's, that's awesome. And that's the same thing. I would say, I would say this carrier, we have a lot we have, you know, this many claims every year. And you know, maybe it's a lesser policy, and that takes longer, but they'll pay the claims, right? These guys just don't pay or they didn't know, I have a list of insurance companies that I know that are easier to deal with. Now, it's your claim guarantee you're gonna be paid when you file a claim with them. No, it still might be a hard process. But they're much easier than these eight other carriers that they're that are out there.   Michael: Yeah. This has been so great. Andy, my last question for you, man. How many claims do you handle a year just out of curiosity? So I can we give people an idea of…   Andy: Yeah, we do over 1000 claims a year?   Michael: Well, but how many how many public adjusters in your office?   Andy: Oh, right now we have four. Right now we have four and we're just we just keep growing. We do a good job marketing and, and building our social media presence. And yeah, it's, it's, it's good. And I mean, I guess it's bad for the insurance. Maybe these claims are handled. But yes, tactically, we, our business grows and we get more calls.   Michael: That's awesome. And I want you to share with everyone your contact information where people can get a hold of you and like what kind of I know you said you don't do residential roofs, but what kind of claims should people consider reaching out to you for?   Andy: Any fire, you know, water claims, you know, whether it's broken pipes sewer backup, we can inspect those or at least advise sewer backups, usually, or water backup limits, they usually have a limit. So I see your limit is 10,000. I look at the photos and I'm like, Well, you max out the limit. You don't need a PA this one's just a max policy easy. A lot of people that call us if we get to two calls, three calls a day of clients that we just kind of give them advice because there's no need for a PA in some instances, they will but we can give them at least advice and help them out.   But fire claims hurricane even commercial roofs we do commercial roofs a lot. Residential roofs is just the one thing we don't really do. Just because we we don't have the staff to do it. So…   Michael: Yeah, okay, fantastic. And for people that want to reach out learn more about your take advantage of your services, what's the best way for them to do so?   Andy: The easiest way is my cell phone. It's literally for your clients they can for your listeners, they can call me it's 708 655 4186 that's literally my cell phone. They can text me call me I'm really easy to get a hold of while I still can. I'm able to get my phone away so write it down because I might have to switch here I might not be able to give my phone away and my wife gets mad with more calls.   Michael: I hope you're so busy that happens.   Andy: So ya know so far so far. Okay, wife's not getting mad, so…   Michael: Awesome. Andy, thank you so much, man. This was super great anyone watching the video could tell I'm super giddy talking about insurance stuff. It's so great to meet someone that's also as giddy so no, I really appreciate the time.   Andy: No, it's fun to actually have a host that actually knows that that area and yeah, it's fun. You You know you've been through it now yourself. So you kind of know the you know, you know, you know what we do and what a PA can help. So it's, good.   Michael: Big time, big time. Well, thanks again, man. I'm sure we'll be in touch.   Andy: Mike, thank you so much for having me. I appreciate it.   Michael: All right, everyone. That was our episode with Andy, A big thank you to him for coming on and sharing some great information, some great knowledge and wisdom with us. Definitely. If you are someone that is going through an insurance claim or will go through an insurance claim in your lifetime with the property you own, definitely consider hiring a public adjuster they are worth their weight in gold. As always, if you enjoyed the episode, please feel free to leave us a rating or review. We'd love to hear from you all in the comments section and ideas on future episode topics. And we look forward to seeing on the next one. Happy investing

Daria Davydenko is a Securities Sales and Operations Specialist at Roofstock where she supports Roofstock's fractional ownership product, Roofstock One. Prior to that, Daria served as Vice President at Goldman Sachs. Her background in finance provides her with a unique view of financial markets and risk management. In this episode, Daria walks us through the history of public and private REITs, and who might be a good fit for investing in them. Additionally, she covers Roofstock's exciting new investment, Roofstock One, a fractional ownership option for accredited investors. Episode Link: https://www.roofstock.com/one --- Transcript Before we get into the episode, this podcast is intended for general informational purposes only and is not financial, investment, or tax advice. The information provided is not directed toward any investor or category of investors and is provided solely as general information products and services or to provide general investment education. Nothing in this podcast should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, I have Daria Davydenko, who is our sales and operations lead for Roofstock One and she's going to be talking to us about the history of public and private REITs really what they are, and who might be a good fit for investing in them. So let's get into it.   Daria, what's going on? Welcome back to the podcast. Great to have you back.   Daria: Hey, Michael, good to see you again. Thank you for having me.   Michael: Yeah, my pleasure, my pleasure. Great to see you again. So today, we're talking about a really cool offering Roofstock has Roofstock One. Can you give us a really quick insight into what that is and then I would love if you could help walk us through kind of the history of REITs in this product and how it came to be?   Daria: Yeah, sure. So Roofstock One is a relatively new offering that we have as part of all of the different products use that we have on roofstock.com. Roofstock One is structured as a private REIT. So one of the benefits of investing in Roofstock One is if you invest in real rental properties, you have the benefit of knowing exactly what your own. While it is a nice benefit, generally, it's not available to visit more passive real estate investments like REITs, public or private. However, we made Roofstock One different, even though it is structured as a private REIT. It is a fully transparent and customizable. So you know exactly what your own by buying a share of Roofstock One. So it is the first of its kind single family rental rate that's transparent and somewhat customizable to investors.   Michael: Awesome. All right. Well, we're definitely gonna dig more into that here in a little bit. But I would love if you could give us again, a kind of a background, like what is a REIT? How did we get here public versus private, bring us up to speed.   Daria: Yeah, so actually, what so REITs have a very interesting history, that I don't think a lot of people realize how the first I guess, you know, private equity firms have emerged, and then how can a REIT structure was created. So back in the 1980s, investors were mainly individuals and they were kind of using real estate to kind of harvest losses and shelter profits. So that was kind of the main reason why people were investing in real estate and also in the 80s, there was something that was called S and L. That they were created by the Federal Home Loan Bank act of 1932. They were like Savings and Loan Banks that basically had some caps on interest rates on deposits and loans, and but they were able to basically lend money to those individuals so they can buy real estate. Now, obviously, in the 80s, we all know that there was a recession and so because of the restrictions that were placed, placed on this SML banks, you know, because they had some caps on interest rates on deposits and loans, it greatly limited their ability to compete with other lenders as the economy slowed and inflation took hold and so for instance, as savers spelled money into the newly created money market funds that were yielding, like a much higher interest rates, like SNL just could not compete with those traditional banks due to their kind of lending restrictions and so when you add the recession of what happened is because the recession was sparked by the high interest rates that were set by the Fed in an effort to end the double digit inflation, which is kind of what we are kind of seeing right now, nowadays. So now we're left with little, you know, little more than, you know, kinda like a dwindling portfolio of low interest rate mortgage loans and so obviously, their revenue stream, you know, were severely tightened and so in the 1986, Reagan changed the law and then this indication was, you know, basically it was no longer working and there was no longer like the tax loss harvesting that was allowed in real estate, that can actually cause a real estate values to crater because a lot of people did not see any value of investing, I guess, are holding real estate anymore and so that actually caused SNL crisis and so I think a lot of people don't realize but during the SNL crisis, there were like 8000 banks that have failed. So, because of this, yeah, because of this kind of crisis that happened. I mean, this was like the largest crisis, you know, since the largest collapse of US financial institutions since the Great Depression.   And so like that, that kind of happened in the 1986 and so what happened, right, so once there's no kind of crisis happened, the government had to step in. So while they found that there was a lot of highly levered foreclosed personnel that owned a lot of real estate, and so government inadvertently owned those banks, and so they end up owning hundreds and 1000s of properties. What happened next is they have created something that's called the Resolution Trust Corporation, that basically became a property manager. So there sole purpose was to own and dispose of those distressed assets. So Resolution Trust Corporation or short, RTC was a temporary federal agency. So basically, from the 89, to the 95. You know, they largely were trying to kind of resolve this SNL crisis that happened in the 1980s, they, you know, they were basically like trying to do some property management, cleanup, what kind of what was left behind and another, I guess, purpose or creation, the RTC was to dispose of this assets. Now, the government wants to sell a lot of assets and so they need to have, you know, it's going to be highly inefficient for them to find like a single bar and buy, like, you know, who can just buy like a single property. So what they had to do is they had to figure out how to find a pooled vehicle that can just come in and buy this pooled kind of assets and so that's when the first private equity firms were created, who kind of came in, they were able to kind of pull financing, and then kind of buy like large amounts of this kind of real estate that was left behind after the SNL crisis. So that's where kind of their real estate or you know, kind of private equity investment was created. That's kind of the history of it. Now, the real estate investment trusts were a way for individual investors or intervene institution investors to get exposure to real estate without kind of having to go through, like active management of the underlying real estate. So Real Estate Investment Trust was a way to, for you to get exposure to, you know, real estate as a class. But you don't, you don't have to kind of forego, like, you know, the whole kind of financing closing, you know, property management aspect of it, while still enjoying the benefits of getting dividend distributions from the rental income, you know, the appreciation of the properties, etc. and then, in addition to that kind of REITs were created to encourage investors to get into the real estate market, and also get some kind of tax benefits from it. Now, I know I spoke a lot. So I just want to make sure I, you know, there's any questions that I can answer for you, Michael.   Michael: This is super interesting. I mean, one thing that terrifies me is this idea of government, governmental property management, that just would have been an absolute nightmare, because we all know how that probably worked out. But no, I think that makes a ton of sense and so the so these private equity firms were created to buy all of the hundreds of 1000s of distressed assets that the government ended up owning because of the collapse and the financial crisis. But so maybe, help me understand what a REIT is, like, is a REIT a share of the private equity company that then owns these properties, is that how that works?   Daria: Yeah, so REIT is basically like a pooled vehicle, you can imagine that, you know, let's say, like, just as a simple example, let's say you, Michael, you own kind of 10 different properties and you would like to allow other, you know, investors to kind of participate in ownership of those properties. You know, you can package them basically into a read. Of course, this is more complex than kind of what I'm describing, but in the simple terms, you can package it into the REIT and sell basically shares of the three to other investors who can get economic benefits of kind of owning 10 of those properties. REIT like many companies, they distribute earnings to investors in the form of dividends, unlike many companies have a REIT incomes are not taxed at the corporate level. So kind of that means that REITs are actually they avoid the double taxation of corporate tax and personal income tax. So instead REITs are sheltered from the corporate taxes so their investors are only taxed once and this is a major reason why investors value REITs over you know, other dividend paying kind of structures out there. Another benefit of REITs I guess, that they were created is that they're widely used because they're highly for favorable tax advantages are REITs are required to distribute 90% of their earnings to investors and so that kind of like allows them to avoid the double taxation that I mentioned previously and so this benefit kind of trickles down to all the underlying investors, you know, they're not being double taxed, and they can receive the maximum amount of capital from rate, I guess another advantage, I mean, we all know that investing in real estate, one of the biggest advantages of is the depreciation.   So depreciation can be passed through to individual investors, even in a REIT structure, basically, you because you get to offset your income is a depreciation kind of tax deduction. Let's say you might be earning tax dollars, that $10 per share, but you only will be paying like $7 as an example, paying taxes on the $7 of those earnings and in addition to that, if you're kind of holding your shares, for longer than a year, you will be paying the long term capital gains taxes, which is kind of much lower than your ordinary income tax. There was another kind, I guess, good, good question that you raised Michael, about what is the difference between private and public REITs, the main difference is private REITs are less liquid, you know, compared to public REITs, public REITs are the ones that are being traded on the public stock exchange and so you're basically kind of they're just like stocks, you can buy them and you can sell them and you will also be getting the dividends while private REITs they're not being traded on the public stock market and so hence, they're being sought after as like a less liquid option for you to own real estate. But at the same time, they're less volatile, obviously, because they're not subject to all of the changes that are happening in the public markets. So you just kind of there's just some kind of major differences, right? The liquidity but you know, because you're foregoing the liquidity, you're obviously getting less of like volatility in the stock price of your, you know, under the ownership of the shares of the REIT. So that's kind of the major kind of difference between public and private REITs.   Michael: Okay. Yeah, that makes a ton of sense. Thanks for walking me through that. I guess the question that gets begged next is the Roofstock has been a marketplace for transacting on single family homes for years now. Why, like, why is this product coming about? Who is it designed to serve and who might not be a good fit for?   Daria: No, that's an excellent question. I think we what we have found as we've been speaking with investors who come to the roofstock.com website and who really enjoy owning kind of real estate and single family rental properties, in particular, one of the feedbacks we have been receiving from investors is that they are some of them you know, obviously, if you want to buy properties outright, you are getting, you know, there is like a large deposit, I guess, that you have to put to buy a property, there is a financing, there is like a very long process of kind of closing, the Roofstock does a very good job at making sure that we simplify this process for investors. So we tried to make it as simple and as friendly as possible. But still, there are multiple steps for you to close on a single property. But obviously, you will be kind of subject to that single asset race grade, if you are only owning a single property you will kind of whatever happens with this property, it will kind of great greatly affect your cash flow, now we have created Roofstock One because investors have been basically asking us, hey, I really can enjoy single family rental investing, but I'm still kind of trying to learn the space and understand how it works. I've never owned single family rentals before and so kind of I'd like to dip my toes into this asset class and so I think Roofstock One kind of offers this perfect opportunity for somebody to own this exposure to this asset class, single family rentals, while you know being completely passive, so meaning you don't need to go through the kind of the whole process of closing on the property, finding the financing, you know, finding the property manager, we do all of that for you.   You just kind of buy the share of stock one REIT you get exposure to this particular asset class and then kind of get, you know, potentially get quarterly dividends from the rental income and kind of just learn a little bit about single family rentals, how it works, how you know how you receive the dividends and gonna get accustomed to kind of owning single family rental asset class, where we have seen as there are, you know, some investors who really enjoy kind of being actively involved in the day to day of managing properties because you get this kind of owner exposure means that some people really like and so for those people, maybe Roofstock One might be a little bit too hands off and so they might kind of prefer to do like the direct ownership of the property. But there are also like a certain subset of individuals who just don't have the time to, like, investigate and spend time with property management companies and figure out like, you know, if they should increase the rent, or drop the rent, just kind of just to find tenants for the house, or should they kind of, I don't know, change the roof, or change the water heater in a property or wait for another month or two. So it kind of… Michael: All the operational stuff…   Daria: All the operational stuff, all of this kind of micro decisions that you kind of don't realize, but they do pile up and they do take a little bit of your time. So you know, some, some of those individuals are like, Look, I just want an exposure to this particular asset class, I want it to be passive, I really enjoy it, I think, you know, I believe in single family rental, kind of asset class in particular and so, you know, this is like, a perfect way for me to get a passive exposure, while still kind of feeling like I'm owning some, you know, underlying properties and we try to kind of make it as transparent as possible to investors, so they actually can see, you know, what properties are inside, you know, Roofstock, one reads, so they can understand, you know, what homes, kind of their tracking the economic performance of, and so they're still kind of getting the feeling of like, okay, with this share, I potentially can own 10 to 20 you know, how many properties they would like, still kind of feel like they're owning those properties. But you know, they don't have to spend as much time on the operation or day to day stuff. So yeah, that's kind of the major reason why we have created the Roofstock One is just to serve certain subset of our investors that we have seen come through roofstock.com website and, you know, obviously, there is absolutely still a lot of kind of benefit of owning the properties outright. But there's also like, you know, there's just a time kind of aspect that's involved in it as well.   Michael: Yeah, that makes a ton of sense and you said something about, for those people that are still learning want to dip their toes into the water, Roofstock One might be a good fit. But if I'm thinking about like a traditional REIT, I can go buy it on the stock market, I buy a share of it. I don't hear from anyone, I don't know what's going on in the day, like, I have zero insight into this. Is that different with Roofstock One like can someone truly expect to learn a little bit about what it's like to own single family rentals with roof stock one, or is it going to be just as hands off in passive and kind of, at a distance, like a traditional route would be?   Daria: I'd say it's somewhere in the middle. So I mean, it is just as hands off and passive. But I guess the major benefit is in public creeds, I guess it's a little bit more of like a pooled vehicle. So just by buying a share of like a public REIT, let's say, for example, that there are like 60, and 1000 properties that are public REIT owns. Now they can be in different like various markets, right. So there could be across many different states in the United States and so you kind of get exposure to all of those kind of little, you know, properties a little bit. So Roofstock One allows you to be a little bit more targeted, if you wish to do so, we have something that's kind of cool, called like a tracking stock, which is like a mini portfolio of subset of properties. So let's say if you're interested in a certain region in the US, just as an example, let's say Georgia, because you believe in this region, or maybe you have invested in this region before, you can get exposure only to the properties in Georgia instead of kind of getting the exposure to all of the properties inside the Roofstock One. But at the same time, if you don't have anything, you know, any convictions and you just kind of enjoy single family rental kind of asset class and you just want to have diversification, then you can also just kind of do that and you can just by exposure to all of the properties inside the restock one read. So we kind of just provide like an ultimate flexibility of investors coming in and kind of creating their own journey. Almost like a custom rate, create your own custom read…   Michael: The subway sandwich of REITs…   Daria: Exactly. Yeah, it's like a Subway sandwich. You're correct. Yeah, that just you know, you choose whatever you want, like and you can even choose your own sauce visit.   Michael: Except we use real fish and real meat in our subway sandwich. Don't know if this is the best analogy but people get the point.   Daria: Yeah, like yeah, we're you know, we're the like a guest who's probably accretes you're just kind of getting the you know, whatever the prepackage Subway sandwich that, you know, is not customizable, and you can't even choose your sauce. So that's kind of how I would think about it. I think the benefit of it is like, look, you can still kind of see what are the properties, underlying properties inside the, like those mini portfolios, for example, which is definitely something that you want to get with like a traditional public REITs, I feel like that they're kind of more giving you like, hey, this is our general structure, or a general investment objective, this is what we're doing this is like, let's say, 30% of our portfolios in Georgia, like x percentages in some other state, which is also great for those people who don't really have much conviction, and maybe they just want to get the general kind of diversified exposure. But you can also have to just be mindful of this kind of this still difference, there is still like this difference that exists between private and public REITs, where no public REITs are still subject to the same market volatility as any other stock would be, you know, I wouldn't say that there is like one, right or wrong way, just kind of, it's all about diversification, and what fits your investment goals and investment needs, and what makes sense for you, and for your investment portfolio and, you know, we're just kind of offering a way for real estate investors to create their custom REITs, if they want to get exposure to the whole asset class, if they wish to do so. They can also mix and match they can invest a little bit into public rates a little bit into private REITs and again, you know, there's it's always, diversification has always been a good way for you to kind of diversify your risk, so…   Michael: Yeah, okay, I do get well, Daria I have a question. That's maybe on every buddy's mind who's listening, you talked about the hurdles and barriers to entry of investing directly, and that's usually coming in the form of down payment heavyweight financing and there's steps involved, how much does investing in recycling cost? What's Is there a minimum investment is our maximum investment, like walk us through what that looks like?   Daria: Yeah, so we actually kind of tried to bring it down to minimum investment is $5,000. So anyone who so there is like a limitation that we you do have to be an accredited investor and accredited investor is something that's basically set up by CC, that's kind of their rules and regulations that in order for you to be invested in private REIT, you kind of have to be an accredited investor and I think it's kind of basically done for the benefit of the investors themselves. Since it is a limited liquidity you do want to make sure you have enough liquid cash that kind of set aside you know, that you have access to because you will if you're invested in into like any private vehicle private REIT or anything else, usually you know, you will not be able to like us you know this drill those money for like five years or so and so, I think that accredited investors just kind of really done to make sure that investors understand that this particular funds will not be able they will not be able to access it and they have enough liquidity on hands to you know, meet any some sort of like liquidity needs that they have during their like day to day life. Now accredited investor, someone who, who is an accredited investor, guess accredited investor is someone who has a net worth of a million dollars and that can include their real estate, investment portfolio or retirement, you know, retirement portfolios, or, you know, bank assets, kinda you name it, it can't include their private primary residence, but if they have secondary homes, and, you know, if they can only count equity basically on those properties, so if they have like a mortgage on the secondary home, they will have to figure out like how much of equity they have, and they can count it towards their networks. Another way to understand if you're an accredited investor is if you are making over $200,000 per year, and you've made over $200,000 per year, in the past two years, or you and your spouse or partner are making over $300,000 together this year and in the past two years. So those are kind of some of the limitations that beans set and they just kind of follow those limitations. But as long as you are kind of accredited investor, you can put you know $5,000 into like a Roofstock One REIT and there's $5,000 can be invested across all of our offerings. So we you know, we are not limiting you can only put $5,000 into like a separate a single kind of mini portfolio or a tracking stock. What we call, you can, you know, put $1,000 or $100 into tracking stock and the rest into like a giant, like a bigger font or you know, vice versa. So you can customize this $5,000 as much as you would like. So yeah, that's, that's kind of the limit. Yeah…   Michael: Great. Okay and I would imagine that other private REITs and for sure, public REITs that have been around for a while, have a track record the history of performance does Roofstock One have that yet or is it too new, like, how has it been performing to date?   Daria: Yeah, we do have a track record on Roofstock when you launched Roofstock One in November last year. So we are a little bit close to like a year of existence. So we have been distributing dividends and the dividend yields that we have distributed for the historical or like our past offerings, they are listed on our website. They can be accessed here, the investor reports and we also do have appreciation of the assets that has happened since we acquired them back in, let's say, November. So we just recently started to calculate something that's called nav, which is net asset value of our investments and that's in general, how private REITs figure out what is the value of their shares. So unlike public REITs, where the share price has been determined by the kind of just the normal forces of the markets, private REITs, because they're private, they, you know, they had to kind of figure out a way to value the assets, the underlying assets that they have and so the net asset value is kind of the common term where NAV is kind of a common term that they use to figure out what is the share price of their rate and that's what the Roofstock One does as well. So we are just like any other private three, we calculate NAV, we publish it, and then can investors are able to track estimated value of their shares. Now the reason I say it's estimated is because obviously, until we sell the assets, we wouldn't know the exact value of, of the underlying assets, we can only kind of do like an estimation of where we think it is right now. But it is, you know, a good proxy, I guess, for an investor to think, hey, this is like my estimated value. But you know, until you can actually sell the assets and just kind of the nature of real estate market in general, that it's very illiquid, and you wouldn't know the value of the asset until you actually like listed for sale and you started getting some buyers who are interested giving you offers etc. So very similar, you know, in REITs, because we own underlying assets. There, you know, we're kind of subject to the same market forces as any anyone else who owns real estate. But you know, net asset value is a good measure for someone to use to determine what is the estimated value of their shares.   Michael: Okay, okay super informative from the history to the product offering and why it makes sense. This is awesome. If people want to learn more about private REITs chat with you learn about Roofstock One, where's the best place for them to do that?   Daria: Yeah, we can be found on the roof stock.com website, or someone can just type in www.roofstock.com/O N E -one. That's our website. Now feel free to give us a call there is a button that you can click on and request a phone call and we have very friendly people to chat and they're always happy to talk about real estate, private REITs single family rentals investing. Now we love investors ask us questions and they love talking to them on various subjects. So yeah, you know, feel free to check out our websites style by ask questions and we are always happy to chat.   Michael: Amazing, well thanks again and definitely looking forward to seeing where Roofstock One goes from here. Talk soon.   Daria: Thank you Michael. Thank you for having me today.   Michael: You got it, take care.   Okay, everyone, that was our episode A big thank you to Daria for coming on really interesting stuff with the product offering as well as the history of REITs themselves. So go check out the website at roofstock.com/one. As always, if you enjoyed the episode, definitely love hearing from you. All ratings and reviews are super appreciated and we look forward to seeing the next one. Happy investing…

Derek Dombeck, a Real Estate Expert hosts and runs the WiscoREIA based out of Wausau, WI. There he coaches and teaches other real estate investors his keys to success. He is currently hosting 3 national Mastermind groups called the R.E. Circle of Trust and puts on an Advanced training and Networking event each winter called The Generations of Wealth Voyage. In the last podcast episode, Derek talked about creative financing solutions for real estate investors. In today's episode he will be tackling the other side of the coin and will share some insights about private capital, lending and how that plays into real estate investing. Episode Link: https://gowvoyage.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, I have Derek Dombeck again on the podcast and for those of you who missed his first episode, I highly recommend you going back and giving that a listen. But Derek is the owner of best REIA funding a private lender, he's also an investor. So today, we're gonna be talking about private lending, and also what we need to know as investors and how to utilize it. So let's get into it.   Derek, what's going on, man? Good to see you. Thanks for coming back on the pod.   Derek: Yeah, absolutely. Glad to be back.   Michael: I'm super excited to have you on. So last time, we talked about creative financing solutions for real estate investors. Now we're going to be tackling kind of the other side of the coin and so talk to us about private capital and lending and how that plays into real estate investing.   Derek: Well, I like to talk to our clients that are coming to us for loans in more along the lines of what how would they want to structure if they were the lender? So it makes more sense to them why are we asking for what we're asking for? We design our company, primarily because we were borrowers ourselves, and we want to do it in a way that would be probed by our borrower, but still safe for our investors. So a couple examples, we don't collect monthly payments, we don't collect interest payments, we let it accrue. Very, very few lenders do that. The methodology is that when you're when you're the lender, and a payment is missed or late, that gives you an indication of something could be going wrong with the loan and that's true. But we don't want to have to collect payments every month on 175 outstanding loans, which is typically what we're carrying at any given point in time. It's another staff member that we would have to have basically just to do that do collections. So as a borrower when I was borrowing the money, that's what I would have wanted, right? As a lender, it's different. So a lot of times I'm trying to have these conversations with our borrowers, as I mentioned, in a way that shows them that we're their ally, we're not just somebody sitting across the big fancy desk with a, you know, a suit and tie on looking down their noses at them. We want them to really realize that we are their business partner, in one way, shape, or form. Most interactions with borrowers if they've never met me before, it just starts out with a brief overview of our loan program and I often tell them, well, if you were going to be the lender, if it was your money, what would you want to see happen, especially if they're, you know, if your listeners are out there trying to apply for loans. There's three things two to three things that I think are super important. First one is whether they're going to a bank, a hard money lender, or a private lender, or their great uncle, have all of your documentation ready to go. At the I mean, at the drop of the phone, right? Like we get off the phone, bam, you can submit it. What drives every lender crazy is when they send stuff in piecemeal. You know, and we always have to ask for it and then we have to remind them and follow up that makes you look so foolish in the eyes of a lender. Okay, another thing for us, we don't require appraisals, but most people do. So, and we don't require appraisals in our loans, because I don't trust appraisers. They have no skin in the game, we have way more experience. But we're in a niche lending market of lending on rehabs and some appraisers may never have picked up a hammer in their life. How do they know what the after repair value is going to be based off of a scope of work? You know, if I get a scope of work that's submitted on an application and they claim they're gonna put a brand new kitchen in for $2,000 I'm gonna call bull ** because I know what it cost to put in a low end, middle end or high end kitchen. But again, as a borrower trying to help your listeners in that regard. If you're going to an appraiser or you're coming to us and we don't require appraisals, but having your data somewhere you had to come up with your numbers, right? When you made your offer to buy the property, I want to see, an appraiser may not want to because some of them don't necessarily like to help. But I want to see, because, you know, some of them are just arrogant. Let's be honest at it.   Michael: It's the ego play, yeah…   Derek: It's an ego play. But for me, it's not for me, it's required. I want to see those comps, or CMA, or a BPO, from a real estate broker, something to show me how did you come up with your valuations? If it's going to be a rental property, where's your cash flow analysis, you wouldn't believe it how many times we get applications in and they want to rent borrow money from our short term to fix the property, get a tenant in there and then refinance. But yet they have not talked to any long term lenders, typically banks to even know what their refinance terms would be or if they'd be able to get refinanced. They haven't done a cash flow analysis. Again, have everything ready for your lender as much as possible, right? Gosh, what else as a borrower, you know, coming in with a backup plan, a plan B, is so crucial. Our job as the lender is to expect you to fail and every question we ask is, is asked, because we want to know, if something goes wrong? Can we either take the property back or lien against the, you know, the borrower to get our money back? I mean, that's what it's all about. We are asset based lenders, banks are gonna look at the asset and their income, every lender is a little different.   But the bottom line is, can we protect our investors' money? Can we protect our money and if that borrower walked out of closing, sign the papers and got hit by a bus and died? Can we recoup our money, right? Borrowers don't think that way. Borrowers think sun shines, and sunshine and unicorns, right. Nothing's ever gonna go wrong, the project is going to be on time on budget, we're gonna get under budget. You know, it's total bul****. But that's, that's our jobs to explain that to them in a way that's, you know, we're not trying to drive them from our business, we want to do business with everybody, that's got to legit good deal. But they've also got to be realistic and the number one, two spots that most borrowers come in sunshine and unicorns, their budget is too low on their renovations, and their comps are too high. So they want to use the top comps and we don't, why don't we because the markets shift. Now, if they came in on evaluation, I'm going to use Wisconsin numbers, you know, because that's what I'm used to, if they come in with an after repair value of $200,000 and I look at the comps that they submitted to me and there was one house that sold for 200,000. But the majority of them sold for 175. Which one do you think is the lender want to use?   Michael: Yeah, the 175.   Derek: Right, so we're going to lend based on 175. Now, that means they're going to have to put some of their own or more of their own money into the deal. If they sell for 200 bonus for them. That's great, I hope they can. But as the lender, we can't live on hopes and dreams, we got to live on reality and what happens most of the time is they're trying to come in with as little money out of their pocket as possible by using the highest comps, the lender takes on all the risk, which is why we use the middle of the road comps and I don't go to the very low end either. But we're using the middle and again, if they have to put in 10 20,000 extra dollars, and they're confident in their numbers, they shouldn't have a problem putting in 10 to 20,000 extra because according to them, it's going to sell for 200 they should get their money back and then some but when you start changing that or having that conversation with them. Boy, it's amazing when they have to use their own money, how they start to sing a little bit different tune.   Michael: Yeah. Interesting. So it's almost like you have to protect them from themselves.   Derek: Absolutely and we will tell them that I mean, there's plenty of times where we have just flat out told people you should walk away from this deal. Like we want to do business with you in the future. We want to give you a loan, but you are setting yourself up for failure on this deal and most lenders wouldn't typically do that most lenders will just say, we're only comfortable lending up to x, go ahead and do the deal and then when they fail, the lender will take the property back and the lender is in good position depending on loan to value. But we don't, I don't really like that model. I mean, it's certainly not our model and at the end of the day, if I take care of that investor, and I save them from themselves this time, hopefully when they come back around, they're more educated, and they bring us a really great loan, they've got a really great project. That's what it's supposed to be all about.   Michael: Yeah, yeah. Well, let's talk about that for a minute, Derek. So it sounds like the things that you asked for, from your borrowers. It's really an opportunity for them to showcase their experience level that they've taught, crossed, the T's dotted the eyes and really thought about it and in very proactive in that, what if someone's just getting started? I mean, how much hand holding should someone expect from their lender or can they expect from their lender to help them get to a point where they're feeling confident or do you tell people hey, you know, go kind of skin, your knees somewhere else, and then come back to us when you're a little bit more polished?   Derek: So the answer is, it depends. There's, most lenders out there do not want to deal with brand new people. I mean, it's just a reality of life. We are different in that regard, too because we may say to the applicant, alright, we want you to partner with somebody, and that person has to have, you know, we'd like to see at least three deals worth of experience. Now, I don't care if they get mentored for free, or if they split the deal 50-50. I don't care what that partnership looks like. But we would like to see somebody with experience that is backing this deal and if they can't do that, or they don't want to do that, then we typically would say sorry, but we can't lend on this deal right now and if they don't know anyone else, which happens, we have an extensive network throughout the state. So we can pretty much in any market, we can line them up with somebody that would be willing to, to mentor them and get some feedback from them. So but I don't think there's a whole lot of lenders that would do that much hand holding… Yeah, you know.   Michael: And that makes sense to walk us through because you're a private money lender. So you are kind of this middle person where you take investor money, and then lend it out to other investors that are that buying real estate. So when the Fed talks about interest rate hikes are this sort of thing? Like, how do you set your pricing and what should listeners be expecting if they're going to private lenders in terms of rates, right now, we're recording this almost near early September and August 2022. What are you seeing an image of you'll be expecting.   Derek: So it's very volatile, depending on where you are in the country, and how much competition there is, we certainly have national, hard money lenders that are that are, you know, advertising, much cheaper rates than we offer. But they sell off their loans. Almost many before the ink was even dry. They're white labeling almost everything, which means that there's a hedge fund or another note buyer, that is fronting the cash to close the loan and at the closing table, that loan gets transferred and you know, the person that you signed the paperwork with may still be the servicer of the loan. So you may not even realize it's been sold off. But most of the national lending companies, that's what they do. The challenge with that is, when the borrower gets to any kind of a challenge, we'll call it with their loan, maybe they need an extension, or something's just going terribly bad. Those lenders are not going to be willing to work with them because they don't own the loan anymore. It's gone. It's in some hedge fund on Wall Street, and it's just a number. It's just a loan number, they don't care. They just okay, you failed, get out, we'll take your property. As private lenders, we don't currently we don't sell off any of our loans.   We are 100% privately backed, so I don't have any institutional money at all. That has their thumb on us telling us what we can and can't do and our investors are all individual people there, some are mom and pop. Some are, you know, a little bit higher net worth individuals, but we can have conversations with them. So for example, let's just assume that the markets crashed and 20% of our portfolio defaulted and we had to go take these properties back well, if the market isn't really viable, viable option to sell them off and be made whole, we can go to our investors and we've done this with all of our investors. Prior to them even getting started with us, we have this conversation, but we can go to them say, okay, you know, we still myself, my business partner still run a full time real estate acquisition company, we have rentals, we have everything in place. So we're gonna have to take these, you know, whatever it is 20, 30, 40 properties, and we're going to lease them out and we're going to just collect rents until the market comes back and our investors are, that's not their first choice, but they're okay with it, because they know it's a Plan B, I mentioned that before, you know, the, the borrower's don't want to come in with a plan B or Plan C, we've got that in place with all of our investors upfront and, you know, we pay our investors 9% currently, maybe they would have to agree to go down to 7% or 8%, it would have to look at the cash flow numbers. But that's still better than the alternative of losing money.   Michael: At zero, yeah, zero or negative.   Derek: As far as rates are concerned with us, what we pay our investors dictates what we charge and at 9%, we've got a three to four point spread on interest rate. So we charge 12%, throughout the bulk of the state of Wisconsin, and we charge 13%, currently in Milwaukee and it's really just to be 100% honest with you and your listeners, Milwaukee, we could probably charge more, because our competition is charging 15%. So we don't really have any intentions of increasing our rates, we don't have a lot of junk fees, that's another thing your listeners really should consider looking at when we're looking at any lender, the interest rates might be much, much better, but their junk fees, I know of a lender within my state, who charged something like $3,500 to get paid off. In order for you to pay the loan off, you had to pay a payoff fee, which is asinine. We see a lot of lenders that are charging several $100 to do a construction draw, or a loan or an escrow draw for your construction proceeds, that's your money as the borrower and you now have to pay three, four or $500 to get your money out of escrow. It's crazy, you know…   Michael: I've seen that.   Derek: All these fees are they're nuts. We do charge an extension fee if they go past our six month term and it's equal equals to what if we weren't able to redeploy that money and another 12% in three origination points. So for an extension fee, for us, it's a point per month, up to three more months. Why because we want that money back to redeploy it. So we could charge three more points, right? So but it's not some 10 points in some crazy, crazy astronomical numbers, it's really just trying to get our same level return on our money, whether it's extended or redeployed to a new loan.   Michael: Okay and people listening might be getting excited about using private money, because it sounds like so much more flexible, and just investor friendly. Other people might be a little bit scared hearing this and so I'm wondering if you can talk to if those people are listening, can they get involved on the investor side of things where they're funding other people's deals, and just clipping that 9% coupon or whatever the return is?   Derek: Yeah, absolutely. I mean, if whether it's with me or with somebody else, I'm more than happy to talk to anybody about it and if you invest with us, you do if you don't, I don't, that's fine. But I would say there's some very important things that everyone should know if you went and borrowed money from your family. Okay, so maybe they're talking about a private lender being an individual that they have relationship with, or they might be using somebody's retirement account. I've seen this happen so many times, it makes me cringe. There was a couple young couple, I mentored them years ago, now they're, they're super successful, but they were just getting into the business and they were, they bought a flip house and they said, We borrow the money from my uncle at 2% and we can pay it back when we sell the house. So that's fantastic. That you know, this was back before 2% was popular, right? Yeah and I said, okay, did you put a note and a mortgage in place to protect your uncle and they said, no, he didn't care. He just said, pay me back when you get it, you know, when you get the money? I said, okay, do you have the property insurance? You know, the listing them? In case the place burns to the ground? Nope. Did you get them title insurance? Nope. All these things like they did not protect their family at all. So picture them getting sued by a contractor or anybody. Here's a free and clear property without a recorded mortgage against it and not and they lose it. Let's say we lose a lawsuit property gets taken away from them. Now they still owe their uncle all this money, and he had nothing to protect himself or we go back to the they get hit by a bus walking out of the title company, right?   Property, the money's gone, the money went to whoever they bought the property from, how does that family member collect or get their money back, if they don't have a mortgage in place, they can't foreclose on the property... So I just caution, anybody that's, you know, on the borrower side, that's going to borrow money from friends or family, make sure you always get title insurance to protect your lender. You know, the property insurance, the lender should be listed as a lender, not as an additional insured, there's a big difference and, you know, go through a title company, go through a closing attorney, make sure everything's aboveboard note mortgage in place, or deed of trust, depending on your state because you're just, I mean, you're hurting your family if you don't do it the right way. So always, always, always protect your lender, no matter what and if you're going to take a loss on a property or a project, I don't care what it takes, you make sure your lender is made whole, because we've lent money to people that screwed up their deals, but they took care of us and next time around, we lent the money again but you got to take care of your lenders. On the other side of it, if you want to be a lender, there's a lot that you have to consider just the whole underwriting of the deal. Is it a good deal? Is it not a good deal and how are you going to make sure that you get paid back are you going to have third party that goes there and make sure that the property is being managed, right, or if it's rehab, or you're gonna have somebody that's checking on the project and releasing money on construction escrow drawers. If you do want to collect monthly payments, who's going to do that who's going to service the loan. So there's a lot of things that it don't get me wrong, it's a great business, but there's a lot of things that people don't necessarily think about and I've seen it happen enough times where, you know, somebody has 100 200 $300,000 sitting around, and they just do a handshake deal, and lend the money to somebody, again, not getting the proper documentation in place. We had one ***hole and I say that, because he really was an ***hole, he took money out of his disabled brothers, IRA, to fund a rehab project and he had three other lenders on that project and he never he told his lenders, he was going to record all their mortgages for them and he never recorded the mortgages and it turned into this in this really nasty lawsuit. But he lost his disabled brothers IRA in that transaction and he's just the snake, you know, and they're out there. But you got to protect yourself. You know, I still believe in taking somebody at their word and believing the handshake. But that doesn't mean you don't write down and memorialize what you just shook hands about.   Michael: Right and if someone wants to get involved in the lending side of things, but you know what, you just said, what you just shared kind of makes them a little bit gun shy, or they want to have someone else take care of the day to day operations. I mean, are there businesses that they can plug into it? So here, take my money, pay me a return, I don't want to hear about it or know about what you're doing with it.   Derek: I mean, there is there's a lot of crowdfunding companies that you know, that became very popular. It seems to have died off here lately. You know, I don't hear as much or see as much marketing about crowdfunding. I would say the best way to do it is either find somebody in your local market at a RIA meeting, or, you know, a meetup group or even online, Bigger Pockets or something like that. But you got to spend some time getting to know who you're doing business with and, you know, Google the hell out of them, do background checks, all that kind of stuff. I invite anybody to Google me I have nothing to hide. You know, I'm never I just, I never tried to screw anybody over you know, and I mean, yeah, and it shows. But at the end of the day, you've got to know, this is I don't think this will ever circle back around. But I was invited to be on somebody else's podcast and I won't say the name. But then that gentleman was having a four day online conference and he asked me to speak for 90 minutes on this conference and I said, yeah, absolutely, I'd love to do it. He was expecting, you know, four or 500 people and so I was gonna send it out to my email list and help advertise it for him and it wasn't out there for 30 minutes, and two of my closest friends, one being a really good attorney were emailing me saying, Have you lost your fricking marbles? Like this guy is the biggest con artist and scammer there is and he actually the attorney sent me case studies of actual cases that this guy lost, and how he's not in jail, I don't know and I was just, you know, took and took him at his word. He's got a reputable podcast, right? So I'll go and speak on his conference. Well, who will you associate with can reflect very horribly on you, especially on social media. So I didn't mark it to anybody at that point, I still, I still spoke because I said I would and I believe in you know, I gave my word and I and there was a lot of other speakers at that event that were good. But I would never do business with that man and so that's the same thing. If you're going to lend money, or you're going to borrow money. Do you want to borrow money from a lender that doesn't want to be flexible if you run into trouble? Yeah, for us, we've only had to foreclose on nine properties in the last 10 or 11 years of lending, which is, is very, very, very low as far as the default rate. That's not to say we haven't had other people that had problems because we have, we have borrowers that have problems every week. But we're there to help them work through it, versus the lender, that's lending money as a backdoor way of getting properties.   Michael: It's a much more adversarial relationship.   Derek: Right, so you got to vet your lender, no different than if you were vetting somebody that you're going to invest with, we have a very clear in writing no ***holes policy within our company. I swear to God! Michael: I love it.   Derek: If I have somebody that and this has happened, I've had people that had several million dollars that approached us and said, We want to invest in your company and after half an hour, 45 minutes of talking with them, we just knew they were going to be the biggest pain in our *** and we turned them down. Same thing with our borrowers. If our borrowers stopped communicating with us, and stop doing what we agreed for them to do, then the ***holes  policy kicks in and we will have to default we will have to foreclose or at least we're not going to give them a loan next time. But the life is a lot better when you wake up in the morning and enjoy doing what you're doing and dealing with people that are not fun to deal with takes away from that. Yeah, we just don't do it. You just avoid it entirely. So I'd love to work with any of your listeners, unless they're an  *hole. Don't call me.   Michael: Okay, fair enough. Fair enough. Derek, on that note for people that do want to reach out that do want to work with you that have more questions about private lending, what's the best way for them to do so?   Derek: My, my personal email address is Derek spelled DEREK, @ bestreifunding.com (Derek@bestreifunding.com)  and I keep an eye on my own emails, my if I miss something, my assistant will grab it. But I'd love to chat with anybody that's got questions and again, it's this isn't a sales pitch. I mean, if somebody just says legit questions about lending, and they have no intentions of wanting to work with me as an investor, whatever, that's totally fine. I don't it's not about that for me and then the other thing I'm writing a book right now about lending in from start to finish. What happens when an application comes in all the way through closing and servicing after the fact and that's going to be coming out towards the tail end of the year, November December it'll be published. So I'd love to give your listeners that for free the electronic version for free.   Michael: Awesome.   Derek: So they just send me an email that same email address (Derek@bestreifunding.com) , and say, hey, I heard you on this podcast and put you on the list when the books published we'll get it out to you.   Michael: Fantastic. Thank you so much and I just have an ask for all of our listeners that do reach out to Derek if you wouldn't mind please referencing that you heard him on the Remote Real Estate Investor in the subject line. So he knows where you're coming to him from. That would be super helpful.   Derek: Absolutely.   Michael: Well, Derek, this was great, man. Thank you again for coming on the show. Really appreciate it and I'm sure we'll be chatting soon. Can't wait, can't wait to read the book.   Derek: Yeah, I can't wait to finish the book because it's great when you're writing a book, except some weeks are more stressful than others trying to hit deadlines and stuff. So I'm looking forward to it, but I'm really looking forward to it being done, too.   Michael: I can imagine I can imagine. Well, hey, man, we'll definitely be in touch soon.   Derek: Awesome. Thanks so much for having me.   Michael: You got it, take care.   All right, everyone. That was our episode, a big thank you to Derek for coming on again and sharing his time and knowledge with us. As always, if you enjoyed the episode, feel free to give us a rating or review wherever it is eat your podcasts, and we look forward to seeing in the next one. Happy investing…

Raising finance for new real estate projects is difficult. Property development firms face interest rates as high as 29% when working with banking institutions as single source loan providers. They also face challenges with multiple loan sources as crowd financing can be difficult to administer. Blockchain simplifies access to alternative financing models by facilitating investor management for developers and ensuring investment transparency and continuous ROI tracking for investors. In today's episode Goeffrey Thompson, Chief Blockchain Officer of Roofstock, and Sanjay Raghavan, Head of Structured Securities and Co-head of Digital Securities Initiative, walk us through what blockchain technology is and how they are tokenizing properties in a revolutionary way to buy and sell property.   Episode Links: https://onchain.roofstock.com/ https://twitter.com/rsonchain --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by Geoffrey Thompson, who's the chief blockchain Officer here at Roofstock and Sanjay Raghavan, who's the head of web three initiatives here at Roofstock and we're gonna be talking today about what blockchain is, and how it applies to us as real estate investors. So let's get into it.   Goeff, and Sanjay, thank you so much for hanging out with me today. I am super excited to chat with you both.   Sanjay: Likewise.   Goeff: Thank you for having us, thank you.   Michael: No, absolutely, absolutely. So I know a little bit, obviously, who you guys are because we work together. But for anyone who isn't familiar with you. Give us a quick and dirty description who you are, and what is it that you're doing at Roofstock? Goeff, I'll kick it over to you first.   Goeff: Sure. So I'm Goeffrey Thompson. I currently have the title of Chief blockchain Officer at Roofstock. Previously, I was General Counsel and I've been a lawyer for by training for a long time and now heading up the blockchain initiative at rootstock together with Sanjay.   Michael: Awesome, great.   Sanjay: I'm Sanjay, head of web three initiatives. Previously, I was leading securities initiatives at roof stock coming up on actually three years this week. So super exciting tomorrow, I think.   Michael: Right on, so really quick follow up questions for you both. Jeff. Were you just like a crypto guy in your everyday life? I mean, how does a real out as a lawyer turn into a blockchain official at a company at the C suite level? I mean, that's incredible.   Goeff: Yeah, I kind of backed into it. That wasn't a plan but I had been advising friends. Since 2017, during the ICO boom, the initial coin offering boom, and I started hearing people in my network, talk about it and say things like, oh, well, it's not a security because it's a coin. So you don't have to follow the securities laws, you know, and I thought, I don't get a lot of the technical stuff that talking about, but I know I can help them with the legal stuff. So then I just I was acting as legal advisor for a couple of years and, and then Gary, our CEO knew that and last year, maybe 12 months ago or a little bit more, our board came to our CEO and said, you guys, Roofstock, you need to get smart on blockchain. We're not saying you have to do it. But you know, we want you to have an idea of whether there's something there and so he asked me and Sanjay, because he knew I had some crypto background and there's a lot of legal and obviously, the financial structure is critical as well, so we kind of got into it together.   Michael: Awesome and Sanjay, at the risk of sounding like a total rookie, what the hell is web three man, I hear so much about it. Break it down for us.   Sanjay: All right. So I know it's so web low. So let's take a step back, right. So web one, which was kind of the first incarnation of the internet, right? There were sites that had static information, you could like type a URL, URL and go and, like, consume that information. But that's all you could do is just a read only type of a platform and then a few years later, the internet evolved to kind of web two, which widely is known as the read write version of the internet. So not only could you consume information, but you could go and, you know, provide information and content to the internet as well as a consumer and what happened with web two was it you know, that ability to read and write created all kinds of new interactions, and that allowed a lot of kind of the internet economy to bloom around it, where the Googles and the apples and eBays and other large companies were able to curate a lot of the content and manage a lot of the traffic. But you know, with social media and stuff, you are providing content as well, and you are consuming content, there was ecommerce, so a lot of these things came about, but the power resided with a very few large corporations that kind of controlled all of these transactions and the when, when web one started, the kind of original vision behind it was a more collaborative environment, where the consumers and the creators and consumers could actually work with each other and use a token economy and share you know, revenue and monetization. So that idea of you know, read, write and then adding on to it at the end. So it's a read write own type of economy that's decentralized. permissionless trustless has its own native payment rails, where the content creators and con Then consumers are all working together and you know, there's no power resting with large corporations, but it's, you know, giving power back to the people. So that's how that's how I would sort of succinctly describe, three and it's so it's a sort of a new way of thinking about things and it's super exciting.   Michael: Yeah it does sound super exciting and so give us all like a background again, treat me like a third grader, because that's probably my IQ level when it comes to the crypto and blockchain world. Give us all an idea of like, what is blockchain and what is cryptocurrency and then we'll get in maybe on how to be thinking about it. With regard to the real estate space and why it even belongs here you don't think this…   Goeff: Yep, sure, so the core concept for blockchain is that it's a network that can be validated the data that's recorded onto the network, which is the chain can be validated by an a limitless number of third parties who aren't organized or connected in any other way. So these are called validators I could have when you could have when they just computers that read the information that's coming in from the blockchain, they perform some mathematical calculations, and then they verify that the data that's been submitted is, is what it says it is and then at that point, it's formalized and recorded to the block and then, so these blocks are really just pieces of data, data that had been put together and then as you form one block after another, that becomes the chain. So it's really just a chain of data that's been validated by third parties that are completely decentralized. So why is that important because it means that there's no third party, a corporation or government, whoever it might be, that can intervene in the functioning of the blockchain, once it's up and running, and you have enough people who are validating and writing to the to the system, it goes infinitely, and it can't be shut down and so the first use case that really grabbed a lot of attention was payments, right? That's what Sanjay was alluding to, in the early you know, the current web two universe, you don't have an easy way to send value to another person without going through a bank or a financial services company, Blockchain, Bitcoin allows you to do that, it's just simply on the on the chain, if you have value in the in the form of Bitcoin, you can send it to any other address anywhere in the world, instantaneously and no one can stop you from doing that. So this really arose from kind of an idealistic perception, like, we have to be able to have to guarantee our own freedom, you know, the government can't intervene and prevent me from sending money to you and that's where, you know, it came from, like the sophisticated cryptographers mathematicians who had an idealistic view, and that's where Bitcoin came from and then since then, it's expanded to a lot more utility, where you can do much, many more things other than just send payments. You can, you know, NFT, you can have lending platforms, you can have social media companies that are effectively on a blockchain and can't be shut down or controlled by third party. So that's, you know, that's the overview of kind of where it came from and why it's important today. Sanjay, anything to add?   Sanjay: Yeah, no, taking a step from there right and that's exactly right, Geoffrey, the original idea was, you know, this all came about during the great financial crisis of 2008 2000, you know, 10 or so, where people thought that these, you know, financial intermediaries are, you know, in control of our lives and so Bitcoin kind of, you know, that was the reason why it came about as a peer to peer system where you can exchange value without involving these intermediaries. But then over the years, we've kind of seen that world expand rapidly and there's other cryptocurrencies now and one of the notable ones is Ethereum and on the Ethereum network, there's actually the ability to create what's known as a smart contract and a smart contract is essentially a piece of computer code that will execute based on a certain event occurring and why that is important is if you think about it from a disintermediation perspective, you know, in a transaction where two parties are involved, and party A needs to provide a good or service and party B needs to make a payment for that. You need a way to make sure that both parties are adhering to their portion of the agreement, or contract, right and so oftentimes, what happens in the financial services world is, in order to make sure that both parties are compliant with their aspects of the contract. You create an intermediary in the middle that takes that position of collecting information or payment from both parties and sending it across and a very common example of this in real estate. Michael, you as a, an owner of, you know, dozens of properties, you've gone through this process many, many times. But you there's an escrow agent involved exactly what I was thinking sure that, you know, right, the property title moves over to, you know, the buyer and the money goes to the seller, right. But imagine you had a piece of computer software that executed on a sale, and it made sure that the two parties were both appropriately receiving what they were expected to receive and there was no intermediary involved in this process. So this, this all executed, basically on the click of a button, right? Like that would be game changing in the real estate world and that's what we're trying to do now with through stock on chain.   Michael: Holy crap. For anybody who's not watching this video, I just didn't pick up my jaw up off the floor, because that was totally a game. So I have so many questions, I want to take just a step back and so Goeff, you were talking about this, these validations that can be done by any number of people. So I'm thinking about like a real world example. So if I go to the store, and I buy something with my credit card, I put down my credit card, they give me the goods and then in this case, would the validator be like the credit card company that says, look, this is the charge that like how do I think about that from like a traditional example.   Goeff: That's exactly right, the validator or usually there are multiple, but they'll they play the function of the credit card company. But instead of sending your data and the transaction data to the credit card company, where the credit, you know, the data goes to the credit card company, the credit card company says okay, this person has credit and the transaction is now going to be posted on their account, and then they send the okay back to the merchant. Instead, the merchant would send the data to a blockchain, the blockchain validators would pick up that transaction, they would validate that, you know, all of the details are the same. Usually, it's a small number of validators that have to agree on the transaction details to make sure that there aren't, you know, nothing's been missed and then once they've reached that consensus, whether that's five or 10, validators, or whatever it may be at that point, then it goes back to the merchant and as it says, The Merton now the blockchain has been updated to show that this transaction occurred, Goeff, or you or whoever was spending the money now no longer has that money. So I had that money in Bitcoin. I gave it to the merchant, the merchant side of the blockchain and said, hey, guys, can you verify that you're debiting Goeff's account and you're adding it to my account? Everyone said, okay, verified, validated, coming back. Now, I can't spend that money, I don't have it anymore and it's in your account. So that's, you know, a high level how that would work.   Michael: Okay   Sanjay: And a couple of more things there, right. Like, if you, you know, credit card transactions for small dollar values is one example. But if you look at larger dollar values, and there's ACH transactions that take three or four days to get validated through the banking system, a wire transaction, if you're trying to buy a house, and you need to make a wire payment, you're rushing to the nearest retail brand, scheduling an appointment to go into the wire, right?   Michael: It's such a pain.     Sanjay: It is all such a pain and like, imagine you had a way 24/7, right, like, you're looking at, you're browsing a site today, you find a property you really like, you want to buy that property, it's Sunday night at 10pm. You just click the button, and you know, your wallet says you have enough money and the smart contract validates that you have the money transfer property over to you, right, like imagine a world that's like that, where you don't have to worry about waiting three or four days for an ACH or running to your bank and getting an appointment waiting in line to get a wire done and it's all literally you're doing all this from your computer, click of a button 24/7 AMS and payments do anywhere in the world.   Goeff: And the cost is in most cases, negligible. You know, the wire fee is whatever 35 $50 It takes a day, you know, some amount of time to process ACH could be clawed back. The claw back concept that exists with ACH that doesn't happen in blockchain that doesn't exist. Like once it's final, it's validated, it's done and you could, you know, a simple payment transaction might cost from a few cents to a few bucks, but it's not going to be anywhere near the cost of a wire transfer.   Sanjay: And the transaction is immutably recorded on the blockchain, nobody can contest it, because you can go and open up that transaction on the blockchain and say, these two parties agreed to this transaction and it's hot, you know, it was hashed on the blockchain and there's this unique hash that represents this transaction, right. So there's no disputing later on. The parties agree that transaction gets done, it's instantaneously recorded and so that that makes this platform as a technology choice. You have innumerable number of possibilities because once you have those types of payment rails, you can build all kinds of applications around it.   Michael: This is insane, you guys. So like, we were talking about the validators and Goeff, you were saying, whatever, four or five or 10 validation points and people are doing it. So is it literally like people on their computer going, like watching their screen for these payments going back and forth or is this happening automatically?   Goeff: No, it can happen. It happens, it's automatic. Yeah, you set up a server that has the right hardware, there are different hardware and software requirements for different blockchains. But it runs silently in the background, or in some cases, it's, it's loud, because there are a lot of fans this morning.   Michael: I heard that, yeah…   Goeff: Yeah, but it's happening 24/7 In the background, and, and in most cases, it's just set or forget, set and forget, you don't have to be online all the time, doing anything manually.   Sanjay: And one other thing I wanted to point out was, you know, obviously, with banks, you can go there on weekends, after hours bank holidays and such, but even a MasterCard or Visa, if they're having a problem with their servers or something, you can have outages where you know, for a couple of hours, you're not able to do any credit card transactions, right? Whereas on the blockchain, that doesn't happen, right because there's blocks can be like, even if my computer was one of the validators, but for whatever reason, it's not working right now there are hundreds of other computers that are doing the same thing that are waiting to pick up the next block and compute it and solve the puzzle and so, you know, as Goeff was saying earlier, once the blockchain is up and running, and there's, you know, enough infrastructure in terms of validators that support that blockchain, you know, it's then it's permanently out there, and it's you can shut it down.   Michael: So that kind of brings to my next question and so you both are talking about this decentralization aspect and I think I've heard so much about the crypto world, it's like getting away from big banks and government and that sort of thing. But if this information is, I mean, it's public at this point, right? When I, Goeff, when I send you money or buy a service from you, it's now public information.   Sanjay: Just to just to clarify on that, right, the part of the information that's public is that this wallet address transacted with this other wallet address. But it's not necessarily public that, you know, Michael transacted with Goeff, right. So what's publicly stored is just the, you know, so, you know, when we talk about privacy, oftentimes, people use the words privacy and anonymity interchangeably, but they're two different things, right? You know, in one example, where there's just two wallets transacting with each other, you both still have full anonymity but the privacy concerning the fact that the transaction occurred between two wallets, that may be public information, but that's the kind of subtle.   Michael: Got it, yeah okay. Okay, that makes total sense, because, well, I was going with the question is, if I send Jeff money for a service, I mean, that could be a taxable event on the traditional world, like, if you were a credit card company, or you were a merchant, I send you that you have sales tax to pay. So I'm imagining government's point to the me sending you money and say, well, now we're going to tax it. But Sanjay, what you're saying is that the actual dollar amount, or what it was for, might not be available to them, all they could see was, someone sent money to someone else, end of story…   Sanjay: We use you the amount of money that went from a to b, but you don't like people don't automatically know who a and who B where the US are going as far as…   Michael: Or what it's for…   Sanjay: Right, in the US people are required, basically to report their own earnings and that's, you know, whether it's on the in the crypto side or non-crypto side, but, you know, you're required to report your earnings and in other countries and jurisdictions, they've passed laws where crypto transactions are not necessarily taxable. So, like, if you bought Bitcoin for, you know, $5,000 and sold it for $20,000, you may not have capital gains taxes in other jurisdictions in the US we do and that's, you know, self-reported, for the most part,   Michael: This is so nuts. Okay, so, taking one more step forward, we're talking about these coins. We talked about Bitcoin, and we mentioned Ethereum, as well, what gives these things of value? Is it just that we have generally I mean, the same thing can be said for the dollar, it's enough people have accepted or any currency have enough people have bought into this idea that this piece of paper that has an old president's face on it is worth what we've decided it's worth, same thing for Bitcoin and Ethereum.   Goeff: Exactly the same. All right, yeah. Nothing else. There's nothing else to we, you know, we all agree today that Bitcoin is worth 20,000. If it goes up, then you know, that's literally the market price. It's set by the people in the market who are transacting on a you know, every second and so it's a very clear pricing mechanism.   Sanjay: In a way you know, it's pure demand and supply that drive pricing for the these types of alternative currencies or crypto currencies, the dollar, for example, you know, we price $1 bill to be worth $1, right and so you will always be able to redeem $1 for $1. But, you know, inflation and other characteristics might make it less valuable to you, right like if a loaf of bread was 50 cents, and now it's $1, you know, you're paying more money to get it, but you know, you're not paying more bills necessarily, you know, like, the dollar bill is always $1 Bill, right? Whereas, one, one Bitcoin or one Ethereum, its value can go up over time, almost like the stock market, right? If you're looking at a share of Microsoft, it's $100 today, but because we all think Microsoft is very valuable, or Apple is very valuable, and the next iPhone is the most sexiest thing that's come out, and therefore, you know, we think we should, you know, put more value to the Apple stock, right? So the concept is similar with Bitcoin and Ethereum. It's simply people that are there are people who are, you know, buyers, and then there's their long on Bitcoin and then there are people who are short on Bitcoin and if there are more people long than short, then the price is going to go up. If there are more people short at a particular point in time price will come down. There's fewer demand.   Michael: Cool and so we mentioned, I think you both mentioned a couple of different use cases for the blockchain and for crypto. What, like, where do you see this going and for Roofstock, specifically, maybe you could talk about what we're doing as a company with regards to blockchain and where do you see it evolving from here?   Goeff: Sure, so, the, you know, the easiest use case for the blockchain technology is for something that is entirely on chain right payment is a perfect example, right? The you know, I give you send you something of value, call it Bitcoin, you accept that, and that's all on the blockchain and that's pretty easy. What we're doing is, we think taking the next step forward for blockchain and we're not the only ones. But we think that we do have something to add here, which is to bridge blockchain to real world assets and that's where things start to get a little bit tricky because let's say that you have a home, you call it a home on chain, a tokenized, home, whatever it is, and you have a token, a blockchain representation of a home, but it's a real world home and so you know, you say, oh, I go to my blockchain wallet, my crypto wallet, and I see I have this home token. That's great but let's say it's not the home that I live in and in fact, it's a home somewhere else in the country and I haven't been there for a while. How do I even know that there's still a home there, right and if I want to sell it to you, you know, you like the idea of using a smart contract to buy and sell this home? You like the idea of having a one click transaction of having certainty that you're going to get what you know, the home token in exchange for your money. That's all great. But how do you know that you're actually buying a real home and not just something that is called a home on a blockchain, whatever that even means, right.   And so that's where we've spent all of the last nine months and the better part of the last 12 months, diving into the nitty gritty legal details to understand and practical implications to understand how we can put this together in a system that works and the answer is, you have to have some type of validation from the real world as well, obviously, you know, the scenarios that I just mentioned, we can't allow that to happen where someone purchases a home token, and finds out that the home burned down three months ago. So you know, you just got nothing and so the way that I think what Roofstock can bring to this equation is the deep, detailed knowledge about how real estate transactions work, plus the blockchain, the blockchain, structuring the legal implementation and that's the value add that we have. I think there are a lot of others in the space and we encourage everyone to get out there and try, you know, try to build, but we do see others who don't have the real estate experience and even though they have a beautiful blockchain strategy, they don't know how to connect that and that you end up with something that's not useful. So what we're doing is designing a system that ensures that before any home is transacted, it's gone through all of the usual checks and balances that are necessary for real estate transaction and inspection has been done recently. We've done you know, made sure that taxes are paid, made sure that insurance is in place, make sure that the title is you know, unencumbered. We do all of that, because you have to do all of that no one's gonna buy it, if you doubt, but we do that behind the scenes, and so went by the time that you as the buyer come to see our site and you see the home, the home tokens that are listed there, you know that you have a data room that shows all of the documents that I just mentioned and more. So your diligence is already done for you. You don't need an inspection contingency, because you have an inspection report sitting right there, you know, you don't need on the on the on the flip side, you know, you don't need an escrow agent, because the smart contract simply it won't execute, it won't perform its function unless the buyer has the funds that it says it has. So you know, this smart contract at the time that you as the buyer purchase, you click, I want to buy this home, the smart contract checks, do you have money, the right amount of funds in your wallet? You know, they check the other side. Does the seller have a home, which is already been approved by Roofstock to be sold? Yes, yes, the transaction happens, and it's not and if one of those isn't true, then it fails and you know, we have to go back to the drawing board and fix whatever was wrong.   Sanjay: Right and then to add to that, right, the kind of the first version of smart contracts and NF T's and all these things that came about on web three, you know, a lot of those assets themselves had the value in it, right. So you might have heard about projects like board a, or crypto punks, these are well known NFT projects where people are spending Saturday 98 to buy, you know, a JPEG image of you know, this popcorn ape. But in those cases, that image itself has that value embedded in it and when people get that image when they buy that they've already exchanged value, right. But the example Goeff is giving us with a real life, real world asset, the NFT is a representation of that real world asset, but it's that real world asset that has the value in it and so when people are transacting these NF t's on the marketplace, Roofstock has to make sure that you know what they're buying and selling corresponds to that real world asset that has that value and we've gone through the inspection and other diligence process to make sure that is still true, right. So that's the sort of the next leap in the web three world where you go beyond just the you know, cryptocurrencies and crypto Native Assets getting traded and now you start looking at real world applications.   Michael: Goeff, I'm thinking about is like, so if I'm trying to understand this, I'm I buy this token, which the underlying asset kind of backing the token up, if you will, is the home, right? So I then own the home as well. How does that work for like, insurance purposes? If I gotta go get insurance on his home? Am I Michael, like going out to my traditional insurance people and saying, okay, well, I own this home, or like, who's on title of the home? How does that all work, is the token on the title?   Goeff: All the right questions. So the way that we're setting this up, each home is titled in its own LLC. So we have a limited liability company where the home is titled and so that really facilitates the transfer between different parties, because you don't have to record title, every time that home token is sold. The title obviously has to be recorded the traditional way at the county recorder's office, the first time that it's transferred into the LLC and then from that moment on, it doesn't need to be retitled because the only thing that's changing hands is the LLC, the ownership of the LLC, the membership interest, it's called like the share of the LLC. So that's, that's how we unlock that. So that when I sell you my home token, I'm selling you an LLC that owns the home and you as the owner of the LLC, you have full control of the LLC, and thereby full control of the underlying home. So you can do whatever you want with the home. If you want to rent it, you can rent it, if you want it to be a long term rental, a short term rental, you get to decide all of that you get to decide when you put a new roof on or if you want to repair the roof instead of replace it. You make all those decisions. As far as the insurance question that you asked, we do have an agreement with an existing insurance company that's tech forward, and they're interested in working on this project. So we've already set that up. The first time you buy a home from us, it will come with one year of property insurance, it's prepaid. If you want to change that you can you can change it if you want to cancel it and replace it with a different insurer. You can what we found is that a lot of intermediates in the space are not necessarily comfortable and dealing with this type of transaction. So we've spent a fair amount of time diligence seen a lot of, you know, providers in the market and we think the ones that we have are very good, but it's up to you as the owner, if you want to have a specific insurer, or a specific title company, you can do that. But otherwise, it's already in place and it's really as easy as just paying your annual premiums you can, you don't have to think about it, if you don't want to.   Michael: Okay, so the follow up what popped in my mind immediately, and then we're going to get you guys out of here, but we live in California. So Roofstock obviously doesn't have a very big footprint here, because there's not a lot of cash flow potential, or it's much more difficult to make the numbers work as compared to a lot of other parts of the country. So, Sanjay, if you buy a home for a million bucks, tokenize it and now you your property taxes in California are based on your purchase price. So if five years down the road, you sell it to me for 2 million bucks. Traditionally, my new property tax value is going based on that 2 million bucks. But are you saying that because this trent this sale isn't getting recorded, as it would traditionally that my property taxes are still gonna be based on your original sale price of a million bucks.   Sanjay: In many state that's, that would be true. But in California, unfortunately, prop 13 would pick that sale up. That's it's a state by state analysis and in most of the states, you know, the transaction would be fine. You individually report any capital gain on your taxes, of course. But in California, the transfer does get picked up.   Michael: Damn it. They always get you somehow but maybe in some states, it sounds like that might not get picked up, right. There's less of an issue…   Sanjay: That's right, in many cases…Yeah.   Michael: Interesting. Okay, man, I thought I had this huge unlock but clearly you guys have already thought of, of all this. So this is this is super exciting, guys. We definitely need to continue the conversation, got a lot more questions, a lot more information. I would love to disseminate to our listeners. But thank you both so much for joining me. If people want to learn more about web three and blockchain and crypto in general, is there are there good resources out there that we can point people to?   Sanjay: Yeah, I mean, definitely come to our website to learn about real estate tokenization. That's https://onchain.roofstock.com/ and also, you know, follow us on crypto Twitter. It's at @rsonchain and then individually, like Goeff and I do contribute in Twitter and LinkedIn and other areas as well. So, you know, look us up and follow us as well, on those platforms.   Goeff: And don't feel don't hesitate to reach out. Like you know, we're happy to talk we're here. We're you know, we're doing something new. We know a lot of people have a lot of questions, and we're happy to answer the questions and then he conversation. So ping us, we're happy to chat.   Michael: Amazing, amazing. Well, thank you both again, for coming on and super looking forward to doing this again soon.   Sanjay: Thank you. Thanks for having us.   Goeff: Likewise. Thanks.   Michael: Alright, anyway, that was our episode. A huge thank you to Goeff and Sanjay for coming on. We're gonna definitely be having them back on again soon. So if you have additional questions about things you just heard, or blockchain things in general, we'd love for you to see those in the comment section. Wherever it is, you get your podcasts, and we will try to get to them on the next episode with Goeff and Sanjay. As always, if you liked the episode, feel free to leave us just traditional rating or review. We love those as well and we look forward to see you in the next one. Happy investing…

Raising finance for new real estate projects is difficult. Property development firms face interest rates as high as 29% when working with banking institutions as single-source loan providers. They also face challenges with multiple loan sources as crowd financing can be difficult to administer. Blockchain simplifies access to alternative financing models by facilitating investor management for developers and ensuring investment transparency and continuous ROI tracking for investors. In today's episode Goeffrey Thompson, Chief Blockchain Officer of Roofstock, and Sanjay Raghavan, Head of Structured Securities and Co-head of Digital Securities Initiative, walk us through what blockchain technology is and how they are tokenizing properties in a revolutionary way to buy and sell property.     Episode Link: https://onchain.roofstock.com/ https://twitter.com/rsonchain --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by Geoffrey Thompson, who's the chief blockchain Officer here at Roofstock and Sanjay Raghavan, who's the head of web three initiatives here at Roofstock and we're gonna be talking today about what blockchain is, and how it applies to us as real estate investors. So let's get into it.   Goeff, and Sanjay, thank you so much for hanging out with me today. I am super excited to chat with you both.   Sanjay: Likewise.   Goeff: Thank you for having us, thank you.   Michael: No, absolutely, absolutely. So I know a little bit, obviously, who you guys are because we work together. But for anyone who isn't familiar with you. Give us a quick and dirty description who you are, and what is it that you're doing at Roofstock? Goeff, I'll kick it over to you first.   Goeff: Sure. So I'm Goeffrey Thompson. I currently have the title of Chief blockchain Officer at Roofstock. Previously, I was General Counsel and I've been a lawyer for by training for a long time and now heading up the blockchain initiative at rootstock together with Sanjay.   Michael: Awesome, great.   Sanjay: I'm Sanjay, head of web three initiatives. Previously, I was leading securities initiatives at roof stock coming up on actually three years this week. So super exciting tomorrow, I think.   Michael: Right on, so really quick follow up questions for you both. Jeff. Were you just like a crypto guy in your everyday life? I mean, how does a real out as a lawyer turn into a blockchain official at a company at the C suite level? I mean, that's incredible.   Goeff: Yeah, I kind of backed into it. That wasn't a plan but I had been advising friends. Since 2017, during the ICO boom, the initial coin offering boom, and I started hearing people in my network, talk about it and say things like, oh, well, it's not a security because it's a coin. So you don't have to follow the securities laws, you know, and I thought, I don't get a lot of the technical stuff that talking about, but I know I can help them with the legal stuff. So then I just I was acting as legal advisor for a couple of years and, and then Gary, our CEO knew that and last year, maybe 12 months ago or a little bit more, our board came to our CEO and said, you guys, Roofstock, you need to get smart on blockchain. We're not saying you have to do it. But you know, we want you to have an idea of whether there's something there and so he asked me and Sanjay, because he knew I had some crypto background and there's a lot of legal and obviously, the financial structure is critical as well, so we kind of got into it together.   Michael: Awesome and Sanjay, at the risk of sounding like a total rookie, what the hell is web three man, I hear so much about it. Break it down for us.   Sanjay: All right. So I know it's so web low. So let's take a step back, right. So web one, which was kind of the first incarnation of the internet, right? There were sites that had static information, you could like type a URL, URL and go and, like, consume that information. But that's all you could do is just a read only type of a platform and then a few years later, the internet evolved to kind of web two, which widely is known as the read write version of the internet. So not only could you consume information, but you could go and, you know, provide information and content to the internet as well as a consumer and what happened with web two was it you know, that ability to read and write created all kinds of new interactions, and that allowed a lot of kind of the internet economy to bloom around it, where the Googles and the apples and eBays and other large companies were able to curate a lot of the content and manage a lot of the traffic. But you know, with social media and stuff, you are providing content as well, and you are consuming content, there was ecommerce, so a lot of these things came about, but the power resided with a very few large corporations that kind of controlled all of these transactions and the when, when web one started, the kind of original vision behind it was a more collaborative environment, where the consumers and the creators and consumers could actually work with each other and use a token economy and share you know, revenue and monetization. So that idea of you know, read, write and then adding on to it at the end. So it's a read write own type of economy that's decentralized. permissionless trustless has its own native payment rails, where the content creators and con Then consumers are all working together and you know, there's no power resting with large corporations, but it's, you know, giving power back to the people. So that's how that's how I would sort of succinctly describe, three and it's so it's a sort of a new way of thinking about things and it's super exciting.   Michael: Yeah it does sound super exciting and so give us all like a background again, treat me like a third grader, because that's probably my IQ level when it comes to the crypto and blockchain world. Give us all an idea of like, what is blockchain and what is cryptocurrency and then we'll get in maybe on how to be thinking about it. With regard to the real estate space and why it even belongs here you don't think this…   Goeff: Yep, sure, so the core concept for blockchain is that it's a network that can be validated the data that's recorded onto the network, which is the chain can be validated by an a limitless number of third parties who aren't organized or connected in any other way. So these are called validators I could have when you could have when they just computers that read the information that's coming in from the blockchain, they perform some mathematical calculations, and then they verify that the data that's been submitted is, is what it says it is and then at that point, it's formalized and recorded to the block and then, so these blocks are really just pieces of data, data that had been put together and then as you form one block after another, that becomes the chain. So it's really just a chain of data that's been validated by third parties that are completely decentralized. So why is that important because it means that there's no third party, a corporation or government, whoever it might be, that can intervene in the functioning of the blockchain, once it's up and running, and you have enough people who are validating and writing to the to the system, it goes infinitely, and it can't be shut down and so the first use case that really grabbed a lot of attention was payments, right? That's what Sanjay was alluding to, in the early you know, the current web two universe, you don't have an easy way to send value to another person without going through a bank or a financial services company, Blockchain, Bitcoin allows you to do that, it's just simply on the on the chain, if you have value in the in the form of Bitcoin, you can send it to any other address anywhere in the world, instantaneously and no one can stop you from doing that. So this really arose from kind of an idealistic perception, like, we have to be able to have to guarantee our own freedom, you know, the government can't intervene and prevent me from sending money to you and that's where, you know, it came from, like the sophisticated cryptographers mathematicians who had an idealistic view, and that's where Bitcoin came from and then since then, it's expanded to a lot more utility, where you can do much, many more things other than just send payments. You can, you know, NFT, you can have lending platforms, you can have social media companies that are effectively on a blockchain and can't be shut down or controlled by third party. So that's, you know, that's the overview of kind of where it came from and why it's important today. Sanjay, anything to add?   Sanjay: Yeah, no, taking a step from there right and that's exactly right, Geoffrey, the original idea was, you know, this all came about during the great financial crisis of 2008 2000, you know, 10 or so, where people thought that these, you know, financial intermediaries are, you know, in control of our lives and so Bitcoin kind of, you know, that was the reason why it came about as a peer to peer system where you can exchange value without involving these intermediaries. But then over the years, we've kind of seen that world expand rapidly and there's other cryptocurrencies now and one of the notable ones is Ethereum and on the Ethereum network, there's actually the ability to create what's known as a smart contract and a smart contract is essentially a piece of computer code that will execute based on a certain event occurring and why that is important is if you think about it from a disintermediation perspective, you know, in a transaction where two parties are involved, and party A needs to provide a good or service and party B needs to make a payment for that. You need a way to make sure that both parties are adhering to their portion of the agreement, or contract, right and so oftentimes, what happens in the financial services world is, in order to make sure that both parties are compliant with their aspects of the contract. You create an intermediary in the middle that takes that position of collecting information or payment from both parties and sending it across and a very common example of this in real estate. Michael, you as a, an owner of, you know, dozens of properties, you've gone through this process many, many times. But you there's an escrow agent involved exactly what I was thinking sure that, you know, right, the property title moves over to, you know, the buyer and the money goes to the seller, right. But imagine you had a piece of computer software that executed on a sale, and it made sure that the two parties were both appropriately receiving what they were expected to receive and there was no intermediary involved in this process. So this, this all executed, basically on the click of a button, right? Like that would be game changing in the real estate world and that's what we're trying to do now with through stock on chain.   Michael: Holy crap. For anybody who's not watching this video, I just didn't pick up my jaw up off the floor, because that was totally a game. So I have so many questions, I want to take just a step back and so Goeff, you were talking about this, these validations that can be done by any number of people. So I'm thinking about like a real world example. So if I go to the store, and I buy something with my credit card, I put down my credit card, they give me the goods and then in this case, would the validator be like the credit card company that says, look, this is the charge that like how do I think about that from like a traditional example.   Goeff: That's exactly right, the validator or usually there are multiple, but they'll they play the function of the credit card company. But instead of sending your data and the transaction data to the credit card company, where the credit, you know, the data goes to the credit card company, the credit card company says okay, this person has credit and the transaction is now going to be posted on their account, and then they send the okay back to the merchant. Instead, the merchant would send the data to a blockchain, the blockchain validators would pick up that transaction, they would validate that, you know, all of the details are the same. Usually, it's a small number of validators that have to agree on the transaction details to make sure that there aren't, you know, nothing's been missed and then once they've reached that consensus, whether that's five or 10, validators, or whatever it may be at that point, then it goes back to the merchant and as it says, The Merton now the blockchain has been updated to show that this transaction occurred, Goeff, or you or whoever was spending the money now no longer has that money. So I had that money in Bitcoin. I gave it to the merchant, the merchant side of the blockchain and said, hey, guys, can you verify that you're debiting Goeff's account and you're adding it to my account? Everyone said, okay, verified, validated, coming back. Now, I can't spend that money, I don't have it anymore and it's in your account. So that's, you know, a high level how that would work.   Michael: Okay   Sanjay: And a couple of more things there, right. Like, if you, you know, credit card transactions for small dollar values is one example. But if you look at larger dollar values, and there's ACH transactions that take three or four days to get validated through the banking system, a wire transaction, if you're trying to buy a house, and you need to make a wire payment, you're rushing to the nearest retail brand, scheduling an appointment to go into the wire, right?   Michael: It's such a pain.     Sanjay: It is all such a pain and like, imagine you had a way 24/7, right, like, you're looking at, you're browsing a site today, you find a property you really like, you want to buy that property, it's Sunday night at 10pm. You just click the button, and you know, your wallet says you have enough money and the smart contract validates that you have the money transfer property over to you, right, like imagine a world that's like that, where you don't have to worry about waiting three or four days for an ACH or running to your bank and getting an appointment waiting in line to get a wire done and it's all literally you're doing all this from your computer, click of a button 24/7 AMS and payments do anywhere in the world.   Goeff: And the cost is in most cases, negligible. You know, the wire fee is whatever 35 $50 It takes a day, you know, some amount of time to process ACH could be clawed back. The claw back concept that exists with ACH that doesn't happen in blockchain that doesn't exist. Like once it's final, it's validated, it's done and you could, you know, a simple payment transaction might cost from a few cents to a few bucks, but it's not going to be anywhere near the cost of a wire transfer.   Sanjay: And the transaction is immutably recorded on the blockchain, nobody can contest it, because you can go and open up that transaction on the blockchain and say, these two parties agreed to this transaction and it's hot, you know, it was hashed on the blockchain and there's this unique hash that represents this transaction, right. So there's no disputing later on. The parties agree that transaction gets done, it's instantaneously recorded and so that that makes this platform as a technology choice. You have innumerable number of possibilities because once you have those types of payment rails, you can build all kinds of applications around it.   Michael: This is insane, you guys. So like, we were talking about the validators and Goeff, you were saying, whatever, four or five or 10 validation points and people are doing it. So is it literally like people on their computer going, like watching their screen for these payments going back and forth or is this happening automatically?   Goeff: No, it can happen. It happens, it's automatic. Yeah, you set up a server that has the right hardware, there are different hardware and software requirements for different blockchains. But it runs silently in the background, or in some cases, it's, it's loud, because there are a lot of fans this morning.   Michael: I heard that, yeah…   Goeff: Yeah, but it's happening 24/7 In the background, and, and in most cases, it's just set or forget, set and forget, you don't have to be online all the time, doing anything manually.   Sanjay: And one other thing I wanted to point out was, you know, obviously, with banks, you can go there on weekends, after hours bank holidays and such, but even a MasterCard or Visa, if they're having a problem with their servers or something, you can have outages where you know, for a couple of hours, you're not able to do any credit card transactions, right? Whereas on the blockchain, that doesn't happen, right because there's blocks can be like, even if my computer was one of the validators, but for whatever reason, it's not working right now there are hundreds of other computers that are doing the same thing that are waiting to pick up the next block and compute it and solve the puzzle and so, you know, as Goeff was saying earlier, once the blockchain is up and running, and there's, you know, enough infrastructure in terms of validators that support that blockchain, you know, it's then it's permanently out there, and it's you can shut it down.   Michael: So that kind of brings to my next question and so you both are talking about this decentralization aspect and I think I've heard so much about the crypto world, it's like getting away from big banks and government and that sort of thing. But if this information is, I mean, it's public at this point, right? When I, Goeff, when I send you money or buy a service from you, it's now public information.   Sanjay: Just to just to clarify on that, right, the part of the information that's public is that this wallet address transacted with this other wallet address. But it's not necessarily public that, you know, Michael transacted with Goeff, right. So what's publicly stored is just the, you know, so, you know, when we talk about privacy, oftentimes, people use the words privacy and anonymity interchangeably, but they're two different things, right? You know, in one example, where there's just two wallets transacting with each other, you both still have full anonymity but the privacy concerning the fact that the transaction occurred between two wallets, that may be public information, but that's the kind of subtle.   Michael: Got it, yeah okay. Okay, that makes total sense, because, well, I was going with the question is, if I send Jeff money for a service, I mean, that could be a taxable event on the traditional world, like, if you were a credit card company, or you were a merchant, I send you that you have sales tax to pay. So I'm imagining government's point to the me sending you money and say, well, now we're going to tax it. But Sanjay, what you're saying is that the actual dollar amount, or what it was for, might not be available to them, all they could see was, someone sent money to someone else, end of story…   Sanjay: We use you the amount of money that went from a to b, but you don't like people don't automatically know who a and who B where the US are going as far as…   Michael: Or what it's for…   Sanjay: Right, in the US people are required, basically to report their own earnings and that's, you know, whether it's on the in the crypto side or non-crypto side, but, you know, you're required to report your earnings and in other countries and jurisdictions, they've passed laws where crypto transactions are not necessarily taxable. So, like, if you bought Bitcoin for, you know, $5,000 and sold it for $20,000, you may not have capital gains taxes in other jurisdictions in the US we do and that's, you know, self-reported, for the most part,   Michael: This is so nuts. Okay, so, taking one more step forward, we're talking about these coins. We talked about Bitcoin, and we mentioned Ethereum, as well, what gives these things of value? Is it just that we have generally I mean, the same thing can be said for the dollar, it's enough people have accepted or any currency have enough people have bought into this idea that this piece of paper that has an old president's face on it is worth what we've decided it's worth, same thing for Bitcoin and Ethereum.   Goeff: Exactly the same. All right, yeah. Nothing else. There's nothing else to we, you know, we all agree today that Bitcoin is worth 20,000. If it goes up, then you know, that's literally the market price. It's set by the people in the market who are transacting on a you know, every second and so it's a very clear pricing mechanism.   Sanjay: In a way you know, it's pure demand and supply that drive pricing for the these types of alternative currencies or crypto currencies, the dollar, for example, you know, we price $1 bill to be worth $1, right and so you will always be able to redeem $1 for $1. But, you know, inflation and other characteristics might make it less valuable to you, right like if a loaf of bread was 50 cents, and now it's $1, you know, you're paying more money to get it, but you know, you're not paying more bills necessarily, you know, like, the dollar bill is always $1 Bill, right? Whereas, one, one Bitcoin or one Ethereum, its value can go up over time, almost like the stock market, right? If you're looking at a share of Microsoft, it's $100 today, but because we all think Microsoft is very valuable, or Apple is very valuable, and the next iPhone is the most sexiest thing that's come out, and therefore, you know, we think we should, you know, put more value to the Apple stock, right? So the concept is similar with Bitcoin and Ethereum. It's simply people that are there are people who are, you know, buyers, and then there's their long on Bitcoin and then there are people who are short on Bitcoin and if there are more people long than short, then the price is going to go up. If there are more people short at a particular point in time price will come down. There's fewer demand.   Michael: Cool and so we mentioned, I think you both mentioned a couple of different use cases for the blockchain and for crypto. What, like, where do you see this going and for Roofstock, specifically, maybe you could talk about what we're doing as a company with regards to blockchain and where do you see it evolving from here?   Goeff: Sure, so, the, you know, the easiest use case for the blockchain technology is for something that is entirely on chain right payment is a perfect example, right? The you know, I give you send you something of value, call it Bitcoin, you accept that, and that's all on the blockchain and that's pretty easy. What we're doing is, we think taking the next step forward for blockchain and we're not the only ones. But we think that we do have something to add here, which is to bridge blockchain to real world assets and that's where things start to get a little bit tricky because let's say that you have a home, you call it a home on chain, a tokenized, home, whatever it is, and you have a token, a blockchain representation of a home, but it's a real world home and so you know, you say, oh, I go to my blockchain wallet, my crypto wallet, and I see I have this home token. That's great but let's say it's not the home that I live in and in fact, it's a home somewhere else in the country and I haven't been there for a while. How do I even know that there's still a home there, right and if I want to sell it to you, you know, you like the idea of using a smart contract to buy and sell this home? You like the idea of having a one click transaction of having certainty that you're going to get what you know, the home token in exchange for your money. That's all great. But how do you know that you're actually buying a real home and not just something that is called a home on a blockchain, whatever that even means, right.   And so that's where we've spent all of the last nine months and the better part of the last 12 months, diving into the nitty gritty legal details to understand and practical implications to understand how we can put this together in a system that works and the answer is, you have to have some type of validation from the real world as well, obviously, you know, the scenarios that I just mentioned, we can't allow that to happen where someone purchases a home token, and finds out that the home burned down three months ago. So you know, you just got nothing and so the way that I think what Roofstock can bring to this equation is the deep, detailed knowledge about how real estate transactions work, plus the blockchain, the blockchain, structuring the legal implementation and that's the value add that we have. I think there are a lot of others in the space and we encourage everyone to get out there and try, you know, try to build, but we do see others who don't have the real estate experience and even though they have a beautiful blockchain strategy, they don't know how to connect that and that you end up with something that's not useful. So what we're doing is designing a system that ensures that before any home is transacted, it's gone through all of the usual checks and balances that are necessary for real estate transaction and inspection has been done recently. We've done you know, made sure that taxes are paid, made sure that insurance is in place, make sure that the title is you know, unencumbered. We do all of that, because you have to do all of that no one's gonna buy it, if you doubt, but we do that behind the scenes, and so went by the time that you as the buyer come to see our site and you see the home, the home tokens that are listed there, you know that you have a data room that shows all of the documents that I just mentioned and more. So your diligence is already done for you. You don't need an inspection contingency, because you have an inspection report sitting right there, you know, you don't need on the on the on the flip side, you know, you don't need an escrow agent, because the smart contract simply it won't execute, it won't perform its function unless the buyer has the funds that it says it has. So you know, this smart contract at the time that you as the buyer purchase, you click, I want to buy this home, the smart contract checks, do you have money, the right amount of funds in your wallet? You know, they check the other side. Does the seller have a home, which is already been approved by Roofstock to be sold? Yes, yes, the transaction happens, and it's not and if one of those isn't true, then it fails and you know, we have to go back to the drawing board and fix whatever was wrong.   Sanjay: Right and then to add to that, right, the kind of the first version of smart contracts and NF T's and all these things that came about on web three, you know, a lot of those assets themselves had the value in it, right. So you might have heard about projects like board a, or crypto punks, these are well known NFT projects where people are spending Saturday 98 to buy, you know, a JPEG image of you know, this popcorn ape. But in those cases, that image itself has that value embedded in it and when people get that image when they buy that they've already exchanged value, right. But the example Goeff is giving us with a real life, real world asset, the NFT is a representation of that real world asset, but it's that real world asset that has the value in it and so when people are transacting these NF t's on the marketplace, Roofstock has to make sure that you know what they're buying and selling corresponds to that real world asset that has that value and we've gone through the inspection and other diligence process to make sure that is still true, right. So that's the sort of the next leap in the web three world where you go beyond just the you know, cryptocurrencies and crypto Native Assets getting traded and now you start looking at real world applications.   Michael: Goeff, I'm thinking about is like, so if I'm trying to understand this, I'm I buy this token, which the underlying asset kind of backing the token up, if you will, is the home, right? So I then own the home as well. How does that work for like, insurance purposes? If I gotta go get insurance on his home? Am I Michael, like going out to my traditional insurance people and saying, okay, well, I own this home, or like, who's on title of the home? How does that all work, is the token on the title?   Goeff: All the right questions. So the way that we're setting this up, each home is titled in its own LLC. So we have a limited liability company where the home is titled and so that really facilitates the transfer between different parties, because you don't have to record title, every time that home token is sold. The title obviously has to be recorded the traditional way at the county recorder's office, the first time that it's transferred into the LLC and then from that moment on, it doesn't need to be retitled because the only thing that's changing hands is the LLC, the ownership of the LLC, the membership interest, it's called like the share of the LLC. So that's, that's how we unlock that. So that when I sell you my home token, I'm selling you an LLC that owns the home and you as the owner of the LLC, you have full control of the LLC, and thereby full control of the underlying home. So you can do whatever you want with the home. If you want to rent it, you can rent it, if you want it to be a long term rental, a short term rental, you get to decide all of that you get to decide when you put a new roof on or if you want to repair the roof instead of replace it. You make all those decisions. As far as the insurance question that you asked, we do have an agreement with an existing insurance company that's tech forward, and they're interested in working on this project. So we've already set that up. The first time you buy a home from us, it will come with one year of property insurance, it's prepaid. If you want to change that you can you can change it if you want to cancel it and replace it with a different insurer. You can what we found is that a lot of intermediates in the space are not necessarily comfortable and dealing with this type of transaction. So we've spent a fair amount of time diligence seen a lot of, you know, providers in the market and we think the ones that we have are very good, but it's up to you as the owner, if you want to have a specific insurer, or a specific title company, you can do that. But otherwise, it's already in place and it's really as easy as just paying your annual premiums you can, you don't have to think about it, if you don't want to.   Michael: Okay, so the follow up what popped in my mind immediately, and then we're going to get you guys out of here, but we live in California. So Roofstock obviously doesn't have a very big footprint here, because there's not a lot of cash flow potential, or it's much more difficult to make the numbers work as compared to a lot of other parts of the country. So, Sanjay, if you buy a home for a million bucks, tokenize it and now you your property taxes in California are based on your purchase price. So if five years down the road, you sell it to me for 2 million bucks. Traditionally, my new property tax value is going based on that 2 million bucks. But are you saying that because this trent this sale isn't getting recorded, as it would traditionally that my property taxes are still gonna be based on your original sale price of a million bucks.   Sanjay: In many state that's, that would be true. But in California, unfortunately, prop 13 would pick that sale up. That's it's a state by state analysis and in most of the states, you know, the transaction would be fine. You individually report any capital gain on your taxes, of course. But in California, the transfer does get picked up.   Michael: Damn it. They always get you somehow but maybe in some states, it sounds like that might not get picked up, right. There's less of an issue…   Sanjay: That's right, in many cases…Yeah.   Michael: Interesting. Okay, man, I thought I had this huge unlock but clearly you guys have already thought of, of all this. So this is this is super exciting, guys. We definitely need to continue the conversation, got a lot more questions, a lot more information. I would love to disseminate to our listeners. But thank you both so much for joining me. If people want to learn more about web three and blockchain and crypto in general, is there are there good resources out there that we can point people to?   Sanjay: Yeah, I mean, definitely come to our website to learn about real estate tokenization. That's https://onchain.roofstock.com/ and also, you know, follow us on crypto Twitter. It's at @rsonchain and then individually, like Goeff and I do contribute in Twitter and LinkedIn and other areas as well. So, you know, look us up and follow us as well, on those platforms.   Goeff: And don't feel don't hesitate to reach out. Like you know, we're happy to talk we're here. We're you know, we're doing something new. We know a lot of people have a lot of questions, and we're happy to answer the questions and then he conversation. So ping us, we're happy to chat.   Michael: Amazing, amazing. Well, thank you both again, for coming on and super looking forward to doing this again soon.   Sanjay: Thank you. Thanks for having us.   Goeff: Likewise. Thanks.   Michael: Alright, anyway, that was our episode. A huge thank you to Goeff and Sanjay for coming on. We're gonna definitely be having them back on again soon. So if you have additional questions about things you just heard, or blockchain things in general, we'd love for you to see those in the comment section. Wherever it is, you get your podcasts, and we will try to get to them on the next episode with Goeff and Sanjay. As always, if you liked the episode, feel free to leave us just traditional rating or review. We love those as well and we look forward to see you in the next one. Happy investing…

Neal Bawa is a technologist who is universally known in the real estate circles as the Mad Scientist of Multifamily. Besides being one of the most in-demand speakers in commercial real estate, Neal is a data guru, a process freak, and an outsourcing expert. Neal treats his $947 million-dollar portfolio as an ongoing experiment in efficiency and optimization. The Mad Scientist lives by two mantras. His first mantra is that "We can only manage what we can measure". His second mantra is that, "Data beats gut feel by a million miles". These mantras and a dozen other disruptive beliefs drive profit for his 700+ investors. In today's episode, Neal shares insights about his strategy for multifamily investing, some interesting market statistics, and what he expects the future of the real estate market to look like. Episode Link: https://multifamilyu.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my very special guest, Neal Bawa and he's talking to us about multifamily investing syndications and some really, really interesting market statistics about looking forward into what the real estate market future holds for all of us. So let's get into it.   Hey Neal, thanks so much for taking the time to come on the show with me today. I really appreciate you coming on and sharing some wisdom with me.   Neal: Well, it's exciting to be here, especially because I am a fan of your company and until five minutes ago, I didn't know that I was doing a podcast with Roofstock. So super excited to be here.   Michael: Awesome. Well, surprises always tend to keep people on their feet. So I'm really excited to chat with you today. So I know a little bit about your background and who you are but for anyone listening, who might not be familiar if you can give us the quick and dirty who you are, where you come from, and what is it you're doing in real estate today?   Neal: Absolutely. I'm a geek, a nerd, a maverick, I come from Silicon Valley. I live in Silicon Valley, I'm a data scientist by profession with a computer science degree. I've had a successful tech career, which, after 17 years ended in the sale of my technology company. I got into real estate because I live in Texas Fornia and I was paying 53.7% of my gross income in taxes and so you know, I looked around and looked at lots of different avenues to save money, looked at solar panels looked at oil, and came to the conclusion that none of those were anywhere close to real estate in terms of the incredible taxation benefits. I tell people, real estate is America's number one legitimate tax mafia. That's really what it is. I mean, no other area has the astonishing, the shocking tax benefits that real estate has. So I started doing real estate for that and started sharing a lot of my data science, you know, thought processes and ideas and it sort of just exploded from there. The first time I shared my insights on data science, I had four people in front of me. A week ago, I had 1100 listening.   Michael: Oh my gosh, that is really, really cool. So I love chatting with data scientists with geeks and nerds as the self-proclaimed title that you gave yourself, because I think it puts a process. They come from very process oriented backgrounds, and it allows them to apply the same processes to real estate, which I'm sure we're gonna get into in a little bit. But you're doing some pretty amazing things in the multifamily space if I'm wrong, mistaken, right.   Neal: I am, I am and I'm a huge fan by the way of the single family space and often direct people to single family, but multifamily is where I've been simply because of its amazing scale. So I started off in single family and I have now moved over to multifamily. So currently have about 750 million in construction and various multifamily spaces such as built around and apartments have about 250 million that I'm managing that I purchased that are existing buildings, and then I dabble in other areas as well as multifamily is kind of the core foundation of my business, but I dabble in self-storage, industrial townhomes for construction and student housing as well. So I love all kinds. I love all kinds of different asset classes at different times. But I always come back to the Foundation, which is which is multifamily.   Michael: Okay, now, you said a lot of amazing things with a lot of big numbers and I want to come back to that in just a minute. But I'm just curious on a personal note, can you share with our listeners, what's the best compliment you've ever received?   Neal: I think that the compliment had and I actually use it now you already heard it today was a person that walked in and said, This is the geekiest and nerdiest presentation I've ever heard that was still very entertaining. So that second part was like, okay, so I can I can get geeky I can get nerdy but I can still kind of get it down to the level where people enjoy it and are not snoring, you know, five minutes into the presentation. So I love that comment because it's hard to be a geek and be a nerd and still, you know have these aha moments for my audience. So I've worked really hard on that.   Michael: I love it and clearly you're doing it well because people 1100 people are coming to listen so my hat off to you. So let's talk about what excites you about multifamily because I think that there's an argument to be made that the fundamentals but you talking about going back to the basics is single family. So why do you think that it's multifamily? Why do you make that argument?   Neal: Because of single family? The short answer is this single family is why I'm excited about multifamily. Okay. So, you know, you hear a few numbers all over and over again, people say these numbers that don't quite explain the meaning of this, right. So we say in this home, the you hear this all the time, we have a shortage of single family homes in the US 5 million, the actual shortage is 5.1 4 million. You also hear we have a shortage of multifamily or apartments in this, you know, in the US and the actual shortage today is 600,000 units. So you notice most of the shortage is actually on the single family side, right? 5.2 million there 600,000 on the apartment side and for both of those, the vast majority of the shortage, not all of it, but the vast majority came from the fact that the US actually didn't really build anything single family or multifamily between 2011 in 2015. So we used to build, you know, I don't know, eight 700,000 800,000 a million units and then all of a sudden, 1112 1314 15, we built less than half of that creating this massive supply demand gap. It was enormous and that's why that has led to rental growth being you know, to AX what it used to be in the previous 30 years, we've also seen massive growth in prices on the multifamily side where, you know, we used to buy, you know, properties at, you know, $40,000 a door, and now we're buying the same properties at $250,000 adoor. So it's just an incredible, massive increase there in Parador prices, a lot of it really comes back down to the fact that we are absolutely unable and I haven't seen any evidence to the contrary, we are absolutely unable to build starter homes in the United States, we actually don't have a shortage of single family. It's a very common misconception. We don't have a shortage of single family, we have a shortage of starter homes and when I talk about starter homes, I mean anything that in a reasonably reasonable Metro, I'm not talking about San Francisco Bay area, but let's say something in Phoenix, right? Being able to build a nice three to four bedroom home that's brand new for about $275,000 that has become categorically impossible today. Okay, for I'll give you an example of this, as you know, multifamily scales a lot better because when you're building 100 units, you get all these economies of scale, blah, blah, blah, okay, my cost of construction in New Braunfels, which, by the way, is not a major metro, you've probably never even heard of it. It's in the corridor between Austin and San Antonio and so you one could say Austin and San Antonio are both, you know, secondary markets, not primary like San Francisco or Los Angeles and in so and this, so this market must be like a tertiary market because it's in between my cost of construction for townhomes, not single family is well over 300,000 units. That's what my cost as a builder is, right.   So you understand what's happened since March 2020. Construction costs in the US have gone up by 34%. That's basically about 27 or 28 months, they're up 34% and the problem was there before COVID. So before COVID, even in the face of outstanding and insane amounts of demand. We were only able to build enough single family enough multifamily housing just to keep up with demand. So remember what I said 11, 12, 13, 14,15 those five years, we under built massively, and then 1617 1819 20, those five years we built okay, we did find we stayed up with demand. But we didn't make any dent in the single family shortage. We didn't make any dent in the multifamily shortage, those numbers stayed the same, because we were just building enough. And that was before this once in a century 34% increase in construction cost. That was before that increase. Today, construction cost has gone up. So but people who think that home prices will drop 20% simply have no understanding of the fact that there is it's impossible to supply a product. If home prices dropped by to even 10 or 15%. Most builders will either go out of business or simply pivot to build the rent. So they'll stop building anything for the market and what that will do is make the shortage worse, which means that there's even worse it's going to make it much worse, right? Because we absolutely have to build 500,000 units a year just to keep up with this year's demand. Forget about the shortage from before, right, we still want to keep up with the demand for this particular year. So we can keep the shortage from getting worse.   You know, otherwise, that number that 5.2 million number will go to 5.5 million and 6 million and 7 million so we'll keep getting worse and every time it gets worse rents rise prices right? So there's a cushion under home prices and most people wonder mentally failed to understand the mathematics here. If your cost of construction goes up 34% how are you going to deal with prices going down and if developers don't make enough homes, the only homes available in the market are the existing homes, right? So will competition on them will increase and haven't you been reading already in the last three months that permits in the US have dropped to 30% because as the US economy goes closer into a recession, so it's inevitable at this point that we'll go into recession, builders are very skittish, their construction costs are at an all-time high and so they're backing off. They're saying, You know what, I'm not going to take the risk of building 10,000 homes, I'll build five. So if everybody drops their permits by 30, or 40%, you're digging now a new hole for the construction that would have afforded for the delivery that would have happened next year and the year after. So now we're digging a hole in 2023, deliveries and 2024 deliveries. How do you reconcile that with a 20% drop in prices? The mathematics, the fact that people actually keep saying this with a straight face is mind boggling to a data scientist.   Michael: Yeah, I love that because you like everything you just said, I don't know, if you're watching the video, you saw my jaw on the floor, I'm gonna have to pick it back up here. But it just people feel like it feels because prices are so high and toppling, then interest rates are so high, but everything you've just said, I mean, factually, and mathematically makes so much sense and so how should people be listening? How should our listeners be thinking and reconciling? Okay, well, interest rates have gone so high, so fast. So the purchasing power has been drastically reduced. How should you be thinking about like, what's going to happen next?   Neal: So the first thing you should do is study the past, because the past gives you some wonderful examples of what happens when these sorts of things happen, right? So I'm gonna give you some benchmarks that will really blow you away, right? So in 1982, the Federal Reserve raised interest rates so fast, and so many times that mortgage rates went to 18%. As we're recording this, mortgage rates are at 5.3%. So when I say this in front of a an audience, I was teaching in Seattle, there were 500 people listening. So just, you know, for shits and giggles, I basically went down to the stage and I stuck the mic in people's faces and I said, So if interest rates were at 18%, would you buy a single family home? No. Okay. Do you think anybody else bought a single family home? No. What do you think prices went down? Why the answers were 20 to 50%? Well, history tells us that in 1982, when interest rates to buy new homes were 18%. Home prices declined by 10% for one quarter, bounced up by 10%, the following quarter, and actually ended the 1982 recession higher than the beginning of the recession. study history. It tells you how sticky real estate is. Now, everyone, the biggest reason why people feel that prices are about to fall off a cliff is 2008. There's no other reason because if you look at the data from the last 61 years, all you notice is home prices are extraordinarily sticky when interest rates go up, because interest rates haven't gone up once or twice, or three times. Nine times in the last 61 years, the Federal Reserve has hiked rates to kill inflation, nine times, right? Eight times the economy went into a recession, how many times you'd be have real estate prices go down? Once 2008 because 2008 was not a recession. 2008 was the largest single evidence of large scale fraud in American history. Millions of brokers and 1000s of bank banks committed large scale fraud on about 20 million Americans. That's what caused those home prices to fall. I see no evidence of fraud at this point. If I if anything, underwriting standards are pretty darn robust. The people have trouble…   Michael: getting a mortgage is such a pain.   Neal: Right? So when you look at this, and you say, so every everything that you're doing is based on what you saw in 2008. But you're not comparing the US economy today to 2008, right. So let's go back to looking at 2007 and comparing it to today's economy. So you want home prices to drop by 20%? Okay, fine. Question is, have you looked at how many jobs the economy was creating in 2007 and have you compared that to today's jobs, right? So in the last three months, and people are saying we're in a recession, and maybe we can talk about that, in the last three months, the US created 500,000 400,400 1000 jobs. That's 1.3 million jobs in the last three months, we actually struggled to create that many jobs in most regular years. So in three months, we created 1.3 million jobs and of course, before you know anybody says, hey, the quality of the jobs is very low. They're part time no, they're not. Please go back and look at a a shockingly high percentage of those are full time jobs and then people are like, Yeah, but people are not getting paid enough.   These are standard objections, right because people are not studying the radar. No wage inflation is very high in the US right now in work have the upper hand. Wait, inflation is at 5.1%. Most years, it's one and a half percent. What that what does that mean? People are good people who have existing jobs are getting big raises and then there's 11 million open jobs in the United States. This is the first time in US history that we've been at 3.5% unemployment and still have 11 million jobs open. So the economy is producing jobs at two and a half times. It usually does in a normal marketplace. How do you factor that in with home prices falling 20%? It's the it's a highly desired asset that people want. Now, it's absolutely likely that home prices will fall. But the big question is, will they fall on a nationwide basis and the answer is that there is no data to support that. markets that are red, hot, white hot, some of those markets that I invest in Phoenix, Boise, Las Vegas, Austin, these are markets that are at risk of a 10% correction, maybe some markets might even get a 15% correction. But the US is combined of 330 markets. When you look at those 330 markets, the chances that we will see a 1% overall price reduction is still low and most people are talking about 10 to 20% based on what data?   Michael: Ah, I love it. I love it. Neal, this is this is super, super insightful. So kind of thinking about the feel part of the emotional part and the people talking about the 20% correction. There are those who have said that the Zillow or the kind of red fins that give estimates of value or rentability. It's almost a self-fulfilling prophecy if I'm an investor and I go on Zillow and see hey, this was only valued at 100k by Zillow, but it listed at 120 I just wanna be paying 100k. Is there some risk of that with public sentiment that prices should be falling with the Zillow effect that's not trademarked?   Neal: Let's call it the Zillow effect and actually, it's a very important thing to talk about because if you know, the question really is, is there a risk of that the there's a 100% chance that the Zillow effect will drag home prices down? Here's the catch, though. The Zillow effect is both ways, right? So we've also seen the Zillow effect when prices go up. So you're gonna see a short term curve downwards as the market adjusts and then when it adjusts, a whole bunch of people are like, home prices are 10% down, this is my chance to get in and it's not just, it's not just the individual investors anymore. America is fundamentally different in 2022, than it was in 2008. There one single company called BlackRock, I think is Blackrock or Blackstone, maybe I'm confused about that, it has now launched a $50 billion fund, just to buy homes during a dip and their definition of a dip is 7%. So the moment they see home prices falling 7%, they're gonna come in, and there aren't, it's not a billion dollar fund. It's not a $2 billion fund, it's $50 billion, just Google it, right. So just Google $50 billion home buying fund. Now, that's one company, but there's at least two dozen of them. So real estate now is an institutional asset class that rival stock markets, and people who invest at a big scale in the stock market, their dip is 5% 7% 10%. So you'll get that dip and they'll come in and they'll, you know, scoop up a bunch of these properties and then at some point, people will realize this market isn't going to crash 10%, they're going to be like, Yeah, but it's seven or 8%, or 12%, down in my area. Let me grab some properties and then you're going to see that correction and now all of a sudden, your backup as before you know it, this is normal, right? The market that we've had for the last 10 years where prices only go up. That's bizarre, that's abnormal. That's never happened before in US history. What we've seen before is prices go up. But they don't always go up in a straight line, they go up, they're just a little bit, they go down for three or four months, then they go back up, and the overall direction is upward. in markets like this. The Zillow effect is necessary, right?   I'm telling people number one, a dip in market prices is incredibly healthy. I've got my fingers and toes crossed that it happens. I've got my fingers and toes crossed that the US economy goes into a recession and most people would beat me up for that. It's like, why would you have your fingers and toes crossed for that? Short answer is when we have this much money floating around. If we do not occasionally adjust the economic cycle, we always end up in a bubble and bubbles when they burst of this size, create trillions of dollars in losses and can drag us into a 2008 type recession but if you look at the history, and again, I keep going back to this, the Fed has raised and income interest rates nine times and eight of those the US economy went into a recession, right? Only one of those eight was a destructive event 2008. All other seven events were in economic cycle, reset or adjustment and when you actually look at the effect of that recession over a three year timeframe, the net effect was zero, the cyclically adjusted, some of the bad companies fell out some of the bad developers fell out some of the bad money in the marketplace fell out and in the if you look at the long term trend, that that bumped down that six month recession had no real impact on the economy 2008 I can't say that, right. So once again, there's one time when we've seen total destruction happen, and that was because we perpetrated large scale fraud on American millions of Americans and using that as our benchmark to make all decisions in the future simply means we're ignoring 61 years of history.   Michael: Which seemingly is easy to do for a lot of people.   Neal: But for most people, it seems right. So I'm kind of looking at this going, this doesn't make any sense. Do you not realize that we just produced 1.3 million jobs in the last three months and isn't that the best way for company, companies are saying we're worried about recession, they're issuing earnings, you know, forward looking, and they're saying your earnings might reduce, and then they go off and hire 500,000 people in a month, right. So I mean, it's lip service for the stock market, it's lip service, for their for their, you know, phone calls with their investors. But they're not doing what they're saying they're going to do, which is reduce hiring, reduce hiring is half a million. Now normal months tend to be about 200,000 reduce hiring should be 100,000 new people being hired or 50,000, not 500,000.   Michael: Yeah, yeah. It's so interesting, Neal. So how do you take the data and use it when you're investing?   Neal: So one of the things that I do, and I'll kind of give you a little story on this on how I got started, so right, so I'm a data scientist. So right around 2009. I am, you know, looking at the real estate market, and everything looks incredible for me, of course, everyone else is telling me this is the worst real estate market of all time. So I go and tell my family, we should be buying all kinds of real estate today. Just buy everything in the marketplace, you know, with every last dime you have and then my family basically decides that I'm so stupid that they don't want me attending family events in case I infect other people with my horrible ideas. So I'm excommunicated from the family because, they like this guy is going to infect other people and we're going to lose millions dollars. So I'm like, okay, I'm gonna prove these people wrong. So I go and get gathered the best of my data science information and  I mined the Zillow website, I mined the Bureau of Labor Statistics website, along with a Ukrainian hacker was pretty good at mining. So we, you know, gather all this data together, we put it in a statistical software called R and we look at every city in America and up at the top is an unknown city, a town called Madera, California, mid era, it's 20 minutes from Fresno, right?   Nobody's ever heard of Madera, California. I know Madera, right and so Michael, what my data is telling me is, Madera, California is by far fallen way more than it should have, because from Peak 2005, it had already fallen in 2009 by 73%. So prices had fallen by 73%. But most markets fell by 30 and 40%. You know, some markets didn't even fall that much like Dallas only fell by 11%. So I'm looking at this falling 73%. I'm like, statistically speaking, this is the greatest market of all time. So I drive a jump into my car, I drive 144 miles to Madera, and I go there, and I see all these very beautiful Kaufman and Broad homes. They're like, gorgeous, like, they're brand new, right? Nobody's clearly nobody's ever lived in them. So I go to a broker in Madera, and I say, hey, what's happening here? I mean, these homes are gorgeous, right? Why doesn't anybody want to buy them and the answer is, well, Kaufman and Broad basically sold these two farmworkers, none of them had documented income. They've all left, so half the city's empty and I'm like, so. So what does it cost to make these beautiful five bedroom homes today? So it's like, yeah, if you were doing new construction would cost 250,000? So I'm like, but I'm, what are they available for? Oh, you can buy these for 90,000 any day, you know, they're all available for 90,000. You can buy as many as you like and I'm like, why in God's name? Would I not buy these for 90,000? He says, Neal only for one reason, one reason only one reason. You can't rent them. There's too many empty homes in Madera, so you can't rent them.   So you basically would have to buy these homes and then keep paying your mortgage in the hope that the market comes back someday. I'm like, I have to find a solution to this. There has to be a solution. So I jumped in my car again, I drive another 20 miles to Fresno, which is the big city, right and I go there, and I talked to a broker and I say, I want you to sell me an ugly property. He's like, Neal, no, no, no, no, I'll send you a brand new one. I've got plenty of them. None. I said no, I want a 30 year old ugly property in Fresno and he says, okay, well, these, you know, sells me a property. I buy it in cash. It's $110,000 on Summerfield, right? I take that property, I put pictures up on the web, and I go to my Ukrainian team and I say I want to In an avalanche of leads, rental leads for this one property and they're like, why? I mean, it's a pretty decent rental market in Fresno. Why do you want that many leads, I'm like, trust me, just give me like 5000 leads for this one property and they're like, okay, so the guy is sort of goes to back to his Hacking Team, and he hacks a bunch of sites, and he writes a bunch of scripts, and all of a sudden that property is like on the web 300 times in 26 different places and so is just listing it continuously using his engine and before I know it, the phone's just ringing off the hook, I'm, you know, my mailbox is filling up with leads. So I hired a person in the Philippines, this lady on a full time basis, and I say, call every one of these people and tell them this property is rented. But I have nine brand new properties 20 miles away in Madera and I will give you $50 amazon gift cards, if you just drive there and attend an open house $50, no questions asked. We'll just give you an Amazon or gas card and so she starts making phone calls. She was pretty good at her job. She'd been in a call center and you know, half the people swore at her because they would they were like, yeah, but this is not press No, this is Madera and it's like, well, this property is rented, I, you know, I've got these options and she would keep sending pictures to them by text, right, because people weren't reading, reading their emails, she would keep texting pictures of these beautiful properties and before I knew it, people were attending those open houses, I already had to deal with the banks where the moment I got a rent contract signed, I would pay cash for the property the next morning. Well, before I knew it, 11 properties were rented and then I turned around and repeated my success with my family and all of a sudden, I was making massive amounts of cash flow on these brand new homes, that now of course, they're all you know, $400,000 each.   But even back then, I was making so much money every single day on properties that I knew had to come back. It's all about the cost of construction. You don't hear about this on podcast, if it costs $250,000 to build something, and it's available for $100,000. Buy it because construction costs have never gone down in human history. They've only gone up and they've gone shockingly, up in the last two years. But even before that they've never really gone down. Nobody was able to reduce construction cost during the 2009 downturn. They simply didn't build anything, right. But did anybody get a reduction in construction costs? That's not possible. Most of our construction material doesn't even come from the US or I mean, our steel comes from places like China, right? You can't get a discount simply because your economy is in a recession. So it's all about construction costs. So once I had proven this algorithm, I decided I'm going to tell the world about it. But that's another story. So that's really how I got started in in single family and then I wrote algorithms, again and again, published them. As I said, the first time I had people that were for people listening to me last week, I had 1100 people listening to me, it's really about those algorithms. The only thing that's changed and this is the answer to your question, sorry, long winded but the answer to your question is, what I found was, when I spend this, use the same algorithm for single family that it has everything that I can possibly imagine except scale, I can never grow to a billion dollar portfolio, I can maybe grow to 10 million or 50 million, and a lot of people have. But if I apply the exact same data with multifamily, I have an 18 month crystal ball and I'll explain what that means and I was getting the same exact results. But because I was buying 200 units or building 300 units at a time, I was able to hit my goal of a billion dollar portfolio and I did it in I don't know that from 2014 to 2021, right. So seven years, I was able to hit a billion dollars. You just can't do that in the single family side. Otherwise, single family pretty awesome.   Michael: Neal, I love it. I absolutely love it. What happens and then I want to hear about your 18 month crystal ball. But what happens when things switch where the cost of new construction is cheaper than buying something that's existing?   Neal: My business is in trouble. We're all in trouble. But and so I obsess over that greatly. I go to all the conferences where I see new real estate technology coming out. I go to the modular conferences, I go to the 3d printing conferences. I look at what Amazon is selling online in terms of you know, kits I look at. I look at everything and I can tell you with complete confidence that in the next five to seven years, there is no technology that will drop cost of construction in the US. The first technology that I think will make an impact right around the 2030 timeframe is 3d printing. Modular is a laughable technology in the US. less than point 1% of homes in the US are made through modular and the total volume of modular factories in the US is under 5000 units. We need a million. So unless Congress decides to put $150 billion towards building ala carte factories, there's no volume and because of a company called KATERA, a very famous company K A T E R A going out and losing $2 billion of investor money. Nobody in the right white mind wants to build a modular factory modular completely, you know, not useful. 3d printing, yes. But remember, 3d printing only works in edge case scenarios, because the property looks odd because of all that concrete that you have to basically put on. So I think it'll work in subsidized housing for the first 10 years. So let's say 2030 to 2040. It'll be in subsidized housing by the end of 2040. I think 3d printing will completely change all math around construction and we'll do a full reset of real estate. So luckily, I'll be gone long before them.   Michael: I would say, well, hopefully this podcast is still in existence, we'll have to have you back on in 2040. To talk about it. Yep, so give us give us some insight into your 18 month crystal ball because that's something I've never heard before.   Neal: Yeah. So I love you know, again, going back to Statistics, right? So when we're crunching numbers or big data with our teams, one of the things we realized is when a market starts to see home prices going upwards. Okay, so it's home prices are screaming upwards, right in a certain market. What we noticed was between 12 and 18 months later rents in that market explode. Okay, between 12 and 18 months later, but not immediately and you might say, why not? Well, the short answer is, what happens is that there's a bunch of people in that market that are looking at home prices going up, and everybody wants to be on that train when it's going upwards. So they jump in, they buy these homes, and then that makes more people want to jump in and buy those homes, because they're friends, you know, their homes are worth a lot more and so you see this upward momentum and then finally, the market hits a critical point where most people that are looking to buy a new home in that marketplace, their income doesn't allow them to qualify, not most substantial portion of those people, right, so you get to maybe a quarter of all the people in market X can no longer qualify based on their income, right and the moment that happens, those people, they realize that their dream of homeownership is gone forever and then they don't want to go live in an apartment, what they'd want to do basically is they either wanted to go live in a class A apartments, so it's amenitized, with pools and gyms, and all those kinds of things or they want to go live in a built to rent community, which I'm building lots of, which essentially is the same as a single family home, but it's for rent.   But it's better than a single family home, because you've still got the pool and the jacuzzi and, and the dog park and the park, right, because it's 200 single family homes in one community, it's just that you're renting that home instead of buying it. So now you have a massive increase in demand for those kinds of assets because people realize I simply cannot buy any more unless I get a huge salary increase. I'm going to be renting, then those people they want to rent the best property they can find. At the very high end, they're going to be doing built around a single family rentals below that they're going to be doing built around. Below that they're going to be doing class a multifamily below that they're going to be doing Class B and Class C multifamily. So all of these rental markets see a massive boost. So this crystal ball works for every market, we've never actually found an exception to this rule with some weirdo exceptions in in rent control markets where rents simply can't rise. So as long as the market is not rent controlled, we have never seen an exception, the crystal ball works. The only part of it that is a little fuzzy is sometimes we see rents going up as soon as 12 months after the explosive growth of home prices and sometimes it takes 18 months.   So that crystal ball makes my life so much simpler because crystal balls are so hard to find actual crystal balls and reliably work are so hard to find. So I just look at these markets that are seeing these massive increases in home prices and I go buy a multifamily there, I have a business plan to rehab that multifamily and do value ads with it and do or maybe I'm doing new construction. So either way, I have a business plan. But that's my plan A but what I've found so far is in every instance that I've done this plan B has worked better, which is simply the market just went exp has explosive rent growth. So I didn't actually ended up implementing my business plan. I simply ended up selling my property in 18 to 24 months and making my investors a lot of money. I mean, I don't know of anybody else in the US that uses Core Data Science, not just numbers, but core data science to do what we do. We've had 37% IRR 47% annualized returns for our investors by simply using the crystal ball over and over again, over and over again. I mean, and I can tell you what those cities local like today, and I guarantee you've not heard of many of those cities.   Michael: Neal, I love it. What would you say have seen massive price appreciation? What is that mean because I think massive could mean different things to different people. So is there a percentage that you say, hey, you know what we crossed this threshold, that's the city that I want to invest in?   Neal: Oh, absolutely. The short answer is with multifamily. It's only about 25- 30% increase in prices. So one of the things that most people don't understand is, you don't need prices to double to double your profits, because you use leverage. So let's say somebody buys a $10 million building, and $3 million of that is equity, right or down payment, and 7 million of that is a loan. Now, let's say this building goes from $10 million to $13 million, right? So you've it's only gone up 30%. So if you sell it for 13%, and you return that $3 million in equity, right, there's $3 million in profit, plus all the rents you got for two years while you were holding it. So you've doubled people's money in two years or three years, right, even though the property's only gone up 30%. So that's very important to realize, 25 to 30% increase, usually doubled investor money in during the whole time and recently, those hold times have been very short, two years, two and a half years. So essentially, that means 45-50%, annualized returns. Now in normal times, it takes about five years to get to that point. So you're, you're doubling investor equity in five years, but that's still 20% annualized returns and I think that's pretty awesome because the investors are doing nothing, they attend a quarterly webinar, and they read a monthly update and if they, if they like you, they don't even do that. They just sort of delete your emails when they come to cash flow, right. As long as their cash flow checks are coming in. They're not reading anything you're sending them.   Michael: They're not complaining. That's it, that's it. Neal, this has been so much fun. Where can people learn more about you continue the conversation, and what's the best way for them to get in touch?   Neal: So I'm lucky enough that I'm the only Neal Bawa on the World Wide Web. So simply typing in any URL, and bawl and hitting enter into Google. There's a couple 100 podcasts that I've been on. They're geeky and nerdy, like this one too. But and if you're interested in my metrics, if you want to figure out what is that next unknown city that is going to have explosive growth, type in Neal space Bawa space, location, magic into the web, and you will see a 45 minute course that walks you through that process. So you can find those cities yourself. Or you can simply be lazy and go to my website multifamilyyou.com and find location magic they are sometimes we call it real estate secrets, same webinar, go in there and there's a list there's a list of those cities. You know, and I believe a lot of them are tertiary markets, but a lot of them are actually 35 minutes away from some kind of primary or secondary market, I find that the primary market secondary markets are really too expensive and are at much greater risk today of price drops. So like I wouldn't go out and in buy a property in Austin. But I've surrounded Austin with seven different properties because I find it to be the hottest city in America for the next 10 years. I'm just not interested in paying what I have to pay what I would have to pay in Austin. So I've literally surrounded Austin in all four directions with my portfolio.   Michael: Super clever. I can't wait to see how that works out. Neal, thank you so much for taking the time and coming on sharing with us. Really appreciate it and I'm sure we'll be chatting again soon.   Neal: Thanks for having me on the show.   Michael: Okay, everyone, that was our show a big thank you to Neal for coming on. Tons and tons and tons and tons and tons of meat and potatoes there to go digest and really think about because Neal kind of flipped the script on what a lot of people have been saying for a long time. So as always, if you enjoyed the episode, definitely we would love to hear ratings, feedbacks review from all of you, and we look forward to seeing the next one. Happy investing…

Mike Simmons, a real estate investor, author of the book Level Jumping (linked below), has shared the stage with some of the greats like Gary V. Has made over $1 million in profits in 12 months!! He knew he wanted to invest in 2003, and bought his first flip in 2008....why did it take so long? Like a lot of people starting out Mike was afraid to tell his spouse because of the difficult conversation. It wasn't until he finally decided he was tired of allowing fear to be his excuse that he dove in. Today, Mike shares his inspiring story of how he left his job, entered the real estate world professionally to begin wholesaling and flipping houses. Episode Links: https://www.mikesimmons.com/ Level Jumping   --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, I'm joined by Mike Simmons, author, CEO, business coach speaker, and we're gonna be talking about Mike's business, wholesaling and flipping houses, and what we should be aware of if you're going to get into either of those businesses. So let's get into it.   Mike Simmons, what's going on, man? Welcome to the real estate investor.   Mike: Thanks for having me, I appreciate it.   Michael: Oh, my gosh, no, the pleasure is all mine. Super excited to have you on and really excited for our conversation today. So Mike, I know a little bit about your background and a little bit about what you do but for all of our listeners who are not familiar with you, give us a quick and dirty who you are, where you come from, and what is it that you do in real estate today?   Mike: Yeah, no problem. So, you know, I always say that my background is probably the least remarkable. I didn't sell baseball cards, I didn't go around the neighborhood looking for lawns to mow or things to do. I was a normal kid, probably on the lazy side. You know, and my parents were, we're in the automotive industry, and we're very blue collar Michigan, right. So the life that was displayed before me through example, and through explicit, you know, direction from my parents, and the Blueprint was, you got you finish high school, you go to college, or just as maybe even more preferable, you get into a union factory type of environment and it's very secure and you work there for 30 to 35 years, and you retire and you hopefully save some money and you scrimp buy and that's how you that's how life goes. That's just life. That's what people do, that's normal. Yeah, there wasn't one single person in my family or anybody on the horizon that was doing anything remotely entrepreneurial. So I did that I went to school, I went, I finished high school, I got a job with UPS, Teamsters, my parents could not have been happier with me being in the Teamsters and I went down that path, and I got married young, and I was working at UPS and like, unfortunately, UPS is a great company.   But there are injuries that happen because people you know, lift wrong and all that and at 25 years old, 24 years old, actually, I couldn't get out of bed in the morning without going to the chiropractor three times a week as a 24 year old, otherwise healthy man, oh my gosh and I knew I couldn't retire from there, because I was already almost too hurt and crippled to do the job I had to do at that time and I was in my early 20s and so I got another job in the automotive industry. It was a desk job and I started working there and this was, we were the mid to late 90s at this point and the automotive industry, like most industries, were starting to decline starting to have some problems. We were heading toward 2000 where a lot of bad things happen and in, you know, people think about tech and what happened if tech the big boom that happened. But the same thing happened in the automotive industry, essentially, we went from, you know, booming industry to many, many suppliers, going out of business struggling, it was really bad for a while and so I had to look around and ask myself, and I'm one thing I'm good about one thing I one of my superpowers is I'm a very honest, and I can I can very objective about myself and part of that is because it can be a tough thing to do. It's most people I don't think are, are objective about themselves and I'm not saying this to brag, I'm gonna tell you why I'm objective, and it's gonna kind of be like a poor, poor guy. My dad was a Marine, and, and he made it real clear what our shortcomings were on a daily basis as kids and so I have no problem. being real, honest, in a way that say, these this is what I'm not good at.   This is what's not great about me, like I'm very aware, I'm very easy for me to for me to figure that stuff out and so I asked myself at this point in the automotive industry, and things were declining, I didn't have a college education. I would I hire me if I were without a job and I was in the position of HR and I was, you know, somebody like me was across the table. What is there anything about me, that makes me more hirable than the 1000s of people who've been laid off over the last few years and it was easy. There was nothing about me that was remarkable. I had no college experience and I had very little practical experience. So why hire me when there's so many really, really talented people that were being laid off because of the industry. So went back to college, got a degree and I was working I'm kind of fast forwarding a lot, but I got my degree and I doubled my income. Like the minute I retire, graduated, the minute I graduated, I got a job, which literally was twice the annual salary and I was like, here we go, baby. There's no stopping and so just to kind of illustrate how that went, so I went into a company, it was automotive and I was working there for about six, seven years and at one point, it's seven o'clock at night and it's everyone had gone except my team. Everyone had gone home for the night, obviously, it was a five o'clock, most people were gone. It was seven 30 and I'm in at work and there are our client is there too, because there was something going wrong with our program that we are working on and he's there and in we're discussing the problem, and the guy gets really agitated the client, I'm not going to say which automotive company I'm talking about, but it rhymes with board.   Break company, I have an F 150. But he gets in my face and basically start screaming at me like dressing me down, like very much, really like when I was a kid like my dad did write down. Yeah and he was and it was seven o'clock at night. We're all working overtime. We're all clearly busting our butts to solve the problem and he gets in my face. They're screaming at me and he's the client, right? He's a big client and I can't really say anything back, except I'm really sorry. We're working on it and after he walked away, I went to my manager who was there too and I said, what are we doing here? What is happening right now? Why are we here? I'm getting screamed at we're doing our best, like there are issues I get it but nobody, nobody was negligent. We just have we have things that have happened, and we're working through but why are we still here? We should be at home and he said to me, I'll never forget, you need to get your priorities straight and I thought you are correct. I absolutely do, I have young children at home, I have a wife at home. I've been working overtime all week on this project. I didn't say this but in my mind, I'm thinking, you are correct, my priorities are wrong and from that point, I decided to take my side hustle that I was doing, which was real estate, flipping houses not doing a particularly great job at it, but just kind of stumbling through it and I said that is going to become my career priority. My priorities need to get dialed back to my family and make sure I'm at home and I'm spending the evening with them. I'm eating dinner, putting my kids to bed but from a career standpoint, that now becomes my focus and I will get my priorities straight and so he essentially put me on the right track. Inadvertently, he obviously was referring to work priorities but it worked the other way and so I from that day, I started making my side hustle, my main focus and I will say I a year later quit my job and the first year that I was in business and real estate full time that listen to this, this is true and I did this math, the first year that I was in business full time for myself as a real estate investor, my company's gross profits were equal to the total sum of my salary for the previous 25 years that I was working for somebody else, year one, which was a million dollars, I made over a million dollars in my real estate and over the years, like I'm talking going back to 18. When I started working right, I was making very little money and in the middle, I wasn't making a ton toward the end, I was making more but if you just take the average, which is about $40,000 for me, and you times that by 25 and is $1 million. My company grows that in in one year.   Michael: That's crazy, Mike! So where did you take it from there? I mean, are you still flipping houses today where you focus exclusively on that? Give us give us the insider scoop?   Mike: Yep… Yeah, good question. So I was flipping houses. When I was working full time, my wife and I were flipping houses and like I said, we weren't doing a particularly great job of it because she worked full time as a teacher, I was working full time plus as an automotive person and we were getting flips done. But we weren't particularly profitable, like we should have been. We didn't have any processes in place. My wife is extremely risk averse and so I kept trying to do more and do it faster. And she was slowing like brakes, brakes, brakes, right because she was nervous that we were getting ahead of ourselves and she probably saved me from really screwing up bad in the beginning. But at some point, she said, You know what? This is great and you clearly love it. I don't love it as much as you do. In fact, this is making it hard for me to sleep and it's making me hard for me to focus on my day job with the kids and I'm a teacher and that's what I do and I love you, I love the I love real estate but it's the roller coaster, the mental roller coaster is too much and I really would rather you go on without me and let me pull back and I'll just cheer for you from the sidelines and I totally support you and this isn't a negative this is actually a positive I just trust you to do it better without me and I did in and that's when things started taking off because I started doing way more activity like before we would get a house under contract. We would get it quoted out, you know, we would renovate it, we would put up for sale, we'd go through the wholesale process closed, check in the bank, before we started looking for the next day and that's not really a that's not how you scale anything, right?   So when she backed out, I was like, okay and I started putting offers in on multiple houses a day, like I was putting offers on everything and I started getting multiple deals at one time and so I had to learn how to raise money and I had to learn how to manage groups and what a forced me to do was, it forced me to come up with a process in a system that was repeatable and could handle scale. Before that, nothing we did was scalable, is all very manual, we'd go to Home Depot, we'd pick new colors for the walls, we'd pick out different cabinets, different flooring, like everything was custom to the house that we were working on and what I realized was really, really good house flippers who do it at scale, okay, and I'm not talking boutique flippers, who go into a town and they buy a $3 million, you know, historical home, and they like, put it back together with love. It's I'm not talking about that I'm talking about the people that are flipping 20-30 at 100 200 deals, they are not falling in love with every single house and going in there and making it the route, right, it's turning burn a little bit and so I learned how to turn and burn a little bit more in my business and scale it in a in a way that had systems and processes. But I still hadn't hired anybody. It was still just me, what changed the game for me and that changed the game for me in terms of, you know, a racing analogy, but, and again, this is not like I said all this in front of my wife as early as like the last month I've said all of this and she 100% agrees but she was like the governor in a race car, right? They put the restrictor on there. So you can only go so fast. Once that got pulled off. I pushed the gas all the way down to the floor, and I never stopped like, and so things just go faster when you're doing that much volume and back then, you know, now we're talking about 2014 ish timeframe. It was easier to get deals, I'll be honest, like, as someone who coaches people in real estate, I'm not gonna lie. It's harder now than it was back in 2014.   Still possible now, but it was easy back then. So I was getting deals off the MLS and it was going pretty fast. Fast forward another year or so and it started to get harder to get deals off the MLS and I was struggling a little bit and so I had to do some research and figure out and I was I was going to all the meetup groups and I was asking all the other house flippers like, where are you guys finding deals like what's happening? Where are you guys getting your volume from and they were all like, man, it's hard, like we're not getting deals like we're struggling and I'm like, Well, where are you looking? Where are you trying to find deals and everybody said the MLS everybody. I only knew one wholesaler in my market and I reached out to him. I'm like, Dude, I know you're not buying off the MLS. So where are you finding deals? He's like direct mail, I'm going direct to sellers and I'm like, what do you mean, go direct to sellers? How do you do that and so I took him out to lunch. He gave me the down and dirty playbook for how to do direct mail is what I was doing at the time and I started doing that and the deal flow started happening again and I started building and what I realized was and there's a whole story behind it that we don't necessarily have to get into but I changed my model from house flipping to wholesaling and it wasn't because of that guy. To finish in a nutshell, I was overly dependent and this is a huge mistake that new investors make all the time. I was overly dependent on one contractor and one realtor, they were everything the realtors, he found all the deals for me and they ran the numbers and they told me what was a good deal and my contractor was my only contractor and he basically made her are broke my rehab and on the same project as chance would have it. The realtor missed the numbers pretty badly and my contractor started flaking.   Now if you flip houses or renovate houses, or you have rentals, and I say my contractor flake, you probably don't need more information than that you go I'm with you, my contractors flaked too, right. But essentially, he stopped showing up he started charging me for things that he wasn't doing. He started making up half truths about stuff that he did do and so I was forced it and by the way, I was getting deal flow because I was direct mail, right. I had to let both these individuals off my team, to say the least and I had no backup plan and so as these deals were coming in, I reached back out to my wholesaling friend, I'm like, What do I do? I don't know how to wholesale. Can you just tell me what that even means? Like, what do you guys do and he again, gave me the down and dirty playbook and I called a house flipper friend of mine who I had recently talked to and he's like, I can't find anything and I said, Hey, man, I got this deal under contract. Do you want it for 110,000 at the time, that was the price 110,000 he's like, let me take let me look at let me look at the numbers coming back in 10 minutes. He's like I'll take it, I got it under contract for 95,000. I made $15,000 in like 10 minutes and In Michigan at that time, a normal flip 15 to 20,000 is a good flip number. Right, profit. Yeah and I was like I made almost the entire profit with a phone call. That was cool and probably a lot easier sold.   So much easier to do. No, by the way, no contract, right? No realtors. So I got another deal under contract. Ironically, it was also a contract for $95,000 and it was in a similar neighborhood. I called the exact same guy and I told him the exact same thing. I've got a deal for 110,000 It's yours. He said, give me five minutes. Call me back, he said, I'll take it. This all happened within four weeks to deal. I was like, I felt literally talked about love at first sight. I was in love with the model of wholesaling and so I switched my model over to wholesaling and I started, I started scaling it up and what really changed everything for me though, because although I was scaling up and I was starting to have some success, I still wasn't really running it like a true business I was I was a little bit scattered, I was a little bit unfocused and I joined a mastermind, a friend of mine at the time who lived in California, he had a podcast, and I knew him just through podcasting, and I was listening to his podcast one day, and at the end, he signed off, thanked his guest signed off, and I was doing dishes actually, at the time in my house and I saw I let it go, it was it's just kept going because I wasn't able to turn it off. My hands were wet and if it was over, he goes, Hey, if you're still there, I want to let you know about this very exclusive opportunity. I am pulling together some of the best real estate investors from around the country. We're going to form a mastermind, we're going to share ideas, we're going to help each other it's going to be awesome. If you want to get involved, you know, send me an email, whatever.   So I did $25,000 mastermind. Well, I $25,000 bazillion dollars to me at the time, but I was I was doing wholesale deals, right and at the time $25 was like two wholesale deals because I was averaging around 12 $13,000 per deal and I thought, I mean, if I surround myself with these people, will I do two more deals as a result of the relationships and the knowledge that will be exchanged. It seemed reasonable that I would and so I joined and I met someone their mentor, more than one person, but one person in particular, who laid out his company, he just laid it out. This is how I run my company is exactly what I do is what I did right and wrong over the last decade and he had the company I wanted and I said to him, his name's Andy, I said, if I if I see what you did, and I see what you're telling me, I should do and I totally agree with you. But you took you 10 years if I knew everything that you know now, and I apply it proactively. Couldn't I condense that timeframe? Like could I do any year and he said, I don't see why not? That's exactly what I did and I sort of came up with this term that, that I didn't think about a much until I've said it on podcast, and people resonate with it but I think the most powerful thing you can do in business is to use other people who are successful use their hindsight, which is 2020, as they say, right, as your foresight and so I used Andy's hindsight, all the things he did right and wrong, as my foresight going forward and I was able, that's what I was telling you that first year that I was doing the full time because I applied all of Andy's principals and I went from doing a couple of deals here and there to 10 to 15 deals per month and scaled up to a million dollars in that first year.   Michael: That is amazing and so right now your business is focused exclusively on wholesales, are you still doing flips?   Mike: Historically, it's always been wholesales but recently, and I have a business partner to its which is a whole story in itself kind of interesting about hiring and identifying talent. But so my partner and I have started strategically buying properties outright and then doing in Michigan, what we call them land contract, or we basically play the bank, we own the property, and we sell it to them and we hold the note as a company. So we started doing a lot of that. So we do like 100 deals a year, but half of those or more, but at least half would make fantastic land contract deals for us and so, and because of you know, COVID kind of showed us this a little bit and over the last several years that we've been in business, every business has ups and downs every industry has, you know, markets go up and down, right. So revenue kind of fluctuates and we thought how do we level that out a little bit? How do we make the valleys much higher, you know, so they don't go down and so we're doing a lot of this land contract stuff because it's every it's like you know, monthly recurring revenue and so we make the valleys much shallower and the peaks are still there. So we're probably wholesaling half of our deals and the other half we're buying inland contracting out…   Michael: Okay, let's dig into land contracts live because it's just not something I know very much about and we always joke on the podcast that we get to ask self-serving questions of our guests... So walk our listeners through asking for a friend walk us through like how land contract works and why it's so wide, so interesting.   Mike: Yeah, it's pretty straightforward but the concept and I'll kind of give you a peek, like a little bit behind the curtain here, right? The real like mechanics or the real like logic behind it. Me and my partner both as of a year ago, I had about 25 rentals, okay, which I have sold recently and I did it for a couple of reasons. Now, because rentals aren't great, they're great and actually, the rents are higher now than even when I sold them. So rent rents are going up, which is awesome. But for me, I bought them really, and I bought them like 2015, most of them and so the equity in them was very tempting to tap into and I recently have started doing lending on a grander scale, like I've scaled up my lending company, and I wanted to put that equity, that money into my lending company, it's just more of my focus now. But so what we're doing with land contracts, and why one of the reasons why we love them is unlike a rental, we are not responsible for any maintenance, any vacancies like we are, what the bank is to your mortgage, we get the mortgage payment, regardless of whether or not they have a leaky roof or whatever has to happen, right, we don't have to deal with any of that stuff and what we're able to do at least in Michigan, this doesn't work necessarily everywhere, the same way, because the rents aren't high enough in the house prices aren't low enough for to work in a lot of areas.   But for us, if you take someone who's living in a neighborhood, and they're renting, and let's just say they're paying for the sake of round numbers, they're paying $1,000 in rent, okay and they're renting a certain level house in that neighborhood, I can buy a house in that neighborhood that maybe is a little bit in distress that I can go in and buy it inexpensively and put some work into it and if someone were to buy that house with a traditional mortgage, especially a year or two ago, when rates were like high twos, low threes, they could buy that house and their mortgage payment might be $600, right, right. But they can't get approved for a mortgage for whatever reason, right? They have bad credit, or whatever it is, right? But I can buy that house, I can renovate it, and I can sell it to someone and really the pitch to them is listen, you want to own a home, and you're not currently in a position to get approved for a mortgage through a traditional mortgage company. But what if you could have homeownership, and you would pay no more than you were paying when you were renting, right still give me $1,000 give or take. But you own the home and you can build equity and in three to five years you can refinance out at a lower rate and you can own the home and probably drop your payments a little bit. Is it important enough to a person to own the home? If they're if all things being equal rent 1000 I have to pay this company 1000 for the house, but I own the house. That's what we do we buy the houses now, the reality is the interest rates are a lot higher than what you might get at a mortgage company, right. But we're also taking a bit of a risk. These are folks that have defaulted on things in the past and their interest and their credit scores are not great, but they have homeownership at this point and if so they if they have a down payment, and they want to own a home, we can get them into a home for no more than they would pay to rent a home in that neighborhood and three to five years, the goal for them is to fix things in their life and be able to refinance out at a lower rate and move on forever and then. So we're typically an average deal for us might be, you know, we buy it for 50. The ARV is 100, we put 20 into it. So now we're into it for 70 and we sell it for 85, right, we're still a little undervalued. So they're getting some instant equity, they have home ownership but when they go to refi in three, five years, we're getting a $15,000 check or whatever it is at that point, right. So in there's no calls from tenants, and there's no vacancies and none of that stuff. So that that's the that's the allure for US interest…   Michael: Interesting, I mean, isn't that similar, like rent to own or is it different?   Mike: It's similar, but they're not renting, right? a rent to own it, depending on how it's structured. Obviously, you can have some portion of the rent go toward whatever, but you still own the house, right? You still own the house as the person who's having that rent down. We don't own the house, necessarily. We own it, just the way the bank owns your house when you have a mortgage, right. But we're never getting calls from the city for law for Tallgrass. We're not getting calls about the maintenance issues or whatever. We don't have to worry that they didn't, you know, they left and they didn't finish their contract like it's a mortgage and if they if they don't pay their if they don't pay their mortgage, then we will foreclose we can foreclose on them.   Michael: Yep, interesting and so that like when you place these tenants into the home, there's a recorded sale that happens and so you're literally just playing bank, interesting…   Mike: Yep, just playing bank. Yeah, because we both had rentals, both of us and like I said, rental they're awesome but there's just a different level of responsibility for us playing the bank than then playing landlord and that's just what we're choosing to do. We both of us have rentals and it's, it's awesome. I rentals have been fantastic for me. It's just, it's not what we're doing now and we were just like, gonna get rid of the rentals and just wholesale. That's it but then this model presented itself, somebody we mutually knew in the industry is kind of like, hey, I'm doing this and they're doing it in Texas and it works down there too. I don't know that it would work in Los Angeles or San Diego or I don't know that it would probably not as well because the house prices but if you have house prices that you can get a house in a nice in these are like safe blue county collar neighborhoods, we're not talking about like war zones, but by any means I wouldn't buy a house there but in a nice blue collar brick ranch neighborhood, if you can get a house between 50 and 150,000. It could work when they start getting up to a half a quarter of a million, it just doesn't work as well anymore. You can't, the numbers don't work out.   Michael: Okay, okay. Good to know and just out of curiosity, I mean, how many folks end up refinancing out of your mortgage and then truly then own the house versus how many what percentage defaults or you have to go through that?   Mike: Really good question. We started doing this, like, eight months ago. So okay, I don't know, we don't have a loop. Yeah, but the friend of ours who kind of introduced this concept to us. He said about half of them refi out. Very few defaults, very few defaults because it's home, you know, people it's their home, right? They don't default, like they do necessarily on a lease, because it's not as transient. So according to him very few defaults. But we also screen people pretty well to like you would with a rental, like we're not just letting anybody in there, right? If they clearly have a pattern of defaulting on everything they've ever done, we could expect to default to we're not special but people have certain circumstances where their credit cut takes a pretty good hit but it's you know, it's something that is understandable, or it has a you know, story behind it. That makes sense. So I'm not expecting a lot of defaults, how many people will refi out? You know, our plan is to be a little bit more proactive with helping them with credit repair right now, we're not really getting involved in that but I suspect as we do get more involved with helping with that, that the number of people who actually refi out will probably go up, you know, so I don't really know right now how that's gonna go down. We'll see, we'll see how that goes. I don't know. Sure…   Michael: Okay, we'll have to have you back in 24 months to see. See what that looks like…   Mike: For sure, for sure.   Michael: Awesome. Well, Mike, let's shift gears here just for a moment and talk about wholesaling because, I mean, like you were mentioning a bit ago, it's no surprise that deals are a bit tougher to come by today. I think in the industry as a whole it's probably no surprise that wholesalers don't have the best reputation out there. Yeah, so I mean, I have I'm going to share kind of my thoughts on I think what makes you different but curious to get your thoughts and share with our listeners, me what makes you different as a wholesaling company and then what are some things that people can do to protect themselves from the not so great actors out there who are wholesalers?   Mike: The problem with wholesaling and the reason why it can get a bad name Is it is it is advertised and when I say advertised, I mean if you go out on the internet and say how do you become a wholesaler? Should I be a wholesaler? It's billed to people as this no money, no experience and that's how you get started in the industry…   Michael: And no risk…   Mike: Yeah, no risk. You get this, like, this mentality of this person who thinks they're just gonna roll out of bed open up their eyes, and money's gonna pour through the windows of their house if they're a wholesaler and it's not true, obviously. So you asked me what I do that makes me different. Here's what anyone can do to make their business different, but it doesn't it's not, you know, just for wholesaling but you have to run it like a business and a lot of wholesalers are very transactional in their thinking. They only care about the cheque they're getting next they don't care about future checks. They don't care about consistency, or predictability of their of their business and so they treat wholesaling, like this little dirty act they have to do before the real serious business comes along and in the reason why a lot of wholesalers get this bad reputation also is because there's something called daisy chaining in real estate, and most real, most wholesalers I'm doing air quotes if you guys aren't watching.   The reason most wholesalers or a lot of wholesalers have this reputation is they're not really wholesalers as much as they are what's called daisy chains and a daisy chain er is okay I'm a wholesaler I market to sellers I go into a seller's home. I create rapport and trust and in understanding of what's happening. I get a purchase agreement with them and I take that purchase agreement and I market it out to the other real estate investors in my community and some person who sees this takes the pictures, they take the text, and they mark up the price and then they send it out to a bunch of people, a lot of times a lot of the same people at a higher price and it's like called them and so you call them and you say, hey, I'll take it because you didn't see my marketing, you saw their marketing for whatever reason, you say, I'll take it. They don't even know me and I don't know them. But they're representing that they have this this deal under contract and meanwhile, I'm working with my buyers and I come to an agreement with a buyer and then this person calls me who's was also marketing up my contract and says, hey, I want to buy that house and I go, I've already sold it. Well, he's already told his buyer that they can have it for that price. But I already sold it because I have it under contract. Now he has to go back to the buyer and say, sorry, we have to back out of this deal, right and so it looks like a wholesaler is a really bad business person, bad guy, dishonest, whatever, misrepresenting himself, but he never had the deal and so that happens that's runs rampant. That's a real epidemic in the wholesaling world. So you also asked me, How do you tell the difference or how do you how do you avoid the bad ones?   The first question is that because I get people who send me deals, and frankly, I'll look at them if some other wholesaler finds a deal, and they were they offer it out at a price that my company might be able to land contract that house and we want to buy it, we'll do it. So the first question I asked them is, do you have this under contract yourself or are you representing somebody else and a lot of times they do and sometimes they don't? Sometimes they say they do and I say good. Then before I would buy this, I would need to see the agreement between you and the seller, your company in the seller, what's the name of your company, and I verify this stuff because if they don't have it under contract, I don't even care if they say, yeah, it's not me. But the guy who has under contracts a good friend of mine, and he gave me exclusive rights. I want to talk to who has entered a contract always deal with the person who has an order contract with the seller, with the seller, right? All right, that's, that's key. That's huge and we don't, we don't allow daisy chaining, we don't ever allow people to market out our deals, we only market them out and so all of our buyers know, we've told them several times, if someone if we're marketing a house and you see the same house being marketed by someone else, believe me when I tell you, they're not authorized to do that, they will never be able to sell it to you. So and as a wholesaler, I always make sure that I'm dealing with the end buyer, not a middle person, right? So if someone comes to us, though, and says, hey, I've got a buyer, and they're gonna, they'll pay you this much money and it makes sense for us. We'll give them a check like, well, we'll compensate them for bringing that buyer. But we're not going to we're not going to be what's going to be all transparent, we're going to let everyone know what's happening and so transparency in the wholesale process is important between us as the wholesalers and the buyers total transparency. Now, I'll say something that your audience may not love. There is not total transparency between us and the seller and does that mean that we're lying to them? No, it's not it doesn't. But here's what I always tell people to illustrate my point. Nobody loves or trusts me more than my mother, nobody.   My mom has heard me explain what I do as a wholesaler 1000 times and she has been all ears like she's could not be more dialed in to hurts her baby boy and what he does, and she's so proud and so happy and she's listening intently. But if you call my mom and put her on the air right now and said, Could you please explain to me what your son does? How he does it? She wouldn't know she might even tell you. I'm a realtor. She just doesn't know. It doesn't make sense to her. It's just it's too obscure. Right? So when we're in a seller's home, we don't say to them, Mr. Mrs. Seller, I know you're under a lot of duress. You have to move maybe there was a death or divorce or whatever there was right? Something happened in your life is spiraling. Here's the deal. I want to sign a contract, saying that I'm gonna buy your house, but I'm not buying it. I don't even know who's gonna buy it. I don't know where the money is coming from. I don't know who's gonna show up at closing. I'm not even sure if I'm gonna be able to close. Can we sign the deal now? It nobody would say yes. Okay and that's an a character characterization of what a wholesaler does. But on some level, it's facetious, but it's sort of true, right? I'm signing a contract. I don't exactly know who's going to buy it. In my case as a wholesaler and what I think makes what I do ethical is I have the financial backing to buy any house that I put under contract. If worst comes to worst, I can buy it right and that's not that doesn't come in the beginning. new investors don't always have that luxury. But what you can do as an investor and where you can be transparent and you should be transparent is do not sign a contract and imply or explicitly state that you will for sure be closing on the house without exception, you can't say that in most cases.   So what I say is some version of this, Mister seller, when I came here I was prepared to offer you $100,000 for your house, that was the highest number that I was authorized to offer you, you cannot go below 110,000 That is your lowest, that's the number. That's the gap, right… You want 110 minimum, and I was maximum allowed to offer you 100 but here's what I would like to suggest. Let's sign the contract for 110. Okay, I'm gonna go back to my investors and people who make decisions and help me buy these houses and I am going to see if there is interest at that price, I anticipate that there is not going to be but there very well could be but at the very least, if you can give me two weeks to talk to my investors and go to bat for you, and try to make them understand now that I'm here, I see this house is very nice. I didn't know is this nice but it is a very nice house. I think I can get this done but give me two weeks and I will come back to you in two weeks or less by the way and I'll tell you one of two things either, we can't pay 110 and so we need to rip this contract up and just part as friends, because we all knew that that was a possibility or we're going to move forward at this price and everything is good and I guarantee you will close. Okay, can if you couldn't give me two weeks. Now, if you don't want to do that, I totally get it. If you go to a realtor, they're going to want you to sign it like a three month contract where they get three months to market your house. I just want two weeks and if it takes me two days, I'll come back in two days. Either way, I'll be totally honest with you and it will be up to you what we do from that point we rip up the contract or not. It's totally up to you. Is that? Is that something that you can live with just for a week or two and nine times out of 10? They say yes. Now, when I when I go out now I am going out to my buyers and I'm saying hey, I got this this opportunity who's interested, right? If I get crickets and it's like, nope, nope, nope.   Then usually we'll try to figure out what our buyers would pay, right? That's the next question. Okay, you don't want it? It's fine. But what would you pay for this and we start getting that feedback and so we can go back to the seller and say, listen, I was right. 100,000 is the best we can do but I'm totally willing to rip up this contract because you want 110 or we can talk about a reduction or, or the or we get buyers that are like, yeah, I'll do it for that price. That's great, right and it's a little better than we thought and we go back and tell the seller, hey, if we go out to our buyers, and we find out that 110 is a really good price for us still, we'll still make the money we thought we were going to make we always go back and say we'll honor the 110 because I think that's the question I would be thinking in my mind if I'm listening to this interview? Well, what happens if they get really great offers? Do they still always go back and try to get that lower number? No, we don't. If we can make what we thought we would make or pretty close to it, we'll pay a higher price, right? We're, my goal here is to get to heaven not to make an extra $5,000, right. So I'm not trying to be a bad guy. But the key is the ethical wholesalers versus not the ethical ones, prepare the seller for the potential for a renegotiate or a cancellation up front and so when we go back, how often are they irate because we come back and say, hey, we can't do the 110. Almost never, because we very thoroughly explain what we're doing and we prepare them that we may have to come back and discuss the reduction or cancellation. The people honestly, they just want clarity.   They just want to know what's going to happen. What people get mad about are surprises. So when you say oh, great 110 done deal. I can't wait to close with you in a few weeks. This is so exciting and then you come back in three days and say we have to cancel the contract. They're mad 100% of the time, because they weren't you're not clear on what was happening. You surprise them with bad news and nobody likes being surprised with bad news but when you come back and say, hey, remember when we talked a week ago and I said this? Well, we can't do the 110. You know, we tried nine times out of 10 they're totally fine and honestly, seven times out of 10. They say well, what can you do and then we have that discussion. So, man, it's all about setting expectations.   Michael: Yes, 1000 times yes, as funny as you were going through kind of your pitch. I was like, Oh yeah, like that makes sense. That's such a different, like feeling that I got as you were giving as you were giving that Spiel than what I was expecting or than what I've experienced with wholesaler. So I mean, kudos to you and your team. It's clearly it's clearly working for you, so keep up keep up the great work.   Mike: Well, honestly, we have gotten deals, where and I know that sounds cliche, but I swear to you, this happens all the time and it we only know that when people tell us right so my guess is it happens more than we even know but we get deals where they got a higher offer from another wholesaler. But because we come in and we are professional, and we do address their concerns, but we wholesaling is not really about buying houses. It's about solving problems and again, sounds cliche, totally true. You can figure out what their pain point is and you can focus on that the sale of the house is secondary and I know that because we've had sellers tell us listen, we had somebody come along and offer us more than you guys, but we're not going to sell to them, we're going to sell to you because we believe you, we believe what you're saying and we like working with you. So professionalism matters and just to illustrate that point, underline it real quickly, one of our reps went into a house one time, and he was talking to a seller and they were going through the whole thing, it was like halfway through the meeting, and then knock on the door, and the seller says, oh, I forgot.   There's another investor or another, whatever. They call them coming in another person who wants to look at my house and my rep was like, oh, okay, and he kind of stood aside and a guy came in, my rep looked outside, and he saw the guy was driving a Mercedes, nothing wrong with that Mercedes fine but he left it running. He was wearing a suit, he came into the house, briefly said hello, and started walking around, pointing out all the flaws in the house, this is all this has to be replaced. That's no good. Nobody wants that and he shot a number at her with what he would pay and said, think about it and he got in his car and left. Like, everything that guy said, that wasn't verbal screamed, you are not that important to me. I'm way too big of a deal for you and I don't even have time to turn my car off. That's how little I think about what is your situation. I'm just telling you what I need and what I want and what I'll give you and I'm out of here, right and understandably, the seller was floored. She's like, that was the rudest thing I've ever seen, like, that was awful. I feel so like, offended by that. Yeah and of course, my rep was like, yeah, I would be offended too, right. Like, I agree with you. They're horrible. We're great. Let's get back to talking about how great we are. So it matters, like paying attention to their pain points, and not being all about the number. If you start talking about price right off the bat, you can almost guarantee you're not gonna buy the house. Yeah, if you start by listening, and addressing their problems, and let the sale be last. It'll work out for you much, much better.   Michael: I love it, I love it, I love it. Mike, we could go on, I think probably for days talking about this stuff but I want to be very respectful of your time and get you out here. For anyone that wants to learn more about you, your processes your business, where's the best place for them to do that?   Mike: Yeah, thank you for that by the way, I appreciate it. The best place to get a hold of me would be at my on my website, https://www.mikesimmons.com/ . If you go on mikesimmons.com, you can find anything about me and also my podcasts. I have a podcast called just out real estate. You can find the link to that on my on my website as well.   Michael: Right on…   Mike: Which you were on right, you were my guest.   Michael: We had a lot of fun.   Mike: Yeah, we did.   Michael: Well, Mike, thank you again for coming on and sharing so much wisdom with our listeners really appreciate it and I'm sure we'll chat soon, man. I look forward to it.   Mike: Absolutely. Thank you for having me. It was a pleasure.   Michael: Likewise, talk soon.   All right, everyone. That was our show a big thank you to Mike for coming on. Super, super insightful stuff. I learned a ton about the wholesaling business and wholesalers in general, and some really great questions that we as investors can be asking wholesalers to protect ourselves from the downside. So as always, if you liked the episode, feel free to leave us a rating or review wherever it is you get your episodes, and we look forward to seeing the next one. Happy investing…

Brandon Schwab is based in Chicago where he specializes in boutique assisted living. Brandon who is, founder, and CEO of Shepherd Premier Senior Living and Boutique Senior Living Fund had experienced first-hand the deficient care of his grandfather at a large, industrial-type senior living facility, he vowed to make improvements in the industry by starting his own senior living company that provides better, quality care to the elderly. It seems that parts of the US are significantly under-served with this class of product. To learn more or to connect with Brandon tune in to today's podcast and you can set up a time to speak with him directly. Brandon talks about his unique business model of syndicating small senior living assets. Episode Link: https://boutiqueseniorlivingfund.com/ wwww.shepherdpremierseriorliving.com www.brandonschwab.com   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Brandon Schwab, who is going to be talking to us about how he's turning the senior living facility industry upside down. So let's get into it…   Brandon Schwab, what's going on, man? Thanks so much for taking the time to hang out with me today. I appreciate you coming on.   Brandon: Hey, man, this year is awesome, man. Thank you for having me.   Michael: Oh, of course and I think we're gonna have a lot of fun today, talking about senior living, which is I don't think we've ever covered this topic on the show before. So I'm super excited.   Brandon: Never…?   Michael: I don't think ever I don't think ever and shame. I know, I know, I know. Shame on us, that's our bad but give us the quick and dirty. We're gonna get into senior living in just a minute. Give us we can do it, who you are, where do you come from and what is it that you're doing in real estate today?   Brandon: Down and dirty… I've been in Crystal Lake Illinois. For 35 years, I am 40. I've got two kids I got in real estate in 2010. But back before that, I actually opened up our own company at the age of about 15 years old. I did that for 14 years, until I figured out quickly that I didn't actually own anything. I thought I owned something the whole time. But I found out at the end, I didn't actually own any assets. So therefore, I  didn't actually have anything to own to actually have up for sale. So I got into this industry in 2010. After I got crushed after 2008 happened. I at the age of 15. I was cleaning cars in RVs for 14 years and I thought I was crushing it doing there. I was taking home 200 220,000 per year but I was probably working 7080 hours per week. So like wholesaling back in 2010. Because I was like dude, I got paid like $200 for each car and probably about 500 for each RV. So like wholesaling in our first deal was like $1,000 I was like, do you know that would take me like 40 hours just to like, even come close to that and I said I have to get into that business. So that's it, man, it's awesome. Fast forward to today I am changing the industry for how the elderly are taking care of totally upside down.   Michael: That's wait. So you're putting elders on their head? I don't think is that is that good for them?   Brandon: We obtained we are changing the whole and we're changing the whole industry of how everyone thinks of it because typically, if you think of the older industry, right? You think of 100 to 200 type with a ton of elderly in there, right? Tons of them, right and they typically have a pretty terrible odor and the odor isn't very good. It's the odor because people don't get any help and then there's also the atmosphere of everyone asking for help because the average caregiver has to care for 20 to 30 people. I don't know on you, but we are in the top country in this whole entire and if that's how we care for the elderly, I feel like we didn't do things properly and they have to be totally turned upside down because how they're currently doing it isn't able to operate. I had a thing happen in our family back in 2004 where there was a person in our family who was 85 who ended up in a place for 200 beds and we pulled the pull cord to have people come in there to help them and it took them 10 minutes 15 minutes by 20 minutes like I'm getting like pretty irritated by 25 minutes like I just lose my shit and I go out to get a them to help them and I can't say I handled it all that well because I kind of exploded but like that's how I was first exposed and it turns out that's actually common to how the industry is able to operate and I said that's terrible. I hate this industry, hate it, hate it hate it.   They bought 10 years after that I was down in Florida and I got exposed to a five a home that had five people in it and I was like what is this? You know at the time I had 23 homes in our total I began build In our portfolio in 2012, and by the end of 12, I had 23 homes and I had, I thought I kind of had everything figured out. Well, at the end of 14, I'm in this house down in Florida and I'm doing each one of these like arms kind of crossed, because I'm just looking at the place and I go, What is this? I haven't ever seen a home before that is it was probably a 2800 foot house. There was houses on each side, probably 10 or 12 feet from the house and I was just like, What is this because typically as I would go down to Florida, Kelly's dad would play his piano in the old folks home 328 times per year for 35 bucks and I hated going because it was typically in these huge in the elderly in the odor was just terrible and I was just like, if we can get out of that, is there anything that I can do that I don't have to actually, and I would offer to like cook to clean all of that just so I didn't have to go? Thank God, I didn't I didn't have any option because I was ill put this house and I was like, What is this? This is cool. It's it didn't have any odor. It had this awesome atmosphere and I was just like, how have I been in?   How have I been investing in assets and I don't have any clue what this is and I asked the girl in charge, and I said, hey, how much do these people pay to be here and I threw out a figure of like 1500 or $2,000 in this girl did this hurt? Like her eyes came down here and like this girl's answer was like, and just kind of kept on walking and I was like, Kelly, what the hell was that answer? She didn't even answer me. So I ended up calling her and the girl goes, Brandon, I am sorry, I thought that you were only kidding because they begin at $5,200 a month, what times five people I'm like, that's $26,000 and every home that I had all 23 Our highest was like $2,200 per month and our average was like 18 and I said holy crap that one house with five people in it was outperforming every house that I had two times each month. And I was like, I'm in the I have to get into that business and by the time I was able to come home, I found a house in a town of 832 people and it was the house was 4880 feet on three acres. So like we bought it for 250 and put $550,000 into it right over the top. I got this house full by February of 17 and we were gross and 55,000 of income within a cost of the expenses of like 30 to 32,000 a month. So this house was jam on month, one month, one house, we were changing the industry to and offered this cool option that people have never heard of.   Michael: So you're netting like 20 grand a month on this place.   Brandon: Per house, yes and I have homes that are 1015 and 20 each home. So that's the that's the entry level for us, is 10, so…   Michael: I mean, okay, I've like speeches, I have so many questions. So I've got to imagine caring for the elderly. This is a very medically intensive, medically heavy industry and so talk to us a little bit about how do you how do you get into this industry because I think there's so many barriers to medical and then care and I could go on but tell us how you how you got started.   Brandon: So when I got going, I had everything in the to open up the house, right, I was able to open it. I even got the first two or three people in there, right and when I quickly got past like two or three people, I quickly figured out that I didn't really have the experience to operate them, right. So I was doing what I was trying to do to get the house full was I was calling on churches, in particularly wanting to talk to the head of each church. Now, I found out quickly that churches are hard to call on because they don't ever answer and they don't tend to call you back but I finally got one and I called in I was talking to the church pastor and honestly, I think he felt terrible for me because he's like, Brandon, you aren't so good at this like this is this isn't going to be your thing, right? So like he goes Brandon, hi god, their closest friend was in health care for 38 years. She just retired in in. She was getting kind of anxious to like go in to do things. So they introduced me and she was in health care industry for 38 years I ended up taking You're out to eat every Tuesday for about six months and I finally got her on our team, I got her to invest, but I had her in charge of operations and that was back in 2015. So I basically was able to open up homes, but I quickly figured out that I needed a team of experts to actually operate them. So after I had her in, it was in 2015, I kind of had her handle the ops and I focus on opening up homes.   Michael: That is wild. So at the beginning, before you brought her up, where I mean, were you there at the home, cooking, cleaning, doing all that kind of stuff yourself?   Brandon: No, I only had to go there when people didn't come in. So there was a handful of times where a person called in, and I had to go in there. That wasn't very fun and I quickly figured out I need to have things in place that that isn't going to ever happen over because I found out quickly that I am not very good when it comes to cleaning and taking care of people I quickly said, you know, I had to get out early. So I found people, I did have to cover a handful of shifts and I did call in for help because there were some things I just couldn't do.   Michael: I can imagine, I can imagine. So when you're looking at properties, I mean, this first property, what about it kind of jumped out at you and said, Hey, this, this is a good candidate or a good prospect to purchase, you know, for this type of business.   Brandon: So when I was down in Florida, I saw a five bed house in the five bed house was great. But the five bed house wasn't. It was geared for like an owner operator, a person that was in a health care field and I quickly figured out that that wasn't going to be us that I couldn't do that personally. So I decided to exercise. So I was looking for a first floor house, it was like 5000 feet, first floor 5000 feet. That's hard to find. So when I came back home, I thought that they'd be everywhere because down in Florida, there's 1800 of these homes. California has 2800 out there close to you, I think Arizona has 3000, Texas has 15,000 back by us. There's 55 by five, so I said…   Michael: And when you say when you say these homes, you mean like single family homes in neighborhoods that are being used for senior care facilities.   Brandon: So I am talking about homes that are caring for the elderly under 10 people. It is under 15 people per home.   Michael: Okay, All right. So you had 55 in your market…?   Brandon: 55 not in and there's 18 in all of Florida, and there was only 55 here, right and I said, that's bingo. Perfect I'm in, so that's how I first jumped in but a thing a thing that happened is when I first got in, there wasn't a ton of other people out there doing this. So I had to kind of go teach people this concept. So the healthcare part was definitely challenging but the houses that I was trying to find where four to 5000 feet, first floor only our first house, it was on three acres. It was a financial planner that I purchased that bought our debt built in office on to his house. So I had to open things up, I ended up putting 550,000 into the first house. So I had four private bedrooms, and I had three bedrooms for two people each. So for privates, and then I had three for two. So I had a total of 10. Did I go over, did I go overboard? Absolutely but I feel like if you're going to do anything, you have to do it how it ought to and I put three ADA A's on the inside for people to go to the psych bathroom, I only had to have only one and I had 380 access points to get into the house and out of the house and we just did everything over the top. So that's how I first got in and then beyond that house, it was harder to find that type of house over. So fast forward to today I've got five homes up and operating. I got two homes opening up in quarter three this year. And then in 2000 are in I also have 7.2 acres of land that I bought before COVID that I was going to put our own homes on.   Michael: This is incredible. So what is the financing look like for these homes? I mean, can you go to a bank and say hey, I want the purchase. I want to purchase it at 20 and I want you to give me a line of credit for the construction for the rehab. I mean who's financing this type of stuff…   Brandon: I had a chance, dude when I went in there to talk to these guys, they thought I had like, they couldn't get it. These guys are used to like, easy, typical type deals, when I told them that, that I was going to 10 people each paying 5000 to 5500. Each month, their heads literally exploded. They're like, Hey, man, why don't you come back after you do your first house? Then I'll talk to you and I was able to do that and they're like, hey, why don't you come back when you have two houses and then at that, at that part, I am like, you know, I don't think I'm going to actually go ask him for anything anymore. But like, that's how it happens. So a thing that I do for financing is I actually brought in private capital, from investors on a per L for each home and that's, that is how we did, I had to offer some pretty high IRR hours. But when you're first getting things going, that is your only option and a thing that I found that I was really good at is when I was buying properties, I was buying like oddball type properties, not the typical like three to 2200.   So I was buying houses that were on properties that the typical family at the time weren't trying to buy, right. So I was buying houses that were on the app on the MLS for 200 days, 400 days, 500 days and what I would do is I would give them an offer for them to carry back financing at the full asking price. Or I would give them an offer for cash but the cash offer was like so like 50% and a lot of times I was just using that cash offer to help prop up the other offer but I've had a handful of times where when I was putting in those two offers, they would take the other one. So I bought one house off the MLS one time that was on for 2.4 million. I bought that for 750 cash and other time I bought one in Connecticut that was on the MLS for 2.1 million. I bought that one for 700,000.   Michael: Okay, you are not kidding, those cash offers 30, that's incredible a budget you're solving for someone's like, that's…   Brandon: Yeah, those are offers that as I was able to have them in I thought no ways anyone can ever take this off or like they are going to be like, click just kiss but they took him because our other offer was 1.8 million owner carry back financing and they just didn't take but that was probably only 30% of our upfront portfolio. The other ones, I've had them take the owner offer carrying back financing. So that so that is how we did hazing.   Michael: And then you bring in investor capital to do the rehab, whatever upgrades you need. Yep, amazing.   Brandon: Yes, sir.   Michael: So like, when you're looking at properties, there's got to be at Imagine zoning limitations or requirements or local licensures that you need to get what, like, what should people be on the lookout for or how should someone be thinking about those?   Brandon: Well, anyone that's thinking of getting into this themselves and having people operate it themselves, I would tell you don't do it. It is something that I casually got into it thinking that I could just figure it out and it's been one of the most challenging things I've done, where it's taken me eight years, open up five houses and it's challenging. But as I would look for houses, I would look for houses in an area where the household income, the average was over 80,000 and then one of the things that I would do is I would go to the population and I would look for a population of in each town over 65 years of age, I would look for like 10 to 12% plus, anything that was up over hire, that was awesome. I did buy the 7.2 acres of land, all of our first five homes, they're in towns where it's like, you know, 10 to 20 or 10 to 18% over the age right. And then the town that I bought this dirt in for 7.2 acres, we paid 220,000 per acre but it is located directly next to a Dell property.   That's that is 5500 homes that are all 55 plus. So our percentage of over 65 in this town of 26,000 people is 32% Wow. Let's go. All of us purchase that. Before COVID. We were finishing that we got through entitlements, we were going to build six homes, 20 beds each and in office, it was gonna cost us $15.5 million. We had the all of that done, we even had a closing in place for a family office down in Florida, actually to give us a 10 $10.86 million at 12% and they were going to close March 13 2020. We were going to begin pushing dirt April 1, 2020. If you think back to the time, a little COVID pandemic entered into this plan, and the family office were two guys that were probably in their 70s or 80s themselves that earned a bulk of their family office capital from offices and they were in the class a office industry, right and they were trying to take cash out of that inputted into any other asset class and they ended up pulling out two days before closing. Yeah, because they were having tenants that GSA weren't paying. So it wasn't ideal, the overall timing of it, but our things have changed where we aren't building today because cost the build is just too high, where we are holding off until that cost comes back down and we are doing other things today that that fit what is going on.   Michael: Okay, you should have told those guys look, you'll get a free room and board. Just give me the money. I'll build you a spot.   Brandon: I was trying. It just wasn't great timing. I was like, what COVID? Come on. That's fine. It was just too early for us to have any clue. So yeah, unfortunately, they passed but I'm gearing things today now to try to build those connections up with those guys, because a ton of those guys have capital galore. So much dry powder that's just sitting, where if they can find an asset class that is out there that can help the elderly that can help give them awesome IRR that's going to top inflation and also help have a tangible asset. That's what they are looking for today. I think the days where people earn in 200% 300% Kryptos those days are kind of over for some time now, where people are looking for tangible assets today and I have this, so…   Michael: That is amazing and so these houses, I would imagine they serve three meals a day, and they've got all the medical care and there's like it's like a proper business like you would expect to see if you went to a traditional elder care facility, you would have all those same amenities and sounds like and then more, right…   Brandon: So a thing that's different for us for a for every home that has 10 Total people in it, I have a caregiver to every five to eight, five to eight total people compared to the other. The other competition has a caregiver every 1520 to 30 people. That's the thing that causes the old the overall odor. So in a home for 10 total people, I've got two caregivers in there from 7am till 10pm and then I've got a RN that comes in in the am and in the evening just to have eyes on everybody and then I have… that comes each week or as he has to write. So I offer everything in a home that is very cozy that other places have in 100 to 200 type building. Now, with that being said, it's actually harder for us to be as efficient as everyone else. As I only have 458 homes, I actually need like 1020 3040 80 homes to actually have things be efficient. So I'll tell you 10 Plus, under 10, it's hard to be efficient and that's a thing that keeps other people from being able to get into this overall industry or if they do get in there.   They're the owner operator that owns a home or to homes but they're in it every day going 80 hours per week probably profiting 250 to 400,000 per year, but they're busy and I said you know I can't do that I'm going to operate a company that I can expand, to have time to go do other things. You know, I've our oldest is 14 years old and I openness that I could have time to coach him, right and I have been able to coach him playing baseball just since he was eight years old and that's only possible because everything here so time free is…   Michael: That's amazing, Brandon. I think my last question for you. I mean, I have a million more, let's be honest but we gotta keep this within time. How do you insure the thing, is it like us traditional long term rental? Is it insured like a medical office? I mean, what does that look like?   Brandon: Yeah, so the insurance is going to, you're going to have insurance on the overall asset but then you also have to have extra, the extra insurance for operating it for E and O for if anything is able to happen, if anyone's able to get hurt all of that. That's typically about $800 Each house each month but a thing for us, though, is because I haven't had any issues. Over the past eight years, we haven't had any, any type claims, whereas you're in a home with only 10 people, if you offer on if you offer awesome care, they don't tend to have any issues and that's what's awesome on this because typically at the other places for 100 to 200. They have a they've got a caregiver to every 20 to 30 people because the owners are trying to get it to earn extra money. The only avenue to do that is either to push up your income or to cut your expenses. That's the only thing to change the actual NOI. So what they typically do is they cut the care giver item, which is going to an increase the NOI. However, when people are able to have issues and they are able to pass, then you have their families, a attorneys after you and they're pissed, telling everyone how terrible you are. I always feel that it is better to do things how they ought to be done upfront, even if it's harder, because everything that I'm able to do is harder. Like this isn't easy by any means I would tell you, it takes you getting to like home tend to like really cover the overhead. The overhead I found to truly operate this properly, is over 500,000 per year and in order to pay for that you need enough houses paying towards that, to don't have each house covered in too much expenses that they just can't cover, so…   Michael: That makes total sense. Big numbers…   Brandon: Big numbers.   Michael: Yeah, awesome Brandon, this was so much fun, man. If people want to learn more about you reach out with additional questions. What's the best way for them to do that?   Brandon: They can they can call me or text me. So on my phone, you can call me at 815-790-2330 or else you can call our office of 847-380-8624, yes, 847-380-8624.   Michael: Amazing and do you have a website that people can check out as well?   Brandon: I do for our fund but our fund isn't for everyone or funds only for a for investors that are a core they are qualified purchasers. So it's a tear a BB it's a 506 C they can check that out their shepherd, our operating company, I can get you the page to put in there. So it is well just for anyone to put eyeballs on our actual homes or our fund is https://boutiqueseniorlivingfund.com/   Michael: Awesome.   Brandon: That is that as well, man. Thanks for taking time to talk with us today, man. This has been awesome!   Michael: It has been a pleasure, I am sure we'll be in touch soon and take care.   Okay, everyone, that was our show a big thank you to Brandon for coming on super, super interesting topic that like I showed at the beginning of the show. I don't think we've ever had someone on the show talking about this topic, so really interesting. Definitely go check out Brandon's fund, and it's an interesting asset class. See where it goes from here. As always, thanks so much for watching or listening, and we look forward to seeing the next one. Happy investing…

Dana Dunford is the CEO of Hemlane Property Management and a real estate investor. In today's episode we discuss market conditions, interest rates, what is happening in the stock market, and what the current moment means for real estate investors. If you are wondering if it is the right time to purchase an investment property, you will want to listen to this episode. Links: Hemlane.com --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Dana Dunford, co founder and CEO of Hemlane Property Management. And today Dana is gonna be talking to us about the state of the economy and some things that investors should be aware of and thinking about as we move forward in today's market. So let's get into it.   Dana Dunford, welcome back again to The Remote Real Estate Investor. Thanks for coming on and hanging out with me.   Dana: Great. Thanks for having me. Again, Michael.   Michael: Oh, my gosh, it is such a pleasure. You are great friend of the pod. Great friend of Roofstock. For those who might not be familiar with you give us the Quick, quick and dirty background of who you are. And background on yourself.   Dana: Yeah, so I'm Dana Dunford. I'm here in San Francisco. So just right across the bridge from rootstock. I have been in technology for gosh, now we're going on 18 years. So I'm a tech veteran, which we'll be talking about tonight, today, which I'm excited about. And on top of that, I'm in property management. So we're a tech platform for property management, and partner of Roofstock's. And we've seen what has been going on since q1, the market softening things changing in technology. So I think this is going to be a great call, because both Roofstock and Hemlane have seen it firsthand. And hopefully this gives some insight into what, what the upcoming year is going to look like for all real estate investors out there.   Michael: Totally. And just to give some people, some additional color, you are CEO, co founder of Hemlane, and you just did your series A, what was it q3 of 2021 or q4 of 2021?   Dana: Q4, so we raised at the perfect timing, those who are not in venture and the tech world of Silicon Valley. We couldn't have timed it better. You know, right now, and we'll talk about this today. Right now, the market is really softening. There's just less capital going into startups. We can't say this was people were already predicting this. So back in q3, and q4 venture capitalists were already saying, Ooh, there's a lot of money pouring into this valuations are really high. And some had already started pulling back. But it wasn't until what happened in the public markets, where you know, trillions of dollars were taken out of these Sass companies, valuations are overall the market cap, that suddenly the venture world that trickled down and people really started to pull back capital. So yeah, we raised back then roofstock, when was your guys's last raise? Because you guys are at a later stage. And so obviously, also impacted by this and quite, potentially, more significantly than us.   Michael: I think we got our term sheet squared away in in q4, as well. So right around that same perfect timing with money getting wired in coming in and in q1.   Dana: Yeah, perfect. So you guys will be able to weather the storm with that what we're going to be talking about soon here.   Michael: Yep, absolutely. I'm thinking so. Okay, so let's talk about how, like, how did we get here, because you're mentioning that trillions of dollars have been essentially taken off the table in terms of market cap. But for those people that aren't familiar with the space that haven't maybe been following along as closely, what like, where are we today? And can you give us some insight and background as to how you think we got here?   Dana: Yeah, so first of all, I believe most people on this podcast today listening are real estate investors. And so all of you hopefully got in when interest rates were super low, just artificially low, right? We never seen interest rates below 3% for so long. And one that was fantastic for real estate, right? You could get a rental properties at afford a higher price because your interest rate is much lower your loan. And then for startups and for companies money was much more free it was much more flowing. What we ended up seeing happen which most people predicted this would happen. But no one knew when or at least I haven't heard of any economists who knew this was going to happen exactly. We're in March, but we started seeing the inflation go through the roof, you know, 8.6%. And it's been consistent where we have seen the inflation rate really, really high.   And so the only way for the Fed to essentially combat that was obviously, to increase interest rates, which we are all seeing now are all seen in our real estate itself, doesn't mean there aren't great deals out there. So Mike, like, do you want us to talk about that, because I still think there's great deals out there that you guys have on the platform, and now could be a really good time to buy. So don't let that taint your decision of whether or not you should go into real estate.   But with that, as you know, when the Fed raises interest rates, consumer spending just goes down, that will probably people will spend less, and also things are more expensive. And so once you have that happen, the stock market's inversely correlated to interest rates. And so once interest rates went up, there was a correction in the stock market. Why it affects us on the private company side so much is Roofstock and Hemlane are both considered growth companies. And what happened was essentially, in the public markets, so any public company, there's basically two different types, there's growth, just like us, companies like Roofstock, that have gone public. And then there are value companies and the value companies are much more stable. They're based on their cash flow. They're typically larger, older companies, and their price is based on their sales. So their price is relatively low relative to sales, in companies like that, or like Bank of America, if you think about it, and RG like gas companies like very stable, steady businesses, where you're not going to see   Michael: Blue chip companies.   Dana: Yeah, your blue chip companies where you're not going to see, you know, 500% growth year over year. But what ends up happening is when the interest rates go up like that, and stocks go down, the ones that get devalued, the most are the growth stage companies. And the growth stage companies are companies like Roofstock, and heavily that are public. And so what we basically saw happen was this huge, huge cut in market cap in the public markets. And so for SAS company software as a service where you go, you pay a subscription every month to use a service, the market cap cap got cut by $1 trillion dollars from November of 2021. Until today, and so what that did was essentially, these companies thought they were worth a lot more.   And you know, some of them, like the stripes of the world, in the snowflakes had these really high revenue multiples, and suddenly, those just deteriorated. And the multiple based of what their valuation is versus their, their revenue went down. And that essentially trickled down to private companies like us as well. And so now when a company goes out to raise capital in q1, q2, primarily, now it's even, it's even worse. And what we're foreseeing in q3 is that you might have had a 10x, revenue multiple, so your valuation, it's 10x, what your revenue is, that's how it used to be.   Now you go out to a venture capitalist, and they're like, great, you're worth 3x, or 5x. So much lower valuation. And so what they're, they're expecting is a lot of down rounds, a lot of startup saying, If I can, let me just hold on to my cash, let me cut my bird, let me try to raise later and better times. And all of this impacts the economy, because it was the public markets that were hit. And now it's also the private companies where we are in Silicon Valley. And I do think this, this trickles a bit to real estate. It's it's a different type of market correction that we saw in 2008. In 2008, it was housing right and the mortgage crisis today, I think this is a lot more like the.com bubble. This is very similar to the.com bubble of these really high tech valuations that need to be corrected. And so when you think about purchasing real estate, I actually think that's why Roofstock is such a fantastic place to go. Because you're getting out of the tech scene, you're going to other markets and purchasing there.   Michael: It's so interesting. But then so I'm curious, we talk so often about in real estate that the price is only a factor, or it's only important if you're doing something with the property if you're buying selling refinancing, because otherwise you're just having a cash flow, and that often is independent of what the value is of the company, or excuse me, the property. So why does that matter? or for companies like the fact that there's the company is now worth less, unless they're trying to do something buy, sell, or refinance or raise, raise, raise capital, like, why does that matter?   Dana: So it doesn't matter for Roofstock. And it doesn't matter for Hemlane, because we just raised, we have enough capital to weather this storm. But imagine a company that raised and they had a, let's just give the case of like the stripes of the world 100x Multiple. And let's just say it's a private company, with 100x, multiple, and now they're going back out, and they're now getting a 10x. Multiple, they could have what we call a down round, where suddenly they are worth less than they were before. And that gives a lot less confidence. One the company itself, right? The amount that you're giving up as a founder, as an employee, as an existing investor, it's a lot more just to get in the same amount of capital you wanted to historically, in so what you're seeing is these companies really, really tighten the ship, and just say, Okay, we're going to stop hiring as many people, we're really going to look at our expenses. And that means there's not more money pouring into, you know, hiring 100 people every week, they're suddenly going back and thinking about who are the strategic hires, we really need? Should we be letting go? You've seen the massive tech layoffs where it's, you know, 20% of the workforce. And now suddenly, they're really tightening their books, because cash is king right? Now, you want to hold on to that cash? Because the last thing you want to do is go out and have a lower valuation.   Michael: Yeah. Okay. Well, that makes sense. And so talk to us a little bit about why this is affecting real estate investors or why real estate investors should even care about this that's going on?   Dana: Yeah. So I always think there's a huge opportunity when there's like the Warren Buffett, quote, right? be fearful when others are greedy and be greedy when others are fearful. I think right now everyone's scared. And there's a lot of real estate investors, like we actually just did a survey at Hemlane, where majority were saying we're not going to purchase in the next 12 months, because interest rates have gone up we should have gotten any year ago. Well, you know, the best time to get into real estate was 10 years ago, and the next best time is today, I think there's going to be a lot of great deals out there. I think that while others are tightening up, other investors are scared, this is a time for you to be really aggressive. I mean, still looking at your pro forma and and follow your numbers. But you'll be able to find some some great deals out there.   Michael: I've heard a lot of sentiment around, you can always change your interest rate, but you can never change your purchase price. So if someone is getting into a deal today, at an interest rate that's a little bit higher than they're comfortable with. But they anticipate interest rates to come down at some point down the road. What are your thoughts there?   Dana: Yeah, you can always refinance. I mean, don't do a deal hoping that interest rates go down, and you can refinance it or fudge the numbers on your spreadsheet. This is why   Michael: I was hoping that's what you were gonna say.   Dana: Yeah, like this is I mean, this is why I'm, I'm more conservative than most in every property purchases had a fixed rate. I don't do adjustable. But I can refinance, right? So I can always refinance. But I want to know what I'm getting into. So when you do your pro forma, do it with whatever the interest rate is now and consider it a huge advantage and just like increased cash flow, if you can refinance in the future, will interest rates go back to this like artificially low rate that we saw over the past five years, maybe not. But I don't think that is a reason not to purchase now. You do your numbers, and you look at it just because you might say property values are really high interest rates are going up, now's not a good time to buy. That's just laziness. Like, honestly, that's just you being lazy and not wanting to do the work.   There's always great deals out there. You just have to do the work, find them look at the numbers and say even with this increased interest rate, it's still a great deal. I'm still cash flowing and I've got a great cap rate, and you can go ahead and purchase. So I don't think of this as the time really to, to change your decisions on real estate. And part of that has to do with I think, you know, some markets will soften. Some markets may remain flat for a while but that doesn't mean that you're not getting the cash flow and having a great investment that by the way, with inflation where it is If it continues, having an asset where the value goes up with inflation, so I still think now's a great time to purchase real estate. And you might be able to get some fantastic deals as other investors are pulling out, you can really, really go in and get those great deals.   Michael; Love it. And Dana, I'm curious if because we've seen prices go through the roof, and interest rates have also gone up significantly, there might be a bit of a lead lag measure until we see prices come down. So in in terms of looking for different markets, I mean, are you targeting markets that are continuing to grow? Are you targeting markets that maybe are seeing some of that softening in terms of pricing?   Dana: So for us, we go where the real estate investors are. So if there's a real estate investor there, right, we're going to do the property management for them. I think when you're when you're thinking about the lag, that is definitely true. I've heard this with other real estate investors, I've seen it myself, where you see a price. And with interest rates up, the seller puts one price out there, because that's what it was two weeks ago. And suddenly, it's not worth that much. It's worth like 10% 20%. Last, but it's actually really good to put yourself into the position of the seller, and of the real estate agent, because you can actually get some really, really good deals off of that.   And what I mean by it is real estate investors have always told historically, have told their buyers in the past couple of years. If your mark, if your property is on market for over two weeks, people might think there's something wrong with that. And so, you know, we're going to ask for offers on X date, right, like X date and two weeks, or maybe we'll do one week, we're going to ask for offers. Well, if they've missed priced the property, you might be able to go in and you don't know this, but you might be the only offer because they priced it way too high, because we priced it from a purchase price from two weeks ago. And now that has suddenly changed like the market changes every two weeks, it really is. And you could go in and get a great deal. And so I think from from that perspective, there are still fantastic deals out there. But you have to be patient. And some of it will be that luck, where you get the right deal, though what else has gone into, and you can go ahead and purchase that.   So if you put yourself in the other shoes, you might see that you also see a lot of people you know why I don't think it's like 2008 and 2009 is people have a lot more equity in their properties because one value values have gone up. And then two, the interest rates were really low, people could afford more put more money in the market was booming. And so what we're seeing is that more people have equity in them. And at some point, it's emotional for someone, they're like, I just want to get rid of this asset, because I'm gonna go buy another one, or I just really want to move out of the city and move somewhere else. And, you know, to them, maybe 20 To 50 to $70,000 is not a lot depending on what it is. But that is a lot to you. And that changes, changes the numbers on your spreadsheet significantly.   And so I mean, with that purchase price, obviously that matters. But just because the price is out on the market for a property doesn't mean that the price is going to sell for. And so it would be a really good time to go out and experiment with that you will know your market better than anyone else, whatever market you're in, because it will take you bidding on like five properties. And maybe people will laugh at you like your first one, you go like 20% under and they laugh at you. But maybe you get lucky on the fifth one, and you'll get a great deal. But yeah, just follow the numbers in your spreadsheet don't have a purchase price, that doesn't make sense and you're not cash flowing. Or don't change the interest rate hoping that it will go down to that to that amount.   Michael: Yeah, that makes total sense. And speaking of spreadsheet numbers, are you seeing a lot of your investor clients that you work with adjusting their expectations around cash on cash returns? Now that prices and interest rates are up?   Dana: So not really I think most investors like most of the savvy ones we work with, we work with his sort of two different types of of customers, those who had properties just handed to them. And they actually never did the analysis like pan downs from parents and things like that. And then others   Michael: Accidental landlords.   Dana: Accidental Yes. And then others who are very strategic real estate investors and what we have found with them as they have the capital and they might not be they might be with inflation to your point Michael being like, Oh, maybe I should just go buy something because the dollar today is worth less On tomorrow, but no, I actually think most real estate investors are still saying, this is the deal that I got, historically, I want to get something like that. And so they're not changing those expectations on cash on cash return, but they might be going somewhere else. So they go to Roofstock, and they say, Okay, I, you know, couldn't find this property, you know, in my backyard, but on Roofstock, they do have the cash on cash return that I that I that I targeting. And so I do think they're not changing their expectations. But they are going out and finding alternative ways to get the numbers they need.   There's one case, Michael, where I find people change their expectations. And it's first time real estate investors to just get their foot in the door. And I'm actually okay with that. I think that there's too many people who, and for anyone who's listening to this, who doesn't have a real estate investment, you kind of sit there and you kind of fantasize about getting one and then you put so much like anxiety into getting your first property. And once you have your first you're like, oh, okay, that's what I got, here's what it is. And it makes it easier, where then you can go and purchase more properties and more properties. And you know, what you're looking for, and you know what the return was, and you have this process set up.   But the first one is really difficult to get into. So I find that those people today are changing their expectations, for certain metrics just to get into the market, before it's too late. Interest rates go up more, or you know, they're kind of kicking themselves that they didn't get in, you know, four years ago, five years ago. So I only think it's first time real estate investors where that's happening. And I'm actually okay with that. Because I think if you can get more people into real estate investing, and more people to just get their foot in the door, you're going to learn so much off of that first property, that then you're going to say, Okay, this was my cap rate for my first property. My next one, I have to at least have that or better and you kind of improve, you know, it's kind of like dating, you never like you don't date someone who's great. And then like the next person is like a downgrade, you kind of have the standard. And you're like, I can only go up from there. It's the same exact thing with real estate investing. So I really think it's only first time homebuyers where that happens are real estate investors for rental properties?   Michael: Yep, I think and I think that makes tons of sense. It's something that I hear all the time. It's Michael, I'm trying to get my first deal done and has to be amazing. And you know, it has to be a Grand Slam? Like? Don't worry about the grand slams, let's practice getting on base first. And then you'll know how to swing for   Dana: Exactly, exactly. And it makes it a lot easier when you have one property in that area. You know your market a bit more, and then you can kind of purchase some more around at.   Michael: Yep. Yeah, I think it makes him think that's totally right. And so Dana, we're kind of at this like crossroads where we're talking about, some investors are pressing pause on their acquisitions. And then this whole other cohort of investors are like, Oh, crap, I gotta get into the market before interest rates go up further before prices go up further. So it does feel like there's this pressure to buy or there's frenzy to buy, on the one hand, and then there's this whole other group, that's again, kind of taking a step back and saying, let's, let's wait and see what happens. How do you square those two?   Dana: Well, to me, I'm like a pretty unemotional real estate investor. And I feel like for anyone, whatever segment you fall into, you still have to go back to the numbers and see what makes sense. And so I mean, is there a right way to go? I think one people who are not going out, and they're using this as an excuse not to purchase properties, or just being lazy, honestly. And for those who are out there saying, I gotta get in and get my next deal. I think they're almost too emotional. Where they might go in and change the numbers to your point of saying, like, oh, it's not, you know, my last deal was was better than this, but I just need to get my foot in the door. Maybe that's not the right approach to have, it's, Hey, there's gonna be a deal out there. I might have to be a little bit more patient during this the for the next three to six months, I have to be patient, I have to understand what's going on.   But yeah, I just kind of go back to the numbers. I think in both cases, they're they're taking emotion and what's happening in the market and using that, like the macro for the micro. And instead of saying, You know what, I know what is a good deal, here's what it looks like on paper. Let me continue to go search until I find that and it might take you a little bit longer to find it. Or you might find a process like oh, wow, I can, you know, go 20% under and get lucky on a deal off of this, whatever the home price is, I could, you know, undercut them and give them an offer and maybe they'll take it to get that great deal.   Um, But I don't I think both categories are bad. I think someone who says I have to get my foot in the door. Before interest rates go up is emotional. I think someone who says there are no great deals out there are just lazy. And so I kind of fall somewhere in between of saying, yeah, just be financially prudent as you always should be with your real estate investment investments, know your market, know what numbers numbers you need, and make sure you're a little bit more conservative. Like, I know, a couple investors with adjustable rate mortgages that did them, you know, back when interest rates were really low. And I bet they feel pretty stupid right now. So   Michael: we won't name names,   Dana: Won't name names here.   Michael: Well, I'd be very interested to meet the the emotionally lazy person, because it sounds like those are two opposite ends of the spectrum. Yeah, I have to see. Okay. And last thing that I want to ask you about is around expectations. If someone is newer to the investment space, they may be looking to get their first deal done. Everyone around them, their sister, their brother, aunts, uncles in this market are making 10% cash on cash. Yeah, pick a number. Nice round number 10%. And they're like their expectation was was 15%. Right, for whatever reason, that's what makes them tick. That's what gets them excited about an investment. Everyone around them is making 10%. So how the how should investors be thinking about not looking at other people, and just focusing on what's good for them, but also not being blind and naive to what a market is really able to produce? In terms of In other words, like, they I want someone to be excited about the returns that they're getting, but I also want them to be realistic. How do you kind of how do you?   Dana: So the biggest thing I would say to throttle that is, most likely you've sort of selected a market because you've looked at, okay, where is and I mean, Roofstock does this for you, and you guys, I think have some great shows from like every single market of why why you guys are looking at a certain market. So that helps. But you as a real estate investor are gonna say worse population growth? And why like, is more industry going there? Like maybe an Amazon facility was just put into place? Does it have fed, ed's and meds? Like, is it stable, even recession proof, especially now? So you kind of go through and figure out why am I excited about this market? And you just start there? And like, don't forget about your, I mean, 15% cash on cash return? Like, let's just forget about all of that and just go through? What looking at macro, and now we're kind of going to micro to like city level?   Why do I think this is going to be a lot a good market in five to 10 years, because you're going to hold on to these properties and purchase more, right? Do that first, then you say, Okay, this is my market, then what you're going to do is for two to three months, you're going to look at all the deals there, go on Roofstock, I think you could set up alerts because I have those that go to my email that essentially like tell you here's a new property in that market, great purchase. Um, you're gonna go through and you might the first couple of properties, say you know what? Those, those don't really hit my cash on cash return expectations, but now you're starting to know your market and you're gonna see a trend, are they going up? Are they going down? And you can look at that over time to make an unemotional decision that is based on data.   I think that is the most important thing to do. When someone gets in this frenzy of I need this cash on cash return shoot, I'm not going to get it. So I'm just going to slash it. And I'm going to say now I need, you know, seven or 8% I and you're just becoming emotional. But if you go through look at the numbers and you say okay, great, I wanted 15% You know, my friends are getting 10% I'm and you're you change those expectations. And suddenly you say, Okay, I made this decision, and here's my cash on cash return. But I knew at that time, that was the best I could do. Because I looked at the data, then suddenly you never go back and wish you had done it differently. Because you have something that is non non emotional to back you up. And don't compare yourself to other real estate investors. I've seen real estate investors in the past four to five years who've been super successful, who are super stupid.   And the reason they were successful and I hate to say that but like there's so many people out there because basically it was free money like there was so much investment it was there was so much easy money from investors that I saw way too many people also going into real estate. A lot of actually on the fix and flip side that just got lucky because yeah, money was basically free to do a fix and flip and a The home prices were going up astronomically. And they feel like they're the smartest people in the room.   Well, maybe they were at that time, but like, give it two to three months, maybe six months, and the story might change. And so that's why I think it's hard at like one point in time, if you're just getting started to compare yourself to those around you, I don't think you should do that. I think you should just be financially prudent, and make sure that you're not overextending yourself. And you know, your market. And you know why you made the decision, you see you did, and it's all based off those numbers. And it's based off the numbers, but also you need to know the market, like you need to know you guys have neighborhood scores and ratings, that kind of stuff of like, here's why I only invest in neighborhoods that have three stars, or greater, or whatever it may be like it, write all of this stuff out, and take a really methodical approach to your assets, your real estate investing, and I don't think you'll regret it. Like, I don't think you're gonna go back and say, Oh, I really wish I would have gotten that 15% I targeted?   Michael; I think that is like spot on. Thank you so much. And if you missed it, if you missed any part of that, go back, rewind the last three minutes, and listen to that again, cuz I think that's a lot of gold in there. Then this was super fun. As always, if people want to reach out more, find out more about you or hemline. Where's the best place for them to do that?   Dana: Yeah, you can go on to Roofstock when you purchase a property, how many will be listed as a property manager? So go go ahead and do that. You can also go to Hemlane.com. And my email is dana@hemlane.com. So I love hearing from people.   Michael: Awesome. Well, thank you again, and very much looking forward to having you on. Again, I'm sure take care of we'll chat soon.   Dana: Great. Yeah, I'm excited in six months for us to see if we were if we stand corrected on what's going on in the market.   Michael: I know it'd be very interesting. Well keep close tabs on it.   Dana: Great. Thanks so much for having me.   Michael: You got it, take care.   Okay, everyone, and that was our episode A big thank you to Dana for coming on as always big friend of the pod as we were saying at the beginning of the show. As always, if you liked the episode, we'd love to hear from you all with a rating and review and we look forward to seeing the next one. Happy investing

Dana Dunford is the CEO of Hemlane Property Management and a real estate investor. In today's episode we discuss market conditions, interest rates, what is happening in the stock market, and what the current moment means for real estate investors. If you are wondering if it is the right time to purchase an investment property, you will want to listen to this episode. Links: Hemlane.com --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Dana Dunford, co founder and CEO of Hemlane Property Management. And today Dana is gonna be talking to us about the state of the economy and some things that investors should be aware of and thinking about as we move forward in today's market. So let's get into it.   Dana Dunford, welcome back again to The Remote Real Estate Investor. Thanks for coming on and hanging out with me.   Dana: Great. Thanks for having me. Again, Michael.   Michael: Oh, my gosh, it is such a pleasure. You are great friend of the pod. Great friend of Roofstock. For those who might not be familiar with you give us the Quick, quick and dirty background of who you are. And background on yourself.   Dana: Yeah, so I'm Dana Dunford. I'm here in San Francisco. So just right across the bridge from rootstock. I have been in technology for gosh, now we're going on 18 years. So I'm a tech veteran, which we'll be talking about tonight, today, which I'm excited about. And on top of that, I'm in property management. So we're a tech platform for property management, and partner of Roofstock's. And we've seen what has been going on since q1, the market softening things changing in technology. So I think this is going to be a great call, because both Roofstock and Hemlane have seen it firsthand. And hopefully this gives some insight into what, what the upcoming year is going to look like for all real estate investors out there.   Michael: Totally. And just to give some people, some additional color, you are CEO, co founder of Hemlane, and you just did your series A, what was it q3 of 2021 or q4 of 2021?   Dana: Q4, so we raised at the perfect timing, those who are not in venture and the tech world of Silicon Valley. We couldn't have timed it better. You know, right now, and we'll talk about this today. Right now, the market is really softening. There's just less capital going into startups. We can't say this was people were already predicting this. So back in q3, and q4 venture capitalists were already saying, Ooh, there's a lot of money pouring into this valuations are really high. And some had already started pulling back. But it wasn't until what happened in the public markets, where you know, trillions of dollars were taken out of these Sass companies, valuations are overall the market cap, that suddenly the venture world that trickled down and people really started to pull back capital. So yeah, we raised back then roofstock, when was your guys's last raise? Because you guys are at a later stage. And so obviously, also impacted by this and quite, potentially, more significantly than us.   Michael: I think we got our term sheet squared away in in q4, as well. So right around that same perfect timing with money getting wired in coming in and in q1.   Dana: Yeah, perfect. So you guys will be able to weather the storm with that what we're going to be talking about soon here.   Michael: Yep, absolutely. I'm thinking so. Okay, so let's talk about how, like, how did we get here, because you're mentioning that trillions of dollars have been essentially taken off the table in terms of market cap. But for those people that aren't familiar with the space that haven't maybe been following along as closely, what like, where are we today? And can you give us some insight and background as to how you think we got here?   Dana: Yeah, so first of all, I believe most people on this podcast today listening are real estate investors. And so all of you hopefully got in when interest rates were super low, just artificially low, right? We never seen interest rates below 3% for so long. And one that was fantastic for real estate, right? You could get a rental properties at afford a higher price because your interest rate is much lower your loan. And then for startups and for companies money was much more free it was much more flowing. What we ended up seeing happen which most people predicted this would happen. But no one knew when or at least I haven't heard of any economists who knew this was going to happen exactly. We're in March, but we started seeing the inflation go through the roof, you know, 8.6%. And it's been consistent where we have seen the inflation rate really, really high.   And so the only way for the Fed to essentially combat that was obviously, to increase interest rates, which we are all seeing now are all seen in our real estate itself, doesn't mean there aren't great deals out there. So Mike, like, do you want us to talk about that, because I still think there's great deals out there that you guys have on the platform, and now could be a really good time to buy. So don't let that taint your decision of whether or not you should go into real estate.   But with that, as you know, when the Fed raises interest rates, consumer spending just goes down, that will probably people will spend less, and also things are more expensive. And so once you have that happen, the stock market's inversely correlated to interest rates. And so once interest rates went up, there was a correction in the stock market. Why it affects us on the private company side so much is Roofstock and Hemlane are both considered growth companies. And what happened was essentially, in the public markets, so any public company, there's basically two different types, there's growth, just like us, companies like Roofstock, that have gone public. And then there are value companies and the value companies are much more stable. They're based on their cash flow. They're typically larger, older companies, and their price is based on their sales. So their price is relatively low relative to sales, in companies like that, or like Bank of America, if you think about it, and RG like gas companies like very stable, steady businesses, where you're not going to see   Michael: Blue chip companies.   Dana: Yeah, your blue chip companies where you're not going to see, you know, 500% growth year over year. But what ends up happening is when the interest rates go up like that, and stocks go down, the ones that get devalued, the most are the growth stage companies. And the growth stage companies are companies like Roofstock, and heavily that are public. And so what we basically saw happen was this huge, huge cut in market cap in the public markets. And so for SAS company software as a service where you go, you pay a subscription every month to use a service, the market cap cap got cut by $1 trillion dollars from November of 2021. Until today, and so what that did was essentially, these companies thought they were worth a lot more.   And you know, some of them, like the stripes of the world, in the snowflakes had these really high revenue multiples, and suddenly, those just deteriorated. And the multiple based of what their valuation is versus their, their revenue went down. And that essentially trickled down to private companies like us as well. And so now when a company goes out to raise capital in q1, q2, primarily, now it's even, it's even worse. And what we're foreseeing in q3 is that you might have had a 10x, revenue multiple, so your valuation, it's 10x, what your revenue is, that's how it used to be.   Now you go out to a venture capitalist, and they're like, great, you're worth 3x, or 5x. So much lower valuation. And so what they're, they're expecting is a lot of down rounds, a lot of startup saying, If I can, let me just hold on to my cash, let me cut my bird, let me try to raise later and better times. And all of this impacts the economy, because it was the public markets that were hit. And now it's also the private companies where we are in Silicon Valley. And I do think this, this trickles a bit to real estate. It's it's a different type of market correction that we saw in 2008. In 2008, it was housing right and the mortgage crisis today, I think this is a lot more like the.com bubble. This is very similar to the.com bubble of these really high tech valuations that need to be corrected. And so when you think about purchasing real estate, I actually think that's why Roofstock is such a fantastic place to go. Because you're getting out of the tech scene, you're going to other markets and purchasing there.   Michael: It's so interesting. But then so I'm curious, we talk so often about in real estate that the price is only a factor, or it's only important if you're doing something with the property if you're buying selling refinancing, because otherwise you're just having a cash flow, and that often is independent of what the value is of the company, or excuse me, the property. So why does that matter? or for companies like the fact that there's the company is now worth less, unless they're trying to do something buy, sell, or refinance or raise, raise, raise capital, like, why does that matter?   Dana: So it doesn't matter for Roofstock. And it doesn't matter for Hemlane, because we just raised, we have enough capital to weather this storm. But imagine a company that raised and they had a, let's just give the case of like the stripes of the world 100x Multiple. And let's just say it's a private company, with 100x, multiple, and now they're going back out, and they're now getting a 10x. Multiple, they could have what we call a down round, where suddenly they are worth less than they were before. And that gives a lot less confidence. One the company itself, right? The amount that you're giving up as a founder, as an employee, as an existing investor, it's a lot more just to get in the same amount of capital you wanted to historically, in so what you're seeing is these companies really, really tighten the ship, and just say, Okay, we're going to stop hiring as many people, we're really going to look at our expenses. And that means there's not more money pouring into, you know, hiring 100 people every week, they're suddenly going back and thinking about who are the strategic hires, we really need? Should we be letting go? You've seen the massive tech layoffs where it's, you know, 20% of the workforce. And now suddenly, they're really tightening their books, because cash is king right? Now, you want to hold on to that cash? Because the last thing you want to do is go out and have a lower valuation.   Michael: Yeah. Okay. Well, that makes sense. And so talk to us a little bit about why this is affecting real estate investors or why real estate investors should even care about this that's going on?   Dana: Yeah. So I always think there's a huge opportunity when there's like the Warren Buffett, quote, right? be fearful when others are greedy and be greedy when others are fearful. I think right now everyone's scared. And there's a lot of real estate investors, like we actually just did a survey at Hemlane, where majority were saying we're not going to purchase in the next 12 months, because interest rates have gone up we should have gotten any year ago. Well, you know, the best time to get into real estate was 10 years ago, and the next best time is today, I think there's going to be a lot of great deals out there. I think that while others are tightening up, other investors are scared, this is a time for you to be really aggressive. I mean, still looking at your pro forma and and follow your numbers. But you'll be able to find some some great deals out there.   Michael: I've heard a lot of sentiment around, you can always change your interest rate, but you can never change your purchase price. So if someone is getting into a deal today, at an interest rate that's a little bit higher than they're comfortable with. But they anticipate interest rates to come down at some point down the road. What are your thoughts there?   Dana: Yeah, you can always refinance. I mean, don't do a deal hoping that interest rates go down, and you can refinance it or fudge the numbers on your spreadsheet. This is why   Michael: I was hoping that's what you were gonna say.   Dana: Yeah, like this is I mean, this is why I'm, I'm more conservative than most in every property purchases had a fixed rate. I don't do adjustable. But I can refinance, right? So I can always refinance. But I want to know what I'm getting into. So when you do your pro forma, do it with whatever the interest rate is now and consider it a huge advantage and just like increased cash flow, if you can refinance in the future, will interest rates go back to this like artificially low rate that we saw over the past five years, maybe not. But I don't think that is a reason not to purchase now. You do your numbers, and you look at it just because you might say property values are really high interest rates are going up, now's not a good time to buy. That's just laziness. Like, honestly, that's just you being lazy and not wanting to do the work.   There's always great deals out there. You just have to do the work, find them look at the numbers and say even with this increased interest rate, it's still a great deal. I'm still cash flowing and I've got a great cap rate, and you can go ahead and purchase. So I don't think of this as the time really to, to change your decisions on real estate. And part of that has to do with I think, you know, some markets will soften. Some markets may remain flat for a while but that doesn't mean that you're not getting the cash flow and having a great investment that by the way, with inflation where it is If it continues, having an asset where the value goes up with inflation, so I still think now's a great time to purchase real estate. And you might be able to get some fantastic deals as other investors are pulling out, you can really, really go in and get those great deals.   Michael; Love it. And Dana, I'm curious if because we've seen prices go through the roof, and interest rates have also gone up significantly, there might be a bit of a lead lag measure until we see prices come down. So in in terms of looking for different markets, I mean, are you targeting markets that are continuing to grow? Are you targeting markets that maybe are seeing some of that softening in terms of pricing?   Dana: So for us, we go where the real estate investors are. So if there's a real estate investor there, right, we're going to do the property management for them. I think when you're when you're thinking about the lag, that is definitely true. I've heard this with other real estate investors, I've seen it myself, where you see a price. And with interest rates up, the seller puts one price out there, because that's what it was two weeks ago. And suddenly, it's not worth that much. It's worth like 10% 20%. Last, but it's actually really good to put yourself into the position of the seller, and of the real estate agent, because you can actually get some really, really good deals off of that.   And what I mean by it is real estate investors have always told historically, have told their buyers in the past couple of years. If your mark, if your property is on market for over two weeks, people might think there's something wrong with that. And so, you know, we're going to ask for offers on X date, right, like X date and two weeks, or maybe we'll do one week, we're going to ask for offers. Well, if they've missed priced the property, you might be able to go in and you don't know this, but you might be the only offer because they priced it way too high, because we priced it from a purchase price from two weeks ago. And now that has suddenly changed like the market changes every two weeks, it really is. And you could go in and get a great deal. And so I think from from that perspective, there are still fantastic deals out there. But you have to be patient. And some of it will be that luck, where you get the right deal, though what else has gone into, and you can go ahead and purchase that.   So if you put yourself in the other shoes, you might see that you also see a lot of people you know why I don't think it's like 2008 and 2009 is people have a lot more equity in their properties because one value values have gone up. And then two, the interest rates were really low, people could afford more put more money in the market was booming. And so what we're seeing is that more people have equity in them. And at some point, it's emotional for someone, they're like, I just want to get rid of this asset, because I'm gonna go buy another one, or I just really want to move out of the city and move somewhere else. And, you know, to them, maybe 20 To 50 to $70,000 is not a lot depending on what it is. But that is a lot to you. And that changes, changes the numbers on your spreadsheet significantly.   And so I mean, with that purchase price, obviously that matters. But just because the price is out on the market for a property doesn't mean that the price is going to sell for. And so it would be a really good time to go out and experiment with that you will know your market better than anyone else, whatever market you're in, because it will take you bidding on like five properties. And maybe people will laugh at you like your first one, you go like 20% under and they laugh at you. But maybe you get lucky on the fifth one, and you'll get a great deal. But yeah, just follow the numbers in your spreadsheet don't have a purchase price, that doesn't make sense and you're not cash flowing. Or don't change the interest rate hoping that it will go down to that to that amount.   Michael: Yeah, that makes total sense. And speaking of spreadsheet numbers, are you seeing a lot of your investor clients that you work with adjusting their expectations around cash on cash returns? Now that prices and interest rates are up?   Dana: So not really I think most investors like most of the savvy ones we work with, we work with his sort of two different types of of customers, those who had properties just handed to them. And they actually never did the analysis like pan downs from parents and things like that. And then others   Michael: Accidental landlords.   Dana: Accidental Yes. And then others who are very strategic real estate investors and what we have found with them as they have the capital and they might not be they might be with inflation to your point Michael being like, Oh, maybe I should just go buy something because the dollar today is worth less On tomorrow, but no, I actually think most real estate investors are still saying, this is the deal that I got, historically, I want to get something like that. And so they're not changing those expectations on cash on cash return, but they might be going somewhere else. So they go to Roofstock, and they say, Okay, I, you know, couldn't find this property, you know, in my backyard, but on Roofstock, they do have the cash on cash return that I that I that I targeting. And so I do think they're not changing their expectations. But they are going out and finding alternative ways to get the numbers they need.   There's one case, Michael, where I find people change their expectations. And it's first time real estate investors to just get their foot in the door. And I'm actually okay with that. I think that there's too many people who, and for anyone who's listening to this, who doesn't have a real estate investment, you kind of sit there and you kind of fantasize about getting one and then you put so much like anxiety into getting your first property. And once you have your first you're like, oh, okay, that's what I got, here's what it is. And it makes it easier, where then you can go and purchase more properties and more properties. And you know, what you're looking for, and you know what the return was, and you have this process set up.   But the first one is really difficult to get into. So I find that those people today are changing their expectations, for certain metrics just to get into the market, before it's too late. Interest rates go up more, or you know, they're kind of kicking themselves that they didn't get in, you know, four years ago, five years ago. So I only think it's first time real estate investors where that's happening. And I'm actually okay with that. Because I think if you can get more people into real estate investing, and more people to just get their foot in the door, you're going to learn so much off of that first property, that then you're going to say, Okay, this was my cap rate for my first property. My next one, I have to at least have that or better and you kind of improve, you know, it's kind of like dating, you never like you don't date someone who's great. And then like the next person is like a downgrade, you kind of have the standard. And you're like, I can only go up from there. It's the same exact thing with real estate investing. So I really think it's only first time homebuyers where that happens are real estate investors for rental properties?   Michael: Yep, I think and I think that makes tons of sense. It's something that I hear all the time. It's Michael, I'm trying to get my first deal done and has to be amazing. And you know, it has to be a Grand Slam? Like? Don't worry about the grand slams, let's practice getting on base first. And then you'll know how to swing for   Dana: Exactly, exactly. And it makes it a lot easier when you have one property in that area. You know your market a bit more, and then you can kind of purchase some more around at.   Michael: Yep. Yeah, I think it makes him think that's totally right. And so Dana, we're kind of at this like crossroads where we're talking about, some investors are pressing pause on their acquisitions. And then this whole other cohort of investors are like, Oh, crap, I gotta get into the market before interest rates go up further before prices go up further. So it does feel like there's this pressure to buy or there's frenzy to buy, on the one hand, and then there's this whole other group, that's again, kind of taking a step back and saying, let's, let's wait and see what happens. How do you square those two?   Dana: Well, to me, I'm like a pretty unemotional real estate investor. And I feel like for anyone, whatever segment you fall into, you still have to go back to the numbers and see what makes sense. And so I mean, is there a right way to go? I think one people who are not going out, and they're using this as an excuse not to purchase properties, or just being lazy, honestly. And for those who are out there saying, I gotta get in and get my next deal. I think they're almost too emotional. Where they might go in and change the numbers to your point of saying, like, oh, it's not, you know, my last deal was was better than this, but I just need to get my foot in the door. Maybe that's not the right approach to have, it's, Hey, there's gonna be a deal out there. I might have to be a little bit more patient during this the for the next three to six months, I have to be patient, I have to understand what's going on.   But yeah, I just kind of go back to the numbers. I think in both cases, they're they're taking emotion and what's happening in the market and using that, like the macro for the micro. And instead of saying, You know what, I know what is a good deal, here's what it looks like on paper. Let me continue to go search until I find that and it might take you a little bit longer to find it. Or you might find a process like oh, wow, I can, you know, go 20% under and get lucky on a deal off of this, whatever the home price is, I could, you know, undercut them and give them an offer and maybe they'll take it to get that great deal.   Um, But I don't I think both categories are bad. I think someone who says I have to get my foot in the door. Before interest rates go up is emotional. I think someone who says there are no great deals out there are just lazy. And so I kind of fall somewhere in between of saying, yeah, just be financially prudent as you always should be with your real estate investment investments, know your market, know what numbers numbers you need, and make sure you're a little bit more conservative. Like, I know, a couple investors with adjustable rate mortgages that did them, you know, back when interest rates were really low. And I bet they feel pretty stupid right now. So   Michael: we won't name names,   Dana: Won't name names here.   Michael: Well, I'd be very interested to meet the the emotionally lazy person, because it sounds like those are two opposite ends of the spectrum. Yeah, I have to see. Okay. And last thing that I want to ask you about is around expectations. If someone is newer to the investment space, they may be looking to get their first deal done. Everyone around them, their sister, their brother, aunts, uncles in this market are making 10% cash on cash. Yeah, pick a number. Nice round number 10%. And they're like their expectation was was 15%. Right, for whatever reason, that's what makes them tick. That's what gets them excited about an investment. Everyone around them is making 10%. So how the how should investors be thinking about not looking at other people, and just focusing on what's good for them, but also not being blind and naive to what a market is really able to produce? In terms of In other words, like, they I want someone to be excited about the returns that they're getting, but I also want them to be realistic. How do you kind of how do you?   Dana: So the biggest thing I would say to throttle that is, most likely you've sort of selected a market because you've looked at, okay, where is and I mean, Roofstock does this for you, and you guys, I think have some great shows from like every single market of why why you guys are looking at a certain market. So that helps. But you as a real estate investor are gonna say worse population growth? And why like, is more industry going there? Like maybe an Amazon facility was just put into place? Does it have fed, ed's and meds? Like, is it stable, even recession proof, especially now? So you kind of go through and figure out why am I excited about this market? And you just start there? And like, don't forget about your, I mean, 15% cash on cash return? Like, let's just forget about all of that and just go through? What looking at macro, and now we're kind of going to micro to like city level?   Why do I think this is going to be a lot a good market in five to 10 years, because you're going to hold on to these properties and purchase more, right? Do that first, then you say, Okay, this is my market, then what you're going to do is for two to three months, you're going to look at all the deals there, go on Roofstock, I think you could set up alerts because I have those that go to my email that essentially like tell you here's a new property in that market, great purchase. Um, you're gonna go through and you might the first couple of properties, say you know what? Those, those don't really hit my cash on cash return expectations, but now you're starting to know your market and you're gonna see a trend, are they going up? Are they going down? And you can look at that over time to make an unemotional decision that is based on data.   I think that is the most important thing to do. When someone gets in this frenzy of I need this cash on cash return shoot, I'm not going to get it. So I'm just going to slash it. And I'm going to say now I need, you know, seven or 8% I and you're just becoming emotional. But if you go through look at the numbers and you say okay, great, I wanted 15% You know, my friends are getting 10% I'm and you're you change those expectations. And suddenly you say, Okay, I made this decision, and here's my cash on cash return. But I knew at that time, that was the best I could do. Because I looked at the data, then suddenly you never go back and wish you had done it differently. Because you have something that is non non emotional to back you up. And don't compare yourself to other real estate investors. I've seen real estate investors in the past four to five years who've been super successful, who are super stupid.   And the reason they were successful and I hate to say that but like there's so many people out there because basically it was free money like there was so much investment it was there was so much easy money from investors that I saw way too many people also going into real estate. A lot of actually on the fix and flip side that just got lucky because yeah, money was basically free to do a fix and flip and a The home prices were going up astronomically. And they feel like they're the smartest people in the room.   Well, maybe they were at that time, but like, give it two to three months, maybe six months, and the story might change. And so that's why I think it's hard at like one point in time, if you're just getting started to compare yourself to those around you, I don't think you should do that. I think you should just be financially prudent, and make sure that you're not overextending yourself. And you know, your market. And you know why you made the decision, you see you did, and it's all based off those numbers. And it's based off the numbers, but also you need to know the market, like you need to know you guys have neighborhood scores and ratings, that kind of stuff of like, here's why I only invest in neighborhoods that have three stars, or greater, or whatever it may be like it, write all of this stuff out, and take a really methodical approach to your assets, your real estate investing, and I don't think you'll regret it. Like, I don't think you're gonna go back and say, Oh, I really wish I would have gotten that 15% I targeted?   Michael; I think that is like spot on. Thank you so much. And if you missed it, if you missed any part of that, go back, rewind the last three minutes, and listen to that again, cuz I think that's a lot of gold in there. Then this was super fun. As always, if people want to reach out more, find out more about you or hemline. Where's the best place for them to do that?   Dana: Yeah, you can go on to Roofstock when you purchase a property, how many will be listed as a property manager? So go go ahead and do that. You can also go to Hemlane.com. And my email is dana@hemlane.com. So I love hearing from people.   Michael: Awesome. Well, thank you again, and very much looking forward to having you on. Again, I'm sure take care of we'll chat soon.   Dana: Great. Yeah, I'm excited in six months for us to see if we were if we stand corrected on what's going on in the market.   Michael: I know it'd be very interesting. Well keep close tabs on it.   Dana: Great. Thanks so much for having me.   Michael: You got it, take care.   Okay, everyone, and that was our episode A big thank you to Dana for coming on as always big friend of the pod as we were saying at the beginning of the show. As always, if you liked the episode, we'd love to hear from you all with a rating and review and we look forward to seeing the next one. Happy investing

A common refrain in the investment world is, diversify your portfolio. But many real estate investors have a massive majority of their net worth in property. In this episode, Michael shares his thoughts on portfolio diversification and why he is so heavily focused on rental property. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Pierre: Hey everyone, welcome to the Remote Real Estate Investor. My name is Pierre Carrillo and today I am joined by…   Michael: Michael Albaum   Pierre: and today we are going to talk about portfolio diversification, so let's just jump right in. Hey, Michael.   Michael: How's it going Pierre?   Pierre: So Michael, one of the basic pieces of investment advice that I hear everywhere is diversification, diversification, diversify, don't be too consolidated. Because if any one piece of the market goes down, you're going to be left exposed somewhere. I remember you saying in a previous episode, that you're about 80-85% in real estate, and that made me think, wow, that's heavily consolidated. How do you find, how do you find comfort in being so consolidated in one asset class?   Michael: Yeah, it's a really good question, Pierre and I think, for me, my strategy has changed over the 10 plus years that I've been investing and so for me, I was very focused on single family when I first got started and I think a lot of people do kind of find their niche inside of single family investing and it's funny because there's this, there's kind of two camps. There's one that says, diversify, diversify, diversify and then another one says, get rich in your niche and niche down and pick one thing to do and do it really well and if you can do it really well, you don't really need diversification. Diversification is for people that maybe aren't able to niche down or pick one thing or particular that they're passionate about, or really good at. So for me, I was always thinking about single families. I wanted to purchase a bunch of them, I wanted to own a bunch and I thought that was great and at the end of the day, and we've talked about it on prior episodes, the like I think what people are always scared about is their value decreasing, given some event or over time and that's when people talk about, like the S&P 500 index funds, you have a bunch of different companies.   And so if one goes out of business, you're not only holding that stock and so that is usually because the value can evaporate and unless the stock is paying some kind of dividend, or it's paying some kind of yeah, I guess that's what stocks dividends, the value of the stock is really in the value and hopefully it goes up over time. With rental real estate, we've got kind of a two headed play here. One is like a yield play a cashflow play, that pays us every single month and every single year and then the other is the appreciation, which is congruent, or synonymous with the stock value going up over time and so again, I'm really less concerned with the value of the property over time, because given a long enough time horizon, I'm comfortable, that thing is going up into the right. But even in the event of a downturn where the value is decreased, I've got yearlong leases and so the rent that I'm going to be collecting is likely going to be unaffected and unchanged. So for that reason, I was really comfortable getting very involved in the single family asset class. The other thing to think about is, I think real estate is this big, all-encompassing umbrella, if you will, it catches a lot of things, and a lot of different events like sub asset classes, for those you watching. I'm doing air quotes, so there's single family investing, there's multifamily investing, there's triple net lease investing, there's industrial, there's flipping, there's all these other things that you can be doing under the real estate umbrella, that I would argue are diversifying you within the asset class itself and so if you'll say, well, people talked a lot about during when COVID first hit, oh, apartments are doomed. Everyone's moving to single family, they want more space. Well, a lot of people thought a lot of things about during COVID when the pandemic first hit, and I don't think that was necessarily true. It was maybe in a little bit of San Francisco and New York and some of these major, major, major metros, but most of our listeners and most of our beginning investors aren't investing in those cities to begin with and so A) I don't think we saw that happen B) we definitely didn't see values fall through the floor, they kind of went the other way. But you can be diversified within the asset class. So if you own multifamily, you own single family, maybe you did see some folks leave your multifamily but maybe you saw your single family values increase. So I think that there's a lot of different ways to play this and then last but not least, I would say if you're in the short term space, you've been killing it for last two years and so again, that's a kind of third way to diversify with in the real estate asset class itself.   Pierre: So with for people just starting out and if they're just you know, you save up a big chunk of money and you because there's a high barrier to entry to get into real estate. How should like is does that diversification just happen over time or is there some sort of comfort you can find in that initial first down payment that you're putting up? It's like, chopping an arm off just to get started?   Michael: Yeah, well, I think for those people who are just getting started, one of the reasons that they may have been attracted initially into real estate is because it is diverse and different from the other things that they're doing. It's not the stock market, it's not a it's not an investor, a retirement portfolio, which is often invest in the stock market. It's not in bonds, so it is different and without getting into like the correlation of the real estate market versus the stock market and talking about, I think it's beta, or maybe it's alpha talking about the differences in the correlations, it's different than what they're currently doing and I think that in and of itself means that you are diversifying and if that's a part of your investment thesis, that diversification is important, this can be a great place to come do that. So I think with regard to your question about saving so much for the down payment, or kind of chopping off an arm and putting a big chunk of your potential overall net worth into that first property, I think people need to think long and hard about that, I think they need to understand what the risks are, what the benefits are and if those are both tolerable, I think the conclusion that I came to and that a lot of other people have come to for themselves is that real estate's a fairly safe place to park money, because of what I mentioned earlier, if it's rented and the value goes down, it doesn't really affect us and it's an unrealized gain or loss, just like in the stock market and so you'll say, oh, I made a bunch of money, the stock market today, well, not unless you bought or sold. So unless you're actually doing a transaction, the value is kind of meaningless. It's always fun to talk about at parties or get together with your friends. Oh, that's probably my net worth whatever like, but doesn't mean anything. It's not tangible and realized until you do something with it and so if you are planning on doing this for the long term, and for the long haul, parking money in real estate, for my experience has been a really great thing for me over time.   Pierre: Okay, so I know you're not, we're not giving investment advice at all here. But from the tone of it, real estate is a safe place to park your money that implies to me that you are like, you're not super worried about a major market correction affecting your values or affecting rent prices to the point where it brings you into the red. You are you feeling good moving forward into the next year?   Michael: Yeah, I'm feeling really good and here's why. Like, I was just listening to a book, an audio book, as part of the Roofstock Academy, we do a book club, and this quarter, we're reading first 2 million by Dan sheets, and he's gonna be joining us for a Q&A session with all of our members who read the book. And so I'm reading this book, and he's talking about the 4% rule and for anyone that might not be familiar, the 4% rule basically says, once you've hit a $1 amount inside of an investment portfolio, and a stock portfolio, you can very safely and confidently withdraw 4% of the value every year, because the hope is that you're essentially living off the interest, you're essentially living off the gains that that portfolio is throwing off, and the principle is not going to be reduced. Well, that's all fine well and good when the markets going up. But when the market goes down, and you're continuing to draw on this account, you could see that dwindle very quickly, and possibly to a point that's unrecoverable and so that again, is the value of the stock is going up or the stocks are going up in value, the portfolio is going up, you're drawing down a certain percentage. For real estate oftentimes, we're not relying on the principal value of the property to do this stuff with, right we can, there are tons of people that I know that only live off the cash flow that the real estate portfolios are generating, they don't care what the value is, it can go up, it can go down, it can go sideways, it doesn't matter because the cash flow the property generates is independent of the value. Your tenants aren't saying, oh, well, the property is valued at x. So I'm only going to pay you why and rent doesn't work like that, which is the nice thing and so I'm much more comfortable and confident in the historic performance, the really strong historic performance of real estate, again, for the rental market, independent of what values are doing and so if I'm someone that's planning to live off my cash flow, I get a great deal of my living income from cash flow. I'm not worried about the principal balance versus in the stock market. When it goes up. It's great when it goes down. I mean, that can that can take a long time to recover from. So yeah, I'm very comfortable going into this the upcoming year 2022 and beyond. That's like a Buzz Lightyear saying to infinity and beyond.   Pierre: That's good to hear, that makes a lot of sense. I guess there's other ways you can find that diversification beyond just between single family and multifamily or even commercial. I know you're investing in vacation rentals outside of the country. I mean, you're completely separate from the US economy. So and then we've spoken on the podcast before with Peter Badger doing the investing in agricultural land and, and internationally as well. So yeah, I guess there's a lot of different ways that you can achieve that diversity with or diversification within your portfolio just using real estate. Are there ways that someone might be exposing themselves to learn how to say this, but like being under diversified in real estate? What are some things that people need to look out for?   Michael: I mean, I guess in theory, you could be if you were invested in New Orleans, when Katrina hit and didn't have really great insurance policies, that's probably an area where you could easily be overexposed. It's a really good question and one that I haven't really thought about because I come from the insurance world and so I'm make darn sure that I'm, I'm not taking on too much because aggregate exposure in the insurance world, an insurance company will look at all of the insurance that they have in a particular area and say, okay, well, if an earthquake happens, we're going to have claims on all of these buildings, that's going to be a ton to pay out. So that's how they're evaluating the risk. I do something similar, and say, okay, well, if something really bad happens, I've got the insurance. But how long? Is it going to take these properties to get rebuilt? And what does that look like going forward? So I think you absolutely could, but I think it's, it's going to be a factor related to other things, not purely the fact that you are investing in own properties all in the same geographic location, are all inside the same asset class and as we talked about regularly on the podcast, real estate is so hyperlocal and so someone could argue, oh, you've got 10 homes in Louisiana, and 10 homes in North Carolina and 10 homes in California and so you're all in single families you ever exposed?   Well, I would argue that that might not be the case, I don't think we can look at that. That surface level data point and say, yes, someone's overexposed, I would say, let's look and understand, okay, what kind of natural catastrophes are in an area? Are they all on the same street? Do they have good insurance policies? What does that look like? What does their occupancy look like? So it's tough to say, without doing a little bit of a deeper dive, that just because someone owns X amount of properties, that represents Y percentage of their net worth, they are over or underexposed and it also comes down to risk tolerance, you can have two people that own very similar portfolios. One is can't sleep at night, because they're worried about a hailstorm taking out all the roofs, the other could not think twice about it, because they got good insurance, or whatever the case is for that person. So it becomes very personal and that's why one of the reasons I love real estate is because there's no right or wrong, there's only right or wrong for you as an individual.   Pierre: Yeah nd some other thing is it's working out in the past, it's just making sure you have multiple strategies available for you with every property that you have. So if you're buying a short term rental, you know, see if it's going to work, maybe you won't make as much money. But could it work as a long term rental? That's another way just to kind of build diversity within your single property.   Michael: Totally And you're seeing a lot of people do that. Now as they're pivoting. They're realizing, hey, my single family has long term makes way more sense as a short term rental, awesome, don't have to do a whole lot to the property to pivot that way.   Pierre: So that that'll make sense And thanks for all of that. Speaking about the other remainder of your portfolio, how do you assess where you're going to put your money outside of real estate?   Michael. That's a good question; That's going into index funds. Just diversification, I have to think about it, I have to worry about it. I just set it and forget it type of thing. We just had a guest on the podcast couple weeks ago, he was talking about picking stocks, and how index fund investing is kind of silly, but go pick stocks and win big. I've done okay, that in the past, but I think it's for me, it's more of a gamble and I real estate for me, because I did a lot of value add investing was definitely a little bit of a gamble. And so I'm very happy now I was in growth mode for a lot of years and now I'm very happy with just a kind of modest return from the stock market and so if it does, great, awesome, if it doesn't, that's okay, too. I'm in it for the long haul and to use that up into the right analogy again, I know given the time horizon that I'm anticipating for holding the stocks and adding to the portfolio. It's going to be going up into the right…   Pierre: Have you messed it all with crypto yet?   Michael: Yeah, it's funny. My wife and I have been playing around with crypto for the last couple years and she works in the tech space as well do in for an education company and we were she came home and he like Michael I did an interview with someone and we're talking about this thing called the theory I'm like we should check it out. So we did some research and ended up buying some a couple years ago and we put it on a I forgot to call like a cold a cold wallet like a USB thumb drive. Well I called wallet yeah and then like stuck it in the bank safe deposit box and never thought twice about it and then like last May everyone was talking about crypto and so I just looked at the values and I was like, Holy crap. I think we've made a lot of fun ready and so we did some more research and played on some of their Kryptos. But it's all like Vegas casino money, to be honest, it's not. It's not something that I understand first and foremost and that's what a lot of financial experts will tell you is don't invest in anything you don't understand unless you're prepared to lose it all and so that's totally where we're at. Like, it's rolling the dice if it does great, awesome. If not, well, you know, it was it was exciting while we were in it.   Pierre: Oh, well, that's all good to hear, man and I think that answers my question about diversification. So I think that's all I have.   Michael: Awesome. Well, great questions Pierre. Thanks a lot, man. Appreciate you having me on.   Pierre: Me having you on. Alright, alright. Let's get out of here.   Alright, everyone that is our episode for today. Thanks so much for joining us. Remember to subscribe to our podcast that helps us bring you more content like this every day and we hope to catch you on the very next one. Happy investing.   Michael: Happy investing.

Jaden Sterling is an award-winning, international Best-selling author of, “The Alchemy of True Success.” Creator of Wealth & Wisdom Daily Oracle Cards and founder of Sterling Stock Ed. Inc., an International stock investment program with hundreds of students worldwide. Sterling draws on 30 + years as a professional investor assisting people to become confident investors by simplifying the investment process. Prior to consulting, Sterling held title as Regional Vice President of Asset Management for Citigroup increasing sales from 100 Million to over 300 Million in two years. Sterling also worked as a financial consultant for Merrill Lynch and Smith Barney advising some of the wealthiest families in the United States. Sterling's passion and purpose is to assist people to take control of their finances and live life financially free. Sterling teaches via online platforms how to invest in stocks and how to buy and sell stocks via his software, “Sterling Stock Picker.” Join Jaden, as shares his story, his passion for teaching and helping people in real estate, what people need to be aware of going into their investment career, and an overview of his software, Sterling Stock Picker. Episode Links: https://sterlingstockpicker.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I have with me Jaden Sterling, who is going to be sharing his story about going from equity stock investor, to real estate investor to now equities teacher back in the markets which he left but with a purpose this time. So let's get into it.   Jaden, what is going on? Man, thank you so much for taking the time to hang out with me that I really appreciate it.   Jaden: Hey, my pleasure, Michael, happy to be here with you.   Michael: Awesome. Well, I think we're gonna have a lot of fun today and I know a little bit about your background. But I would love if you could share with our listeners who you are, where you come from, and what is it that you're doing in the financial sector today?   Jaden: Currently presently in British Columbia, Canada, absolutely beautiful up here and working in the financial realm. I've worked in this area for 33 years and finances and 11 years in real estate, and then the last 20 in the equity markets. So I'm super familiar with both and yeah, happy to be here with you and share some value with your audience.   Michael: Awesome and so you're living up in Canada. But did you always work up there? Are you doing equities in Canada or in the states talk to us a little bit about that?   Jaden: So I've been up here 11 years prior to that I was in St. Petersburg, Florida, where I built a portfolio of affordable housing units with the city of St. Pete partnered with them. We did 125 projects, and it worked out really well built a 12 and a half million dollar business in the real estate markets and this was even during the 0708 when it was really tough money was tight, super challenging, but got through it, thank goodness and but my background is steeped in the equity markets. My an initial training was in my 20s, I worked on Wall Street for Merrill Lynch and Citigroup and loved everything that I learned from my wealthy clients, not what I learned from the brokerage firms. That was actually kind of shocking in terms of what I learned about the equity markets and how the system is rigged and it's rigged to make the wealthy wealthier, and the firms are situated in a way to make money off of clients, not for clients. So when I recognize this, yeah, when I learned this truth, I was like, okay, I'm out of here and I'm going to help people also understand how this is set up, and then help people work through work around the situation there.   Michael: Interesting, so can you say more on that about how the system is rigged? Just curious to get, you know, an insider scoop on it, because you hear that being said, and but you also hear the opposition of no, we're here to make money for you and with you and grow with you. So talk to us about how you came to that conclusion.   Jaden: Yeah, a lot of professionals in the financial arena are great people, you know, they have great intentions to help their clients, they, they sincerely have some have a desire to really help people and make a difference and the challenge is the system is set up to steer clients in the direction that makes more money for the brokerage firm, not for the client. One aspect is you know, a lot of people think they need to diversify. We've heard that throughout the ages, right? Diversify for a safety. The challenge is it's like I love what Warren Buffett says diversification is the tax that people pay who don't know what they're doing.   Michael: That is a great quote.   Jaden: He's so right about that. You know, the key is to really focus folk focus your business when I was in real estate, I focused on one area affordable housing. Now, when the stock market, I have owned eight companies, shares of eight different companies. That's it not 100, not 200, not 300. So it really gives an investor leverage to get their money to finally work for them and not work against them. So the industry absolutely, it tracks the it's called velocity, it's still to this day, and I was in it 30 years ago, it tracks how much a portfolio turns over, meaning how much a broker or banker makes on that client's portfolio, not what they make for the client. So just in that understanding alone, you just kind of go yeah, I think I need to find another way than a banker broker to help me make money.   Michael: Yeah, yeah, that makes tons of sense and so just a curiosity. How did you end up in the affordable housing sector?   Jaden: Well, no, I got out of the brokerage business and when I was 31 and I looked around and I something very strong inside me said, start buying real estate and I didn't, I didn't really know I mean, I, you know, I didn't know what to do, I didn't have a mentor in that direction, I just knew that I had to do it. So I researched raw land, I researched apartment buildings, I researched trailer parks, I researched single family homes, commercial real estate and I landed in a, in a category that I felt comfortable with and that was like, from a personal level, doing good helping other people. I'm a big believer in that, the more the better we do for others, the more we help ourselves and it's a beautiful circle that way and so I liked the idea of affordable housing and I also felt like it gave me leverage, if I bought an apartment building that was you know, let's say 12 units, I could, I could renovate, you know, half of them in the beginning, and then still have income coming in. You know, there's only one roof on an apartment building, rather than if you buy 12 single family homes, you've got 12 roofs to deal with, and everything that comes with that. So I felt like the leverage was great and did you know with affordable housing, I didn't know this. But I learned back then that there's special financing for investors who get into that arena, you can get loans that are better rates, some of the money is forgivable in terms of the down payment, less down payment, like it had all these great attributes from an investor's standpoint and then once I bought my first affordable housing project, and made a lot of money, by the way, there's a lot of money to be made in affordable housing, it was always confirmation that when you do good by others and for others, that you'll be abundantly blessed.   Michael: Interesting. So you did that for quite a while and sounds like did quite well and then you moved back into the equities market.   Jaden: Yeah, I knew that my mission was to assist people to teach people how to become wealthy how to work with money, how to understand the principles of money that actually bring in money, rather than take someone's wealth and I wasn't teaching it. You know, I was in my office, I was running a big real estate company, I had 15 employees, we were busy, you know, so I wasn't I wasn't doing what I was intending to do, which was to teach others. So I wrapped up my entire portfolio all in one shot and stepped into my actually my twin brother got sick with cancer. He was diagnosed with stage four cancer.   Michael: I'm so sorry.   Jaden: And this is back in oh seven and he basically they told him look, you have two years to live and during that time, we had incredibly deep conversations and one at one point he said to me, you know, bro, I don't feel like I've lived my purpose and I said, What do you mean, you're doing great. You're a realtor, you're married, you got two great kids, like, what are you talking about? You know, I didn't really understand and he said, no, no, I just feel like, I didn't do what I came here to do and that really struck me because I knew at a very young age, what I was here to do, I had an epiphany at 14, you know, it's like something told me deep down inside, that I would be working with people assisting people to be empowered by money rather than enslaved by it. I just had this clear knowing and that's why I went into working in the equity markets and then ultimately real estate, you know, putting to practice what I had learned and, and I knew I had to start getting out and teaching so I made an about face right then and there. I told my brother I said, man, I'm going to do it for you and for me, I'm going to start getting out there living my purpose and start teaching.   So I did I sold my entire real estate portfolio right then I met my wife, she's up in Canada, we realize our relationship worked better and we lived in the same country. So I made the big leap and came up here and man, it's been amazing. It did bring me right back to my training and stocks and knowing because I I was able to build my real estate portfolio from what I had built from my stock investments over an eight year period. So one fed the other and you know, people ask me all the time, you know what, which do you like best right? Did you like stocks or real estate? I know this is the real estate show. I totally respect that and the thing that that I really draw from is real estate will give you a roof over your head. But stocks are a whole lot easier. There's no fixing toilets and dealing with tenants and you know that situation. So I think a balance of both is key. You can use one to support the other and one to actually buy hi there, I've, I bought an eight unit apartment building by putting my IRA up as collateral with a bank. So no money down. I just said here, take my IRA, and I'm going to do you know, X, Y and Z to this building. Once I get the rents raised and get it improved make these capital improvements, can I get my IRA back? And they said, sure. So I bought it, I got an appraisal done at that time. Six months later, after we made the capital improvements, raise the rents, I got another appraisal done. They issued they released my IRA back to me, so it was a no money down deal worked really well. But had I not had that IRA, it would have been a whole different situation.   Michael: That's unbelievable, Jaden, that's wild. So people, I think in your sphere, some of your coaching students know you as the spiritual money guy and I'm detecting a little bit of that as we converse here, but I would be loved. I'd love to hear from you. How did you come by that name?   Jaden: Two reasons. A lot of people know my background story, that epiphany that I had it 14 that I shared with you that understanding and really clear knowing I've always been a clear knower. So some people call it Claire cognizant, Claire means clear, and then Cognizant is knowing so I've had always had a super clear knowing in my life. But I live that way. You know, I just have, I have a very simple life and there's nothing complicated. I do my best by not lying, stealing, or anything like that and I think by having, having virtues like that, and paying attention to those virtues, and honoring them for yourself, you have a certain amount of clarity in life and things get a little simpler that way. So when I heard one day, it's actually a speaker in a podcast. I wish I could remember who it was because I would give her credit. But she said something really interesting. She said, look at the word prosperity, the Latin derivative of that word is pro spare, which means force spirit and she went on to say, you know, you honor your spirit when you're prosperous and that really spoke to me because I, I really, I believe that I believe she was absolutely correct in that and, you know, think about it, we're not here to worry about money, right? We're not here to let play life and in a small way to play a game that, you know, I look at life as a game. It's a big monopoly board, you know, you have so many houses that convert to hotels, and then apartment buildings, and yada, yada…   Michael: And you hope don't go to jail.   Jaden: That's right, yes right. That saves a lot of hassle when you say right, right.   Michael: Yeah. So let's get deep for just a minute if that's okay. So you I think, are a very lucky person in the sense that you've always been knowing and you've had this clear direction for your life. What do you say to folks that don't have that clarity or that are struggling to find that clarity? How do you how do you become how do you gain that clarity?   Jaden: Well, we know that purpose doesn't it's not like a billboard that drops out of the sky and says, this is your purpose. You know, it doesn't work that way. What I find for most people who asked me that question is what they're doing in that present moment is truly their purpose or else they wouldn't be doing it. So what someone is really asking is, how do I know if I need to be doing something different? That's really the question you're asking, right? Because if we start to acknowledge that where that person is, in that moment, is exactly where they're intended to be. If there's discomfort around that, if they say, you know, I know there's more for me, or there's something out there, but I'm not sure what it is, then it's, there's no way around it, my friend, it's a deep dive inside. It's, it's, you know, I, when I got out of corporate America, I took six months off and I did yoga, I worked with a shaman, I did a deep spiritual, inner work around what I was here to do and that really helped to give the clarity.   So I think people have to spend a little more time off screen and more inner work time. Push away from the, you know, these devices that we use these iPads and phones and computers, lower your brain function that your brain has to actually slowdown in order to connect in with this device to be able to take the information in. So what someone can do, I'm just thinking back then the practice that I did every morning, I'd wait before your eyes open, connect in with your higher self and just ask what do I need to know right now? So this is before the brain kicks in before your phone before any type of device phone or what have you that you turn on the that, that's the time when you're gonna get information, you're still kind of in a sleepy state you haven't fully woken up yet. Just sit with that at that time and you'll get information you'll get, you know, an idea will drop in or something inspiring or the thought of oh, yeah, I need to reach out to this person and then the universe aligns all of that for you. It happens in such an elegant way that a lot of people overlook it. Because they think oh, simple, is not powerful and actually, the truth is, peace is the new power, simplicity is the way to get there.   Michael: Oh, man, I love that I'm getting goosebumps just hearing you say that. I think my problem is I have that thought coming to me at 2am oh, I gotta call this person and then I can't go back to sleep. So I need to figure out a way to get around that.   Jaden: Yeah, super simple. Just either put a whiteboard in your room, and you get up and write that down on the whiteboard, or a pen and paper and so I just use a big fat marker, because I know I'm not gonna be able to read if I do a ballpoint, I can't read it in the morning, reach over, grab my piece of paper, write it down, and then in the morning, you'll have it.   Michael: Oh, that's great, too. I love it man, I'm getting way more than I bargained for here having you on. This is awesome, man. So okay, so let's fast forward now to what you're doing today. Because A, I think it's super interesting and B it's kind of controversial, I think from a traditional investment standpoint. So you are now picking individual stocks. Is it so I have that right?   Jaden: Yeah, so you know, like I say, I'm totally counter narrative, I anything that is out there in the narrative, generally, I'd like to turn on its head and look at it from a different perspective and we have to look at what's being pushed on people, mutual funds, packaged products, manage money, CDs, you know, all these things that are simply not going to give someone a successful retirement, a profitable retirement. And I realized, so back in 2017, I put a course together to teach people how to invest in stocks and what to look for, you know, how to read a chart what, how to interpret it and, and then one of my students said to me, you know, I love your course, could you create software around this and I was like, my brain just exploded, you know, like, oh, well, how would I do that and that's such a good idea and I'm not a techy guy, you know, and, and, and then the universe lined it all up and sure enough, I partnered with two gentlemen who are amazing IT guys, we spent three years developing software called Sterling stock picker, and it does exactly that I said to the guys, if we can create software that in three clicks, someone finds a winning stock, we could change the world and I believed, I believe it, I believe we can, and I believe we are.   So we did that we put the software together, it calculates the algorithm calculates all the metrics that someone needs to know so they don't have to worry about you know, it, about not knowing and it empowers people to find stocks aligned with their personal values, aligned with their risk tolerance level, it's a really comprehensive software that we've put together. And it worked out so well it became profitable right out of the gate that now I'm in the middle of a Regulation A offering where we've raised half a million dollars, I'm taking the company public in two years. So we've got two more years to go to increase the revenue for the for the software, and then our subscribers who get in at 50 cents. I'm going to just do a super low issuance and the float. So my goal is $8 a share to go public in 2024.   Michael: Holy crap, that's amazing. So how has someone not done this before? It seems it seems from the outside looking in so obvious, right?   Jaden: Like yeah, yeah. Oh, there's software out there man. But it's so convoluted it's so cuz I've paid 10s of 1000s of dollars to buy software to invest in the markets and I was confused and I'm like, if it's confusing for me, like this is my background. It's you breathe know what I did for a living for 11 years. If I was confused, there's no way that most people can understand it and it was so confusing. I couldn't put it to work. So we've made our super simple, so easy and I think that's our superpower is we've simplified the complicated with the software.   Michael: So Jaden, tell me why everyone like that is so different and counter to what you hear from everyday investors to the professional investors go get mutual funds, they're safer this and that. Why does this work?       Jaden: Well, it works because people are getting 30 4050 120% return on their investment. Like, first of all, you know, my biggest challenge, Michael, when someone comes into our platform is I have to, I have to teach them that 8% that average is not what they need to be shooting for. But everyone has been so conditioned to focus on, you know, just settle for average returns, right? Don't expect to outperform the markets. I mean, it is why it is so easy to outperform the markets, when you have the right information. That's, that's the key you got you got to have, you got to know when to invest. So our stock, where it tracks when to invest in certain sectors, it's been heavy and mining and oil and gas companies for the last 18 months. Those have been super profitable over the last 18 months, as we know, with the price and rising in oil, and hard assets, commodities, like gold, silver have been, you know, doing fairly well, I think they're still being suppressed in the prices. But that will change at some point, it has to. So yeah, I'm totally contrarian but you know, think about it as a if you're a business owner, entrepreneur and if you have 150, or 200 products to sell, right to manage in your company, you'd be like, I don't even know where to start, let alone how am I going to be profitable and successful, right. But if you have six to eight products that you're selling, you know, you're super focused in your business, you know, what you're doing, you know, your target audience, you know, your, your manufacturing costs, like you just have the six to eight products that you're selling, there's a really good chance your business is going to be really profitable. Wouldn't you agree?   Michael: Yeah, I mean, I'm thinking back to my prior career, and we sold one thing and one thing only, and killed it, as opposed to the other competitors that had multiple lines of similar business, so.   Jaden: Then you answered your question, my friend, it's exactly why we know a smaller, concentrated portfolio of stocks of these are the some of the largest companies in the world, mostly in North America that you know, buying into those shares, you can get rich, there's no question. I did it with one company, the decade in my 20s. It was the company that I worked for Citi Group, that the parent company at the time was travelers, and that stock tripled. So I turned literally $70,000 into over a million and that's why retired.   Michael: Holy smokes… That's incredible. All right, so talk to me a little bit about the software itself. I mean, it must be really expensive.   Jaden: You know, it's not, it's $33 US a month, we have a 14 day free trial. So someone can take it for a test drive for free for 14 days. We priced it in a way that everyone could take advantage of it, you know, we know it should be probably a few $100 a month. But we didn't want to do that. We want to just leave it at a price that people are comfortable paying. If you're paying 15 a month for Netflix, you might as well pay a little bit more.   Michael: That's such a that's such a reality slap in the face like yeah, I'm willing to pay 50 bucks for Netflix, don't even think twice about it. But for to help yourself get rich like well, 33 bucks.   Jaden: That's it, that's it my friend. Exactly, you know, it might as well invest in your future and learn a little bit. I'm in there. Every Monday I do a live stream every Monday at 12:30 and I  share what's going on in the markets from an a macro economic standpoint and then I get into the micro aspect of what I'm buying why I'm buying I tell I'm very, very transparent. I tell people what I'm buying the reasons behind it and why. You know, two weeks ago, I was gonna buy Tesla stock, it was $1,200 a share. I went on to the live stream and I said this these other reasons I'm not buying it here. I know it's going to pull back and I walk them through the software and show them. This is why the stock broke below their short term averages the MFI The Money Flow Index is too high, you know, we just go on and on. So I like to educate people through the platform. That's one of my big things in life is to teach people what to look for when they're buying the stock. So yeah, that's the that's the software.   Michael: That's awesome and so how well versed does someone have to be in the stock market in order to participate or really take advantage or utilize the software to its fullest intent or can someone literally just click a button and it'll spit out based on their inputs, stocks that they should buy?   Jaden: That's it right there, three, three clicks, and they're going to find a list of winning stocks that they can buy at the exact right time. We've already figured it out for them. We actually incorporated personal values as well because, you know, my belief is if you're if you're aligned in alignment with the companies that you're investing your money and then it'll work out far better than you know, let's say if you're a health nut, you probably don't want to own McDonald's. Well, did you know McDonald's is in most mutual funds and most equity funds in the US has holds McDonald's stock in there. So it just depends, right? If you want to steer clear of that you can with individual stocks. That's what's so cool.   I'll tell you a story and this is really this hits home as to why I do what I do. When, when I was a broker with Merrill Lynch, I was like 25 years old. I had a client named Dr. Walter Arnold, and he told me a story about a friend of his who was a back then we call them secretary, she was a an executive secretary and she, she invested $5, every single week in her stocks $5 back then and she did this for 40 years, while she retired with $1.2 million and her stocks grew like exponentially like she had 20% annualized growth year after year after year and he said, he said the fascinating thing was, was how she found these companies what she did back then, in the 40s, and 50s, it was very expensive to advertise in magazines in color. So she would flip through these magazines and any companies that advertised in color, you know, back then it would have been Kodak and just companies that were doing really, really well. IBM was advertising and color back then she said she bought shares of those companies. She had four different companies in our portfolio and she just kept investing in them week after week after week, $5 a week, her portfolio grew. She didn't touch it, she didn't take any dividends out until she retired with $1.2 million.   Michael: That's incredible.   Jaden: Isn't it simple?   Michael: It sounds totally the KISS principle.   Jaden: That's it, yeah…   Michael: My gosh. So it's funny, because you took the question before I can even ask it and I was gonna say, one of the things I think that's so powerful about real estate is leverage that you can take $20,000 and go control $100,000 worth of asset where you cannot do that, with lesser buying margin sort of thing in the stock space. So is it worth it for someone to take a little bit of money and invest it or does it need to be something a larger amount to really become impactful? And it sounds like I got the answer to that question. But curious to hear your thoughts.   Jaden: Yeah, well, you got to start somewhere and with how the equity markets are set up, you know, if you're in the US, you can buy stocks for free, it doesn't cost I my US accounts with TD Ameritrade zero commissions, right. Robin Hood, same situation. So yeah, all of that money goes to work for you were when I was a broker at 25, we were charging several $100 to buy stock. I mean, in one transaction, right? It was it was a lot of money back then. Now it's just that barrier is gone. So more now than ever. It works with starting to invest someone can dollar cost average into the equity markets. That's what that's what Ann did $5 a week. So she didn't try to time the market, she didn't try to figure out you know, what's the best price for a stock she just said, hey, I've got five bucks a week I can invest, put away and not touch and so that might be someone can start with $100 or but we got to start somewhere and like you said, margin is another aspect that can increase their purchasing power.   But you know, we're seeing something very interesting happen in these markets, real estate as well. There's, there's a construction happening, right? The Federal Reserve Fed is starting to raise interest rates on mortgages and I lived through like I said, oh seven and oh eight where it was a scary time. You know, it was a totally the market was contracting lines of credit were being reduced. It was hard to get access to cash. So I would say for an investor today you know, look at it from a multi approach standpoint, have some money in equities, stocks, companies, four to six different stocks. Consider real estate, but also hard assets like gold and silver coins. The actual physicality of gold and silver, I think, I think if you look at you know, there's talk about a central bank digital currency coming in. That has to be reset in the previous 500 years, whenever a currency went bust, it was reset against gold, the gold standard. So when that happens again, which it will at some point, it's probably sooner than later at this point. They're going to have to mark to market gold at a fair price. So that may be instead of 2700, or $2,000 announced it might it might be 20,000 an ounce. It could be 30,000. We don't know what that number is going to be. But if someone starts investing that way, thinking that way, you know, how am I going to maintain my wealth? How am I going to preserve my wealth and grow my wealth during this time? Because this is a tricky time we have we have inflation, probably hyperinflation, you know, on the horizon. We've got interest rates going up, which to me sounds totally counterintuitive. I don't know why they're raising interest rates as inflation starts to run rampid. But the printing presses printed and minted way too much money. So now they're trying to make up for that that's at least that's the narrative that they're telling us. So we have to plan for that and prepare for that.   Michael: Okay and one last question for you Jaden. As so many people, you hear talking about how frothy and how top heavy the equities market is, the stock market is so high, it's never been higher. You know, what do you say to that in terms of people who are just getting started?   Jaden: Yeah, so there's so much new money going into the equity markets right now. It's on an it's an add a net 15 billion, that's what the be a month net buying. So there's more 15 billion more month being purchased equities purchased on the exchanges than being sold. Because frankly, it's one of the best investments out there. So there's tons of money going into the equity markets that will continue to drive then the markets did pull back early this year 15% decline and just two years ago, remember, it was down 35% in a six week period once this COVID pandemic kicked in. So there's, it's pulled back. But what drives the market is buyers, not sellers, and we see the buyers continuing.   Michael: So okay, I like to have one follow up question for you. When Warren Buffett says I think it was Warren Buffett who said be greedy when others are fearful and fearful when others are greedy. To your point of there's all this money going into the market, I mean, is that people being greedy and so therefore should we be fearful or should we be kind of jumping on that bandwagon thinking, Well, hey, if these people that make a lot of money are investing, maybe I should to, you know, hitch my horse, my horse hits my car to their horse, so to speak?   Jaden: Yeah, it's that's such a good point. Because there are so many great companies out there right now that are thriving during this time, and you can make a lot of money in stocks. So I think I think you have to have a balanced portfolio in terms of some money in real estate, right? That's, that's important. People always have to have a place to live and equities and then like I mentioned hard assets, the golden silver coins and then once you have that perfect trifecta of investments, you can really sleep better at night because you're not worried about, you know, what the markets are going to do. You know, you have a study plan. If the market does pull back, well, you get to buy more shares, which is pretty good.   Michael: Now they're on sale.   Jaden: That's right now they're on sale, exactly, right.   Michael: Awesome. Jaden, this was so much fun, super, super informative, and interesting. Where can people learn more about you or take advantage of your software if they'd like to?   Jaden: Sure, https://sterlingstockpicker.com/ is where you can find me reach out to me, we have a clear, great website that shows how to get started in the stock picker software, and how to connect with me if you'd like, I always return emails. It may take me a while because I get a lot each and every day but I promise you I'll certainly get back to you.   Michael: Right on. Well, thank you again for taking the time to chat with me really appreciate you coming on and I'm sure we'll be chatting soon.   Jaden: My pleasure, Michael, I look forward to chatting again. Thank you!   Michael: Awesome, you got it take care. Alright everyone that was our show a big thank you to Jaden for coming on super, super cool software he's developed I will definitely be checking it out and I thought he shared some really interesting perspectives about how to balance a portfolio. So if you liked the episode, please feel free to leave us a rating or review wherever it is you're listening to this podcast and as always, we look forward to seeing the next one. Happy investing…

A lot of real estate investors start out with single-family homes and soon realize that multifamily helps them scale much faster. But multifamily properties can come with more complications and many investors appreciate having learned the ropes in the single-family space before taking on this asset class. So is it smart to start small and work your way up or just dive into the deep end?    In this episode, Emil and Michael share their experience on this topic and point out the pros and cons of either strategy. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my co-host…   Emil: Emil Shour   Michael: …and today Emil and I are going to be chatting about does it make sense to start with single family or with multifamily? So let's get into it.   Alright, Emil, how's it going, man? It's been a minute.   Emil: Good dude. How you doing?   Michael: Hanging in there hanging in, I got a couple of refinances that just close today that I'm working on for a long time, so really excited about that. So I'm going to be redeploying some capital here to some short term rentals. How's, how's the triplex sailing all smooth?   Emil: Yeah, I haven't, I haven't received an email in weeks. So that's my favorite kind of news is no news for my property manager.   Michael: It's a good sign. Yeah, oftentimes I would say.   Emil: Yeah, yeah… We've got tenants in place, you know, they're all fresh, no bad news. So fingers crossed, it keeps staying that way.   Michael: Sweet! Well, today, Emil and me want to talk about if it makes sense to start with single family or multifamily as you're just getting started. And you are someone that started with single families, right?   Emil: I did! My first investment property or actually any property I purchased. It was an investment property. It was a single family in Jacksonville, Florida in 2017.   Michael: Okay, and now you're a seasoned investor, you've got six units, I think, you've done some multifamily.   Emil: Yes sir.   Michael: Should you have done differently?   Emil: I am happy I started with single family. I think starting with one tenant, one home one unit, is the ideal way to start. I don't think, I don't think this is like one of those. There's a better or worse way. I think it's what is what is your appetite for pain? Do you do want to like learn really fast and deal with a lot of craziness at first or do you want something slow and steady and just like an easy on ramp? So for me having a full time job, at the time, starting with a single family was perfect. It was like, I got to learn how to manage a property manager different things that can go wrong. It was just an easier transition for me and I'm happy I started that way.   Michael: Yeah, it's funny you say appetite for pain. I think we just want to be careful to not give people the impression that single families can't be a highway on ramp to pain because you know, my first, my first investor was also a single family and it was like the most painful one ever. So I think it's, it's you can have you can have it either way. You can have horrible experiences with single family, you can have amazing experiences of multifamily. So it really just depends, I think how the asset is structured and where you're buying it.   Emil: Yeah, but you could… let's say you bought a quad Plex, right? You had the same thing, but times fours. It's just like your percentage. No, actually, I don't know, you could look at it either way, you could say, well, I have 4 units, my likelihood of 100% pain is much, is much less likely than so I think personally it's just easier to go with one, learn the ins and outs. Again, you're learning, especially if you're remote investing, you're learning how to do that, you're learning how to deal with a property manager. I think overall, it's just easier with one.   Michael: Okay, and let's dive a little bit deeper. I mean, talk to talk to us a little bit about like, when you say learning the ins and outs, what does that mean? What did you learn from investing in that single family that then better prepared you to invest in that triplex and what was totally brand new? Like what caught you off guard with the triplex?   Emil: That's a good question. I think it's just, you know, if you never if you've never owned your own home, there's all these moving parts of a home that you're not really like, I don't know how an H back works. How does plumbing work? What's uh, what's the main line? What's all these things? I've even forgotten already, as we're on this podcast, but like all, all these bars, all these parts of a home that you just you don't really know. I think that's one just getting more familiarized with all the moving parts.   Michael: Does it matter that you didn't know how an H back works? I mean, you don't know how a car engine work. I mean, I assume I don't want to I don't want to put words in your mouth. But do you know how a car engine works?   Emil: Here's the difference. A lot of things go wrong with your property. I don't say a lot, but things go wrong, right? And it's on you to know, how much does it cost to get that fixed, right? Like if someone said, Hey, your condenser broke? We're gonna replace it for $10,000, how would you know if that's accurate or not?   Michael: I gotcha, I see what you're saying. Okay!   Emil: So that's that's one thing.   Michael: But it's the same thing with car if you take your car to the mechanic and they say, oh, you're continuing to trance function or is broken. We're gonna turn into $1,000 to fix it. So our concept, right, I guess you have to you have to chat with other people…   Emil: Well my first car was a $6,000 used car. So I would just say, okay, you guys keep it, I'll go get a new one, you know what I mean…? I mean, it's like, it's, it's also, in most cases, less less dollars in, right. So a multifamily is going to be more dollars in your learning on more dollars versus single families less dollars in potentially, so less dollars you potentially have on the line to learn.   Michael: All right, all right. I will, I'm gonna I'm gonna take a… alternative position on that one and push back, I think that you can actually find multifamily in particular markets that are as inexpensive or less than some single family. I mean, they're single family all over the place in the 2,3,4- $100,000 verse multifamily, you can find properties that are less than so I think that's a very common misconception that people fall into is oh, multifamily is automatically more expensive and I don't know that that's necessarily the case for every market.   Emil: Yeah. But then you're putting you're potentially putting the cart before the horse, right? You're saying I'm going to go find a market where it meets this versus you should find a market that you like, and then look within that market?   Michael: Hmmm… Yep. So you're letting the deal dictate the market or letting the market dictate the deal?   Emil: Right! I think it's like some people will just I started that way, right. I said, okay, this is how much I want to spend, which markets kind of fall into that, which is one way, but I don't know if that's the right way. I don't know if it's the wrong way. But I would, I would rather if I could start it all from scratch, say like, what is the market I want to really invest in? And then secondarily, who is the property manager, I want to invest with?   Michael: Oh, that's very well said. And so you're someone that wants to kind of cluster their investments in the same market? It sounds like…?   Emil: I would yeah, I think I've said that, like on previous episodes being scattered across couple different markets, I think finding one market you like, you're finding good deals, you have a good property manager, again, to me, that's the key is finding a property manager. It's tough, it's like how do you find that good property manager without trying several markets, right?   Michael: If you get some perspective and you go other places, you realize, oh, man, my manager was amazing, or well, my property manager kind of sucked.   Emil: Right, right. Well, that's the value of I think networking and talking to other people who are doing real estate investing rather than just going solo.   Michael: Totally, totally. And I cut you off before to go down this rabbit hole but you were saying, you were talking about what the ins and outs were that you actually learned that prepped you to be ministers as a multifamily investor.   Emil: I don't think I'm a successful multifamily investor. I have one drive legs and that's been a big learning experience. I don't know, it was just it was a different learning experience in that I had multiple tenants leave at the same time. You know, single family, you're not paying a lot of the utility bills, right. So you're learning on the multifamily, like, what are my actual expenses? What do I cover? And how much are they each month? So it's like, yeah, you can estimate and talk to people, but like, it's just things you're going to learn by doing and buying? I don't know…   Michael: Yeah, I think it makes a lot of sense, I think it makes a lot of sense…   Emil: Those are of the things that come to mind.   Michael: Yeah.   Emil: And then, you know, how long does your average single family tenant stay versus multifamily? Like, yes, their stats online, but it's to me another one of those things you learn by doing?   Michael: Yes, very much so, very much so. See, it's so funny, so many of the points you brought up for single family, I agree with and I think are valid, but I have like the opposite experience and I experienced those things with multifamily. So I actually have another episode too, like my first two investments were single family. I had the tenants leave every single year, they did a ton of damage on the way out and had to go to small claims court. So I was like, oh my God, this sucks. So that's ultimately kind of what led me to multifamily, I was like, oh, I gotta do something different. This is not this is not working out. So had much better luck with multifamily and that's where I've been focusing on since.   Emil: For the record, where are your single family, those two single families you bought?   Michael: They were both in California, in Southern California.   Emil: Southern California is a tough market for landlords, man…   Michael: It very much is…   Emil: That I think probably played some into it, potentially for you.   Michael: I think so, I think so. But also I mean, like given that I've also purchased I purchased two flip properties. One was in Birmingham, Alabama and the other in Kansas City, KC Mo, and that's been those have been paying to the butts too and so I think it's it's not a one size fits all like you were saying and it's it's very much personal preference.   Emil: Sure   Michael: But some takeaways that I had from investing in small multifamily, so two, three and four units is, as he touched on earlier, was the likelihood that you have both tenants or all of the tenants having issues or vacancy or causing damage, the Cisco likelihood just goes down. And so that's why a lot of people buy multiple properties because if you have one property, the likelihood of having one vacancy is fairly high if you have two that goes down, so on and so forth as you expand your portfolio. And so you can do that and acquire more units and increase the statistical likelihood of success.   Success in this case, meaning not no vacancy and less repairs, with fewer transactions and so it just becomes, easier from a management standpoint and easier from a mental capacity standpoint, when you're thinking about, okay, I've got one address to worry about, these are all the things going on there as opposed to these five different addresses to keep track of and so I think for from a small multifamily perspective, like, again, those two to four units, it's fairly similar from a how to own and operate perspective and I think you nailed that also talking about like the expenses and so from that perspective, it can be a little bit different, and your expense load and what your operating costs look like, and who pays what and how often you might have a turn. And but the cool thing is, the financing is the same. So if you go buy a one single family or a two to four unit, and you're getting conventional financing, that's the same, which is really, really cool. It's not until you make that gap into that five plus unit space that it changes into commercial financing.   Emil: Right. And that's probably something important to consider here as well, if you're like thinking about multifamily or single family is, well, if you have less time, let's say you wanna invest real estate, but you have less time, right? Multifamily, we know is valued on how well can you make it perform, it's more like a business, tather than, you know, one to four unit, you're kind of writing the ups and downs of the market to value it right. It's all sales comps. So maybe if you have more time, and you can you feel like you can manipulate the NOI on that property, get it valued higher to do those things. Maybe multifamily makes more sense for you and then but maybe if you're you know, super busy and you want something a little bit more passive, I've just found that my single family has been more passive, my attendance stay longer. I haven't done the triplex for a ton of time. It's been a year and a half. But my tenants stay longer, I hear less things overall, is what I've is my personal experience with, very limited units, so…   Michael: Yeah, I think you've made a great point talking about time, time perspective, I would just add to that, that if you're just starting out and taking on a multifamily investment, finding something that's that has a value add component might be tough. And it really comes down to like, I know, I was way in over my head with my first multifamily deal I had. Because I just feel like you don't know what you don't know and so you're jumping in, like you mentioned, to this multiple unit situation where all of these things are new, versus trying to figure it out with one tenant and one property in one door, where everything is still new. And so I think that there it's it's often an easier pill to swallow. But if someone is super gung ho and wants to take risks and has the financial wherewithal to back it up, and is like yeah, I know I'm gonna I'm no, I'm gonna learn lessons, but I want to learn lessons hard and fast. Multifamily can be a really great way to do that. Most value add now layering that on top of that is another way to learn even harder and faster and more expensively. So if someone's just starting out, I think and they're gung ho about multifamily, I think a turnkey multifamily can be a really a really great way to go.   Emil: Yeah. That's something interesting you kind of bring up their trauma to me not trauma, but like recollection of my this, this triplex my first multifamily is when you're wrong on your calculated repair costs and all that it compounds, right. So if you have three units, you got a turn, and you think it was 5k each and you were wrong, it multiplies faster than oh, the the kitchen on my multimeter and my single family, I thought was gonna be 5000 ended up being 6000, right. Like, you just multiply it if you're wrong multiple times.   Michael: Yeah. No, it's such a good point, it's such a good point. I wholeheartedly agree.   Emil: Yeah. But it's good. That's a good learning experience that, you know, people should go through.   Michael: Yeah, well, I would argue I would have preferred to have someone else go through it and tell me about it and then I could learn from their mistakes, which is why we started the Roofstock academy. By the way, we talked about, hey, this is purpose built for investors, by investors for all the crap that we had to go through that we wish other people had told us ahead of time.   Emil: True, true and it's also valuable in that, like, your cost will change from market to market, right? So having other people in the same market you invest in, it's just so valuable.   Michael: Totally, totally. And oh, I forget who said it. I don't know if it's a famous quote, or it was someone I just heard talking, but they're saying like, not every dollar of rent is created equal, in that in every market you go to, just because it looks attractive on paper doesn't necessarily mean that it's going to be, you know, a rosy walk in the park and so be very particular and do your due diligence around okay, what is the market do? And what is the market doing? And why is this thing, both single family or multifamily, the price that it is both from a rental perspective, as well as a cost perspective. So if you're like, holy crap, I can go buy these $200,000 property rents for five grand a month. Why is that? You know, what, did you find a unicorn? Maybe? And let's, you know, go figure that out, just because it's so good. It shouldn't scare you but you should definitely put up a red flag and say, okay, well, let's investigate this further and find out why this is the way it is.   Emil: Right.   Michael: Awesome. Any other points Emil, before we get out of here?   Emil: No, I think I think we actually cover this one pretty well, in terms of our individual experiences, pros and cons of each thing and it was well covered.   Michael: Love a good humblebrag… Awesome, let's get out of here.   Emil: More so by you, you're just grilling me and I'm like, uh,… I still remember Michael, it was four years ago.   Michael: You tried to block it out of your mind? Forget about it.   Emil: Yeah, I'm like, I don't know. I just it's kind of one of those things where you're like, you just put one foot in front of the other and you know, you're drinking from the firehose, so…   Michael: Totally. Yeah. Well, but real quick, so last question, before we get out of here. How has that investment panned out for you, that first single family?   Emil: My first one?   Michael: Yeah.   Emil: So yeah, it's been a cash cow and if you hear crying in the background, that's my newborn baby in, shout out in.   Michael: My baby boy in… baby boy… Emil: Baby boy… So when I bought it, I think the rent was somewhere around 900 and we've just had steady rent increases and the same tenant for four plus years now. So I think now it's at like 10350 or somewhere like that. Yeah, and just having the same tenant is so valuable. I love it. It's so nice. That's my favorite thing was single families. They seem to stay longer.   Michael: Love it. So what was probably a good deal at the time has now turned into if you saw it today, a great deal, it sounds like…   Emil: Yeah, I think it was a, if I'm being objective. It was a decent deal at the time and now it's become a pretty good deal for me.   Michael: Love, time, compounded with like good decisions. That should be like an equation time. Time plus good decisions equals, I don't know, killer deals. Hey, everyone…   Emil: Michael Einstein, the Einstein of real estate.   Michael: So dumb… awesome. Well, let's get out of here, Emil. That was our episode, everyone. Thank you so much for hanging in there with us through all those rabbit hole side tracked conversations. As always, if you liked the episode, feel free to leave us a rating or review wherever it is you get your podcast, and we look forward to seeing the next one. Happy investing.   Emil: See you later.

Matt Faircloth is the co-founder and president of the DeRosa Group, a real estate investment company that specializes in buying and renovating residential and commercial properties. Matt and his wife, Liz, started investing in real estate in 2004 with a $30,000 loan. They founded DeRosa Group in 2005 and have since grown the company to managing more than 370 units throughout the east coast. DeRosa has completed more than $30M in real estate transactions involving private capital—including fix-and-flips, single-family home rentals, mixed-use buildings, apartment buildings, office buildings, and tax lien investments. He is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets' educational webinars. In this episode, Matt shares his background in real estate investing, and a roadmap for investors looking to raise more private capital to close more deals. Additionally, he talks about the reality of running a real estate business.   Episode Links: https://derosagroup.com/ https://www.instagram.com/themattfaircloth/ https://www.linkedin.com/in/mdfaircloth/ https://www.biggerpockets.com/blog/contributors/mattfaircloth --- Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me I have Matt Faircloth, author, podcast speaker, co-founder, president, investor, syndicator. He does a lot and we're gonna hear a ton from Matt about what he's been doing in the real estate space, and what he's currently putting together and actually closing on today. So let's get into it.   Matt Faircloth, thank you so much for coming on the show today. Really appreciate you taking the time to hang out with me.   Matt: Michael, I appreciate your time and having me on your show, man. Thank you.   Michael: Absolutely, absolutely. So I know a little bit about you but I would love if you could share with our listeners who maybe have never heard of you. They've been living under a rock for the last couple of years, who you are, where you come from, and what you're doing in real estate?   Matt: Where did you come from…   Um, it's cool that my company's called the DeRosa group and I just love saying this, that we're a company dedicated to transforming lads real estate through real estate transforming lives to real estate. We can get into that in the show if you like. I… where I came from, let's see, I grew up Baltimore, bopped around the East Coast for a minute. Before I landed in Philly, met the woman of my dreams because she put Rich Dad Poor Dad in my hand, and we were still dating, that got me to read that. And that that gave got me to drink the entrepreneur Kool Aid, which I guzzled and quit my job in 2005 to start a real estate company, bumped into a lot of walls, you know, did a lot of it, made a lot of mistakes, made some money and then and then just built it and grew over time and just learned how to run an effective real estate company through the school of hard knocks. And now I've been doing it for 16 years and just apply what I've learned over the years, you know, attracted more and more the right people who work with me and build what I think to be a phenomenal brand now.   Michael: Oh, that's awesome, man. That's awesome. You said that once or twice before I can tell it just rolled off your tongue there so nicely.     Matt: You know, this is not my first podcast. Sometimes people ask me, let's just get real, screw it, man. Let's get real right now…   Michael: Let's do it.   Matt: What I get I go on a lot of podcasts and when you go on a lot of podcasts, people tend to ask the same questions, Michael, right and so when they do, it's almost like I'm that guy, I'm the DJ sing in a DJ booth and then in the in the DJ booth of Matt's brain. And then people ask like, Hey, Matt, tell me about your first deal and I'm like, okay, let's get the first deal track pull the first track.   Michael: Go, pull the file.   Matt: You know, yeah, go pull the file, first deal, right. Tell us about the first time that you raise money, tell us about a mistake you made. Okay, let's go ahead skip, let's go pull up mistake file eight. Okay, let's write that file out, right. So it's more fun to go curveball. You know, like…   Michael: Totally   Matt: Yeah, that was a good curveball in the first five seconds of the show that you and I went down right and you into it, you can't help it you end up just going to a script a lot of times you know talking about things on podcast over and over and over again and I was it that a want to be plastic like that, but you end up like, if I've told that story six times the seventh time it starts to come off the same way over and over again, right.   Michael: I totally get it, and I hope that today is not one of those repetitive podcasts.   Matt: You're getting not to be that show already man, you are curve balling, I love it. Keep it up!   Michael: Well as a follow up Matt, what's your favorite mammal, man?   Matt: It's good one, I am, okay, growing up, I have an eight year old, right, so my eight year old is always: Daddy who would win… I wish he was here because you and me, we would have a ball right now… Daddy who would win when a colossal squid or a great white shark? And I'm like Simon, first of all like, but he'll even be like a gorilla or a colossal squid and like girl is gonna drown buddy battle…   Give me more data, that would depth are we talking about the ocean? Are we talking about like 3000 gorillas... To you question, I probably go a gorilla, if I had to pick or, or maybe I don't know why, but growing up I loved Black Panthers.   Michael: Mm hmm. Okay, pretty majestic animals.   Matt: Yeah, I don't know, I don't know, the majestic, they are majestic animals. Yeah, so that would be my favorite, those are my two favorite man…   Michael: I love it, well so real real quick change because we're already on this rabbit hole. You know that there was a show put on by I think NatGeo or discovery that answered your son's questions they would pit these two animals together in a simulation… like that exists…   Matt: You can google and they would show cuz he would be like, daddy who would win a saltwater… It's just you can google saltwater crocodile versus great white shark…   Michael: Great white shark, I saw that episode…   Matt: It's good, it's good, right. Good job displaying well you see the saltwater croc would try and take the deathroll on this or do that...   Oh, he was my son's itch was scratched with that, you know. I don't know, why he is up to the Komodo dragons. Komodo dragon versus anything you can name, that's what you want to talk about…   Michael: That's a battle royale this century… Oh my god. I love it.   Matt: Well, dragons are badasses man, these are like, there they are… Would you know that?   Michael: Yeah, that's the kiss of death, yeah… Matt: It is! Not only the monstrous lizards like little dinosaurs, but they also the venomous bite, you know…   Michael: It's such a ridiculous concept like, oh, let's take two of like humans worst fears, like, long tailed long tongue lizards, and then give it venom, sounds awesome.   Matt: Right! Give it nasty teeth. Yeah, like a really weird awful roar and give them venom, too…   Michael: Oh my god, so good.   Matt: They're nasty creatures, man. Good thing that'll make them in North America.   Michael: I know, I'm stoked, I'm stoked. All right, well, if we bring it slightly back towards the real estate, you know.   Do you want me to do a whole podcast on mammals like komodo dragons… So you started a company, your real estate company in 2005 and when people hear that, I think it might be ominous to some people, you know, what is a real estate company mean? And so what was the transition, like, I mean, like, what is the DeRosa group do first and foremost and then what was that transition, like going from just owning stuff on your own to now I have a business focusing on it?   Matt: That's interesting, you know, that man, um, interesting concept, because a lot of people out there are running real estate investing, like it's a gig, you know, like, or it's like driving Uber, you know, you could just decide to not do it at some point, you know, I mean, it's not a gig, it's a real estate investing is a business because it's a marathon, unless you're wholesaling or just doing a deal here and there something like that. Not for nothing. This business… the business of real estate investing is a business and you should treat it as such. And we didn't always do that the first couple years, I treated it like a hobby and I bumped into walls and did a bunch of different things but like once I really got my legs underneath me, as a real estate investor and really found the calling found the purpose and got and got and got focused on real estate investing. I got clear that it's a business that is like a living animal it's a it's a living thing…   Michael: It's a living Komodo dragon?...   Matt: Real estate investing is like a Komodo dragon, right, it needs food, you know… It can have a venom's bite and can be nasty and shit and can get the fuck out of you. And a lot of people are scared of it, you know, right… Yeah. People read articles about it only exists in certain places we can keep going. But it is something that needs, you know, if you want to grow real estate investing business and sustain yourself in this, in this industry, and not just make it a hobby, you have to have a company that's got you know, clean books and has a purpose and has a mission and has roles and responsibilities and job descriptions and stuff like that, because there's sucky things in real estate you have to do and it's like, well, you know, and you could look on Instagram. And if you look on Instagram for real estate investing, people think that it either means you close deals every day, because it's the people every time people close stuff, they put it on Instagram, or they go to it's like, Instagram thinks that for real estate investors, all you do is close deals, go to conferences and go on vacation That's what you see people doing on Instagram, the real estate investing, right? But there's actually like, this sucky part of real estate investing, which is sitting on your desk and answering emails and you know, just corresponding and looking for deals and swinging and missing and dealing with knucklehead tenants and stuff like that that want to, you know, recently Michael, we had a tenant, had his girlfriend come in and he must have done something bad because she went, put all his clothes on his bed, dumped gasoline on the bed, lit it on fire, walked out.   Michael: Mike dropped…   Matt: This is what happens, that's real stuff, you know… That did not make on Instagram unfortunately, you know…   Michael: No, that wasn't the highlight reel.   Matt: Living my best life, look it's amazing…   Michael: Well, so you bring up a really great point that and that it should be treated like a business and I, I wholeheartedly agree. But so what about all the people out there that are just getting started that could never see themselves as a business owner as an entrepreneur but hear about real estate investing as a great side gig like you mentioned that what about what about all those folks? Where are they left?   Matt: Okay, they need to decide if they want to do it full time or not, right…And there are people out there that have a day job that they love and it's, it's probably something that's very fulfilling to them, or maybe they went to school for a long time, like a doctor or an MD or whatever. I mean, Jesus, those folks go to school, God bless them for like another 12 years after they get out of college, right? So why would they change careers, right? They want, there are people that really in their heart of hearts probably ought to go passive for real estate investing, as a side gig and as a way to build wealth. And there are people that that are doing it because they want to build up the passive income and become a business owner out of it. So you got to choose if you want to be an investor or be, let's remember Robert Kiyosaki Cashflow Quadrant book, right. Yes, ESBI, remember that thing?   Michael: Mm hmm.   Matt: Do you want to be a B or an I, B= business owner, I= investor. And if you're willing to put in your time and and you know, quit your day job eventually become a business owner and that's what you need to do. But unfortunately, people, a lot of people misunderstood Kiyosaki, to think that to be a real estate investor, you have to be an active operator, you have to do it full time. You can make the passive income all you want as an I-quadrate investor and just passively invest in things. And I think that that's, I think it's probably the most misunderstood function in a lot of his books, people that quit their job that really should have never done that they should have just passively invested their way to financial freedom.   Michael: Yeah, okay. And let's talk about that for a minute because you wrote a book about raising capital and I think capital is so often the biggest obstacle for people, the biggest hurdle people overcome. So do you see the kind of this roadmap for people? Where if passivity, is it really time is the goal, right? That's what everybody is after and we get there by either usually being a B or an I, by being at B that sounds terrible, don't be a B. So if people are capital is their obstacle, using real estate as a active vehicle to then take a backseat and invest passively?   Matt: Yeah, well, that's I mean, my book talks about that and then it goes back to like, let's just keep walking to the B and I road, right. So if you're a B quadrant business owner, we're rising D quadrant business owner for real estate, and you either want to do it full time, you already are doing it full time, then at some point, unless you win the lottery, or unless, like, you know, you just got a silver spoon in your mouth, and you got billions of dollars waiting on the sidelines, from your friends from your family or something like that. You're going to need capital, right? You're gonna run out man you are. And so on the other side of it, you've got I quadrate investors, and they have either retirement accounts, real estate equity, cash, any of those things that they want to put to work and not have to put in the time to make that money, you make that money, do what it's supposed to do, you know, then they can those two can marry up the B quadrant business owner of real estate versus the quadrate investor that wants to make a return on their money without trading money for time. Those two can have a really happy partnership. My book talks about all those things, how those two things can get structured together and how the why in my book are called the cash provider, as SI quadrant investor.   Robert Kiyosaki is a good guy, but he probably sue the hell out of me if I use his terms of my books. I didn't use that, I did, I did the the deal provider and the cache provider. The deal provider is the D Quadra business owner, the cache provider is the I quadric investor.   Michael: Okay, awesome and what is your book called?   Matt: Raising private capital. So funny Michael you asked that it happens to be right here behind… They can get it on Amazon or they can get it on biggerpockets.com.   Michael: I was just gonna ask. Alright, so it's called raising private capital and without giving the book away. What can people expect to find in it?   Matt: Along with a lot of my personal story on on you know how I got from guy that quit his job in oh five to you know, running a company that runs that owns, you know, multi 1000 doors of multifamily real estate. It's got that journey in there. And and that but also it's it's got a lot of tools and lessons, it's a how to really on how do you look in your own personal network as an investor, I'm sorry, as a B quadrant designer, it's how to look in your personal network to find the money, you need to do deals because you don't have to go to private lender, or you don't have to go to hard money lenders, you know, if you go and go more corporate level, or sell your soul to get the money you need for the deal that you're trying to do. You can look in your own network to find that money and raising private capital talks about how to find the money you need for deals in your own personal network.   Michael: Okay, all right, Matt can we do something kind of a silly exercise?   Matt: Please.   Michael: Can you because, I think a lot of people are really nervous to have that conversation and I think they feel slimy or gross. Can you pitch me on a deal that you're putting together as someone that would be in your your kind of sphere of influence? Let's let's see. Let's see what that sounds like and feels like.   Matt: Well, it depends if you're accredited, or not, Michael, because if you're not accredited, we have substantial relationship. But if you're accredited, I can talk to you, I can do a Facebook ad that you notice, right? All joking aside, let's pretend you and I are friends. We already know each other you already like and trust me, because I'm me, right and my book recommends that those are your first targets. You know, and that so hey, Michael, how you doing today?   Michael: I'm doing pretty good, what about you, man?   Matt: I'm awesome, man. Hey, listen, I happen to remember you saying that you were working over a company XYZ. You did a great job, didn't you. It's good. But you better get an opportunity to come up with ABC Company. And I'm really grateful for that you were able to move over to that did take on that new job. How's it going?   Michael: It's going really well. XYZ was terrible, ABC is infinitely better. Thank you so much for man, remembering you've got a killer memory.   Matt: No, it's great, I swear to you… I also barely remember going further, Michael, is that XYZ day as much as you hated what they did, and you know, and I'm so grateful you got out of there. But XYZ had a great comp package they did as I remember, you told me they paid you a really great 401k program.   Michael: Yes, yeah, it was pretty.   Matt: Those markets been taken off lately, right. So no, it's maybe maybe hit a top here and is starting to get a little squirrely and everything like that. So I want to tell you that we did you happen to know, Michael, you can take your retirement account and invested in things not Wall Street, you know, in that retirement account you have with XYZ company because you don't work there anymore that retirement account could be put to work in real estate. Did you know that?   Michael: I had heard that. But I didn't really know that I could do anything about it…   Matt: Well, you can now that you've left XYZ company, right, you can take that retirement account that they have, and they probably were paying you and lots of company stock, take the chips, man, take the chips off the table cash in, sell that company stock and roll that and roll that retirement account, which is now by the way was a 401k. Now it was an IRA. And you can roll that IRA over to a third party IRA custodian and you can do all kinds of cool stuff you can buy, you know, shares of companies, you can buy your own your own real estate investments, you can lend that money out and you can also invest it in deals like we have, I, we are right now Michael buying 670 units in two states, five apartment buildings in two states. That's the deal, we're in the middle of right now, produces phenomenal returns, produces, we're going to fix these buildings up and we're going to refinance them over time and as we refinance them, we're going to give some of that money back to you to your retirement account. So you can then take it and parlayed invest in another stuff. It's a great return.   I know a lot of people that we work with are really happy with work that we've done as a company. So you and I should talk further as a matter of fact, I have some Ira custodians that can handle this whole thing for you, if you'd like, I'd like to introduce you to a few of them that I love. You know, and then they we do a lot of work with them. So they give us white glove treatment. Can I introduce you to them for you?   Michael: Yeah, that'd be great, man, thanks so much for doing that. I appreciate it.   Matt: Yeah, and I'm going to mail you the offering. And if you don't, if you're not happy with my, if you don't like the returns, and you're you're nervous, whatever, it's okay, I get other things I can send you over to, I really want to help you build your wealth while I build my business. Because we're building a great real estate company and we're, our mission is to transform lives through real estate, I want you to help me do that. By me helping you earn money with your retirement account. Well, we do the work. So we can do that for you. And if it doesn't work out, that's okay. I have plenty of other friends for this awesome network called biggerpockets.com, you should check out and you can look on BiggerPockets to and find other things to invest in, like private loans and other cool things that can show you that are not real, like that real estate that I mentioned, even though that's a great deal. There's other things you can do to and I'll hold your hand the whole way. What do you think?   Michael: Oh, sign me up, man, I'll be looking for your email.   Matt: Cool, no problem.   Michael: Man, that was awesome. That was so so so good.   Matt: Thank you, thank you…   Michael: So firstly, for first and first and foremost, you've now got to send me that email because I'm sold. But secondly, what I love about what you did is the conversation felt very much, let me help you, let me put provide value for you educate me around what I could do with my retirement funds, which I might have not even been aware of, and then to tell me how you're able to help me, before even the you being helped in the process, being able to your own deals be my financing was even mentioned.   Matt: Yeah, well, so is a few facts, right, um, of the $10 trillion, that's currently in IRAs, right now, not 401k, it's just IRAs of the $10 trillion, it's out there. 4% of us invested in anything else outside of Wall Street and so if you're looking to get your capital game going, the easiest low hanging fruit, and the thing that everybody has is a retirement account that has if they've got a job, and they used to work at one company, and they now work at another company, their retirement account, they had the first company is now eligible to get rolled over to an IRA. And with the big run up the stock markets had it that's what you should be talking to people about, is like, hey, you used to work over here. Now you work here, don't you are you got laid off, you quit whatever it is, they don't have you there them a job. Now they just have to use to have a job. It's such an easy, low hanging fruit conversation and it speaks to their needs too. Because everybody's get a little squirrely and where Wall Street's going, it's just been a great run. You know, it's had a great run over the last 12 years. But now it might be time to pull a few chips back. So I think that that's something that's probably the most underutilized conversation out there. For those looking to raise money, is to talk to anybody that's got a job about investing their retirement account with them with their real estate company.   Michael: That's so good. I think so many people when when thinking about having that conversation, think, well, I don't know anyone who has money, because they might not be in cash assets or liquid assets on the you know, in a taxable account, but the retirement side of things brings into focus a whole another option.   Matt: Yeah. Yeah. Well, you can and there's other ways you can go about it, too. You can kind of sniff out, my book talks about like how to sniff out people that are in your network that likely have a lot of cash. What does what are the signs that a lot of cash leaves, you know, my book talks about that, my book talks about, there's another vehicle that they can they can invest with you and as those are people with free and clear real estate.   Last time I looked, Michael 30% of America owns their home, their primary residence free clear 30%. You know, but they don't. It's not it's not to get paid to ask a different color when it's paid off. It's hard to tell. Like all the purple houses in America are free and clear. Yeah, no, I don't know. So, but my book talks about the signs to look for free and clear real estate. And I also can tell you, here's the free clear real estate conversation. Here's the those with cash conversation and here's the retirement account conversation to have. I just pulled that into my playbook because it seemed like the most obvious one to go for is retirement account is probably the most, it's the most underutilized one. But I think it's the one that's most unnecessary right now, in today's world.   Michael: That makes so much sense, that makes so much sense. Matt, you mentioned before we hit record here that you are actually in the midst of closing the biggest deal that you've ever done to date today. Can you talk to us a little bit about what that looks like?   Matt: That was a by the way, Michael that was it bullshit. That was a real deal. I was pitching you on for your retirement account when you were working for XYZ comm your XYZ IRA could be invested in the deal that we're closing part of right now. Yeah, it's 670 units. It's in it's in two states. It is a five apartment buildings and we're closing two of those today. The other three close in a couple of weeks.   Michael: Amazing, okay, and what attracted you to this deal?   Matt: Um, that okay, so two of the buildings are in Winston Salem, North Carolina, and that is a company that is city we're already heavily invested in and it's a city that's showing phenomenal growth, 14% rent growth last year, RD on pace to do at least 12 this year percent rent growth and this owner hasn't increases rents in the last two. So he hasn't seen any of the rental upside that's been happening, the rent growth has been happening in that market has not been realized on those properties. So great opportunity, we already have property management in that town lined up and Lexington we own six other apartment buildings. So we are a niche down company. We're not going to just invest anywhere that is a good deal. We invest in super specific markets, so those are there were three markets Lexington, Kentucky, the Piedmont triad in North Carolina, and in Lancaster, Pennsylvania, of all places. Those are the three markets that we're in. That's it   Michael: If it works, it works…   Matt: So…I like about it. I also like that it's diverse meaning like it's it's different geographies, different management strategies, even different property conditions. I like all those things about it that it brings a lot of things to the table, that make it more of a stable asset.   Michael: Okay, okay..   Matt: But it's stable investment, like stable here, but poised to go up.   Michael: Okay and we've had a lot of folks on the show recently talking about passive investments. And you know how you're really evaluating the operator more so than the deal itself. But can you give folks listening some tips about how to evaluate maybe the deal? I mean, what, what details of the deal itself should people be looking at to feel comfortable?   Matt: Yeah, um, you should look at…, I'll tell you why I'll tell you, what people will do to make their deal look better than earlier is, you have to look at what their exit criteria is. That meaning like, they might be saying, okay, we're going to buy the property for this number, and then we're going to invest this and then we're going to sell it for this, like that nine times you paid for it, then you investors aren't going to make any money till we sell it, or you're not going to make very much money until we sell it, if the majority of investor returns are projected to come through the sale and the end, the syndicator is assuming that the markets gonna stay very stagnant, that cap rates are gonna stay down and streets gonna stay down, yada, yada, then they're kind of making a lot of assumptions that may or may not come true. So that's one thing to be concerned over. So make sure that they're conservative that their crystal ball is is, you know, that they're looking into has some conservatism's as it in it, because that's one thing. That's one thing, as indeed a syndicator can do is they can predict that the markets going to be super favorable at some point in the future when they go to sell and that makes the deal look really good right now.   Michael: Right, right…   Matt: Yeah, make sure there's a lot of there's some experience on the team that have been it's okay to have new new and to work with new people, because we're all new at some point. But make sure somewhere on their team, there's some deep, there's a deep bench of experience.   Michael: That's great, that's great. Yeah, no, I love those points, I love those points. I think I've seen that too and a bunch of syndication deals like oh yeah, we're gonna buy it at a six cap and we're gonna exit at a three cap and it's like, really look.   Matt: Phenomenal… 22% IRR man, what's the cash flow? Oh, it's only gonna pay like 3% cash on cash. But you know, magic fairy dust, get sprinkled on the deal, and it's gonna get sold and you're gonna make you're gonna triple your money. You know, three right now when I sell it, and that's how it's gonna go, right… When the crypto rises, you know…   Michael: No, that's a great point, those are great points, Matt. And I'm curious to know what do you you know, in your book, I'm sure talks about this but for anyone listening, that's thinking about starting to raise money but doesn't really have experience. They've you know, they've got the hustle, but they don't have the experience and they don't have the capital. You know, what should those people be doing right now?   Matt: Okay, I'm getting smudge get as much exposure as you can. Some folks do that through investing some some people that I know, that are very successful, syndicators now got started investing in other people's deals to learn the ropes, right. And that's it, do that get some exposure, we know why you can to other people's deals, you know, network, do what I did. But to start small, like we're on our 50 we're closing, this is our 15th syndication that we've done. But our first syndication was a guy my wife went to college with put in 50k into it into one into a deal that we did, we bought two single family homes with his 50k, right, that was our first syndication. So you can start small, find the one person that has some capital to work with in your in your network, and do a deal and then expand it out, do another deal, expand it out, do another deal, expand that out, do another deal. So for those that are looking to get started, it's okay to start small. It's not sexy to start small, but it's also okay and there's a lot further there's there's a lot smaller distance to fall and a lot easier to course correct on a small deal than it would be to correct on a behemoth issue first. Michael: Yep, I think that's such a good point, I think that's such a good point. I know I've spoken to people and I thought, well, my first deal would be a 10 year multifamily, because multifamily is the best everyone's talking about it. It's like yeah, okay, well, have you done a single family deal? Well, no…   Matt: I'm telling you, I hear people like, oh, I'm gonna do 100 unit multifamily deal. You know, like, that's my first deal I want to do, I've never done a deal before my life. But I want to close 100 units is my first deal. I get it and I want that, too for you, you know. But you might have to bang your head against the wall a lot. Where you could just go and syndicate a duplex right or syndicate like get your Mama to go give you a couple give me a couple of dollars and you and your Mama would go buy a duplex right, you know…   Michael: But then I can't post it on Instagram. No one wants to see me my mom and me doing deals…   Matt: I can't fake it till I make it that right, you know, or pose next to the Lamborghini that I just bought because I've been, I've been investing in real estate for the last few months.   Michael: So good. The last question I have for you before I let you out of here is, you were talking at the beginning of the show about how you did all these things and kind of rally different directions and then you really niche down and you got really focused. How did you do that? I mean, how did you, what did it take for you to get hyper focused? Because I think so many of us as they get started real estate like, oh, I could do long term buy and hold or I could do flipping or I could do wholesaling or I could do burr investing. And there's so many different ways to go. How do you know when you found the right one?   Matt: Well, first of all, Michael, I just got I just get tired to get my ass kicked, you know…   I'd like to wholesale deals going on at for fix and flips going, I was buying a bunch of rentals and everything like that, and it wasn't sleeping awake, you know and I was doing everything media doing a mediocre level, any of those three things that I was doing, I was involved in some other stuff, too. Any of those three things that I was doing could have gotten to me to my financial goals. But the mistake that I made with all this tribe was doing a bunch of things, mediocre lee versus doing one thing really well, right. And so I found that I was, you know, good at being a landlord, because with the landlord properties that we had raised very well. And it's also good at raising money and explaining what I do land lording in a very simple fashion to people and so I was like, okay, well, I'm awesome at those two things. Let me just focus on those. And the more I focused on those, guess what, Michael, the more money I made, like, money's good. I like making money. I do enjoy my family. You know, that's good. So how about anymore, though? Yeah, I'm not good at managing contractors, some too nice that I believe them when they tell me that their car broke down. And that's why they couldn't show up on the job site, but they still need me to give them 10 grand, you know, and I believe them. Okay, here you go. And that, so I just knew I didn't have people in my network to outsource that to at the time and so it made sense. I had tried partners to run that fix and flip division, my company didn't work out. So I needed to abandon the things that weren't working, and focus on the things that were and for those that are looking to niche down and focus. It doesn't have to it doesn't have to be apartment buildings, believe me, don't listen to Instagram does not have to be apartment buildings. It can be other things, I promise.   But figure out what you were calling your core genius, right? Your God given talents, what are you gonna call it, figure that find out those and how you can best bring those to the real estate table and even better, how they are benefiting your business today. And then just easy, Michael, do more of that. How about that, there's two more of those things, if it's working, you do more of it, and less of the things that aren't, you know, it could be that simple and that's kind of how we grow in and I found people that were able to sit in the seats that I needed for me to focus more on raising money and more on the land lording , and I'd filled in those seats and I got it, you know, tight and I expand that up and I was like okay, land lording is amazing, but I could probably scale faster if I outsource that and hire third party management companies. So we did that I could focus on raising money and I could focus on building the team and enrolling and inspiring and being the leader of my team. Now that's really all I do is I lead my team and I raise money and I talk to you…   Michael: I love it, I love it. That, this has been so much fun Matt, if people have questions for you want to reach out to you are interested in investing in some of your deals, what's the best way for people to get in touch with you?   Matt: There's a ton of stuff on my LinkedIn bio. My LinkedIn is the Matt Faircloth, I'm sure there's plenty of other Matt Faircloth in the world but my Instagram handle…   Michael: You stake your claim…   Matt: I've claimed it, there also the Instagram I'm the only Matt Faircloth, @themattfaircloth and there's a there's a link in my bio on Instagram and there's a ton of stuff there you can go and invest in my and you can hear about investing in deals with us if you're an accredited investor you can join our mailing list because you do a non-accredited deal sometimes for those that are that we have a preexisting relationship with so you can join that list or you know hear more about that. You can buy a copy of my book there you can you know join all kinds of different cool things we have going on and Masterminds webinars, all that jazz is on the link in my bio on Instagram.       Michael: Sweet, well Matt thank you again, man, from Komodo dragons to passive investing, this has been a blast. I'm sure we'll be chatting soon.   Matt: My family and I play a game at dinner called: True two truths and a lie and I'm going to slay it right in two true and a lie there that I was on an interview and me and this guy talked about Komodo dragons. Nobody's gonna believe that. But I totally got my family, totally gonna crush them at true two truths and a lie tonight…   Michael: I love it, I love it. Well, I am glad I could be a part of it.   Matt: Thank you.   Michael: Awesome, take care man.   Alright everyone, that was our episode. A big thank you to Matt for coming on. It was super fun from Komodo dragons to real estate syndication. I didn't think we'd be able to get there but we kept it on the rails. As always, if you liked the episode, please feel free to leave us a rating or review wherever it is you get your podcasts and we look forward to seeing you on the next one. Happy investing!

We often hear real estate investing referred to as passive income. But we feel that can be misleading sometimes. Depending on the cycle of your investment periods, the asset class you are in, and the condition of the properties you are acquiring, real estate investing can require different levels of involvement.  In this episode, we discuss what that level of involvement can look like in these different scenarios and how you can turn the dials to adjust your strategy to accommodate your desired level of activity.  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions, and seek investment advice from licensed professionals.   Michael: What's up everybody Michael Albaum here from The Remote Real Estate Investor. And today I'm joined by my co host,   Tom: Tom Schneider.   Michael: And today Tom and I are going to be talking about why is real estate investing referred to as a passive activity and the benefits some of the benefits that it yields referred to as passive income, we're gonna be talking about how passive investing in real estate actually is. So let's get into it.   Alright, Tom, share with me a quick update about what's going on in your world. A little portfolio update, if you would,   Tom: Oh, so I've mentioned before building a little, shed a little office shed, bottom of the lot, it is coming along. contractors are busy as all get up. But I have secured I'm in line, I'm in the queue, I'm the next person in the queue for my concrete guy. And then for the contractor actually going to putting it together. Next in queue there. So this is a symphony of development. This is my first development ground up development project. And it's just in the corner.   My wife's been asked to get it's a good way to frack totally, like totally, it's, um, you know, on my own whatever, project manager, whatever GM on the site, and it's timing from the materials getting ready from the company, that's prefabricating, the shell, the shed the site team that's doing the actual, like concrete stuff. And, you know, at first in doing this project, and like, yeah, this isn't really real estate investing. But the more that I do it, the more it's like, oh, these are totally muscles that you know, yeah, some some land up development stuff. So anyways, it's it's going along well, that is kind of the extent of my activities as it relates to investing. Right now is some value add stuff at my primary residence.   Michael: That's awesome. And I wish I had done something like that. Before I started my total redevelopment projects, I had a goose egg experience doing that kind of stuff. So that's, that's really cool.   Tom: Yeah, go getting it somewhere. Yeah. And yourself, Michael?   Michael: So I'm in the midst of a 1031 exchange, I'm selling a value add property that I added some value to out in the Midwest, and I'm buying a couple short term rentals via that 1031 exchange. And, man, the timing of it is just like so tight. So I'm scheduled to close on the down like property, the property that I'm selling by Friday or Saturday, and then purchase the new property on Tuesday. And I timed that. So I'm well within my 45 day window, but I didn't realize how tight it was actually going to be. So if one, if the sale of mine gets pushed out a little bit, I might have to scale or slide the purchase a day or two, which I'm hoping doesn't happen, but just really trying to line everything up to be as seamless as possible. But I'm excited to get into the short term rental space.   Tom: Exciting, juggle, juggle, juggle. That's it. That's it. timing. Yeah, very cool.   Michael: All right. So let's start picking this apart. So a lot of people have referred to real estate investing as passive investing or real estate investing generates passive income. And I'm curious to get your thoughts around how passive you think it truly is. And is it black and white, or are there shades of gray here?   Tom: So the way that I would describe it to a friend is, you can get to the point where it can be a pretty passive source of income. But realistically, like upfront, there's, there's some work to do. So in cycles of ownership of the property, there are going to be ones that are more busy. So when a property when you're doing your acquisitions, I'm going to I'm going to spend a good amount of time evaluating properties submitting offers, managing the transaction, stuff getting financed, lined up.   So in that upfront part of the process, definitely not an extremely passive process and even up to the point if you're buying it vacant, and perhaps there's some renovation work that needs to be done, I'm going to poke my nose into that process. Either managing contractors with my property manager or managing them directly. That's not a super passive process. And then going up into the editing process where you're working with your property manager to set rent, where they are marketing the property.   I mean, I'm at the point now with my property managers where I have an established relationship where I trust them to run with stuff but getting off the ground. I'm a little bit more hands on so the other kind of property lifecycle where it's time consuming is some construction thing comes up and I will usually with my property manager, that what's called a not to exceed limit and NTE, am I using that right i think so anyways, Start with the cost. Yeah, yeah,   Michael: Let's run with it.   Tom: If the cost is above a certain dollar, I'll say hey, I want to know about it like this could be a repair replace decision, where I did least like to provide some input, you know, I'll you know, talk to you the local property manager. The other high time commitment not passive is it repeats again, right, the tenant moves out goes back into construction. So a property can be occupied for a long period of time that is relatively passive and not really doing a lot except for opening the proverbial mailbox and seeing the rent check come in. However, though, there like is a good amount of time that it's not necessarily passive. So I think it's a little bit of a misnomer, the passive term that is often applied to it, just because especially in the upfront and some of these major milestones you can be a little bit more involved in, as you start building your profile, go from one to five, to 10, to 20, there really can be a lot more involved in it. I mean, I enjoy, I enjoy it, I think it's fun, you know, but it's definitely   Michael: It's because your sick in the head like me!   Tom; Because I'm sick in the head! The other time where it's not so passive. I'm sorry, Michael, I'm stealing just all the fodder, I'm just like,   Michael: I should never have given you my notes.   Tom: You shouldn't, you should have spoke first, all the points and then anything else. The other pretty time consuming event is tax time. And I think I've complained about this before, on where you're, you're collecting all these different documents and passing them on to your CPA, you're collecting your 1099 from your property manager, your 1098 from your mortgage, if you have a mortgage, and all these other documents. So that can be a little bit time consuming.   But you know where I'm at right now, I don't spend a whole lot of time and that I have a portfolio that's been humming along for a while. So I'm not necessarily doing acquisitions. I'm doing land development on my own personal primary. So Alright, Michael, I'll stop stealing all the points that we talked about before the episode. So go ahead, Michael.   Michael: That was great. You covered everything episode done. Thank you. Just real quick plug, something that you mentioned around tax time is if someone is using Stessa, they'll likely have a much easier time come tax time, because so many of those documents can be housed there and then sent directly over to their CPAs. But I think you nailed it. I think that's definitely a misnomer, calling it passive income. For all the reasons you mentioned that I'll just kind of share an anecdote from when I started investing, because I think it's it's a very common way that people get started investing.   So I started buying very turnkey single family homes in Southern California. And so the first one I bought was was relatively new build was a couple of years old, and was turnkey, ready for a tenant. So we got a tenant in place. And then I was freaking out until we actually got that tenant place, which took about a month, just because of the timing, that of what I bought the property. And so once you got a tenant in place, I was very hands on on the property manager trying to keep tabs on everything that was going on, because I didn't know any better. After a couple months of that it was very, that it was versus very passive. I mean, the property didn't need any work, that tenant was placed. And it was just one single property. So there wasn't a whole lot for me to actually do.   Now I would keep tabs on what the property manager would send over her reports every month and see, okay, what were the expenses and plug that into my spreadsheet and see how close was I in guesstimating, what my pro forma was going to be. So I spent 20 minutes a month, just checking up on things, reviewing the reports. And then I added a second property to the mix. And that was new construction brand new build.   So very similarly, there just wasn't a whole lot of stuff going on with that. And so there was the same property manager in the same market. So now I just had two properties on that monthly report as opposed to one. So okay, I spent 25 minutes reviewing that once a month, then added a third property. And that was my first add a state investment. And so that was a couple duplexes. And very similarly, it was fairly turnkey, fairly new builds about 10 years old. And so already tenants in place, there's just wasn't a whole lot for me to do in terms of being an active manager or managing the manager, so to speak. So I had property managers for all of these.   And that was kind of the case for a lot of my investing. And so the more turnkey I think you buy, oftentimes, the easier it is from the ownership and operational side of things. And there's really not a whole lot to do so to speak other than make sure things aren't going off the rails.   It wasn't until I started getting really heavily invested in value add projects that I was having to manage a lot of what you were mentioning with your with your shed is managing contractors keeping tabs of okay who's doing what and when and keeping tabs on your property managers because they're much more involved with that process on a day to day basis than I am but getting update reports, checking in seeing what happened, what works scheduled it and make sure things are actually getting done. And then following up and seeing what things are renting for how soon are they getting rented this kind of thing. So because that's been my life, up to my eyeballs for the last Three, four or five years, it's just been a lot, I've been much busier in that capacity. But now that things are starting to slow down from a project standpoint, it's definitely becoming more passive.   And I have a four-plex that I've talked about on previous episodes, and took that down to the studs total, I mean, brand new build, essentially. And that is very much humming along because there's not a whole lot that occurs on that property, knock on wood. So I talked to my manager about getting it pre leased and pre marketed and what the rent should be and how we're going to push rents and this kind of a thing, but that's only when the leases come due, so four times a year for that for those four units. So from that perspective, it can be very, very passive.   Tom: It's just a great kind of a point in that I think your there always is going to be some time constraints kind of based where you know where the property is, but there is a little bit of a menu of how much how not passive or, you know, by the type of property that the condition of the property so depending on you know, what type of investment that you're looking for, you know, for me looking for a property you know, maybe turnkey maybe some light work that needs to be done but ultimately, you know, a minimal time investment beyond those major events you know, acquisitions terms, what that versus you were, I have an appetite for a little bit more stuff and up to your eyeballs at points in times. But I mean, like life, there's, you know, there's ebbs and flows of…   Michael: I thought I had an appetite for, until I threw up, but that's neither here nor there. I think, Michaels, Uber says it really well, too. He talks about regularly. And in his book, he talks about taking on all these value add projects, and in hindsight, he wish teachers would have bought more turnkey. And so like you mentioned, you can really dial it up or down how much time and involvement you want to have. But you'll either pay for it or receive a discount. And so I think a lot of people end up buying properties on the cheaper end of the spectrum and given markets that probably do need work, but expect it to have the same time requirement as a turnkey property. And I just think that's a very big misalignment of expectations.   So you really need to understand what does this type of property What does this class of property look like in terms of my time requirement in terms of capital requirement? Because I think people often knock turnkey investments Oh, they're all the equities already been sucked out. Yeah. But if someone doesn't have the time to go manage it, or deal with the headaches or deal with the projects that are needed, like I think it's it can be a really great avenue for people. And so that's I think one of the beauties of real estate is you have this broad spectrum and depending on who you are and where you're looking to go there's likely something for you.   Tom: Yeah, and the other you know thing about these you know, massive project type properties kind of against people who say oh, you know, all the values already been sucked out for these properties that are already in good shape, the concept of beta where in taking on a project that has a property that has a big project, sometimes those costs can go over like and you can you know, end up buying this property that you're thinking you're gonna squeeze out some extra value but instead you're actually just squeezing a bunch of extra work and then your costs are going over I mean, it's really easy to look at these projects with some pink rosy glasses and thinking that you're getting some extra value but when in fact you're just doing more work and oh, materials costs are up Oh, your contractors timing so it's vacant for longer like me I don't think that's really the purpose of this episode so I'd like to expunge upon or talk about the value of slightly more turnkey properties   Michael: Vut that's where it ended up!   Tom: That's where it ended up.   Michael: I mean, I Case in point like Exhibit A myself that for that four Plex I was talking about as we got into the property started taking off the sheetrock. My contractor calls me goes look, Michael, the electrical and plumbing is all done very poorly. So this needs all new electrical and all new plumbing throughout, that wasn't in the scope of the project. So that's $40,000 that was not accounted for. Like that you pay for it now pay for it later kind of thing. So absolutely. I think big risk, big reward potential but also big risk for things to go sideways and get overhead get over your head and over your skis fairly quickly.   Michael: And less passive back to the original topic.   Top: Back to the original topic. So now kind of getting getting through some of the other asset classes I'm fortunate enough to own a couple double net and triple net leased properties. And if anyone doesn't know what that is, I highly encourage you to go check it out. You can Google it, it's abbreviated n n capital or N N N for double net and triple net lease respectively. That is about as passive as you can get in my opinion, with still being a direct owner. Now you can go invest in syndications or funds or crowdfunding any of that kind of stuff, which is truly passive, I mean, it's like stock market investing, you set it and forget it type of a thing, you're not a decision maker, you don't get to decide when things are done, ie being a decision maker, but double net and triple net leased properties often come with very, very little landlord obligations or responsibilities, if any. And so that in my opinion is is another definition of mailbox money. And if somebody is interested, again, highly recommend going and check check stuff out online about those   Tom: And those leases are almost always you know, commercial or retail shop right?   Michael: Exactly at the CVS is the Walgreens the McDonald's, the Carl's juniors. A lot of these companies will use utilize triple net leases and not actually own the property. And so it's it's definitely a different beast different asset class unto itself, but still within the real estate space.   Tom: Future episodes thrown in the queue.   Michael: Let's do it. Let's do it. Hopefully you can't hear the dog snoring next to me.   Tom: Calming, it's calming   Michael: Soothing. Awesome. Tom, anything else before we get out of here.   Tom: Nope, I think that's pretty good. We got it.   Michael: Awesome. So takeaways, do your homework on the front end? Do the legwork. Get the train moving so that way it's easier on the back end. Alright everybody, that was our episode. Thanks, Tom. Always a pleasure to riff on these with you. If you liked the episode, feel free to leave us a rating or review whatever it is listening your podcast with the chorusing on the next one. Happy investing.   Tom: Happy investing.

Roofstock Certified Agent, Harvey Yergin with Simple Solutions Real Estate in Columbus, Ohio answers important questions about investing in this market. In this market overview, Michael and Harvey cover what investors need to know about the Columbus market from, local industry, the rent to price ratio, the competitive environment, the type of properties, and what investors should be looking out for on inspection reports.  If you have more questions for Harvey about deals in Columbus, feel free to reach out.  Simple Solutions Real Estate - harvey.yergin@gmail.com - 901-484-9751  --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and Today we have with us our roofstock certified agent out in Columbus, Ohio, Harvey, Yergin, and Harvey's gonna be talking to us today about the Columbus market as a whole and some things that we as investors need to be aware for if we're going to go invest in that market. So let's get into it.   Harvey, thank you so much for joining us today, man. Really appreciate you taking the time out of your busy schedule to chat with us about Columbus, Ohio.   Harvey: Yeah, sure. No problem. Glad to be here.   Michael: So tell everybody listening. Are you a Columbus native? You know, where did you come from? Like, where did you come from? Where did you go? And how long have you? And how long have you been in the Columbus market?   Harvey: I have been in Columbus, back in Ohio for six or seven years now, with close to six years. I'm originally from Akron, Ohio, which is closer to Cleveland moved around the country a bunch sometime in Virginia, Tennessee, Oregon, Michigan, had a bunch of kids and decided we wanted to get closer to family. And we do a little bit of research on Ohio. No offense out there to other Ohio and but Columbus is it's got the most going on.   Michael: Sound like fighting words to me.   Harvey: Population growth is exponentially higher than the other two major markets in Ohio, Cincinnati and Cleveland. And there's just way more industry here. They're just they're just plain simple. There is more going off Columbus. So we landed here. We're close to family. My wife is from Pittsburgh. So we have a support system here now and Columbus is home.   Michael: Love it. That's awesome. And how long? Have you been a realtor? And then how long have you been in the real estate game? Because I know you're chatting for the episode, you're an investor as well.   Harvey: Yeah, I'm an investor, I spent most of my time in my investment company, and working on investments, been a real estate agent since 2018. So three years or so. And, like I said, primarily working in my own company with my partner. But then also just by nature of being an experienced investor in this market, also helping buyers and sellers buy and sell their real estate investments, as well.   Michael: Awesome. And how many transactions have you done in the last 12? months? Like number of purchases? number of sales?   Harvey: Oh, I don't know, a couple few dozen, most of which are representing our company and the purchase? Or sale?   Michael: Awesome. And so did you get involved in the transactional side of things, because there was just a need for it because you were doing so much business, basically, for your for your investing business on the personal side of things.   Harvey: I got involved as a real estate agent, primarily to I mean, I think there's a common story but get in, get your license so that you can save some expenses and costs   Michael: on the Commission's Yeah,   Harvey: Yeah, on the transaction on your own transactions. And then, you know, obviously, there's some some money to be made. If you're representing other people. You have you have a little bit of a niche in that you understand transactions, maybe more so than other real estate agents, because you buy and sell for yourself. And you're familiar with real estate investment transactions and deals because they're, you know, they're very much different than your retail sales, sales. And I like helping people as long as people want to be helped. I like like working deal but like wouldn't deals together.   Michael: That's great. That's great. All right. Well, now I want to give you the platform to yell from the mountaintops how great of a market Columbus's. So talk to us about some of the economic drivers and talk to me like I know nothing about Columbus And truth be told, I don't know a whole lot. So that'll be eat that should be easy for you to do. But so what are the what are the big economic drivers in the market? Who are the big kind of companies that are that are in the space and do they have a tech scene.   Harvey: There's no secret anymore. I mean, Columbus as a market for real estate investment, that that information is out there makes every top whatever list for real estate investing. And there's really there's two big factors there. Maybe three one is population growth, something like a million people in projected population growth between now and 2030, or 2040, or something like that. So a lot of people for short amount of time.   Industry here, mostly retail, I call it junk retail and fashion retail. So Big Lots is here, dollar generals here. But also, L brands, which is the biggest the biggest employer, in Columbus, they're here designer brands is here. So people like Abercrombie and Fitch, the SW baby, big fashion, retail. Businesses are here. And then if you've ever heard a Nationwide Insurance insider   Michael: On your side!   Harvey: That's right, so insurance is huge here. There's a lot of there's several big players, including nationwide. And then healthcare is also large, because nationwide is plays on both sides of that. So they they run a couple really big hospitals, facilities. And then if you've ever heard of the Ohio State University, their top five employer here as well. And not only do they have the university itself, but they have several research and medical facilities around the region. Technology is largely based in those those industries. There's a lot of funding in financial services I forget forgot to mention Chase is here. financial service technology, innovative insurance, technology and medical, medical technology. And then all of the technological research and development University is doing as well. I mean, there's a lot, there's a lot going on.   Michael: Right on. So is it safe to say that that is a multifaceted economy? It's not solely reliant on a single sector?   Harvey: Right. Yeah. I mean, I'm I went on to what I named, there may be three or four different sectors that are just in the top five employers in the area, there's Yeah, there's a there's a lot going on in terms of different industries, and diversity.   Michael: That's fantastic. So that maybe you can give us kind of a walkthrough of if I'm looking at Google Maps, and I type in Columbus, I get a north, south east west over, you know, 30,000 foot view. Talk to us about some of the different markets, different sub markets within Columbus, that we should be aware of.   Harvey: Yep. So if you look at a few of the map, you got it. 70, which goes around Columbus, generally, inside of that is Franklin County, it extends a little bit outside of that as well. So inside of Franklin County, obviously you have Columbus, but then you have really close in suburbs like Westerville Gahanna, Reynoldsburg, Grove City, Hillier power, how, in my view, there definitely is a couple other ones around. And those are the close in suburbs. And all of all of those cities and municipalities I just mentioned are super hot and saturated in terms of both retail and investment real estate. deals are just hard to come by they're as they are in a lot of MSA.   But if you extend out which the pattern now that we're seeing is that investors are starting to move out and it's because people are starting to move out as well. There's just cheaper houses. There's there's not as much of a demand right now anyway to commute to a job downtown. And even if you are commuting, it's likely that you're commuting less frequently. And maybe you're okay with a 45 minutes 60 minute drive now because you're saving 100- $200,000 on a house and you're getting more acreage and you're getting more space. You're, you're now okay with a 45 minute drive.   So places like Lancaster and Newark, Delaware, maybe Mount Vernon, which is to the north Lancaster's to the south east, Newark is due east, places like that, which are 45 minutes, average driving time to downtown Columbus, on fire. I mean, Newark. If you told me that Newark, Ohio, if you told me a year ago that Newark would be a place where you could buy a house, do a little bit of rehab, put it on the market and get multiple offers over asking, me and a lot of people will tell you recruit your that's exactly what exactly what's going on. And some of the best deals to be had are out in those peripheral markets.   Michael: Now that's wild. And so give give everybody an idea of Like, if I'm a single family investor, I'm looking for a three to that'll have a good rent, what are some of the price points in those four markets, those four neighborhoods just mentioned, as well as their corresponding rents? And just, you know, ballpark average?   Harvey: Yeah, I think it's pretty fair to say that you could find three to for between 130 and $150,000, then rent is going to be between $950-$1150 depending on your specific location and some features in the property. Awesome. Which, okay, 3/2 130 to 150. Good luck finding that and a lot of areas.   Michael: I'm a California guy, and I can pretty well guarantee it doesn't just exist so much out here.   Harvey: Yeah, not even in Columbus.   Michael: So when you're looking to underwrite properties at Roofstock. And for those people that aren't familiar with you, you know, you're one of our rootstock certified agents out in Columbus, and so if not v certified agent out in Columbus. So when you're underwriting properties on Roofstock that go on the Select program, what is it that you're looking for,   Harvey: You know, the big things are rehab, a lot of things that make them Margiela properties that make the market now in Columbus. And just as a disclaimer right now, on Roofstock, even though I'm mentioning these peripheral markets, we're the only the only properties that are available to Roofstock investors are the ones inside of Franklin County, really, because it's, it's because of the on the property management side, there's just there's not a lot of infrastructure for investor support yet on those markets. So we're limited to that, to that Franklin County, I 270 close in ring.   And we're looking for is minimal rehab, things that hit the market at certain price points, you can just guarantee or just just assume I guess that if they're under a certain price point that they probably got some issues with them. And we know that Roofstock investors are not, especially because most of them are out of town, they're not really keen on having to manage any sort of big rehab project with people that they all know in town that they can't get to frequently, minimal rehab being $5,000 or less, on average. And then neighborhood quality because neighborhood quality translates to tenant quality. So we're looking at the the neighborhood rating score, and then gross yield. I mean, just how much how much ranking you get compared to the purchase price, which that number is shrinking with every day that passes I think, I think with time we'll start to see rent start to you know, it's lagging now. But we'll start to inch closer to the kind of growth that we've seen in in sales prices. But so those are the three things, just minimal rehab, making sure we're hitting a minimum neighborhood quality than the gross yield is something that will produce cash flow.   Michael: Love it. And Harvey, can you talk to me a little bit about how to calculate property taxes. Cuz in a market like California, our state, we kind of have a statewide law that says the property taxes are gonna be based on the sale price. So if you bought a property 10 years ago, for 100 grand your property taxes are based on that purchase price, if I buy it from you now, and I pay 500, my property taxes are going to be probably at least 5x what you were paying. So how should investors be thinking about property taxes? And does a sale trigger any kind of reassessment? How does that work?   Harvey: Yeah, the sale the sale doesn't necessarily trigger reassessment. But the local school boards and this is municipality specific. So if you're buying in Columbus, this is true. The school boards are very in, they have a really good process for going through finding recent transactions, making an appeal and getting that value updated. Which because they want their they want their funds they want. They're trying to capitalize on a market that is appreciating. And you know, they want their programs and their facilities to grow right alongside it. So you can't blame them. But that is it's happened to me. And it can be quite sizable. So look at the auditor site and figure out what the tax is based on now. And then figure out where where you think you're going to purchase it. And you get a reasonable idea of how much that tax bill is going to go up. Outside of Columbus, I don't really know but in Columbus, that's very common.   Michael: Okay. So if I'm looking at a property that was at purchase, last purchase $100,000 and the taxes let's call it were 1200 bucks a year. If I'm going to then purchase the same property at two to $200,000. Is it a safe assumption then to double the property tax because the purchase price has doubled. So now I'm thinking I'll be at 2400?   Harvey: You know, if you're underwriting it, I probably will do that. It's probably not that exact. I think they, there's some formula, I forget what it is, but they take a certain percentage off of that, and then they tax you on on that percentage. But yeah, that's, that's probably not a bad place to start for your calculations.   Michael: Okay, perfect. It's funny, you mentioned the school board's I had the exact same thing happened to me numerous times down in Cincinnati, I'm pretty heavily invested down there. And, yeah, and it's funny, you know, because part of me feels really great about being able to help the local school systems get funded and grow, because everybody wants to be part of a good school system. So if you're coming into an area, you're then donating, for lack of a better term, more money to the school system, which will hopefully bring it up. But at the same time, I was like, Man, this sucks, like, it is just so expensive, oftentimes, to do business. So it's a catch 22.   Harvey: It is, and it's a but in theory, it should come full circle that you think as the schools improve the neighborhood improves your your neighborhood and consequentially your house becomes more desirable. And then the like kind of feeds itself. But that assumes obviously the school board is handling your funds with some sort of proficiency.   Michael: Yes.   Harvey: Which, you know, I think in Columbus, they do a pretty good job. But I will also say, if you're taking out a loan on these, and your servicer is a little bit slow to I don't know, I don't know what their process is. But if they're slow to make sure that your escrow account is enough to keep up with that tax increase, what happened to me recently, I have a duplex in Columbus bought for, you know, an increased amount over the last last purchase price. My servicing company didn't know for two years, and then just this past year, we got Oh, you owe tax on the increased value for the last 24 months. We then double your PITI, your your mortgage payment   Michael: To catch up!   Haryvey: For the, catch up. Yeah, for past payments and future payments. Oh, my gosh, that would have been nice to have just incremental increases over, you know, a shorter amount of time. Wow. Yeah, that does happen.   Michael: Well, that's a great tip for listening is look out for that stuff. I mean, if you're if you know what your tax bill should be, and you're mortgaging servicing company, your mortgage service company isn't taking enough from you and to make those payments. Speak up. Say something that's that's a really good teachable moment.   Harvey: You're going to get notification from from the auditor or the treasurer   Michael: For the county.   Harvey: Yeah. When your tax is increasing. And then if you don't see increases in your payment on that property for a couple months, it's probably time to call on it. Start asking questions, because you don't want that surprise. 24 months.   Michael: Yeah, that's that's not a fun present.   Harvey: No, no, not at all.   Michael: Harvey, talk to us about some common issues that might show up on an inspection report in Columbus, that folks should just be aware of, as an example, I bought property in Alaska, and they have diesel fired boiler and heat the house that's just common place me being California. I was like, Whoa, major, major hazard and I was like, calm down. This is standard par for the course. So what are some things that you that that you see that buyers should be aware of?   Harvey: Wet basements blowing basement walls, that those are scary things, especially for people who aren't familiar with basements. And we are familiar with basements that were made to be wet. houses. There's there's a lot of old inventory in Columbus. And a lot of that old inventory from what I understand, was built to take on water that doesn't excuse poor water controls from your downspouts and your gutters and your grading. But they can cause bowing and it can cause signs of water intrusion.   Remedying bowing basement walls is a very common practice going in and having to waterproof a basement that's not already waterproof is a very common practice. The selection of contractors that do that is very high. I mean, there's a lot of contractors out there that do that kind of work, both remedying the the bowing and the waterproofing. So don't let don't let that scare you. If anything, it's a it's a negotiation tactic with whoever you're purchasing from, but that will inventory there's still knob and tube electric work in houses, which can be scary for people. But again, there's those contractors that can handle that sort of thing. I've had to do it several times. It's just not that big a deal.   Being on well water or having a septic tank instead of public water and public sewer. It's just not that's not that scary one buyers, especially if they're native. They understand renters as long as things are inspected and safe and functional. They understand as well, but in certain areas... I mean in Columbus, it's very rare in fact that I think they've fallen gotten rid of all septic tanks? Anybody who's not on public sewer or public water, but just outside of the city. That's that's pretty common and it should not be a deal breaker. As long as they're functional. They're safe. And they've been inspected.   Michael: Great. those are those are three really good ones. Because as you were saying them I'm so over here like, ah, like, that sounds awful. So this is a good learning lesson for me too. I've never heard that that some of these older properties were built to take on water. That is a totally foreign concept to me.   Harvey: Yeah, yeah. When I heard it, too. I was thinking Who the hell would build a house? That's supposed to where the basements supposed to get wet? But yeah, it's just, it just was the way they built.   Michael: Okay. And they don't make them like they used to, that's for sure.   Harvey: No, they don't build basements to take on water anymore.   Michael: Do you have any interesting stats, or kind of notable highlights that you want to share with with potential buyers or folks interested in the Columbus market?   Harvey: I would say the inventory levels here in Columbus right now are pretty interesting. There wasn't long ago, there was 1300 houses on the market. And I just looked today, and I think there's 28-2900 houses on the market. Some of that is seasonal, I mean, things just tend to loosen up around this time of the year anyway. But that's a pretty sizable gain. And we're starting to feel it a little bit. It's not as crazy inventory is starting to sit on the market a little bit longer than it was this summer and spring. And prices are as crazy then maybe isn't as many offers. So it is getting a little bit easier to purchase. We run a real estate investment company we go direct to seller, the more difficult it becomes for anybody to purchase, the more difficult it becomes for us to purchase. But we're seeing a little bit more ease. On the purchase side.   I would just encourage investors Roofstock investors who are interested in the Columbus market to just continue to be patient. I've been a real Roofstock agent since early spring of 2021. Guess how many transactions we've completed for Roofstock purchasers? Zero sec. Yep. And it's, it's just tough. I mean, finding a rehab property that is on the MLS and marketed already, that isn't one going in 24 hours or two, doesn't have the rent to support the purchase price. To date, it's just been a very, it's just, it's just rare to find. But like I mentioned, things are loosening up, continue to be patient. And I think I think you'll there will be deals to find.   And I would also encourage through the winter. So let's say late September through March, keep paying attention because that is the time to buy because historically the market is more buyer friendly. Less seller friendly.   Michael: Harvey are you trying to cut into my turkey time you telling me I gotta go look at real estate deals. I'm trying to eat stuffing.   Harvey: I mean, if you want to, if you want to buy deals and build long term wealth, yeah, I guess   Michael: That was it's such a good point. I bought so many deals in that exact timeframe for just that reason. I mean, I I joke it I kind of saying tongue in cheek, but I think for folks that kind of take time off. That's the wrong time to take off. I say if you're gonna sit out, you know, anytime do it when the markets crazy hot. And so when when there aren't folks out there trying to buy deals when everybody else is taking a break. That's when you should be pushing the pedal to the metal.   Harvey: Yeah, sure. And it takes some discipline to because I came from, like corporate america and a regular job. And that time of year is where everyone kind of slows down takes vacation doesn't take work. So serious holiday parties party is in the office. But yeah, I mean, to just say, Okay, this is our plan for fourth quarter and in the first quarter of 2022. And stick to it and be disciplined about it. I mean, that can be you can make a break an entire year off of the deal you purchase in December.   Michael: Easily, easily. No, I love that man. And I'm curious. I mean, you bring up a really great point that there haven't been any deals done in Columbus. So I would challenge everybody listening to go and be the first person to get a deal done when you know, win that race but also what should folks be aware of? What would you coach recommend people on that they need to do in order to win deals in this market? And we're recording this late August of 2021. So take this with a grain of salt depending on when you're listening to it but right now what do you see in folks? What do they need to do?   Harvey: Be reasonably aggressive on your purchase price, not not aggressive? Just be reasonable on your purchase price. Just assume that the deal you're that you're offering was being offered on by other people now, certainly. You can submit offers below asking, and certainly you should submit offers at a price that makes sense. In fact, I would just encourage you to, to make offers. Because it's, it's, it's just like fishing, right? We just, it's a numbers game at this point.   Don't be over lease, freaked out by a an inspection. Recently, I had a deal blow up when the inspection came back, we had a 10 day remedy period in the contract, which just means that we get the inspection, we read it over, we decide to things that we don't like and then we ask you to either fix them or give us money. Because of that. Use the remedy period, if you ask for things, all they can say is no. Or maybe they say yes. And all of a sudden, now you have a deal. That was less cash in or a deal that is fixed up and better than it was when it was on the market to use that period to your advantage. Don't run off, just because there's some scary things in in the inspection.   Michael: Now those are those are great tips. And how are you seeing all cash offers playing in the Columbus market right now?   Harvey: They're frequent. And they come from institutional buyers quite a bit. There's hedge, hedge funds and institutions that we're all competing with. And they throw down big chunks of cash. And they they often buy multiple houses at the same time.   However, I've seen sellers opting to be more patient for more money than jump out a cash offer just because they can close in 10 days. So cash doesn't always win. It looks like maybe they're winning less frequently. I don't know that for sure. But it seems that way that sellers are being more patient thinking okay, I can get I can wait 30 days, 25 days and get 20,000 more dollars out of this. Well,   Michael: Seems like a pretty good ROI.   Harvey: Yeah. Yeah, not bad. I mean, then lender is good lenders are closing in 21 days. So if you come in and you're pre approved, and your lender is legit, and they're gonna move on things quick. I mean, three weeks, the seller can make, you know, several 1000 more dollars, which can compete with really as a cash offer, at or above asking that close in 10 days.   Michael: Well, that's really good to know. That's really good to know, Harvey, this has been awesome, man. Is there other any other thoughts, tips, tricks, insights that folks should be aware of about the Columbus market?   Harvey: Be patient. And like I said earlier, I'd make make offers and pay attention. Paying attention, especially through the winter months.   Michael: Perfect. We'll have our our heat vision goggles on it's I know it gets pretty cold out there.   Harvey: Yeah it can.   Michael: Awesome. Well, Harvey what's the best way for folks to get in touch with you if they have questions about the Columbus market about property management?   Harvey: Yeah, feel free to email me harvey.yergin@gmail.com. You can also text or call me although I'm usually faster respond to texts at 901-484-9751. I'm also on Facebook, our investment company Simple Solutions Real Estate is also on Facebook. I'm all over the place. Reach out and love to connect.   Michael: Right on. Well, thanks again. Harvey. This was really great. Appreciate you coming on.   Harvey: Yeah. Thank you, Michael.   Michael: Take care. Talk to you soon.   All right. All right, everybody. That was our episode. A big big big thank you to Harvey. I know I learned a ton about the Columbus market very much looking forward to continuing to learn about the market and seeing where it goes from here. Sounds like some really big things coming down the pike. If you enjoyed the episode, feel free to leave us a rating or review. And as always, we'd love to hear comments or a future topic ideas so let us know in the comment section. We look forward to seeing the next one. Happy investing

In this episode, Roofstock's Retail Supply Manager, Richard Weed, joins us to talk about selling property on the Roofstock Marketplace. We cover, why one might want to sell on Roofstock, who it's a good fit for and how to go about doing it successfully.  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the remote real estate investor. I'm Michael Albaum, and today I'm joined by Rootstock's retail supply manager, Richard Weed, and he's gonna be talking to us today about all the things that sellers should be aware of before they get their property listed. And also, who might be a great candidate to sell their property on Roofstock, even if they hadn't thought about it before. So let's get into it.   Richard weed what's going on, man? How are you?   Richard: How's it going, buddy?   Michael: Good, good. So happy to have you on to talk about seller content with folks need to do to sell their properties on Roofstock.   Richard: Yeah, thanks. It's a pleasure to be here. I was telling Pierre, it's my first podcast. Never been been a big fan of been big listener. First time caller. So excited. Excited.   Michael: Yeah, that's awesome. Well, hopefully, it's gonna be a great experience. We'll have you coming back wanting more.   Richard: Yeah.   Michael: So give, give our listeners a little bit of background into who you are, and what do you do at Roofstock And why if they're interested in selling a property, they should be listening right now.   Richard: Yeah, 100%, I named Richard started on the retail supply team, working with sellers back in 2017. So kind of came into the organization, when we were just starting to ramp up that kind of individual owner supply network. Obviously, a lot of our initial supply came from the institutional world. So I joined in 2017 have since kind of helped scale that team up. We're now at about I think 10 or so sales reps on the supply chain that are working with kind of your small market and mid market sellers. Yeah, I mean, really, what we do is we work with the sellers who come to our platform, they're looking to list their investment properties, we'll talk them through all the different value propositions of Roofstock and how the process works, fees, all those those things we talk pricing, and make sure that these people are squared away and set up to be successful working and listing on our platform.   So now, as I mentioned, teams kind of grown from the one me to about 10 of us and I manage that team across all the different markets we're in and all the different sellers we work with.   Michael: I mean, there's 10, there's 10, Richard's at Roofstock? God, help us.     Richard: There's only one, but there's 10 sales people but there's only one of me. I don't know if that is a good thing or a bad thing. Getting there but growing, I think we hired well, and you have a we have a strong, strong team of reps for everybody.   Michael: Awesome. So I think so many people know about Roofstock when it comes to buying investment properties, but maybe less so when it comes to selling. So maybe you could share with everybody what why would somebody sell their investment property through Roofstock, as opposed to the MLS or off market or any of the other avenues that are available to folks?   Richard: Yeah, for sure. I mean, I think at the end of the day, one of the huge value props and reasons why people choose to list their, their occupied rentals or their rental properties on Roofstock is just level of exposure, right? I mean, we've worked so hard and, and invested so much time and energy in building this network of investors. And so if you're looking to get qualified, cash flowing, you know, performing investment property in front of the right group audience and the largest audience possible, Roofstock's a great place to do that, right. You don't. MLS has a lot of eyes, but they're very geographically specific. So if you want to get in front of the most people apart marketplace, like rootstock enables investors to look across multiple markets, right.   Whereas if I was going to put my home on the Atlanta MLS, the only eyes I'm going to see are people that are on the Atlanta MLS. And then from there, you're having to sift through the owner occupants, people that want to move into the home. And that's not your goal. If you have a tenant occupied rental, right, you have a tenant in there, you don't want to disrupt them, you want them to stay in place. And the purpose of what you're doing is you're saying, hey, this home is performing, right? I need that capital to go take elsewhere. And rather than wait for the tenant to leave or evict them, someone can buy this as is and start cash flowing from day one.   And so when you put it on the traditional MLS, right, it's not going to do open houses. How do I do that? With a tenant in place? Am I going to put a sign in the yard? Does that alienate them or make them feel like there's suits and people walking through my home, right? That's just like less conducive when you have a tenant in place to marketplace, like Rootstock enables you to get to a larger audience of people who are looking explicitly for an investment property, not homeowners looking to move in. So you've produced that friction. And you're looking at, you're now in front of people who are looking at it on a numbers basis, right.   So with the resources that we provide to these buyers, folks are able to see all the diligence that we do, they're able to see the underwriting that we do and and make an informed decision without necessarily having to be on site and walking through the home how you would traditionally sell. So there's something like the qualitative value props obviously quantitatively, our commission on the sell side is currently 3%. There's no buy side agents, obviously we work with these buyers through the through the acquisition. But our representation is to that of the seller, do your Commission's 3%. In the event you sell as a portfolio, there's a tiered structure to that. So your fees go down with the more homes that you sell. But ultimately, that 3% compared to the traditional fee or commission of an MLS sale of 6%, you save a couple points there.   If you layer on the missed rental income through vacating the home, right, if you have to vacate the home, put it on the MLS, say it takes two months to sell, and you were previously collecting 1200 months, 1200 bucks a month in rent, that's $2400, you're no longer collecting, right? So compare that $2400. Last to the listener roofstock. You collect that through closing. So it's a couple bucks made. And then that kind of the rehab and updating cost, right, if you're going to put the home in front of end users we're going to walk through, they're going to do that open house, they're going to visualize what their life will look like in this home. Generally, you got to spruce it up, right paint the walls, clean the carpets do all the cosmetic and functional work.   And for an investor, right? Well, they're not looking to buy necessarily something that's like super value add or super dirty and hairy. The home is already cash flowing. So you get to you're kind of selling more like an asset sale and that investor saying, Hey, this is cash flowing uncomfortable with the condition for the inspection report. They're not visualizing it from a, can I build a family here, it's, you know, can I get this rented is our tenant paid currently, and they're paying rent and happy with the condition of the home. So if you layer on the 6% Commission compared to 3%, the lost rental income as well as the rehabilitation cost to get that home spruced up, you're looking at 3% versus what could potentially be 9, 10, 11% in total cost to sell the home. So quantitatively, there's a huge gap there. And qualitatively, it's just kind of less friction, as I had previously summarized.   Michael: Yeah, that makes so much sense. That's a really great summary, man, thanks for sharing. I think that that 9,10,11% to sell a property is so often overlooked by folks. And by the time they get to the closing table, like Wait, what are all these things that are coming out of my purchase price that I have to pay for, and they don't realize that the profit really may not be as significant as they anticipated?   Richard: Yeah, and I mean, I think it's also like, think of it as there's more instant gratification, right? Like, you can ever guarantee yourself a sale anywhere. But if you have a tenant that's in place through September of 2022, and you're looking at around the market right now and saying, Wow, it's hot, like homes are flying, it's a seller's market, I want to get this out there. But I have to wait until September for the tenant to move out, then I have to clean the home up. So maybe I get it on the market by October, I get some offers, maybe it's still hot, and I get it under contract by mid October. And then I close by November. I mean, that's a world away.   Whereas now you can put it up with a tenant in place and take advantage of the way the current economic situation is interest rates, buyer versus seller just supply and demand. And so rather than waiting, and kind of taking on that risk of like, Where will we be in 6, 9, 12 months, it enables you to gain that exposure now. And your cost could potentially be different, you know, as we look at 3% versus 10%. Right? If you end up having to take a little bit of a discount to sell it now to an investor. Right? You can quantify the cost of sell and the value of time, right?   How much are you willing to pay? How much are you willing to sell for less? Considering you have to sell it today? versus nine months from now? 10 months from now, right? That's obviously subjective for every every individual person. But you can put a price on that, I think for a lot of people.   Michael: Absolutely. Absolutely. And so I'm curious too, if somebody is going to want to come sell their property to Roofstock. It's a good fit, they're able to actually get it under contract and ultimately close the sale? Do we have the ability to handle 1031 accommodators on their behalf as well for them to go purchase additional properties?   Richard: Yeah, absolutely. We do it all the time where folks will come and look to kind of transfer out what they currently have. And it's something else, whether it's through Roofstock, or potentially through it through a different video acquisition channel. But we definitely have the partners as you guys may have, you know, talked about on previous pods, where we're able to get these sellers in touch with 1031 accommodators that can help hold those funds for them as they look to to make those acquisitions we can obviously adjust any of our contracts our PSA, just stipulate the grounds of the 1031 exchange, but it's definitely something that we do and we're happy to help facilitate for sellers who do want to defer those taxes and then use that capital for an acquisition.   Michael: Love it. Love it. Love it. So a question I get regularly in the Roofstock Academy and I'm hoping you can speak to this is Who are these sellers? I feel like they're just dirty landlords trying to offload their problems on somebody else. They want to sell their property because why else would they be willing to sell? Can you speak to who the sellers are and what some of the motivations are behind somebody actually selling a property?   Richard: Totally. And, you know, we get we get that question a lot. And I think it's a valid question. People ask, like, you know, Hey, why are they want to sell and I think the simplest answer is given me this same reason that you you want to buy, right? I mean, there's money to be made, right? Someone's recognizing an opportunity where if no one wanted to sell, ever there'd be never be anything to buy. So like, we'd be at this kind of standstill where no homes are transacted. So people, you know, in terms of personas, right, you have individual landlords, people who, you know, moved into a home 10 years ago, and then when they went to go sell it, it wasn't a great opportunity to the market wasn't hot, they didn't want to put it on the market, or they were in a position to go through the friction of selling a property, it's a big endeavor to take on, especially if you're not really a technically an investor, or just that savvy and buying and selling property.   And so they say, Hey, you know, I'll throw a tenant in there, and I'll just let this in cash flow. And then over time, the market gets hotter, or they, they come with your friction, and they're like, Hey, I'm not meant to be a landlord. And I try to get rid of this. But then they recognize what's what sparks out, they're like, Well, I'm not really enjoying this, I didn't really intend or set out to be a landlord, this kinda just like fell into my lap. And the market seems really hot. So now I want to sell it, or it seems like a good opportunity for what I'm hearing from what I'm seeing. So they want to go in and sell that home. You know, that's a persona that we see a lot of right?   You see that it's big in the military community, people who move from base to base, they buy a home when they move to a base, and then they end up getting transferred, they move to another base, but they keep that home, they put a tenant in there, they do that a couple of times, they find themselves with three homes, and maybe they just don't want to be a landlord. They don't want to deal with property management, right? There's positive negative to every investment, maybe for that particular person, it's just, Hey, you know, I'm a little burnt out, or Hey, you know, I just, this isn't what I want to do. Or maybe another investment comes, they want to sell, because they want to buy an investment business, or they want to build their own business, and they need that capital. And a lot of their equity is tied up in the home, right.   So that's someone that we work with fairly frequently. Obviously, that type of person owns the majority of the real estate that's out there in the world. So you can imagine that a lot of the supply we see comes from that demographic or that kind of persona people. But you also have the kind of the business minded folks who build portfolios, who know over time, whether it's in their local area, or in multiple different markets, they go and they are opportunistic, right. So they buy tax foreclosures, they buy bank foreclosures, and then they build up that portfolio of homes and turn it into a little bit of a business, right, a passive stream right now, Michael, you're doing that, right, you're building, you're buying multiple homes know that passive income, a lot of Roofstock investors want to do that. But every now and then it's opportunistic, for them to want to take that money, and maybe they want to buy a multifamily. Maybe they're saying, Hey, I own 15 units in Memphis, and it's getting a little bit tedious trying to own these individual homes across two property managers, I just want to buy an apartment building, consolidate, right consolidation.   People come with come into opportunities, maybe they want to syndicate their money out. And so they decide that, hey, I'd rather have a lot of money tied up here, and I want to sell or they want to go get a conventional loan, but throughout that 10 loan Max, so they want to pull, they want to sell a couple of these to go buy some more. You have your Fix, and flippers, which is kind of like that the previous persona just talked about folks whose business it is to buy distressed assets, add the value to them, and then sell them at that market value stabilized. That's a big, big kind of persona we work with as well. They're the ones that are doing a lot of the heavy lifting and taking on a lot of that risk, right that some of us who are out of state just can't really get control of it's getting the couple relationships with contractors and project managers who are going to have that we're going to go in and make that home kind of up to snuff. A lot of people like those turnkey homes, because they are truly passive in nature. And so you see a lot of sellers on our site, who like the opportunity to be able to do that in their local market and use Roofstock as the kind of the all in one, sales and marketing platform for them to gain that exposure to that wide network of investors.   And of course, you have your institutional folks, obviously, our institute or our enterprise, or I guess it is the executive team, our high rep team has strong relationships with a lot of the institutions that are out there in the world. And as those groups want to dispose of certain assets in certain markets that they may not be scaling in, they may look to someone like Roofstock to list these homes, in getting get in front of that kind of retail marketplace. So there's a wide variety of folks who have different motivations and kind of different justifications. But I wouldn't say any of them are are one that what you mentioned earlier of, you know,   Michael: The dirty landlord,   Richard: dirty landlord, right. I mean,   Michael: Just trying to dump a property!   Richard: Right. I mean, and that's why we have a sales team, right? We have a sales team of folks, we call and have a conversation with every seller who wants to listen on the platform. It's part of the process, you come to the site, you submit your property or properties or portfolio, you book a call with our team, we work with you to understand what it's like how, what the experience is like. And these are experienced agents, right that we work on our team that work on the supply team so they can sniff that out. They can understand what people's motivations are, what they're trying to accomplish. And through that conversation, as well as the process that we put these homes through prior to publishing, we make sure that the stuff that we put on the site is not going to be something that's you know that they're not trying to just take advantage of an unknown Unbeknown California investor or an estate investor who just like, doesn't know any better, right? Like, that's not the brand that we want to build or for how we want to present ourselves.   Michael: Yeah, no, that makes total sense. And something else that I realized I was I was chatting with someone I forget who. And someone was saying like oh Roofstock sells overpriced properties, and this and that. And so I mentioned will not necessarily because Roofstock is putting a their name behind it, but also their guarantee on the property. And so if the property is underperforming, or it's overpriced, roof stock has a 30 day money back guarantee, so they'll end up buying it back from you. So I don't think that we're in the business of selling crap, because then we'd be in the business of owning a lot of crap.   Richard: Right? Exactly. I'm in it as a relates to pricing, right? I mean, I think everybody's got a different way of underwriting and a different way of kind of assessing the performance of an asset, right? our financials are, you can manipulate them. So if you feel that they're too restricted or too conservative, and how they're being underwritten, and you're looking at a home and saying, hey, the yield is just not really there. I mean, by all means, you can look at the way that we underwrite these homes and adjust it to fit a little bit more into your particular point of view. And you know, maybe that home is performing a little bit differently, the way that you look at it, and maybe it's within that kind of buy box.   But you know, yeah, we look at every home on an income approach. We underwrite it, we compare it to the neighborhood it's in, we look at comps to assess kind of how the price is and its ability to appraise. Yeah, like you said, you know, there's a lot of brand that we put behind these listings. And, you know, we want to make sure that what we're putting on the site is, you know, we see the value in to a certain extent, right?   I mean, it's a marketplace. So buyers and sellers are going to dictate what trades and what at what price it trades at. What we'd like to do is as best we can to kind of curate and make sure that we see the value in the upside into nice homes and the potential.   Michael: That's great. I'm curious, Richard to get your take on what sellers can do either on Roof or off to best prepare their properties for sale. And let's talk specifics, specifically investment properties.   Richard: Right, I think the biggest thing to do when we have these conversations with sellers is like put yourself in the shoes of an out of state investor who's coming to Roofstock to buy a home like what would you if you were buying a home 1000 2000 miles away, and you were leveraging this, you know, online platform to do diligence and analyze the pricing and analyze all these things? Like what would you feel comfortable submitting an offer and putting your credit card down on and moving forward on? Like, what level of diligence would you feel comfortable. And that's what is being expected of you as a seller, right?   So understanding like I should have a copy of my lease readily available, I should have some sort of payment history readily available, that's going to be able to show that per the rent or the lease, my rent is $900 a month, I charge it on the first, if it's late by the fifth, and they paid late I have that late fee laid out right showing that those debits and credits month over month. That's something that eases people's minds and advisors minds understand the kind of tenant that they're inheriting, right.   You know, a lot of the investors On our site are passive in nature in the sense that they're not necessarily looking to maybe make massive repair stones, I think there's a price for everything. And you can kind of put put a price on all repairs and what someone might be willing to pay to inherit. But you see a lot of investors on our site, not necessarily looking to take on massive rehab or value add projects. And so getting with your property manager, as a seller, for assessing the homes, any an inspector out there upfront can definitely help. So you're not surprised by the results of an inspection that come back later on. Because you'd like to get in get ahead of those things, whether it's something that you want to repair before you list, or you want to price in and make read, like make it known upfront. Because you'd hate to take to accept an offer and then get into contract and then have a you know, an inspection come back and you know, a buyer request $5-10,000 in repairs, and then basically feel like oh, like, I wish I'd gotten ahead of that because I can't take that price. And if I had known that that was gonna come up, I might have been able to do something 20 30, 50 days ago to prevent that, right. Just understanding kind of what you're selling, what the condition of it is with with the state the standing of your tenant.   Having those docks readily available is really big we collect, like I said, the lease and central ledger rent roll, we collect the section eight contracts. We collect Hoa documents for the seat, the CC&Rs write any contract that you have that is attached to that home, we need to collect because we need to have that available for the buyer to be able to review and understand the terms of and what they're inheriting. And so that's really big to have on file and have readily available. We can get photos taken. We have high resolution photos I can get taken. But if you have any obviously that's super helpful.   And then as relates to pricing. Right. You can talk to our team that's kind of part of the why we have the value the the appointment in the call with us with a rep on our team prior to moving forward but having that conversation understanding, you know, what are investors looking for in markets, right, what is an investor on Roofstock? What kind of yield are they looking for in my area of Indianapolis or my area of Dallas? having that conversation you're going to get a lot of insight into what you can expect in terms of price and offers through our platform. So that's big is is kind of putting yourself in the shoes of the investor understanding like, what kind of yield? Would I need to buy this now? Right, I bought it 10 years ago, and it's appreciated greatly, and the rents grown X percent. But if I were to buy it now at current interest rates with my current expense loads, like what would be a realistic price and understanding that and really understanding how an income approach to a home can differ from a comparable approach, because there might be a market that's blown up, and comps are through the roof. But if your home is under rented, or the rent just hasn't really kept up, right, it's going to be potentially hard to justify that for resale value.   And so putting that hat on and understanding, okay, this home looks a lot different to an out of state investor than it might to a homeowner who's moving in and is going to live there for 20 years while their kids go to school, right? Like those two people have much different perspectives on what the home buy, why they're buying the home. And they're probably gonna have their perspective, low price low pay.   Michael: Yeah, that's such a great point. And so maybe you could speak a little bit to who would be an ideal candidate to sell their property on Roofstock and then who listening would not be an ideal candidate who should take their property to a local MLS or maybe through a different avenue.   Richard: Yeah, absolutely. I mean, I think that there's, like I mentioned earlier, it said, say, who's a good candidate who's not because right at the end of the day, like the market dictates what will what will sell and who will pay, what price for what home. But what you can generally see is a lot of a lot of Western markets, you don't see a lot of supply on the site, right? You don't see a lot of stuff in Vegas, you don't see a lot of stuff in Denver, Salt Lake City, Reno, Seattle, Portland, San Francisco, because   Michael: Los Angeles,   Richard: Right LA home price appreciation, awesome. Anyone who bought 510 1520 years ago, killing it. But if they bought 10 years ago, and put a tenant in there, and they've kept the same tenant in there at 12 $100, while their rent, although their price has gone up to 500, you know, half a million bucks, right? And new investors not paying the same price that you paid a decade ago. And so that may not be a super great fit for our platform. Right? At the end of the day. A lot of the folks who come to our site are coastal folks, people who live in high cost of living markets, and when they look around, they see and even investment properties 500K, 750k. And they're like, I don't, I don't necessarily want a two or three cap, right? Like I'm looking for a little bit more yield. Otherwise, I'll put my money in Bitcoin or cryptocurrency, seems to be blowing up as well.   So they look to the Midwest, it looks for the northeast and southeast, where they can get lower price and higher yielding type of assets are a little bit more of a balanced approach. And so if you're in some of these markets, or in certain pockets of areas where home prices have skyrocketed, right, that it may not end up being the best fit for restock, because the discount that you have to sell for could be fairly dramatic relative to the open market, right? We don't want to pretend like every home's going to be a great fit, right? We want to be consultative in the sense that we can look at a home and know, hey, yeah, there's data to show that this is an investment property that would sell on our site. And there's other instances where it's like, Hey, you know, this home is $600,000. And the rent is at 1200, that price ranges, like doesn't really pencil out. Your best bet is getting a tenant out and selling it on the open market to an end user because they're going to they're you're really going to be able to take advantage of the that is the market right now.   Michael: So Richard, something I've been seeing on the site is homeowners or owner occupants, rather selling their properties as investment homes. Are you seeing that? What's up with that?   Richard: Yeah, so I mean, it kind of come twofold, right? So what we do is we do have our select program, where homes are kind of being pumped in from the MLS that we feel are good investment properties. And those are generally, you know, homes that are being sold on the MLS vacant or unoccupied that have good investment potential. So what we'll do is we'll look at a home, we'll comp it out, we'll get a market rent, quote, and assess whether or not we feel like that's a good potential investment. Well, it may not have been previously, you know it, that doesn't mean it doesn't have potential to moving forward. So we'll be able to position that as well.   Same thing goes with the exclusive inventory, right? We do have investors who reach out our positions investors, we have sellers who reach out and are living in their home and they're they're saying, hey, I'd like to take advantage of restructured marketplace, I think this could be a good investment. Maybe they're interested in just taking advantage of a lower lower fee structure that we charge and saying, Hey, you know, I like the idea of a online platform. I like the idea of not dealing with the traditional stickiness or friction of going through the the MLS process.   And so I'd like to try this out, and we'll look at a home and say, Hey, I mean, one, you know, you're you'll you'll have to move out or you could potentially even sign a lease of a kind of a leaseback option. That's that's a possibility too. But we can look at a home and say, Hey, given the current market rent for bids and the price that you're looking for, this could be a valuable investment property moving forward. So we're going to shy away from that just because it's not there's no tenant in there now. We can sell a home that's vacant, we can sell a home that's owner occupied and that will be vacant upon closing. Or like I mentioned a home where you haven't you have sellers who reach out and say, Hey, I know I want to bring in the equity for my home but I don't want to leave so do you think an investor would be willing to lease this back to me. And that's certainly an option as well. So I mean, that's kind of the reason why you may see some owner occupied stuff or vacant stuff on our platform as well.   Michael: Right on. And curious to know, kind of what you're seeing right now in the marketplace is stuff flying off the shelves? Are things taking longer to get under contract, what do you think?   Richard: Yeah I think the statistic that I heard recently, and essentially not being accurate, I'll point fingers to who had told me but I think the statistic that our marketing team was that 65% of the homes that we're listing are getting offers within the first 14 days of being on the marketplace. So I think we've what we've built is definitely like a flywheel flywheel effect. And like an urgency within the platform where you do see a lot of investors because they're ready to get started, right, they want to start cash flowing, they come to Roofstock, and they're ready to go.   So when homes hit the site, you generally do see a pretty hefty interest right off the bat, if the home is, is priced well, and it's you know, it's going to sell. And so you do see a lot of homes moving fairly quickly within once they do hit the marketplace. Like I mentioned earlier, with higher priced homes with lower yield homes, a lot of investors can see those locally. So those may take a little bit longer to move, you do see homes that are in that 80 to $175,000 price point move with a lot more velocity than maybe something that's 275 to 400K, that doesn't mean that that higher priced homes not going to sell. But people generally think like, Okay, if it's 400k, I got to come out of pocket 100,000 for my down payment plus closing costs. If I have $100,000 liquid, why am I not just buying, you know, four of these homes in St. Louis, where I could cut that into four $25,000 down payments, and diversify a little bit more, right. So that thought process can take a journey a little bit longer.   And so you generally see homes like that taking a little bit longer to move. But for the most part considering type of supply that we have on our site, you do see quite a bit of velocity once I was getting listed, of getting offers quickly and going into contract quickly.   Michael: Right on, Richard, any final thoughts before I let you out of here for either, you know, sellers or buyers,   Richard: I'll let you guys speak to the buy side, I've been here, you know, four years, four and a half years in the supply side. So that I think that's more you know, more of my bread and butter. But I mean, I think we've we've pretty much gone over it right? There's no strings attached. At the end of the day, if you want to talk to someone on the team and get a better feel for kind of what's possible. Ryan mentioned, we have a pretty big team here. So if you want to come to the site, throw your home into the system, we have a kind of a self serving engine that allows you to submit the property, confirm a couple of details, get evaluation report sent over to you and then have that conversation with our team.   I think you'd be surprised, right? I mean, I can only kind of summarize what's going on and kind of what we're seeing in, you know, 10-15 minutes, so effectively, but if you get on the phone with someone on our team, they're really going to be able to give you the value and really drill down into your market and what we're seeing in that specific area of our reps or our kind of their their geographic coverage, their geographic base. So if you have a property in Atlanta, you submit it you'll talk to, to our agent who's working in the Georgia market, and they'll be able to really give you some feedback on what we're seeing in that specific area, you know, what's possible, what's not and kind of what to expect.   So, you know, we welcome the opportunity to talk to everybody and at least give them that consultative kind of, you know, thumbs up or thumbs down, if we're going to be a good fit for him. So   Michael: Right on, and where should folks go to submit their properties or to get that initial report.   Richard: So if you go to Roofstock.com across the top banner of the site, you're gonna see by selling owns the third three core landing pages that we have. So if you click on sell, you're gonna be prompted with kind of a submission engine you put the home in, it's like a three or four step process where you confirm a couple of data points on the specs of the home bed, bath, square footage of your build, you're able to upload some photos, provide some lease info, so give us tell us what the rent is kind of a general spec on condition. And then once you've gotten through that flow, you're going to get a valuation report sent to you within about 48 hours. But at the end of that flow, you're also able to book an appointment directly with our team, you know, and as quickly as 15 minutes from when you come to the site.   So rapid response, we try to get in touch with everybody as quickly as we can. But if you want to go through that flow, that'll get you in touch to the right person. But I always like to leave my door open. My email is Richard@roofstock.com pretty easy. And so if anybody has any, you know, questions, they don't want to submit a home, they still want to learn a little bit more, you know, feel free to shoot me an email, I'm happy to provide some content, some marketing collateral, or point you in the right direction, or they can touch the right person. So you know, my doors always open and I'm happy to be a resource for anybody.   Michael: Fantastic. Richard, this was awesome, man. Thank you so much for taking the time out your busy schedule chapters. I learned a ton hopefully folks listening did as well.   Richard: Yeah. Likewise, I appreciate you guys having me on. I'm always around you know how to reach me. So anytime you need a little bit more info, feel free to tap me but it was a pleasure being on the podcast. Yeah it's exciting time to Roofstock and cool to see what you guys are doing here. So thanks for having me on.   Michael: Nah. Our pleasure. Hopefully we didn't scare you from the podcast world to that.   Richard: No, not at all. I'm going to make my rounds with rest of the circuit so you'll see me you'll see me on on Spotify here. Hopefully.   Michael: Well take care,  I'll talk to you soon.   Richard: All right, thanks. Cheers.   Michael: Alrighty everybody that was our episode a big thank you to Richard for hanging out with us today I learned a ton. Definitely go back and listen to that episode again, if you're even considering selling your property, even if it's not on roof stock, I think now it could be a great opportune time to think about selling. As always, feel free to leave us a rating or review wherever it is you listen to your podcast catches on the next video. We look forward to seeing you there and as always, happy investing

Paul Moore from Wellings Capital is back with us to talk about how to get started in the multifamily rental space. We discuss Paul's transition into the multifamily strategy, how to evaluate the trustworthiness of potential syndicators, different forms of multifamily investments, how to make the SFR to MFR transition yourself, common mistakes investors make, and taking action. Visit Paul's site: wellingscapital.com     --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by my co host,   Tom: Tom Schneider.   Michael: And with us today, we have a repeat very special guest, Paul Moore of Wellings Capital. And Paul is going to be talking to us today about the transition going from single family into multifamily and then into massive multifamily syndication. So let's get into it.   Paul Moore, thank you so much again, for coming back on man. Really appreciate you taking the time.   Paul: I's great to be here, Michael. Thank you.   Michael: So Paul, what I wanted to chat with you about today is multifamily? Because I know that you are a big, big, big player in the space. And so maybe you can just start off by sharing with folks. What are some of the benefits of multifamily versus single family that in your opinion you've seen?   Paul: Yeah, so I just for a quick history, I flipped single family homes for years. You know, we did dozens and dozens and dozens of homes. And we also did waterfront lots, I did some ground up single family. And I wasn't sure how to get into the commercial real estate realm. And actually a friend of mine and I found this huge glut in or the shortage actually what am I saying a glut? An anti-glut and housing in North Dakota for the oil boom that was going on there during the Balkan years in late 2010 and on.   And so we built a multifamily facility sort of a quasi hotel and then we build another one next door then we ended up building a Hyatt Hotel and found out that man, I really like commercial multifamily. I like having all these doors under one roof. I like one parking lot. I like one, you know place where all the toilets are and everything. So we really we jumped into multifamily. And we really never looked back from that point on. And so that's how I got into it.   Multifamily is interesting because the government cau… helped cause a huge supply and demand imbalance in multifamily. So in the mid 90s, in the mid 1990s. The government and its great wisdom decided that everybody who could fog a mirror should own a house. And so they actually pass laws and they forced those laws down on the bankers. There's different opinions on how this really happened. But basically saying, you know, like starting this massive subprime mortgage boom.   And basically they said, Look, you don't have to have a good income, you don't even have to tell us your income. You can just do stated income or you can even do no doc and you guys remember that. And so lots and lots and lots of people were able to buy a home I have a friend who was making about 40 or $45,000 a year, he had a house and he bought a I think was a $500,000 second home in this town he grew up in and it was actually a little castle. It was in, you know this town that was actually in decline in West Virginia. And he bought that as a second home.   And you know, he didn't even have a really good plan. It was years and years before Airbnb. And so he lost it back to the bank and a lot of people lost their homes. But what happened is homeownership went up from its historical norm of about 63% to 69.2% by 2005. And so from ‘95 to ‘05 and went up a whole lot and so single family home ownership was in multifamily was not so much and then of course we have the crash that you know the cracks that started in ‘06 and ‘07 and then the crash that happened from really ‘07 to ‘10 and there was a lot of people who lost their homes. And a lot of people who said you know what? The American dream of having a home having my own house is not such a great dream as they watch their some of their parents and their friends and themselves, lose a home and lose all this massive amount of equity.   I know a guy named Rod Cleef who you guys might have heard of in Florida he had his net worth went up by I think $30 million in in Florida in single family homes between like ‘05 and ‘07 and then it dropped like fifth million dollars after that, and he lost all his single family and his multifamily because they were tied together on loans, you know that we're kind of cross collateralized. But at any rate, single family home ownership dropped back down to around 63%. And every 1% drop from 69.2 to 63 ish was represent a million people coming into multifamily.   But they came in at a time, when there wasn't a lot of multifamily being built, you know, like,'07 - 09 10-11. And so there's became this pretty significant supply and demand imbalance. And the four types of people who are coming in and at the time, especially right after the Great Recession, but even to now are coming in, number one, baby boomers, people my age, it's the smallest number of multifamily tenants, but it's actually the fastest growing. And statistics say when someone goes from a single family home that they own to multifamily, they typically never go back to owning their own home.   Second group is millennials now millennials in general, not you guys, but a lot of people, you know, a lot of them don't see the point in tying themselves down to a 30 year contract on a seemingly overpriced home, when they might have new opportunities, new friends, new jobs, you know, something across town or across America or around the world next year. And a lot of them historically have had a lot of debt. And with the new rules that came in after the crash, you know, a little over a decade ago, it's harder to qualify for a loan. And so millennials on average rent more than buying compared to other generations.   You've also got Gen Z, it's hard to say where they're going to land, but at this time, Gen Z, which is about as large as the millennial group at 77 to 82 million strong in America, they are also renters. And then the fourth group is immigrants. Now people who weren't born in the US, on average, rent more often and rent for longer than people born in the US. And so the question is, are we going to end up going more trending more toward Detroit, whether it's over 70% homeownership, or more toward Dallas, where homeownership is down around 50%? It's hard to say, but my money is on Dallas.   Tom: You know, it's funny, that inverse relationship of in Europe, it's there's some studies out where you have countries, some Scandinavian countries where maybe homeownership is left, but the economy is a lot more dynamic versus country where homeownership is very high, Spain and Greece, and usually the economy is a little sluggish. I think a lot of it has to do with what you're talking about where you have that mobility, you aren't necessarily locked in here. And you can, you know, move around. I think that's, that's part of it.   I love that story related to The Big Short, you know, talking about the run of the economy, I love to hear how your business evolved throughout that. So like you said, you initially were in single family was that in this run of time? Or had you already transitioned? I'd love to hear kind of the confluence of you through that whole, you know, through that market dynamic change?   Paul: Yeah, I'd like to say I thought through it. And some intelligent decisions based…   Michael: Crystal ball.   Paul: Yeah, just didn't work for me. But no, I had a public I sold a company to a publicly traded firm when I was 33, in Detroit, and that was in 1997. At 34, I found myself pretty bored. And so I started seeing flipping single family homes in 2000. And we did that and then we built some ground up like homes, and then we did a small subdivision. And like I said, I did I got into land and lots for a while. But I also set up a website that sold leads to realtors, and I still have that running in the background 17 years later, and it's still going pretty well. That's a regional thing right here in the southern part of Virginia here.   But at any rate, during that time I was I just I didn't know how to get into commercial, like I didn't know, like, how would I get into large scale multifamily, I didn't have $10 million. And I didn't know to trust where to start syndication was a thing we didn't really know much about. I mean, we knew that there was a thing called syndication where you can pull together a whole bunch of few active and then a whole bunch of passive investors. But we really didn't know how to do that. And we were sort of thrown into that when we started building, you know, much larger assets, you know, then we had the money for ourselves. And that was in 2011.   And, you know, when when single family and small multifamily around the country within the tank, we found that the opportunity in the Balkan region of North Dakota with the oil boom made, you know, was made a lot of sets. And so we, and we've kind of fell into that, Tom. I mean, we actually we then we had a failed oil and gas investment in North Dakota. But that's how we learned about the housing shortage there when we drove up there and saw people sleeping in their pickup trucks along the side of the road, in rest stops in a Walmart parking lot.   Tom: There's so many interested, interesting, successful businesses like that, where you went to the gold mine, you know, searching for gold, you know, the analogy of oil. But then you found the money was in the picks and the axes. And in that analogy, that would be the actual housing for it. So that's, and that's such a common, successful entrepreneur story of just kind of having eyes wide open. And, you know, pivoting as it makes sense.   Paul: Yeah. So which is more exciting. Hitting oil? or building a multifamily property? The Healthy oil workers? No, seriously, there's a thing called like, I'm trying to I'm working on a book, I'm just kind of in the early stages, the joys of boring investing, or possibly the boring investor. Boring investing is powerful. I don't know if you guys heard of the coffee house investor, but it's basically saying this look, why should we actively trade stocks, and Bitcoin and all these things that are so exciting? Sure, throw a little bit of that, but why are we spending our life's energy, when we could be hanging out with our families or friends are having a better marriage or whatever those things can be and make more money and ETF, you know, ETFs.   And so I, the thought there are not a stock guy. But the similar thing in real estate is this, would you rather give your let's say, your professional, let's say you're a doctor, a dentist, a lawyer, an IT person, you're making hundreds of 1000s of dollars a year, and you're trying to flip a house on the side does that it doesn't always make as much sense to do that when you can have somebody else do it for you. And so I think companies like Roofstock, and my company, we, you know, we provide opportunities for people to get involved passively, still get the profit still get the appreciation of real estate. But at the same time, they don't have to give every waking moment of their free time to this. And that's one thing I love about it.   And that's sort of similar to what you said, Tom, and I mean, you know, you can either go out there and try to mine, you know, try to be out in the caves and you know, in 19-1849, trying to mine for gold, or you can just sit comfortably in your hardware store and sell all the equipment to them, you know, or you could be Amazon and shipping equipment. Anyway.   Tom: I love that concept of a book, The urge, you know, just kind of going into the the boringness as like the winning strategy. And I mean, just in talking with friends, I think a lot of it is FOMO it's a lot of it the psychology, you know, maybe you have some, you know, of some guy who got in Bitcoin really early. And it's like, oh, maybe I should do that. But it's like, having a kind of a balanced approach at looking at the, the, you know, the variability of it, right, the beta versus some some boring ETF strategy.   Michael: I agree with you both, because I think it's not sexy to talk about at dinner parties, you invested your money in something and it's just sitting there, earning you a great return. And like, everybody wants to hear the big win stories where you swung for the fences and knocked out of the park or it didn't go so well. I mean, that's, that's the stuff people want to talk about. But I couldn't agree more the passive stuff is, is really great.   And Paul I was hoping to kind of get your your take on this about how folks you touched on it a little bit about syndication, but I think so many folks can't fathom investing in commercial real estate, multifamily real estate. And for those of you that don't know, that's five units and up residential is four units and below. So how can people start investing in 100 units, 200 units, 500 units, you know, what, what's the path to get there? And then we'll come back to it and talk about how people can go from four to five.   Paul: Yeah, that's great. So if they want to invest in larger, you know, like, let's say, so I have some money in an IRA and I can't invest in my own company, because it's an IRA and I it has to be, you know, like arm's length. And so I look for other opportunities there. And I'm looking for something really passive and really boring. Now, recently, my friend told me how he was getting a 60% return on setting up this amazing log cabin, Airbnb in Gatlinburg, Tennessee. And I was like, Wait 60% annual return. He's like, yeah, I bought a million dollar house, I financed 900,000 of it. So I have 100,000 in it. And I'm getting 60 to 70,000 free cash flow a year.   And he's actually done this over and over. And he's helping other people do it now. So I got really excited about this in June. And then I thought about through July, and I thought about it through August. And I thought, Wait a minute, you know what that will be so exciting, because I love Gatlinburg, that will be exciting. And that will make a lot of money. But that'll be another thing to think about. That's gonna be another thing I have to worry about. That's going to be some call, you know, from even if there's a third party manager, I'm going to get calls, you know, about some toilet overflowing or some insurance or something. And I'm making pretty good money in our company. And I don't want to have to think about that. And that's the path. That's my passion, to tell people, you know, to be a boring investor and to do it through like syndication, for example, do I mean, do any of us really think we're gonna go out and find a two or three or 500 unit apartment and somehow find a deal that nobody who's given their whole life to it, you know, these hundreds and hundreds of companies who are pursuing these night and day with a team of people? Do we really think we're gonna find a deal, it's probably not going to happen in the real estate realm at that size.   And so why not align yourself with the people who know how to find those deals, and just invest in their deals. And so that's what I recommend I I talk about my new book has a section like 50 pages of seven paths to get into large scale commercial real estate, but the path I'm recommending for this podcast for this discussion would definitely be invest passively with somebody who is an expert.   Tom: So this is a, this is probably a common question.   I think this all sounds great. But, you know, how do you build trust with someone where you're going to give them a bunch of your money? How do you cross that chasm cross that bridge to get uncomfortable, especially for doing it for the very first time putting funds into a syndication?   Paul: So Tom, before I answer that, I just want to make sure are you saying, How do I build trust as a syndicator? to get people to give me money or vice versa? How do I price it versus…   Tom: Vice versa? I'm evaluating Yeah, sure. You know, the log cabins in Gatlinburg sounds super fun, but I you know, passive income, let's let's do that. Okay, how do I sort of vet a potential syndication to put funds into what would you be out around that?   Paul: Yeah, so a couple things I would do. There's a book called The Hands Off Investor, by Brian Burke. And this book is, it's a wonderful book by a guy who was a syndication expert. He's done 1000s and 1000s of apartment units. And it's published by BiggerPockets publishing, so I'd highly recommend The Hands Off Investor, it's about 300 page Guide, which will tell you how to evaluate a syndicator before you invest. Secondly, I would go to the real estate crowdfunding review. And it's not just for crowdfunding, it's for syndication in general. And it gives a tremendous amount of information and education about how to vet operators, fund managers, syndicators, etc. And it basically helps people figure out, you know, the, what they need to know before they invest, there's a lot of other investors on there, and they give very honest reviews. And there's no syndicators or fund managers allowed in their group at all. And so I could never see what people are saying about me there. So they probably feel a lot more willing to, you know, willing to be honest, good and bad.   Tom: I love how self serving these episodes are. This is this is incredible. Yeah, I love it. I have my Amazon cue the hands off investor in my that link to that site up right now.   Paul: Yeah, you know what, I didn't really answer your question that Well, those are two resources. I'll just tell you real quick. I want to actually see how much skin they have in the game, how long their track record is, do they have a cohesive team? How do they treat their staff? How do they talk about their other investors? What do other investors that they refer but also that you find yourself, what do they say about them? What kind of risks are they taking? What kind of cap rate are they assuming on exit, which in other words How much do they assume that the market will go up or down on exit? What kind of occupancy? assumptions are they making? What kind of rate increases rental rate increases in cost increases of a assuming there's a lot to know? And that's why it's so important to lean on things like you know, other people's reviews, which you get especially That real estate crowdfunding review site.   Michael: Paul, I agree with everything you just said. taking it a step further and allow your deeper if someone is brand new to the multifamily space and brand new syndications, how can someone know if the cap rate that's being projected on the exit is reasonable, or the vacancy that they're projecting is reasonable, their costs are reasonable.   Paul: That's really tough. I was just talking about this to an investor about an hour ago, and he was asking me, he said, If I invest with you, what kind of quarterly reporting will I get? And I said, Well, you know, the problem is, you're gonna have to really trust us, honestly. And you're gonna have to trust the people we invest with, because the quarterly reporting will not it might like make you feel good to see a big page of numbers. But first of all, if there's one mistake in their Excel spreadsheet, it can throw off the whole sheet, you know, that's   Michael: It's all garbage. Yeah,   Paul: It's all garbage. But also, you won't really understand, I mean, you won't really, really know. And so this is, again, going back to trust. And this is why I like the educational model, which is what you guys do so well, you're educating your audience, you're telling them about, you know, the different reasons people should look at a real estate investment with Roofstock, and other people on podcasts are telling you about theirs. That's why I think education is so important. And building a loyal group of people over many, many years.   There's a lot of newbies who are doing this now. There's some of them, say stuff like, hey, the real estate market will never go down again. You know, people always need a place to live. That's not true. And history tells us it's not true. And so my money is again, on people that have been around like Buffett, you know, 91 years. And he has some things to say even though he's not a real estate investor. He has some really, really important principles for real estate investors, and I love to study this stuff.   Michael: Yeah. It's such a good point. I've been to several multifamily workshops and syndication workshops, and they're talking about how, you know, it's really important to evaluate not just the deal, but just to your point, the sponsors, who's putting this deal together, why is it that they're asking for money? You know, what is their track record look like? So I think if, if the numbers you can't read the numbers, or you can't tell the story between the numbers, look to the folks who are behind the numbers to get a good understanding of what how that deal is going to perform.   Paul: Yeah, that's true.   Michael: So wondering if we can shift gears here a little bit, Paul, and if you could share with us a little bit on what you've seen folks do really well. Or maybe you personally how you went from single family into small commercial multifamily, because I think that there's this chasm, Tom, to use your word, that people can't make this mental shift, that there's this commercial real estate in the multifamily space is so different than residential or than single family. So what have you seen folks do to be successful to make that leap?   Paul: Yeah, I think it's just actually doing it. I mean, getting some education. There's a lot of great podcasts out there these days. There's books, there's mentoring, there's coaching of the path, you know, that I mentioned earlier, I really highly recommend, you know, getting paid coaching, or even unpaid mentoring and learning from somebody who's been before you.   One thing I mean, I hate to sound like rude, but I'll be on a, you know, I'll be on a BiggerPockets forum answering a question. And if somebody says, I'm trying to make a decision on how much to offer on a single family house, great. That's great. That's no problem. I understand that. But when somebody is on there, saying, I'm trying to buy a two or $3 million mobile home park, or self storage facility, or you know, even a 20 unit apartment, and they don't even know really basic stuff, like what does cap rate mean, or whatever. I'm like, Don't do this.   Michael: What are you doing?   Paul: You're risking your family's money and your friends money, and it's almost sure to be a failure. I mean, the money. The big money in commercial real estate is buying from a mom and pop operator and improving it. And we've seen people double or triple. I'm doing a case study this week with somebody you know, somebody who was able to quadruple their investors joint, you know, the group of investors equity quadrupling, in two years. It was from buying a $10 million Self Storage Facility from a total mom and pop operator who didn't know what he was doing.   And so don't be one of those. And the way to not be one of those is go get a paid coach, or an potentially an unpaid or semi paid mentorship with somebody who's way ahead of you. And then like I said, books, podcasts. cetera is really helpful.   Michael: Yeah, that's such a great tip. I do a lot of coaching inside the Roofstock Academy. And I'll get folks in there sometimes say, Oh, I want to go big for my first one. And I said, Well, why? Well, because I want to do this and everything. And I said, Look, I can almost guarantee you, you're going to make mistakes, you're going to learn lessons. Would you rather learn those lessons on a big, big property with a lot of risk or on a smaller property with a whole lot less risk? and 90% of the time? That's so let's go learn. Let's go learn with training wheels, and then we can go ride our bikes.   Paul: Yeah, I agree. It's so true. And I wish I didn't know that years ago. I mean, I made so many mistakes like this. And, you know, I love what the first Nobel Peace Prize winner Paul Samuelson, in economics from the US. He said, investing should be boring. It should be like watching paint dry are watching grass grow. If you want excitement, take $800 and go Las Vegas. You know, it's it's so people wanting to be part of the excitement is going big, go big or go home. Right. But, you know, life doesn't work that way very often. And when it does, it's such an exception, that, you know, they write books and tell stories about people. I mean, people think, you know, Jeff Bezos was an overnight success. He has massive pain and failure in his background before he got to where he got, you know,   Michael: Yeah, it's so true. People only talk about the highlight reels no one talks about the other 99% that fail or don't make it or that, you know, go home crying,   Paul: Right.   Michael: Yeah. Yeah. Curious.   Paul: That's true.   Michael: Curious, Paul, what is one of you know, a couple of the big mistakes that you see newer investors make as they make the transition to multifamily?   Paul: That's good. One would be just assuming that rent, you can increase rents, like 6% a year every year, but costs are only going to go up 2% make a ton of sense. Although it could happen, you know, it could happen if you can find some efficiencies and things like that.   Another one is not aligning with a great property management team. You know, I mean, if you, I mean, I think finding a property manager is critical. I know a guy who's a medical professional, I met him recently, and he had 42 units. And he was man… He was managing it himself, trying to run his medical practice and managing 42 units. He's like, well, the cash flow will be destroyed if I got a property manager. And I'm like, Yeah, but your life destroyed. Now, you know, like, he was telling me how a tenant had just moved into a place on Monday and on Wednesday, set it on fire. I mean, that was like three days before I met him.   And I'm like, okay, so if you just own that, and you weren't the property manager, you'd still have a ton of hassle here. But as the property manager, and the owner and asset manager, you've got, like, 10 times more. And so I think that is one big mistake people make, assuming they can do it on them on the side. And assuming it won't be that much hassle. And assuming that there won't be any vacancy, things like that.   Tom: Pennywise pound foolish, I guess, Penny penny wise, sanity foolish.   Paul: Yeah right. Yeah, sure.   Michael: One big one that I see is when folks start to make bridge this gap, and it could even be in residential multifamily, but they'll look at a single family house that rents for 1000 bucks a month, and they'll look at a duplex that rents for 1000 bucks a month gross, you know each side for 500 bucks a month, and they'll evaluate those two properties as the same. And I would say that they're not because the folks renting that single family are going to be a different tenant class in the folks renting the duplexes. So don't you've got to go beyond the numbers and don't live in the spreadsheets because it'll come back to bite you in the keister.   Paul: Yeah, sure. Well, that's great point. Appreciate that, Michael. That's good.   Tom: Paul, I think we're we're kind of in an interesting economic point right now where we've had this this wild run up on appreciation, and maybe it will continue. Maybe it won't. I'd love to hear kind of your crystal ball thoughts around the market, rent prices, just kind of a general musing on what to look look towards and coming up and 2021 and into 2022.   Paul: Yeah, well, I was sitting in airport, going in a tiny little airport in Belize city going to The Real Estate Guy's annual conference in June, and I was sitting next to a well dressed guy and I started a conversation with him. It turned out it was Doug Duncan, who was the chief economist for Fannie Mae. And I was like, Well, okay, what do you really think about inflation? I really think the same thing I'm saying publicly, I think it'll be in the fives this year. It'll be like 3.8% next year. I'm like, why do you think it'd be so low 3.8 as I said, they just injected 30% of cash that's ever been created in the US. It has been created in the last 17 months. So why won't inflation just go through the roof?   And he explained that it's not only the amount of cash, it's the velocity of spending. And he said, he thinks there's gonna be a lot of velocity this year, you know, kind of in this post, you know, like the year after 2020, where COVID was just reigning and ruling over all vacations and everything else. But he thinks there's gonna be a big spending spree this year, of course, we're seeing that tons of shortages. I mean, go try to buy a four wheeler or a four wheeler trailer right now you can tell I tried really hard to find anything or try to find a car. You know what the chip crisis, but it's the same in real estate.   And Doug Duncan went on to explain, he said, I think the shortage in the real estate market is real. He said, I started sounding a siren in 2014, saying, you know, seven years ago that there was this growing supply and demand imbalance, which is sort of what I was talking about earlier, that includes multifamily, and single family. And he said that the amount that in balance is going to take years to catch up. And so it really does seem like the price inflation in, you know, rents, and single family home prices and apartment prices, it seems like it's real, it is justified. And it seems to me that without some huge exogeneous shock to the economy, which, you know, we found out we could have, of course, with COVID and other things. Aside from that, which is kind of a black swan issue. It seems like the cap rates are going to continue to stay compressed, returns are going to continue to stay low, it's going to be hard to find single family or small multifamily that cash flows, and people are going to be relying on appreciation. But that's what we've been talking about earlier that that's really risky. Do we want to take risks like that?   Well, I'd say this, align yourself with people who have decades of experience if you're going to, because right now, if you're just coming in near that, what could be the top of the market, where the margins are razor thin, if existent at all. And you know, if there's a shock, or if there's a downturn, you could get, you know, in a lot of trouble getting a 97% loan, and then the value drops by 20 or 30%. It's I think it's a very risky time to get in, even though what I said a minute ago, it seems like the prices are justified, according to Doug Duncan's analysis, which made a lot of sense.   Tom: Thank you for that, that I feel very optimistic about, you know, in hearing that, and that makes a lot of sense. How would that how does that translate into, you know, your strategy and going into the next year? Is it you know, kind of cautiously continuing to deploy capital into the space? Or are you know, I know, there's a lot of other strategies, perhaps, you know, new builds or build to rent, new development. I'd love to hear your thoughts on that, on translating that information into action.   Paul: Yeah. So Tom, you know, Warren Buffett, that sounds like I'm going to go on a bunny trail here, and I am, seriously, he bought, he hated tech stocks, and he was famous writing it. But when when Steve Jobs died, I think it was 2013 or so Apple just was really, really stagnant. And he saw a huge, he saw his grandkids, how they were addicted to all these Apple products. He saw the consumer behavior among a lot of, you know, Apple people that they just couldn't wait to get the next thing that they were basically addicted and chained to Apple. And he said, Look Apple's, like in the $20 per share range. And so he started quietly buying it. And he became the largest To my knowledge, the largest shareholder outside of apple in Apple stock.   And he did it because he saw intrinsic value. And that's where I'm going here. We need to find, I think at this point in the cycle with this much uncertainty, we need to find intrinsic value. And by the way, Buffett made massive, massive profits for Berkshire Hathaway, by his bet on Apple as it went up through the roof after that, and because people saw this something he saw something that people couldn't see before that this kind of crazy quote, Michelangelo said, I saw the angel in the piece of marble and I chipped away all the other stuff to get the angel to, free the angel.   And so the point of that is there's intrinsic value in certain real estate We've got to find that I told you the story about the guy I invested heavily with two years ago, who bought a $10 million self storage. And now he's quadrupled our equity in it. Because he saw intrinsic value. He saw stuff others didn't see. The guy in Gatlinburg I told you about, he has a way of unlocking intrinsic value in these cabins in to maximize the rental value. I know a guy in Minneapolis, he buys single family homes, and like for 400,000, but they only cashflow 1500 a month as to a single family renter. I'm like, how are you making that work?   He said, I furnish them and I rent them to students to beds per bedroom, to like for like five or $700 per bed. And the cashflow is massive because he's able to rent it to like eight students at like 600 a bed that's 4800 on a 44,000 excuse me, 400,000. home, he found intrinsic value. And that's what happens when we buy from a mom and pop, they don't have the knowledge, the desire or the resources to maximize the income and maximize the value of these commercial or residential assets. And so by buying from a mom and pop by seeing the intrinsic value, we have a chance to beat whatever happens in the realm of the market, the economy rents, all that stuff, we can beat it even if interest rates go way up from like where they are to 5,6, 7 range, which I doubt they will By the way, but even if they did a strategy like this can outfox that. And so I would just say that look for intrinsic value. Intrinsic value being the value that's not, that's hidden from the eye is what I meant.   Michael: Yeah. I love chatting with you, Paul. Because every time self doubt starts to creep in on this redevelopment project I'm working on it's taken longer. It's become more expensive than I initially anticipated. But I hear things like this. I'm like, Yes, I'm doing the right thing. This is the right call. So it's it's exciting to hear and it's definitely refreshing to hear and something that I talk a lot of out to investors that I speak with, it's Hey, you know, everybody can see the same set of facts. But it's those who have kind of can look through things at a different lens or through a different angle, that you'll see something different and allows you to see and perform or others can't.   Paul: That's great, man. Thanks for saying that. Michael. I'm glad to hear about your project. I'd love to hear more about it.   Michael: Yeah, absolutely. Absolutely. Tom, any final thoughts for Paul before we let him go?   Tom: No, this is uh, I love all the the Oracle from Omaha references, the Warren Buffett references and yeah, I love these conversations. Yeah. Thank you so much for for joining.   Paul: Yeah, you bet. Well, I'm actually working on the book called Warren Buffett's rules for real estate investors and really excited about it, because I'm, we're taking two friends of mine and me are taking his principles and applying them to real estate. So it's really fun.   Michael: When is that coming out, Paul?   Paul: Well, I've got a couple publishers talking about publishing it, we had it. We had it about I think 75% done a year ago. And then I just completely stalled on it. And so I just reopened all those Google Docs yesterday, hoping to get it done by the end of the year and come out maybe late 2022.   Michael: Awesome. Well, we'll definitely have to have you back on to talk about it. Cuz That sounds very interesting.   Paul: Thanks, I love to do that, man. It's great to be on here.   Michael: And for folks that are interested in learning more about what you do with syndications and learning more about you where should they go? How can I get a hold of you?   Paul: Yeah, you know, like I said earlier, I had a hard time figuring out how to get in, do commercial real estate. And so I've written a guide for people who want to get in, it's actually a quick, quite simple, five day little course they can get that at wellingscapital.com/resources. That's wellingscapital.com/resources.   Michael: Awesome. And that's a free download for folks.   Paul: Right.   Michael: Fantastic. Well, Paul, always a pleasure to have you on thank you again, for spending the time with us really appreciate it really insightful, and definitely look forward to continuing the conversation.   Paul: You bet, guys, thanks so much. Talk to you soon.   Tom: Thanks, Paul.   Michael: Alright, everybody, that was our episode a big, big, big thank you to Paul for coming on. Again. Always a pleasure to have you and definitely looking forward to having you back on and talking about your book. Paul's a wealth of knowledge, and feel free to go back and listen to that episode again. As always, if you'd liked the episode, please feel free to leave us a rating or review wherever you listen to your podcast, and we'd love to hear your ideas about future episode topics. Happy investing. Happy investing.

In this Investor Stories episode, co-founder of West Irving Capital and Stessa power-user, Derrick Deese shares his investment journey. From strategy, operations, and portfolio growth, Derrick shares a wealth of information for investors. We also cover how Derrick uses Stessa for asset management, to simplify his process for procuring lenders, completing taxes and keep a finger on the pulse of his portfolio performance.  WestIrvingCapital.com --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum. And today with us, we have a very special guest, Derrick Deese out of the Pacific Northwest. He's an investor that started small on Rootstock and is now up to 40 plus units with his partner, we're going to talk to him about how he scaled, what tips he has for newer investors and what programs he uses to manage a portfolio that size. So let's get into it.   Awesome, Derrick. Well, thanks so much for taking the time to hang out with us today. Really appreciate it, man.   Derrick: Thanks, Michael. Appreciate it. And happy to be here. And thanks for inviting me and look forward to chatting.   Michael: Yeah, absolutely. So I want to hear about your background. But before we do, I'm curious to know, what was like your worst day ever since becoming a real estate investor?   Derrick: Oh, well, I will, I will let you now. So the worst day I think was actually someone called and said that there was poop and I'll use poop versus the other word coming out of your toilet. It was about 11:30. At night, I actually had just had my second child, my daughter, Evelyn and I was holding her about 11:30 I get a call saying that there's poop come out of toilet. What do we do? And so I had to deal with that. And it was just one of those things, we sort of have to sort of say s.h.i.t happens. And it's sort of one of those forescout moments.   But right that that was pretty, that was pretty funny at the time, I'd look back, but it's sort of one of the things where like, you know, you sort of deal with the good and bad with it. But that was probably one of the worst areas. And really, you know, we had to end up cleaning a pipe inside one of the buildings and following the plumbing stack was off or something. But it comes with territory. So   Michael: It comes it comes with the business. When they said what do we do? Did you tell them like, well put the poop back in the toilet, that's belongs, it's kind of a no brainer.   Derrick: Basically, I said, you know, just get a plunger and just call the day. I can't come out there. You know, figure it out. Just put it back in there. It's probably your poop anyway. So Michael: Yea better than someone else's poop.   Derrick: Exactly. So yeah, yeah, but that was probably the worst. But then in terms of and then in terms of this background, right. I mean, I, I can give you just a quick background for myself in terms of sort of where I how I got to where I am.   So I actually started off. I've had a career in a variety of different different functional areas. I started off after college, in investment banking, and did that for several years. And I actually covered real estate investment trusts when I was doing that, that's when I first started to learn about just real estate in general different asset classes across real estate and understanding how the business works there.   And then from you know, after banking, went to grad school, came out, I did strategy for a little bit. And now I actually work in the tech industry, and really the sales and business development function. And I've been doing that for the past seven years. And I really started getting into real estate, honestly, three years ago, and it was what the birth the birth of my first child a room. And I sort of said, You know, I got to figure out a way to diversify a little bit, but also just figure out a way to own my own time and spend some more time with my kids because I realized that I wasn't spending lot of time with him because he wakes up, I want him to work, I come back from work he was sleeping.   So that's really the the impetus behind me starting to invest was was really family related. And then as I've continued, you know, it sort of has expanded into writing different things which I can get into. But that's really why I started investing in the first place really, for my son, and now my daughter as as as well, and also my wife as well just disappear. We'll have more time to own ourselves.   Michael: Yeah, absolutely. So I'm curious what I mean, if it was the birth of your first child, that would truly was the wake up call. Because you were involved, we can say in the space and you knew about it. But why didn't you feel like it was for you? or Why didn't you take the time to invest back then? wasn't just Oh, it's for somebody else? I don't need to do that. Or just curious what your where the where your mind was at back then?   Derrick: Yeah, honestly, I think that that was one of the things where it's a it seemed almost unattainable. When I first started thinking about it. And again, working in banking, I learned about investing in general. So I had invested in the public markets and sort of was very comfortable there. It was very accessible. You could just go to, you know, fidelity and just buy and sell stocks. It was easy. And I and I knew it. And the people with whom I worked on a real estate side, you know, when I when I covered them, you know, they were all they owned 1000s of units and had tons of space.   And so I just it just wasn't clear to me that you could start off buying a single family or duplex and that wasn't something that I just realized. But then as I started doing more research into sort of Ever friends and people, I sort of realized that you have to start somewhere. And taking your first step is important. And you're not going to start off buying, you know, a 1000s for, you know, 1000 units ready to start off with just one.   And so really, it was just sort of a, I guess, a mis misalignment in my mind of what was like feasible to start versus what versus what I have seen that that was the biggest barrier for me. And once I sort of overcame that barrier, it just became much more easier.   Michael: Awesome. And so what was it that allowed you to actually take that leap to go from zero to one to make that first purchase? And I'm curious to know, if you remember, any, were you just scared out of your mind? Or would you think we confident because you'd seen it? And you you'd seen but it was possible, it was possible? Talk us through that? Yeah. So it's kind of funny.   Derrick: So it's kind of serendipitous that, you know, both Stessa and Roofstock are now one of the same because my first purchase was actually the Roofstock.   Michael: Okay, yeah.   Derrick: And, and I, I was looking at, I said, I don't, I said, I, I knew how the process of buying homes, I'd done it before my primary residence, I did not know, for investment home. So it was kind of daunting to figure out how to find an agent and find a property manager and all this stuff over time. And I ended up doing it. But when I first started, it was just daunting. So I, I literally looked up, like how to buy properties online, I googled it. And, you know, Roofstock came up, and then also, another company came up, I happen to start browsing through stock, love the UI, found a property in Ohio, and wants you to process the Roofstock. And literally, I bought it and I you know, you sort of expect like, you know, some Gong in the sky to like, you know, well, yeah, I'm just like, Okay, done. Like, here's your property. And I said, Okay, that that was it. Right. And after that, it just you started to just start moving forward. But my first property was actually bought the Roofstock. So   Michael: Oh, that's awesome. That's awesome. It was funny. I was chatting with another member, who's who's from rootstock Academy. And I asked him, he closed on this property. And I said, so what did you think? And he goes, honestly, Michael, it was so anticlimactic. And I said, it's because you did all the legwork up front. It should be anticlimactic. It should be boring. Investing should be boring a lot of the time. So I love that. That's   Derrick: Exactly, Exactly.   Michael: So So you got that single family home? Was that a single family? Yes. Okay, so that was your first single family, your your first investment property single family out in Ohio. Talk to us a little bit about what your portfolio looks like today.   Derrick: Yeah, so the portfolio has grown. Over the past three years, now it's close to 40, or somebody units, I think, mostly in Ohio. And I primarily do my investing through a business partnership really is called West Irving Capital Partners, you can go to the website and check it out. It's just westirvingcapital.com. And it's really myself and two other partners who primarily do a mix of call it two to four units, and also some five plus units. So we have around 40 split up between duplexes and a couple of actual, you know, public apartment buildings in the world, but they're under 10 units. And so that's what a portfolio looks like. Now.   You know, we primarily invest in Ohio, just because, you know, we like the market, we think there's a lot of upside in that particular area. And again, our whole strategy is sort of focused on finding properties that we think are undervalued or mismanaged. We've we've seen that there is a lack of supply of housing that is, you know, high quality and also decently priced. That's where our niches, we focus on rents that are around 800 to $1200. We put in some capital expenses, some some ESM, some capex upfront. And that's what we do. And we've been doing that for the past three years.   Michael: I love that strategy. And so I want to come back to this strategy as a whole. But you mentioned targeting properties that are mismanaged. And I want to hear a little bit more about that from because I think a lot of people when they're looking for investment properties, if they see something that appears mismanage they run the other way. But what you're saying is they're running towards it. So what what do you mean by mismanagement? And what, at the risk of giving away the secret sauce? What kind of risk management things are you looking for?   Derrick: Sure, no, I try to give as much information, Michael, just because, you know, the market is so vast, everyone can win. You know, it's not like I'm, you know, I have the only manufacturer of widgets on the country, right, everybody can buy real estate, so I will give as much as I can.   It's sort of funny, as I look at listings, or even talk of talking to people on the ground, I think that I've realized that you can that when you look at the marketing of a property listing, I sort of tend to take with a grain of salt because it's like oh, like you know, some updates have been made to me that means nothing has been updated. So the bare minimum right now like you know, it says like, you know, newer water heater or something Um, like that probably means it's like 10 years old, right?   So it's like any things that I've seen over time, I sort of said look like people don't put in the capital and it is capital intensive, I get that. But people haven't put in the capital that's needed to sort of keep them up to date. And you can sort of see it through MLS listings, or even talking to people who are just around the neighborhoods and seeing houses, right. So some properties that we bought off market, for example, sort of fit the criteria, but it was talking to people and sort of seeing what the condition of the properties were in.   And, you know, most of the times, Michael, there's, I say, mismanaged, and there's mismanagement where it's like, the roofs falling in, or it's like, the, the house is just a little bit dated, and needs a couple of, you know, cosmetic updates, and some mechanicals, we sort of go towards that, you know, the ladder, like we don't want the roof caving in. But it's like, Look, if we need to replace a couple mechanicals, if we need to update some of the fixtures, and they could let you know, more more modern, we're going to do that because our time horizon is, you know, extremely long term. And we don't have any intention on selling anything. And so for us, putting the capital in upfront to start is, you know, an upfront expense, but ultimately, it will pay off down the long run for us.   And that's what we focus on. And so that's what we mean by mismanage is like deferred maintenance. People who, who don't really want to be a, you know, a property owner and want to sort of get out. You know, and obviously, there's there's things that there's other things that go into that whether it is, you know, not wanting to deal with, you know, poopy toilets not wanting to do a lot of things. That's we look for, and again, like, it's, it's worked for us. And that's what we continue to do.   Michael: Yeah. That's great. And so are you utilizing property management? Or are you self managing? So I know you got the empty toilet call? So is that talked about how you're structuring that?   Derrick: Yeah, so it's so it's so it is a mix. So so so the vast majority of the portfolio is through West Irving Capital Partners, but I do have some that I manage myself, and then I have through the partnership, so that would be that was one that I own myself. So that's, that's, that's why there, but I guess we do property management, based in Ohio, great to work with, they do all the leasing the rent collection, things of that nature. And this is sort of funny, like, this is one thing that I didn't know, as an initial, you know, investor, you hear property management, eager asset management, I thought that they were the same thing. They're not I realized, finally, I, you know, I was today years old when I realized that right?   You know, like property management, you know, rent collection, marketing, the property insurance, that it's sort of, like up to standards, great. Asset Management is sort of like, okay, what's the property look like? What are the aesthetics? What, how do I make it modern? How do I position this, you know, as within a portfolio, so that's sort of another piece of that we also do, and ensure that our properties, again, are in the highest and best quality shape, we can make them. So that way, our property manager can make their job easier, right, rent them easily, you know, get the top of the line rents, and get high quality tenants.   Michael: Yeah. Awesome. So I know. And we're kind of gonna shift gears here, since you brought up into asset management, talk to us a little bit about how you do manage your assets.   Derrick: We, we want our assets to be in the best shape that we can have them want to make sure that they're updated to the best quality that that they can be. And we tried to position ourselves as basically like the best landlords, if you will, in the market, in which we operate. And so for us, that means, you know, we could go towards, you know, basic basic fixtures, or we can go sort of like a little bit to higher up to make sure that they're sort of like, you know, nice and are going to last so that's, that's one thing that we choose to do.   Yeah, we can have many houses have sort of old, sort of like aluminum windows, like we try to get vinyl to make sure that, you know, we can maintain, you know, heat, moisture, etc. And it'll also like reduce utility bills down down down the line, we also ensure, you know, we want to focus on the actual property for the tenants, and, you know, the uses of that property is something that we're providing, but anything outside of that, whether it's utilities, water, etc, you know, we believe, you know, should be borne by the tenants are using that. So, we try to submitter all of our properties, such that, you know, the actual utility payments are coming from the tenant.   And again, when I say sort of like, mismanaged assets, right, many properly bought has not been submitted, and the prior owner was paying all the water and water bills is can can get expensive. I have, I have no bearing on water usage, but I can absolutely dictate what the property looks like. So that's sort of our strategy in terms of, from utility standpoint, from from from the asset as well.   And that's what we're really focused on, we're really focused on, on on, on ensuring that it's high quality, and then in terms of how we position our portfolio, you know, we want to make sure that that our assets are, are smartly leveraged, right. So we don't want to over leverage in the market, we try to make sure that we're around 65 to 70% LTV at purchase, we think that we can add we can then force appreciation to some updates that we talked about. So that way our LTV is Can, you know drop a little bit a little bit more such that we can then look to refinance over call a two, three year period and take a capital and then allocated somewhere else?   So that's sort of our approach to asset management. Yeah.   Michael: Oh my gosh. I love that, Derek. And for those of you listening to the episode, not checking us out on YouTube, when Derek talking about submetering, I got this ear to ear grin. And part of the reason I love being a co host on this show is that it's so self serving, and we get to ask our guests all kinds of interesting questions. A lot of them come from our own brain. So I'm very curious, because I have several buildings actually, that I've been looking to sub meter. They're they're smaller multi families, you know, in that five unit range, and I just haven't found an economical company or resource to do that with but it sounds like you have.   Derrick: Yeah, I mean, it really depends on it really depends on what like market you're in. So So may I ask you a question? Like, you know, what, what markets? Are you in Michael?   Michael: So I'm in Cincinnati, and Northern Kentucky.   Derrick: Okay, so those are my two main markets. So, okay, so it's a close, close, close ish. area, and I've been looking for something for ad Cincinnati as well. So So really, within within the area, again, like, there has been, um, spectra energy, which is one, and also, you know, Guardian, Guardian Water and Power has been our main provider, but they, I think that they've been shifting towards less, sort of, like, quote, unquote, smaller units. But I think that if you have five plus units, that actually would be a good one. I think that they're charging 20 bucks per per unit, to on an ongoing on an ongoing basis.   But then there's this the the setup fees, are the capital expense, right, and then it's the cost of the actual submeter, the cost of the installation, etc. That's where it gets a little pricey. But again, I think about it as an upfront investment, it's gonna pay off down the road, because the submetering will ultimately reduce your utility bills on the road.   Michael: Yeah, totally.   Derrick: So I would check out either Yeah, you know, either guardian and or spectrum energy. Especially since they may actually be available in either Cincinnati or Northern Kentucky. Again, I'm not sure if they serve those those markets. But since in Ohio, it's worth a shot.   Michael: Totally. And I'm just writing that down. Now. This is awesome. So for those of you that might not be familiar with, with Derek and I are talking about. So submetering is basically when you have a property that has contains multiple units, so that can make you flesh out like squat, any number of units, there's a different there are several different ways to meter, the energy usage of that property of the utility. So water meter, electricity and gas, if it has it. So if it's something is called master meter, you're going to have one single meter coming into the building that feeds all of the units. And in that instance, it's really difficult to say, Okay, well unit one use this much energy unit to use this much. So they send out bills accordingly. So that's an instance where the landlord typically pays all of the utilities, because there's no way to measure how much is being used by each individual unit, versus installing some metering like what Derrick is talking about is every unit will actually then go get its own separate utility meter installed.   So we can tell how much do you how much water or electricity or gas unit one use, and send them in appropriate bill, and so on, and so forth. So this is an instance I've got a five unit building, it's master metered. The water bill can fluctuate from like 100 bucks a month to like 1000 bucks a month. And we charge a flat bill back for the tenants. And so every month, I lose that on the months where the water bill is really big, I really lose. And that folks are incentivized to tell you if their toilets are leaking or their showers that he because they don't care. They're not paying the bill. So this is a really, really, really great strategy for folks that have multiple units in the same building that have a master meter in place. I love that man.   Derrick: That's a great summary. That's a great summary.   Michael: Awesome. So talk to us about some of the software that you use to help manage your 40 plus units. I mean, I know that you're you're a Stessa user, so I'm curious to get your thoughts on on the program.   Derrick: Yeah, Stessa has been pretty tremendous for us. I mean, honestly, we we do all of our at westerbeke. We do all of our accounting, tax preparation, analysis for the properties, all this. So it's been pretty instrumental, honestly, in managing our business. You know, we're outside investors. And so you know, we're not on the ground. So being able to look at the data, there's data to be able to understand what's happening at a portfolio level, but also at a unit level is great. That's our main source, right? I mean, so so we link all of our accounts. So we see all the rents that come in, we see all the expenses that come out, you know, we're able to track our ltds we're able to track our, you know, stress test scenarios, depending on what happens. That's great for COVID obviously, right, like there's a lot of stress in the market overall.   We use it to look at our overall balance sheet to see sort of where we stand. We use it to have a quick download to get information to lenders who need it when we're looking for additional financing. So it's it's it's, it's great. I mean, it's it is much tremendous tool. We've been using it since we first started and anybody who does not have you know, a system To manage your properties, I highly recommend it. Because it's been great for us, I probably would categorize myself as a power user. I mean, I'm probably in stessa. At least, if not once a day, once every other day, to met to manage it, but truly a tremendous tool and any and a powerful data visualization tool as well just as sort of see trends and be able to address things for the properties in the future.   Michael: Love it. And I'm sure everybody listening is gonna be very curious. Derrick, how much did we pay you for this demo? PSA?   Derrick: Negative $1? Yeah, no, I mean, it's I mean, there's Yeah, there's, it just so happens that this, you know, this podcast is on this. So but I've been using Stesa for the past three years. And it's been pretty incredible. And there's more features that come out all the time. With any product, right, there's obviously obviously things that can can be addressed and things that will come down the pipeline, but it's been great. And again, like literally anything that you need for your properties, whether it's tax preparation, understanding how your assets are performing, looking at the income statement, looking at cash flow, looking at balance sheet, looking at ledger being like anything, it's all there. So it's kind of like, why why you something.   Michael: Why go anywhere else? No, that's great. That's great. That's just me. What would you say your one fit your favorite feature is?   Derrick: I would probably say, I'll, I'll give, I'll give two. So what I what I will say is a dashboard, it's like really cool to see the visualization, that like the opening dashboard is to showcase like this snapshot, what's happened to properties where they stand, what's your cash flow estimates look like? etc, that's probably the one. The second I actually think, which I think is pretty cool. And this is probably a nerdy one is just the rent roll, because you can just download it and sort of see like, it's sort of like a, like a snapshot of your properties. And you can just send it to a lender to say, like, Look, here's our portfolio. Here's our LTV. Here's our estimated cash flow across properties. It has, you know, taxes, insurance, and they're etc. I think that was a pretty powerful one. Because like, we've used it so often, just to say like, is every lender asked same thing? What's your rent roll? Where's your income statement? What's your trailing 12 months? Give me I mean, so literally, you know, there's so many times I just feel like I'm sitting on our computer doing this on stuff like this, like downloading. Like, okay, rent roll, okay, here. So, the rent roll one, I think is a good one to take as I use it so often.   Michael: Yeah, it's such a good point, too, that all lenders, almost every single lender is gonna ask for the same stuff. So if you're using your own program, you know, have a folder of using Stessa. It's all kind of contained in one place. So I'm curious to get your thoughts too, because I know, I've heard that one of the qualms about is, oh, I gotta take time and set this all up and input all the information, all that kind of stuff. From your perspective, now that you've grown your portfolio? And I think you know the answer, but I have to ask it anyhow. Was it worth it? Was the time set up on the front end worth it?   Derrick: Absolutely. It's no different than capital expense for your property. The same thing, you just have these set up once and then after that just pays off. So like, thinking about it is like putting in a new HVAC system. It's like, Oh, my God, I have to buy a new furnace. It's like, well, you got to buy it. And once you buy it, you under bought, you don't have to pay for another one for like, 20 years. It's the same thing. You just do it once it takes so long, it takes like an hour. It's not like it takes 10 days. It's like it takes an hour to like, sign up your account and then put in your you know, your stuff. It's like an hour, so it's not totally worth it. I would do it again in a second. Take an hour. Yeah.   Michael: Awesome. Awesome. That's great stuff, man. So yeah, I want to wind back the clock a little bit. And have you talked to some of our newer investors. So when you after you bought that first property, what allowed you to go step two, and three and four, and really snowball into this massive portfolio that unit partners have been able to accumulate?   Derrick: Yeah, I mean, I really think that that part of it is just taking action. I mean, taking action is such a huge thing that I would say to anybody who's getting into it is that it's so easy to overanalyze, and to create blockers for yourself to say, well, this doesn't fit my numbers, like your first deal is never going to be the best deal. Let's be honest, it's gonna be okay.   Michael: Whhhat?   Derrick: Yeah exactly. Oh my god, it's not a homerun. Maybe you get maybe not even a single maybe you like bunt, and then like they pay you out at first. It's not gonna be the greatest, right? So set expectations, right? But taking action is the biggest thing, right? You have to take action. I think you have to make a conscious choice to say, look, I want to be I want to invest in real estate, I want to be a real estate investor. You have to start somewhere. And I think that getting something under your belt, learning from it, and then applying that to the next one, I think is what I would recommend. That's what I've done. I started off with Roofstock right, they sort of it sort of did everything for me it sort of got the property manager it got the lender, it sort of set it up.   So I said okay, like, they're, they're doing this so I can do it too. And again, it wasn't time investment for myself to do it upfront, right? For myself, my partners that West Irving, right, but now we have agents. We have property managers, we lenders, it's upfront investment. But it was the action that first started. So to me the action is really the biggest thing and being able to get comfortable with being uncomfortable, because it will never not be uncomfortable buying something that you may not necessarily see. That cost a lot of money. It's not it's not comfortable, but like you have to take action and get comfortable being uncomfortable as a as a baseline for stuff that sort of, I would say, is a very, very big baseline.   Michael: That's great. And I'm curious to know what some of your big takeaways were from that very first deal.   Derrick: Again, your first deal is not going to be on running. It's just not that's the takeaway. Yeah, the property and I still track it. And that's, that's what's still on there. So I still see it. But I'd that property had a tenant that didn't pay for seven months. I think at one point time, I had you know, then it then had to do a pretty extensive rehab, but it was cosmetic rehab, that was a decent amount of money. Yeah, now tend to now it's tenanted again.   But again, you never expect that you sort of see like, oh, if you buy property, and then everything is rosy, it's like no, it takes years to reposition an asset. And there's always lumps in terms of like, you know, using a spreadsheet to analyze properties, I've kind of I'm like, I'm a finance guy. So I understand why the like, the spreadsheets are never going to tell you the truth. You can make it say whatever you want to say, oh, cash 10% cash on cash return and like, my, that's not gonna happen. But someone may not pay rent, you have to replace a furnace, you have to replace a roof, you have to get a city ordinance. I mean, it's all kinds of stuff.   So it's, you have to just take a leap a little bit, the comfort with risk. And take a step right. So again, not gonna be a home run.   And then the second thing, I think, is to sort of like expect the unexpected, right? I think it's setting expectations. Were your first property, you just don't know what you don't know. But you should expect like, hey, at any point in time, right, I may, I may have some expense on are expecting something may break, a window may break, a tenant could leave. So having cash buffer is sort of like the metapoint because there's always something that may happen, and it usually does. So be prepared for that. Right? It's kind of no different than some of the conversations of people having expenses saved up for themselves. from a personal standpoint.   Same thing for reserves, because inevitably, something will happen. And you do not want to be caught off guard when it does, because it can spiral very quickly.   Michael: That's such a great point. And yeah, I've never heard anyone make that connection that bridge between Well, hey, you have an emergency reserve for your personal life. So why wouldn't you have one for your rental property? That just makes so much sense to me.   So, so what I'm just curious to get your personal thoughts. If when you look at a turnkey provider, and they say, Oh, the property is brand new, they have $0 for capex and $0 for repair and maintenance and their pro forma, what are your first thoughts?   Derrick: I take with a grain of salt. I say even brand new properties have issues. I mean, especially new bills today, I've had people who bought new who bought new bills for their primary. And this The stairs are thinking that things things go wrong. And again, like this is no particular homebuilder. I'm not saying this, but like, in today's environment, home go up very quickly, the materials are iffy at best. And it's kind of quick for reason is I will say so I would say I'd still save because realistically, something can happen even in new builds, especially when you know when something's new newly constructed, you know, flooring is shifting around because it's expanding, like, you know, like this thing's on your walls that could happen like the baseboards could turn yellow because they didn't paint they forgot to paint.   I mean, just all kinds of stuff. So I just say I'll add 5% for halfbacks and 10% for maintenance this to start because something's gonna happen. Yeah, even a new build. It doesn't matter. Even if a new build.   Michael: IF it is not today it'll probably be tomorrow.   Derrick: Not today, tomorrow. So I say, turn turnkey, is is is is I'll say turnkey. I'll call it like 180 degree turnkey now 360 because something will happen.   Michael: That's great. That's awesome. All right. And so I'm curious to know, Derrick, for all the new investors out there, especially folks that are part of our Roofock Academy are interested in joining the restock Academy or who are in their education phase, let's call it How would you articulate to them or what would you say to them in how do you know when you've had enough information? How do you know when you're ready to take that leap? Because, like any of us, I'm sure we've also come to analysis paralysis. I need to read one more book. I need to take it to one more seminar one more podcast before I'm ready. How do you how do you know and then how did you know?   Derrick: What I would say is I would make I would make an analogy for those who have significant others, boyfriends, girlfriends wives. It's like how do you know when you're ready? To get married, like, you don't really know, you kind of just kind of have a feeling. And you're like, there's gonna be some lumps. But you kind of have, it's kind of in your gut, right? I think intuition is a very powerful tool that we as humans have, that we sometimes go against.   Intuitively, you know, when that person is right for you, in two, I would make an analogy, like, intuitively you're like, Okay, I'm probably 80% of the way there, I've read this book, I've taken the Roofstock Academy, I've talked to people, I've got all my stuff and in process, the other 20%, the incremental value of that is pretty minimal. I would say, again, once you have 80% of the way there, you know, you want to be an investor, you've taken that step, you've gone through these things like Roofstock Academy, etc. You've gotten comfortable with understanding how the numbers work, right? You won't actually really learn to do it, but getting comfortable with understanding how things work, then taking the leap, because ultimately, otherwise, getting from 80 to 100. It's just gonna take forever, and at that point, you might as well just say, I'm just gonna stop.   That's what I would say, right? Like you, you take that leap from, you know, going from, you know, single on taxes to married filing jointly, like you don't really like, no, you're just like this person, is it? There's going to be some bumps, but this is it, I will make that analogy. It's no different than property investing because you kind of like you kind of there and you're like, wishy washy when we read that wishy washy point of like, I need this disc go. Because if you need that other thing, it's gonna keep prolonging it.   Michael: Ah, dude, I love that. I mean, your isms. Two for two on the episode, you're batting 1000 a day. That's so good. That is so good. Oh, I love it. I love it. I love it.   Derrick: Thanks, man. Thanks. I try to make I try to make try to make analogies things. Because otherwise, I mean, it's easier to comprehend those things personally for me. And people did the same thing when I was asking about these things, too. And it's, you know, people have analogies, I think resonate. And for me, at least, having those comparisons that are personal help make it a little bit easier, right? Especially in investing because it's never going to be easy. I think 80% and you have to make a call.   Michael: Totally, totally. Well, I'm gonna let you get out of here in just a minute. But before I let you go, I want to know where your portfolio's headed from here. What's next on the docket? What do you got your sights on?   Derrick: Yeah, sure. So again, check us out WestirvingCapital.com we're looking to continue to expand in your area, you know, just similar to you, Michael, right, Cincinnati, and Northern Kentucky, that sort of those sort of like, you know, markets, I think are ones that have upside. There are a lot of positive economic indicators. For those areas. It's affordable. With the work from home trend, people may look for places that are more affordable than coastal cities, that will continue to go right, we will continue to look to invest in those areas, again, looking for mismatch or mismanaged properties, both on market or off market.   And again, sticking to that niche, right to the 19 units is sort of where we want to stay like we don't need, we don't see the need to have 100 unit apartment building. For us, we think that there's going to be a great demand for high quality, multifamily housing. And that's what we'll say. I think from there, right, we, you know, our buy partners are always looking for other opportunities in terms of our business. So, you know, thinking about ways that we can also help other investors, right, whether that's through real estate services, real estate, back end services, things like that, is something that we're looking to expand into.   Yeah, nothing on the horizon yet. But again, we're thinking of ways that we can continue to help investors like us, you know, who who are smallish, want to continue to grow. So again, like trying to figure out ways that we can, you know, expand into real estate services is probably the other option, right? So we'd have an investing arm, and then the services arm is sort of where we're looking to trend probably over the next two to three years.   Michael: That's really exciting. That's what it is. And it seems like it's the next logical progression. Because you've got kind of your baseline built at the physical properties. Now going and supporting yourselves. You hear so much about property manager businesses, like I started out of necessity to manage their own stuff, and like, Oh, well, we'll help that that friend or that family member. That's really exciting. I can't wait to see where you take it from here.   Derrick: Yeah. Thanks. Thanks a lot.   Michael: And so if people want to reach out to you have additional questions is the best place check out wwestirvingcapital.com? Or do you want to share?   Derrick: WestIrvingCapital.com is our website, there's a Contact Us form there, which is really great. And again, our main email is info@westirvingcapital.com. So you can either submit a submit on the site for contact us, or submit an email to info and one of us will respond back and again, we're happy to help out any way we can. We won't have all the answers But again, we were sort of in many of the same shoes as many investors out there. Just you know, we started only recently, so we're still new to it as well. And we're still learning so happy to share, share, to share the advice.   Michael: That's great. And just so anybody out there I mean, my personal opinion, it sounds like you probably share it as well there. If anybody says they have all the answers run don't walk the other way. Because they're, they're full, they're full of that comes out of poopy toilets.   Derrick: Full of what comes out of poopy toilets. Yes, yes, exactly.   Michael: Man. Well, this. This was great. Derrick, thank you so much for coming on and sharing your story and tidbits of advice. There's a lot of golden nuggets in there. I definitely look forward to touching base with you again shortly.   Derrick: Thanks so much Michael. And thanks for the time and again those those those those who are looking to invest Rofstock Academy is going to be great for you and again, using Stessa to help manage, it's gonna be awesome too. So Best of luck to all those out there who are just getting started.   Michael: Right on. Talk to you soon, man.   Okay, everybody, that was our episode a big big, big thank you to Derek after the recording of this. He and I were chatting we definitely want to have him back on. He has a wealth of knowledge. I highly recommend you go back and listen to this episode again. As always, if you'd like the episode, feel free to give us a rating or review wherever it is using your podcasts. If you're checking us out on YouTube, hit the like and subscribe button below us we can continue bringing you content like this. We look forward to seeing on the next one and happy investing.

There are so many benefits that come with investing in real estate investing. in this episode, we do a draft pick of the most valuable and heavy-hitting perks we have access to as investors. Shout us out on Twitter with who you think won, and some important picks we overlooked! @Roofstock  --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Tom: Greetings, and welcome to the remote real estate investor. On this episode, I am joined by   Michael: Michael Albaum   Emil: Emil Shour   Mark: Mark Woodling.   Tom: And today we've got a fun episode. So as an investor, there are a lot of different events and things that happen, you collect rent, you pay your mortgage, and today we're gonna be focusing on all of the good events. And the way that we're going to do this is a fun segment where we're going to draft our favorite moments as a real estate investor. And then after we do our draft, it's going to be a snake order draft, we're going to post it on a Twitter for you guys to vote on. So again, this episode is going to be on great events or moments as a real estate investor. All right, let's do it.   Gentlemen, just to reiterate the rules, we all are going to have three picks, it's going to be a snake order. I've got a ping pong ball machine behind me with all of our names to define what the order is. And after we complete this draft, we're going to throw it up on Twitter, and let the people vote. I'm feeling pretty good about my chances here. I put a lot of research into great moments as an investor and good luck to get in second place too you guys.   Emil: Trash talking already? Alright. All right. Let's see if you can back it up.   Michael: You know, trash talking is like the epitome of someone who's not confident in their ability. It's kind of the way I see it, but you know, to each their own.   Tom: Smoke smoke and mirrors let's trash talking right there. What you just did. Alright, so   alright. ping pong balls. So the with the the order is with the first pick of the great moments of being an investor is Mark Woodling. That's good. You get the first one but you have to wait all the way to the turn to get your next one. Up. Second is Ooh, Tom Schneider, ooo I like that second. All right, up third. Is Emil Shour. All right, good job and right, bringing up the rear and the turn, Michael Albaum.   Michael: Is this is this because you thought it was talking trash to you? Is that? Why is that what your pinball machine gave me fourth place.   Tom: The ping pong ball. The ball Don't lie. As, was it Ben Wallace that said,   Emil: Can you show us proof of this draft order cuz you're just you're just looking at nothing and magically make taken names out of a hat. So I don't believe you, sir.   Tom: Don't question what's behind the wizard.   Michael: Off screen.   Tom: Alright, so alright, let's let's get into it. So again, we're each gonna pick three rounds of events as a real estate investor that you love that are just like, awesome. And then we're going to shoot it out to the twitterverse to vote on the who, who has the best draft? So Mark, why don't you go ahead and start us off, kick off the draft the draft.   Mark: Cool. So I named mine to add to the fun, and you'll be able to reference that later. But my first one is what I call Hail Yeah. Where I live in the state of Texas and a property that I own here had some hail damage. So I was able to get a new roof for about a 10th of the price, which is gonna run about $30,000 for this home. So you know, I paid the insurance premium and or the deductible excuse me, and it came out to be about a 10th of the price.   So the property needed a new roof anyways, and the timing was good. And so I scored that new roof, Hail Yeah!.   Tom: I love it.   Michael: Great.   Tom: You know, and coming up with this. And coming up with this concept. I would never think of insurance covering some needed cost as an event. And I'm already I'm already digging it. Alright, that's a good one Mark.   Emil: Like we got we got to all have sports analogy. So guys, come on, Mark, Mark started it, you get, you gotta you gotta have a sports analogy with your pick.   Tom: All right, I'm up second. I'm going to simplify a little bit so this is going to be a cha-ching nice and boring rent. The rent collection hits your checking account. So rent   Emil: off the board rent.   Tom: Cha-chiing rent collected that mailbox mailbox money hits it, so that'll be my second pick.   Emil: What's your sports analogy? Come on, Tom.   Tom: I mean I said cha-ching i don't i don't have I don't have   Emil: The layup the layup?   Tom: Yeah layup that's a great one. Yeah. layup that's what we'll…   Emil: I'll be helping you guys all episode. Geez, you guys don't watch no sports.   Tom: You're the marketing guy. You're the marketing guy. Yeah. Okay. Yeah. layup just nice and boring rent collected. That's my first pick.   Emil, You're up next.   Emil: I can't believe this is falling to the number three spot you got you guys are obviously amateurs here in in drafting. So I get the Supermax contract extension. And so what that is that's a renewal with a rent increase, baby. So I'm taking that number three, the super max contract extension. Coming in at number three.   Tom: With an increase in rent cash. That's a good one.   Mark: And the sports analogy or name?   Tom: Supermax contract!   Emil: Supermax contract extension.   Mark: All right.   Emil: That's a basketball one.   Tom: Love. Love that.   Emil: Mark. Paid pay attention, Mark, come on.   Mark: I find no relation, sir. But yeah, I'll keep going.   Tom: Alright, Michael, you've got the next you've got the your pick and the turn. Yep. I'm not really a big sports guy. So I could use a little bit of help kind of finessing this one I call I'm calling it the forced error. But I feel like the error doesn't really apply here. So it's basically forcing appreciation on a property. I'm able to take out about 100k in the course of two years by increasing the rents and decreasing the expenses, sacrifice fly. I'm trying to think of how I'm like, I'm like forcing the appreciation.   Emil: So sacrifice sacrifice, like kind of works.   Tom: Well. How about this? I think you're I think you're including a lot of moments in that one. Why don't you when you get that appraisal back? So like, or whatever, when it's like the moment that you have the higher value.   Michael: Yeah, that's perfect. So right. Yeah. Realizing that you have created equity in the property via forcing appreciation.   Tom: Oh, yeah. It's like the squeeze or   Emil: Yeah, the squeeze bunt squeeze bunt.   Michael: Yeah, squeeze bunt.   Emil: That's not really a bunt. It's like a squeeze Homer, but maybe it's a homer.   Tom: Inside the park home run?   Michael: Okay. Yeah. And inside the park Homer, let's go with that.   Emil: Michael's like, what is this hockey term, homerun, I don't understand.   Michael: All right. So then for my next one, and I just came up with this. Alright, I just came up with this one, the name, it's called, stealing home. And that's where you can buy a property for significantly under market value.   Tom: Ooh, that's a that's a good one.   Michael: And you get a boatload equity day one.   Tom: I like that Emil, you're up with your second pick.   Emil: Oh, man, I'm trying to think of the name for this one. And maybe you guys can help me out. I don't know the name for this one. My pick is when Mr. Market treats really well. And interest rates go down while your property value goes up. And you're able to cash out refi your full initial investment. And the refi basically makes it so that your payment is no different than it was before. So you're doing a full cash out refi and your payment goes up like 10-20 bucks. We can call it the Mr. Market BRRRR   Michael: I've got I've got one, you guys, you guys. Let me know I'm gonna throw it out there, feel free to throw it back. We'll call it a buy. Right? It's where you get the win. But you didn't have to do anything to get it.   Emil: Okay. All right. Or maybe it's like, maybe it's like winning the division where you get to skip the first round or something. You know, you get to advance to the second round of playoffs without having a   Michael: Wildcard?   Emil: No the wildcard you got to play to make   Michael: Oh, I don't know how I know Zilch about sports.   Emil: Homefield advantage, I don't know?   Tom: Oh, I think you're right. They're like buy when like if you're like the one seed like you know, you don't have to do anything and you're just getting that getting out that way. Yeah. So   Emil: Good job Michael see you even though sports kind of   Michael: Awesome. I like came in hot and then immediately fumbled over myself.   Emil: Fumble There you go. For sports analogies. This is getting good.   Tom: I got one that happened. I'm thinking of one right now of a property. This was an event where a tenant moved out. And before they even started to do the turn work. The property manager found a new tenant that wanted to move in right away so they didn't have to do any of the turn work. It wouldn't have been a lot but you know, probably saved me. 1000 bucks. 2000 bucks of the person moving in right away. I kind of like that. Stealing analogy or maybe handoff? That's what it is. Yeah. Handoff. Yeah. Handoff.   So it's a new property. Least before turn construction. That makes sense?   Michael: Yeah,   Emil: Yeah.   Michael: That's a solid getting it leased up early that's great.   Tom: This is really working the right side of the brain coming up with these sports analogies that go with this   Michael: Sure is, especially on the spot.   Mark: Well, I have to say,Emil did take one of mine, it was you know, asking for over market rent getting a two year lease signed, and I called that one, Bill it and they will come. Reference the Field of Dreams. But that was already taken. I just had to one. Because that doesn't happen too often from the marketing genius.   Somine's a little different, but it's, uh, you know, again, in Texas, cash out refi on investment properties is almost impossible to find. But I was able to find one a year ago after making close to 20-30 phone calls to banks to, you know, any type of financing institution, and I found one, so I called it the walk off home run refi. I mean, to me, it was just like the ultimate winner to have that money now sitting there out of a ton of equity that was building up in a property.   Emil: Nice.   Michael: Wait, Mark, are you saying that   Mark: Walk off refi.   Michael: Are you saying it's tough to do a cash out refinance on investment property in Texas? Is that what you said?   Mark: It's very, very difficult. Texas has some different laws about home equity lines of credit, and on. I mean, it is probably one of the most strict in the country. And on investment properties. It's next to impossible, but I found a company that will do it. So if anybody is ever interested, I have the one that will do it.   Tom: Is it the, So I'm assuming it's not the financials of the property? It's just the lending rules. Is that right? Mark?   Mark: Yeah, lending rules enemy in this in this instance. And you know, I kind of use cash out refi, in a sense of like, they also they just left me a line of credit. So you know, in a sense, I just have a dry powder sitting there, they're in a checking account ready to be used at any point. So I kind of maybe use that incorrectly. But the line line of credit is not easy to come by.   Michael: Good to know.   Tom: You got some good creative ones, I love the insurance cover the cost of needed repair too.   Alright, Mark, you're up. And then our last round our third round, you're on the turn. So you do the first one in this round.   Michael: Make it a good one.   Mark: All right. This is a little trick because you know, I am a real estate agent and I am an auctioneer. So I'm calling this one, I'll come up with a creative sports name, going once going twice, rented. So have an open house, make sure you schedule it during a tight timeframe. So this is you know, again, for a property that I've I've managed on my own in the past. You have the open house tight timeframe, you have multiple people all show up at the exact same time. So you create competition. So once that competition starts to boil, people get a little more aggressive.   Hey, I'll sign a two year lease, Oh, great. Actually a one up you know, you know, they'll pay a little bit more. So I let that competition drive just like an auction. And man, it pays dividends because a I get all this time back in my schedule B. You know, I create that competition let people bid up a little bit and then get longer, longer terms and better terms overall.   So a sports analogy. Slam Dunk unno.   Michael: For the competition piece of it. We could just call it sports.   Tom: Or, or or what about this? crowding the paint? That's a lot of people in there.   Emil: I was thinking full court press.   Mark: Yeah, that's it. That's it. I'll take them all. So yeah, good job. I'll take it.   Tom: I'll Alright. So I'm going to go I am up next. And what I'm going to select is, I'm a busy professional. I bought these properties as some ancillary income and you know, it's it's enjoyable, but you know, it's also enjoyable is when nothing happens. Just nice and boring. Call it chalk, right.   So, chalk is a term when everything goes to plan on like your NCAA bracket, and I'm going to call mine chalk so no news is good news. Just nice and boring collecting. You know, nothing no, no news, right Chock. That'll be my there.   Emil: Those are my favorite monthly understatements when it's just rent management fee and that is nothing else.   Tom: Two lines. Yeah. Charge rent, collected rent.   Mark: Can't you just call this a soccer game where like, nothing happens for like, forever. I mean soccer fans, the Olympics are on and I gotta into it, but otherwise, it's nap time almost like golf.   Tom: Yeah, that's a good one.   Michael: Shots fired.   Tom: Shots fired. It'll be interesting, like a little personality test and looking at the ones that we've selected. Because Yeah, anyways, this is this is good. Emil, you're up next.   Emil: Alright. My third pick is going to have to be when you buy a property expecting to do some work to get higher rent. And when you get a new lease, the lease ends up being higher than what you originally underwrote it for. And so I'm calling this one pulling up an all star from the farm system.   Tom: Ooh.   Emil: Michael, that's a baseball reference, in case you're wondering what I'm talking about.   Michael: Thank you very much. Yeah, you saw the blade in the headlights look on my face.   Tom: So I'm just gonna go right down. So this is…   Emil: What's a farm, We're talking about animals now? What's going on here?   Tom: Higher rent than expected? Would that be the short way?   Emil: Yeah, higher rent than expected. On a new lease.   Tom: Sorry, farm system, pigs, I interrupted your guys's banter.   Michael: That's great Emil. Thank you for teaching all of these sports things.   Tom: Yeah, Michael's learning a lot in today's episode.   Michael: Yeah, today, I get to learn all of the sports, all of our listeners get to learn real estate stuff, I get to learn   Mark: All the sports   Michael: Yeah. All the sports!   Alright, so then my third and final one is the fact that you get to have, if you use leverage, you get to have a very high degree of control over your asset. And so you can buy $100,000 asset and that appreciation that you see is on $100,000 asset, but you might have to put in 20 or 25 to get it. And so because you can have a high degree of control. I've called this one to Tom Brady.   Tom: Okay, what is the what is the event here? What is the event?   Michael: Leverage using leverage to purchase real estate because he established a higher degree of control right where he deflated the football.   Tom: Oh.   Mark: I call it the Emmitt Smith personally, just because he's a legend and a real estate investor but I'm a Cowboys fan. So sorry.   Tom: That makes sense. Alright, so I like that you're getting using some leverage to buy and, and all that good stuff. So okay, we're gonna go through very quickly everybody's picks. And then we'll, when this episode goes out, we'll shoot it out to the twitterverse and see what see who see one. So Mark's picks are Hail Yeah, this is…   Mark: I would change that to Hail Mary just to make sure that we're sticking to sports references.   Tom: And that is when insurance covers the cost of a needed repair. That's super Yeah, that's, that's a winner. His second one is a walk off home run. And that's the doing a right refinance in Texas, where it's very difficult to to manage it. A refi. And then his third one is I think I picked the name you're crowding the paint. This is when you have multiple tenant applications, building come some competition, and just getting better terms and offer so. Excellent, Mark. Excellent. pick my….   Michael: Very nice, very nice.   Tom: Mine is a little bit more vanilla than mark so I have a layup that's when just rent is collected. I have a handoff that's when a new property is leased before the turn of construction starts or in the middle of term construction. That's always great news to see in your inbox. And then lastly, a draw chalk there's a there's no news nothing nothing new I don't have to worry about I don't think about it. So that's that is mine.   Let's see next we have Emil and he has some excellent naming you can tell he's got a good marketing mind here. The Supermax contract extension This is a renewal with a rent increase. Excellent Emil. Then we have the the buy win this is appreciation plus, at the same time, lower interest rates. So being able to have a pretty awesome refi perhaps even pay less and get a cash out. And then lastly, he has a an all star coming up from the farm system. And this is when you're getting a higher rent than expected. Excellent excellent.   Michael: Just such a ridiculous like crazy ridiculous name.   Tom: All right. All right. Last one. Michael you have a inside the park homerun. This is a forced appreciation. This is an increase in the rent doing some stuff. So that moment of when you completed that and have the forced appreciation. This is stealing a home buying a property on undervalue equity day one. Love that. A lot of that a lot of home runs here. And then lastly, you have Tom Brady deflate gate using leverage to buy those. Those are our list of, the yeah pantheon of excellent real estate investing moments.   Alright everybody, thank you for listening to the episode. If you enjoyed it, please like subscribe, all that good stuff. And as always happy investing. Happy investing, and happy investing. Happy investing

Looking for a new market to invest in? How about St. Louis Missouri? In this episode, Roofstock Certified Agent, Tellee Warren from 314 Property Solutions Group joins us to tell us about the St. Louis real estate market. Tellee gives us the scoop on the competitive environment, the common price to income ratio, the particularities of this market, common risk factors to consider, and his perspective both as an agent there and with his past experience as an appraiser.     Tellee Warren, 314 Property Solutions Group warrentellee@gmail.com , 314-753-4503   --- Transcript     Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of the remote real estate investor. I'm Michael album and today I'm joined by my co host, Tom Schneider, and Mark Woodling. And today we are chatting with the Roofstock Certified Agent out in St. Louis, Tellee Warren, and he's gonna be telling us all about the St. Louis market, why it's a hot place for investors, and some things you need to be aware of, if you're gonna head out that way. So let's get into it.   Tellee, thank you so much for being with us here today. Really appreciate you taking the time out of your busy schedule to hang out with us for a little bit.   Tellee Absolutely. Thank you so much for having me. I appreciate it.   Michael: No, of course, it's our pleasure. So I want to come out with a big swing and question right off the bat. I'm an investor I invest all over the country. Sell me on St. Louis, why St. Louis, the best market in your opinion?   Tellee: Well, St. Louis, we have I think some of the best price points. The we have very affordable homes with great rents, which you know, make we have fantastic cap rates. We have I mean, we're working right now with with investors from from all over the country and from other countries that are flocking to the St. Louis market to buy rental properties. Because the price point is is so good. And the rents keep up with that to make the cap rates high a great place for investors to hang their hat here. So..   Tom: Love it. What would you say those ranges of what you're talking about price point like where would you say kind of different ranges or buckets of price points that you can get into and the corresponding rents,   Tellee Some of the great areas, I think for investing in St. Louis, the price range, North County area, we've got 100,000 to actually have about 120,000 - 250,000 price range. And that's that's for your average three bed, two bath, you know, probably 11- 1200 square feet. rents are 12 to $1400, on average there. And then you get you get into Western St. Louis County, the there's some areas there that are still great for investing price points are a little bit higher. They're in the 200 to 250 range, I would say rents are also higher, I mean, you got you know, you have rents 18 1800 to 2000. Some as high as 21- 2200. And then you move even further west into St. Louis County, and then you get to the to the higher price points. 400 Plus, probably so…   Michael: Awesome. So you're saying in North County, you can still find 1% properties, properties that meet the 1% rule?   Tellee Once in a while. Yeah, absolutely. We're still seeing plenty of that seven to 10% cap rate, which is, which is the sweet spot? I think anyway, I mean, it's it's where investors are looking to be   Michael: Totally,   Tellee: So yeah, I mean, we still can find the one percenters once in a while.   Michael: For all you haters out there that spew hate, you know, online everyday, there's no such thing as what percent property, reach out to Tellee go check out St. Louis as a market. That is awesome to hear.   Tellee: That's right. Yeah. We have him here.   Michael: Tellee. I'm curious to get your opinion and kind of thoughts around what makes St. Louis, a great market independent of the price to rent ratio, what's driving the economy there? Why are people moving to the market? Or do you see them moving away? Kind of give us an overview, if you could, and help folks understand what St. Louis is all about?   Tellee: I mean, reasons for people moving to the area. I mean, some of the some of the larger businesses. I mean, we have I mean everybody knows Anheuser Busch, you know, we're known for our beer here in St. Louis. We have Boeing, Purina, Enterprise rental car is all here. There's some some pretty good sized companies that are in the St. Louis area that bring a lot of jobs to this market.   Mark: And also there's a ton of colleges out there is what I've been seeing and does that retain a lot of the the millennials are recent college graduates to really retain those people versus just go to college there then then leave town?   Tellee: I think it does. I mean, you talk to a lot of people that have been you know, that have attended college here, Washington University. St. Louis University, University of Missouri St. Louis. I mean, there's there's several big colleges right here. And like I said, he talked to a lot of the people that are out in the workforce now that actually did attend college here too. So…   Tom: Awesome. So let's, let's talk a little bit more about the economy in St. Louis. So, as we know, there's some established companies, why don't you kind of tell us a little bit about the different sectors and different types of industries that are within St. Louis?   Tellee: As I mentioned before, I mean, we have Anheuser Busch, Boeing, you know, manufacturing industries, Purina, we have Enterprise, which is one of the largest car rental companies.   Tom: Yeah, blue chip, blue chippper   Tellee: Yeah, yeah, absolutely. Absolutely. We have, you know, there are some some technology companies that are starting in St. Louis square, is is one of them. And they're hiring like crazy right now. Bringing a lot of people to the area, which is, which is great. Yeah, I think there's some other technology based companies that are that are also getting going here in the St. Louis area. So…   Tom: It makes sense with so many colleges around there, that you know, you get, I love the exposure that you have to both kind of the older industry, you know, the the blue chipper, Anheuser Busch, enterprise, and then you have the you know, with all these colleges, you're just bound to have a bunch of startups in the area. That makes it right, makes a ton of sense.   Tellee: And we also just got a huge, they just, they just built a huge Amazon facility here too. Which is great.   Tom: That's, that's fantastic. On some specific investor related questions. So I'd love to hear about, you know, there's this concept that people talk about with investor friendly, right, be it property taxes, be it with if there happens to be an eviction or any of those types of functions. Where does St. Louis fit in that spectrum of investor friendly as a city?   Telle: Yeah, sure. So property taxes on the Missouri side are, are great. I mean, they're, they're some of the lowest in the country. Now, it's a different story across the river in Illinois, you go over there, and it's darn near doubled. What it is, here on the Missouri side.   We don't work over on the Illinois side, we're on the Missouri side. But yes, our city is is split right in the middle, partially Illinois, partially Missouri. But the real estate taxes on the Missouri side are much, much lower than they are on the Illinois side. Like I said, I mean, some of the some of the lowest in the country, some of the most affordable taxes in the nation.   Michael: And you see rents differ much between the two sites,   Tellee: No rents or rents are similar.   Tom: Yeah, I think those are such interesting. You know, look at where you have these cities that sits on on two different states. Do you so you guys operate specifically in the Missouri side? That's correct.   Tellee: We do yes, we only do Missouri.   Tom: Got it? What a kind of a boon in that, you know, you have all the employment opportunities of just going across, but you can take advantage of those lower property taxes. How about any other aspects of being a landlord and rules around that? In Missouri, or perhaps even comparing to the Illinois side?   Telllee: I'm not? I don't know, specifics on the Illinois side. As far as that goes, just because I don't I don't work over there. I know you had asked about evictions, things like that. And that's been an issue in the, in the St. Louis area during this whole COVID thing. You know, they've been on hold for so long. They finally took a hold off a couple of weeks ago, and then they put an end to that again. So the hold is back on. Lots of mixed feelings about all that. I think, you know, but But yeah, it's it's an ongoing issue.   Mark: What do you think the pre COVID I mean, has it been relatively friendly? Would you say as a landlord friendly state, or is the eviction process rather difficult?   Tellee: Oh, no, you know, it's it's pre COVID. It was fine. I mean, it's a you know, usually 30 to 45 day process. But they were carrying out the evictions regularly on a 30 to 45 day. timeframe, which is good, I think. But now Not same story.   Michael: So I'm curious if you could give us some insight or listeners some insight into some call it a colloquialism into specifics around the St. Louis market that folks should be aware of. So for example, in California, we have earthquakes, if you're not from earthquake country, that might scare the living crap out. So what are some things that you have that occur regularly in St. Louis, that people should be aware of that are just kind of par for the course?   Tellee: Yeah, so I would say the biggest thing is, is our tornadoes, a lot of hail, when things like that, you know, in the spring, summer, a lot of storms, and then in the wintertime, we get a lot of ice, we don't get a, we don't get a ton of snow, we're just kind of right in that area, to where we get a lot of snow to the north rain to the south. And we're kind of right there where we get the ice so. So that's a factor in the wintertime. But I would say the biggest thing would be the hail storms, tornadoes, things like that.   Michael: Okay, great to know. And we were chatting with another agent in a different market around some commonalities around inspection reports. And something he said was, hey, in my market, we just have termites. That's just kind of how it goes. So expect to see termite damage. Are there any things like that, that you see in the St. Louis market of things that we should just expect, as again, kind of par for the course with regard to home inspections?   Tellee: Hail damage on roofs is a very common one. We also have a lot of termites in the St. Louis area, we always recommend a termite inspection be done. They're very, very common. In this area, too. I would say another thing would be foundations. I mean, we have in this area, most homes have basements. That's one of the common things that comes up on an inspection report.   Michael: Okay, great to know.   Mark: Yeah, Tellee, I always like to call out some of the most common inspection issues. So it sounds like with, you know, with these basements that you do see a bit of water intrusion, like it can be common, are those things that you feel maybe really should be looked at even closer? Or do you find that, hey, these are simple fixes that are really going to come up more often than than not on these inspections that you can help address with any buyer that's buying a property?   Tellee: Right. And it really, here, it really kind of depends on the area. But for the most part, I mean, we see a lot of these older homes, like in the city, almost every single one of them is going to have some kind of a trickle of water, you know, during a heavy rain, I mean, they're their old homes or old basements that they're going to leak. I mean, I always tell everybody the same thing. I mean, it's like, expect to have some kind of water in the basement. I mean, I'm not talking to feet of water, but but a trickle of water, at least, you know, coming in that shouldn't shouldn't alarm you, I mean, it's very common in the area.   Now, when we start to see huge cracks in the foundation, especially horizontal cracks. With displacement, I mean, then, you know, there's some, possibly some structural issues to the home, things like that.   Mark: Cool. And, and so for the listeners who want to know more about you, as a certified agent, you're you're the one hand picking many of these properties that are in the St. Louis market that are Roofstock Select properties. So maybe give us a little idea about what you're looking for, you know, when you're helping identify properties to be listed on our website, you know, maybe you're billed as their square footage, Bed Bath count, you know, to help us get get an idea of kind of what you look for and why?   Tellee: The sweet spot is is the three bedroom two bath home that is, you know, in the 1000 to 12-1300 square foot range. finishes don't have to be top of the line. They can be average finishes. When you're looking for investment property or rental property, there's some things that aren't as important when looking for those that they are, you know, like when somebody is looking for a primary residence such as garage, some of the exterior of amenities like you know, decks and and then even like fireplaces, things like that.   And we some of that stuff doesn't doesn't matter as much on the investment property. And those are kind of the properties that I look for. Also, I look for homes that have been on the market or I tried to find homes that have been on the market for a minute because there's you know, there's some of those that People that are looking for a primary home or skipping over and but they still may be great homes for an investor for rental property. So sometimes those are great candidates for Roofstock.   Tom: I have my final question for me and I love food big, big food and guy so I'd love your your input on if I was going to go to St. Louis and I was gonna get two different meals. One of them is fancy date night, you know, taking the wife and the other one is Oh, I need something greasy. I want to get my hands messy. What would you recommend those two to restaurant meals be? fancy date night and the down home goodness.   Tellee: Fancy date night, I would say we have an area here in St. Louis. It's called The Hill. It's an old Italian neighborhood. And there are some incredible Italian restaurants down there. Very authentic. Amazing. And it's a neat little area too. But there are several restaurants right there that I would recommend for a fancy date night for sure.   Tom: The Hill I like it.   Tellee: The Hill. Yeah. You know, St. Louis is known for toasted ravioli. That's a good greasy food. So   Michael: That sounds great.   Tom: I love ravioli., I love toasting, sounds like a match made in heaven.   Michael: It's a beautiful marriage.   Tellee: Right? Yes, pretty darn good.   Michael: Tellee, my last question for you is, granted for everyone listening. We're recording this mid August of 2021. How are you seeing all cash offers play in the St. Louis market at this moment in time?   Tellee: I don't think that cash means as much right now as it as it used to. We submitted a cash offer, say against an offer with a with financing. It'd usually is going to to win. I mean, even if it's you know, a little bit less, the risk is a lot less. But now I mean, we're seeing cash offers for, you know, that are being treated the same as as offers that are financed. I'm not seeing a big advantage to that. I mean, it's cash is always King. But I don't think it's as much of an advantage as it used to be.   Michael: Okay. Great to know,   Mark: How about competition out there, I always love to ask the question about, you know, are you seeing eye buyers? Are you seeing a lot of institutional investors are, you know, coming in as a roof stock buyer, you know, what should they what should they expect in terms of competition? And how do you advise them on maybe where to come in on price point, relative to list price on any offer?   Tellee: We're starting to see it maybe led up just a bit most of these areas. The list price to sale price ratio, I would say it's at about 104 to 106%. So I'd say four to four to 6% over list prices is about average, what a home selling for right now, in these areas in most of these areas that we're finding the investment properties in.   Mark: Sure, so when a buyer comes in and wants to make an initial offer, how do you approach that do you like to come in and kind of warm up or you say, hey, make your highest and best up front? To really make sure you get the attention of the listing agent and the seller?   Tellee: Well, I usually like to, to feel out the situation contact the listing agency, how many offers they have? I mean, usually the you know you're not getting they're not going to tell you how much the offers are for but you can find out how many they have kind of gauge it that way. They usually base it off of that. I mean, if they don't have any, you know, we may be okay. Closer to list price, if they have a few. It needs to be strong. So.. Michael: That's great to know, I know a lot of people, I talked to members of Roofstock Academy get frustrated with paying over list price. But I always tell them, hey look, go back to your numbers. If your numbers support a different price that's above and beyond list price, great. You shouldn't feel bad about that. Because you're still hitting your marks the same token if you can only offer less than this price, but you've got to offer based on your numbers. So get specific get good at running the numbers, and then your answer will will appear to you almost like magic.   Tellee: Right? I mean, it is what it is. It's all yeah, it's all in the numbers.   Michael: That's for sure. Yeah. You know,   Michael: That's great   Telllee: You can only do what makes sense.   Mark: One more question in terms of competition. I like to look at it kind of in the inverse directions I heard last that you have about a month or maybe greater in inventory on the MLS. And that means it you know, the inventory that's available would take one month to sell versus an average market at any given point is about healthy market call it average healthy is about six months. What do you see is the current inventory level now? And how do you see this really impacting, you know, how a buyer needs to react to making offers?   Tellee: I think that's starting to increase just a bit. But I mean, I would say it's, it's probably still between a month and two months worth of inventory. And offers have to be strong. I mean, there, there's a ton of competition. I mean, we're seeing it almost on every deal. So.   And that's, and that's the biggest issue, I think, is that people aren't, you know, we're not making the offer strong enough, that we're getting beat out a lot, which I mean, I know it's happening everywhere. And everybody's writing a ton of offers right now and getting a ton of offers declined. That's just the way this market is.   Mark: I have some stats that I pulled that I think would be good to just throw out there and see if Tellee wants to talk to any of these points. But I was just looking through that John Burns real estate consulting data that he puts out every single month Roofstock is one of the clients so we have access to this data that's not typically available to the open market, I would say. But here's some cool stats I found.   So Tellee, stop me or like go into any detail you want about this. But I saw St. Louis had employment growth that was 5% year over year, starting this July, looking back a year. Appreciation in home prices. The median home price was 194,500. This year, compared to 179,000. Last year, rent growth was 4.5%. year over year looking back one year from July 2021. The cost two for an entry level single family home on a monthly basis is $1434 versus $1126. to own so use me $1434 to rent $1126 to own there's a good night. Yeah. Inventory was one 1.2 months I saw as a December 2021 occupancy was 94.8% for single family rentals. And the census data last showed that 56.6% of St. Louis was renting versus 36%. nationally. How about that?   Tellee: Wow. So you see…   Mark: rapid fire numbers. What do you think about all?   Tellee: St. Louis is the place to be right there. The proof is in the numbers? No, I think Yeah,   Mark: Absolutely.   Tellee: Fantastic.   Mark: I love occupancy, you know, high percentage of renter's, you got the cost to own a home is actually cheaper than what people are paying in rent, year over year market rent growth, great appreciation, and then I always look back at job growth. Right. Those are, those are those big drivers. And I know looking back a year, the market was in a state of turmoil a bit more in terms of the job market, but still to see things, you know, growing and climbing at a rate of 5%. Still pretty dang good.   Tellee: So yeah,   Mark: What do you think overall Telly if you were talking to investors, you know, what are some kind of final pieces of advice that you would give an investor coming into St. Louis, specially from out of state?   Tellee: Yeah, I would say give it a try. I mean, take a look to what we've got here. You're gonna find that your cap rates are great. You're I mean, it's, it's, it's a great place to, to buy investment properties. You'd be happy here, that's for sure. So.   Michael: Awesome.   Mark: Good cash flow. Nice appreciation was kind of the the two two solid things that you're looking for. That's great. Well, we appreciate what you're doing for the certified agent network and bringing the select properties to roof stock Telly. So thanks for all you're doing. And I would say our buyers are going to be interested in connecting with you. So maybe give them a little idea about how you would like to be connected with maybe via email or even phone.   Tellee Yeah, absolutely. Yeah, you can contact me at email. My last name warrentellee@gmail.com. Or a phone number 314-753-4503. We are 314 Property Solutions Group in St. Louis, brokered by Keller Williams. Awesome.   Michael: So I'm curious to get a little bit of background on you as an individual as an investor as an agent because we talked about the market as a whole but give give our listeners a little bit of insight into who you are.   Tellee: Sure. Yeah. So I have Been in the real estate business in some way, shape, or form, I guess for the past 20 2021 years. I started off in 2000. As an appraiser, I'd always wanted to get licensed as an agent. And I finally I just never never had the time to do it really, finally, made myself do it in 2015, I think I got is when I got licensed. And then I eventually switched over to just selling and I don't do appraisal any longer.   Michael: That's great. And I'm curious to know, your track record, having been a former appraiser, when you when you're consulting with clients and saying, hey, this is I think, where this is gonna come in? How close are you typically?   Tellee: Well, actually, I'm, I'm, I feel like I'm pretty close most of the time. Um, that's one of the biggest values that I that I bring, is, is being able to, is Property Valuation. I mean, I'm pretty good at that. And I think that helps out, you know, it can help out a lot. So I think there's a lot of agents that are not nearly good enough at it. And that can really put a client in in danger. So.   Michael: Yeah, big time, but we'll call that your superpower.   Tellee: Yeah, there we go.   Mark: And how about if if values come in too low from an appraisal for, let's say, a lender? You know, what's your success rate there and challenging some of those values? Do you do you find that happens? These days with values going up? Or, you know, what do you see nowadays?   Tellee: We're seeing some issues with appraisals. A few, but not not near as many as I expected to see. Which is kind of a surprise. And of course, I mean, we always try to, to rebut those, whenever we do get alone and try to hit him with as many comps as possible and all that, but it's it does. They're not overturned very often.   Michael: Okay,   Mark: Got it. But that's always a challenge when real estate prices are going up, you know, an appraisal comp is looking backwards, right? So you're looking at prior sales. And when the markets moving so quickly, you know, some of those sales haven't even closed, they're just under a contract. So, you know, that's good to know that there, there isn't this huge valuation challenge that's going on, because a lot of times the, you know, the lenders are trying to mitigate their risks, so they cap their number and, you know, values are moving so quickly, you know, just means buyers may have to come to the table with a little more cash than anticipated.   Tellee: That's right. And that's, that's why it's, I mean, it's very important right now to, you know, typically on an appraisal or in a normal market, you can, you know, they're comparing the home to properties that or maybe six months or even a year, you know, that was sold, six months out, or even a year out. Where now, it's very important that they use sales that are within a month or two, just because the market is changing so quickly. Yeah.   Michael: Yeah. Interesting. Seems like the country's on fire. It is like I gotta be careful how I say that. Well, right. In Flames, so yeah.   Awesome. Any other questions for Tellee guys?   Mark: I'm good. This is this is insightful. Thanks for your time Tellee. We always appreciate it and getting some local knowledge.   Tellee: Absolutely. Thanks for having me, guys.   Michael: All right, awesome. Well, Tellee, thank you so much. This was really really insightful. Very excited to see the St. Louis market and all it has to offer and for anyone interested, feel free to reach out to Tellee.   Thanks again, man. Hopefully we'll we'll catch up with you soon.   Tellee: You bet. Thanks so much, guys.   Michael: Alrighty, everybody that was our episode a big big big thank you to Tellee if you're interested in learning more about the St. Louis market definitely reach out to him. He is a wealth of knowledge, especially with his appraisal background. As always, if you liked the episode, please feel free to leave us a rating or review. If you're checking us out on YouTube, hit the like and subscribe button right below you. And we'd love to hear about episode ideas for things you want to learn more about. Thanks so much for watching. Happy investing.

Author of Happy Ever After, The 7 Dollar Millionaire, joins us again to shed light on the complex world of personal finances. He shares tips on getting started, saving money, and aligning your goals with your family to work your way to financial peace of mind one step at a time. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, and welcome to another episode of the real estate investor. I'm Michael Albaum, and today I'm joined by my co host,   Tom: Tom Schneider.   Michael: And with us we have a very special repeat guests, the 7 Dollar Millionaire, if you recall, he wrote a book that we had him on chatting about Happy Ever After. And today, he's going to be talking to us again about personal finances, some things you can do to get started, as well as how to talk to your spouse or significant other or partner about personal finance. So let's get into it.   Michael: Awesome. Mr.7 Dollar Millionaire, thank you for joining us again, we so looking forward to recording with you.   7 Dollar Millionaire: It's a pleasure. Thanks for having me back on that says, this is a first for me. No one's ever invited me.   Michael: Well, hopefully the first of many. So how have you just curious how are things out in Singapore?   7 Dollar Millionaire: Things are just improved. Yesterday, we had like a mini re lockdown. So they call it circuit breaker here for about a month. Because there was a bit of a spike in cases. But that ended yesterday. The big change is very little apart from Oh, you're now allowed to go to restaurants, their restaurants are all closed. That's pretty much it. Gyms are kind of reopening slowly, that kind of stuff. But yeah, that was that was nice. It's nice to kind of go and get a meal somewhere, you know. But otherwise, it's you know, as with a lot of Asia, they're taking that kind of minimal risk approach to it.   So I mean, even when there was a spike, it was like 100 cases a day. 5 million people, right? I mean, it's still a very low number.   Michael: Yeah. But everybody in your world is healthy and safe.   7 Dollar Millionaire: Oh, yeah. Thanks. And you guys are on good.   Michael: Yeah, we just chatted with some family friends of ours yesterday, and they are double vaccinated. But she and her daughter just got his tested positive. So she had a breakthrough case. So she's feeling pretty crummy at the moment. But I'm hoping that she's hoping she's not going to go to the hospital or anything like that. So the breakthrough cases don't seem to be as severe as the unvaccinated stuff.   7 Dollar Millionaire: Fingers crossed. Yeah, fingers crossed. touchwood. Right. That's that's the big hope. As long as it stays like that we can live with it. Right?   Tom: I have a friend who had a breakthrough case who's also vaccinated. And he's got a wife and three little kids and his wife and three little kids didn't, didn't catch it. So he's hanging by himself. And you know, I feel much more for his wife, who's managing a house full of Toddlers and Babies versus him who's just hanging out at their their lake. Well, he's men. He's on the men. He's feeling much better. But it's Yeah, really.   7 Dollar Millionaire: Did she get did she get like a second opinion on that? Right. Yeah.   Michael: Thank goodness.   Tom: Yeah. Doing recovering. Well, good, good.   Michael: Well, Tom, it's it's funny as the wrong word. But interesting. This kind of segues nicely into what we want to chat with the 7 Dollar Millionaire about today. Again, circling back and talking some more about personal finance. But a question that I have is, so often people have these target goals in mind, and whether that's net worth or cash flow monthly annual basis. But that's so often based on today's needs, for their whatever family is currently in the picture. And I've got to imagine that changes over time. And so as someone who doesn't have kids, I don't have a really good sense of what kids costs, it could be 20 bucks a day, it could be 100 bucks it you know, I don't have a good sense for that. So how do you recommend folks think about not only their cash flow needs for today, but also for their future selves, as they continue to age but also as additional family members may enter the picture?   7 Dollar Millionaire: Yeah, I mean, it's a it's a there's no right answer, right?   Michael: I mean, I mean, oh, well, then we can we can we can cancel the show. We're done here.   7 Dollar Millionaire: There's just no single one right answer. I mean, the first step with the first answer to this is actually just taking the first step start actually doing some work, right. I think I was working recently with talking about how you make all the progress in personal finance. And a lot of people are discouraged because they think they can't come up with an answer. And it's like painting, right? The first blob of paint on the on the canvas doesn't look like the painting You can't expect it to you go put it on, put it on, put it on. Only after a long time does it actually start to get to the real picture, and it's the same, it's exactly the same with this. You just got to start doing the work. And starting doing the work is actually working out what you want your kids to be like, what kind of life you want to live with them where it's going to be, and the kinds of expenses you're going to have.   So you can roll that stuff out pretty easily. I mean, so For me, because I was an expert, I had to put my kids in international school, there's some serious education expenses. You know, it's like the, for me, when my kids went to college, they got cheaper. I mean, that doesn't happen very often, right? My kids got a lot cheaper when I was paying for them to live in a foreign country, flying them backwards and forwards and paying college fees, they were cheaper than the local education costs for me.   So that's how individually these things can be right? I mean, you just have to do that. So you have to look forward and you think, okay, and I'll give you perfect opposite example, really good friend of mine used to live like five floors below where I had seen the apartment block right here. He's got for various reasons, he ended up with like, kind of one of those joint families who so like, five kids under the age of five, you know, bizarrely, and really bonded, situated,   Tom: Yeah, Brady Bunch situation.   7 Dollar Millionaire: And he's, he's like a, he's a fund manager, based in Singapore. And he worked out that he could actually, it made sense for him to quit his job and move back to California, because paying for five kids in local education system here, when you know, that, and everything else, it's cheaper to move to a place with a good free education system and have a normal job rather than trying to have a high paid job and pay those kinds of costs.   So that's how individual all of these kinds of decisions get to be. The first thing is just to sit down and, and dream a little, right, exactly. Who do you want your kids to be? And how do you want to live with them. And because a lot of the costs, like your actual food costs, it's not a big deal, it's really not going to be an enormous deal. So the basic, you know, adding one bedroom to the house may or may not be a big deal, depending on on where you're at. And then after that is things like education and flying, holiday is right, they do cost literally an extra person on every single thing you do, when you start and that's times 20 years, right?   So there's, there's some, there's a lot of extra costs on that kind of stuff. And it's really just sitting down and working out those kinds of things, and those kinds of budgets. And then as you move closer, closer towards the end, you'll realize exactly what is going on, you'll get a much closer impression. But as always, it's just start, just sit down with a piece of paper and just go, Okay, I think it could be this, and then find out the extra information that you'd actually need. Because it can be a scary amount, or it can be really, if someone for someone like me, that was having to pay man it was 15 years of 14 years of school fees. I don't want to think what that was, you know, really, I definitely don't want to, you know, PV it, I mean, that's just insane amount of money. But you know, had to be done for In my case, if you don't have that you don't need to put it in.   Tom: I love that analogy of the paint, and it just kind of evolving a little bit over time. As far as, you know, practically getting the paint down, would you recommend a model where, say this is in Excel, and each row is like a year, and then, you know, perhaps there's some different sort of expenses within the different rows, or it's just like a really kind of basic form of that is that sort of a rough construct is, and I'm sure it's you know, could be a little unique for everyone. But that's immediately where my mind goes is seeing in that sort of a model.   7 Dollar Millionaire: That's definitely where I think you move it, I actually like to do a pen and paper to start with, I think there's a, there's kind of a free flow, when you're actually kind of sit down with pen and paper and just as scribble stuff out. I've even tried doing it on my iPad with you know, like the sketch but it doesn't work as well, there isn't that sort of connection, which sitting there with a piece of piece of paper and a pen for 10 minutes, and just sort of scribbling out the bunch of the cost because we're all prepared to be kind of messy on a piece of paper, right, and we can just draw in things and loop them around, that connects to that, scribble that out and need this.   And then once you've got probably only 10 minutes in, you can move that to a spreadsheet, seven or eight lines, seven or eight lines is going to get you most of the way to the kind of things you're thinking about.   Michael: And Tom, I'm curious not to put you on the spot here in the hot seat but having a young child is this an exercise that you went through with your wife and was this conversations that you had prior to the little one arriving?   7 Dollar Millionaire: You know, I was actually so I'm in my mid 30s now and when I was in my mid 20s and early 20s actually was way more active about kind of performing out like 20-30 years in advance so I actually had to pull back the old spreadsheets pain analogy I think it's probably time to have another round I love these interviews with you 7 Dollar Millionaire I literally after our last call that we had I went and totally redid all my you know auto deposit into my investing and I already have some immediate action items from from this one. So just to kind of go back I was I not not so much with these with with my current kid but I think it's an exercise to go revisit some work that I did in my mid 20s.   7 Dollar Millionaire: It's always good to know right? It's also good to know how good you are at modeling. Where you make mistakes and modeling, I mean, we we professionally we do that. And it's you know, you can be miles out. But if you actually, I mean, there's a company modeling, we're actually modeling like an investment will have various inputs that we can that we can change them to go back and you look and go, Oh my god, I was miles out, but then you realize that one of the inputs was x, y, zed, which turned out not to be remotely true. So you can, okay, then change that. And sometimes it kind of comes back to closer to reality. So all these things are really, really important to actually just understand how well you model because it's not like you have to stop modeling, or you never stop acts.   And modeling is like, it sounds like it's too specific to what we do. But we're all forecasting all of the time. Now, my favorite analogy for forecasting and how we're all forecasting all the time, is we all pretty much expect chairs not to break when we sit in them, right?   I mean, even some of my weight, I don't expect the chair to break when I sit in it. But I pretty certainly if you if you sat on three chair, three different chairs in a row, and they broke every time, that fourth chair, you'd be like pushing it scratching it thinking, Okay, is this thing solid, you'd have lost all your trust in chairs, that's just forecasting. It's just natural forecasting. We do it all the time. And so knowing if you're good or bad at it is a is an amazing life skill.   Tom: Do you find that most people are overly optimistic when forecasting I guess you could apply this to business or to kind of personal? I'd love to hear your kind of thoughts on, I guess human nature and in applying forecasts and ways to beat yourself and be better at it.   7 Dollar Millionaire: Yeah, I honestly, unfortunately, it really it is really bad answer. But 50% of people are better than average. And there's no other way of looking at it. I think the key is most of us aren't doing it particularly consciously most of the time. And so sense of like actual aware forecasting and awareness of how optimistic or pessimistic we tend to be. Pessimists, I mean, pessimism is one of the reasons that overcaution is what keeps a lot of people out of the markets. Right. And because they think of it as markets, right, they don't think of it as I'm working. I'm living in this economy, and not being in it with my capital is essentially an enormous risk that this economy is going to crash and burn. I'm literally taking that investment option. And not seeing it that way keeps them out because they view it as being very, very high risk and pessimistic because they don't understand it enough.   Let's throw some analogies around that's just like being in the dark, right? It's just being in the dark, you can walk out into your hallway with no light, and you can't find your way along the hallway anymore. Right? That's, it's it's still there. Everything's exactly where I was people without the education. I mean, we're moving back into financial education, right. It's what keeps people out. It's they're unsure, they're in the dark. And that's why I think creates most of the pessimism and overcaution around it.   Yeah, there's a bunch of people who, too, you know, too optimistic, too. But that's what I mean. I tend not to mind it when when investing, I don't engage over optimism. But when I'm doing things like a little bit more entrepreneurial, then yeah, I shoot for the moon. There's just no point right? or shoot for the stars even then you get the moon there's no point not being no point starting an endeavor without thinking it's going to be amazing.   Michael: Yeah, I love that analogy about being in the dark. I wonder though, your take on, when people have gotten out into the hallway realize that it's not that scary. Or maybe they've gotten a little flashlight, it a little bit of education, they understand. And now they think, Well, I know everything. And so how does that that little bit of education, a little bit of knowledge, not get overblown, and a bit turned into overconfidence, where now you are taking risks, well beyond your your light beam, so to speak.   Tom: Great point, Michael.   7 Dollar Millionaire: Yeah, it, it's it's actually why I think it's so important. This gets taught in schools. And, you know, there's, there's a bunch of different sides on this. But it's, that's why, you know, why are we confident reading? Right, we're confident reading because we've been taught it at such a young age, right? This is this is how we have that kind of confidence. Why are we not confident in a foreign language? Because we weren't taught it. We don't know any of the words, we don't know how this thing's put together. And we need that it's, it's about having that broad underpinning to what we do, and it's why it needs to be taught in schools because any other way, you're coming in at some random entry point, right?   So some friend tells you the you know, you should trade options on Robin Hood because I made x, y, zed and then you kind of get in there and you learn a little bit about it. Maybe you have like some Beginner's luck and you do quite well. That's now your little wheelhouse. It may just may be a good wheelhouse for you. It may be a terrible one. More likely the second option, right. So that becomes your think that's what you need that we need the education to make sure we get a little bit of light in all areas.   I mean, I'll give you a perfect example for this. I so the CFA exams Chartered Financial Analyst. I'm not one I did level one.I got way too busy to do levels two and three, my first daughter was born like immediately after getting level one. And level one even just shows you the entire spectrum. So you kind of you get like a beginners entry level on everything. And that's like, you kind of you know where to come back to later. Right? If I need to calculate a bond price, I can't do it off the top of my head, but I know where to read. I know where to look. And then I'd know how to do it. And that, obviously, that's a little bit specific for most people. But that kind of general entry level stuff is I think, you know, what's needed otherwise, you do end up with the flashlight, or moving from analogies. Under the under the street lamp looking for their keys, right?   You know, the stories like, you know, and the guy's looking for his keys under the street lamp and a piece of wedge, you lose them over there. So why are you looking here? Well, this is where the light is, right? That's it's so important to just have like a basic level of light.   Tom: To know what you don't know. Definitely.   Michael: Yeah, that's Yeah. I'm curious to know, in your opinion, if someone is looking to invest in the next 12 months, they're looking to get educated and wanting to get involved, whatever investment class they deem is in their wheelhouse, where should they be keeping those funds? Should that be something that they're investing the whole time labeling? And, you know, dollar cost averaging? Or should they kind of wait till they have enough funds to do something with curious to get your thoughts?   7 Dollar Millionaire: Okay, well, always dot dollar cost average, unless there's like a ticket price that, you know, makes that unavoidable that you have to go in single level, like, like some kinds of property, right, where you have to have a certain amount of downpayment, and that's the minimum you can get involved. The great thing about other asset classes is you can dollar cost average in the tiniest amounts. And you always should, I mean, cuz, you know, you can't predict the future, you don't know if it's gonna go up or down, right. So you should try and remove as much of that risk as possible. And dollar cost averaging is the is the free way of doing that.   Michael: Right.   7 Dollar Millionaire: So right, so always dollar cost averaging, I think there's a one thing that I quite like is what I think of it in my head is like a reverse ladder. So you know how you have ladders on fixed deposits, time deposits, whatever they call them. In the US, you know, where you can get kind of get like a little bit more return, if you lock the money into a deposit account for longer, let's say three months, six months, whatever it is, and you stagger it in. So you put in like a sixth this month and a six the next month, and then you do that over six months. So you got the money, you got access to six of the money every single month, you can put it put it into those and then actually dollar cost into the thing you're putting it into. So you can sort of you're still making a little bit of money doesn't have to sit as pure cash. Right.   Michael: So so go get six CDs.   7 Dollar Millionaire: Yeah, exactly.   Michael: on six month intervals. And okay, gotcha.   7 Dollar Millionaire: Yeah, exactly right. And then you can just plug it straight in. And you might only be making like an extra, like a few bucks. But this is how you make money, right is by it's like that little extra, which for no risk, right? That's always the key a little bit extra, no risk is better than a lot extra for a lot of risk. So just that just that small, those small moves are always useful.   But I think also one of the other things to do is depending on the asset class, if if what you're doing, if the cash you've got is a long way away from the asset class, then it does make sense to have some kind of hedge if it's possible. So I mean, I think one of the things often is say, like, being able to put some of the money into a REIT in advance of buying a property.   So let's say if there's like, if you're going to buy property in New York for some reason, then there's a new york rate, if you can do enough analysis around that read to understand it's like, oh, this is, this is pretty similar, this should go up when my property goes up, it should go down when my property goes down, you can at least put some of the money as you're building towards that downpayment into the REIT and then hedge out a little bit of that extra risk. Because, I mean, the risk on property is nearly always, everywhere in the world, the government prints more money, right? I mean, properties actually don't…   Micheal: Inflation.   7 Dollar Millionaire: Yeah, well, yeah, properties don't often go up in value, your money goes down in value in terms of property, right, that's what actually happens. So actually, removing that risk is is is useful. So I'd always think through these ways, rather than thinking, yeah, just chucking money in now. Just steady push it in steadily as it's just if you can, if you have the patience.   Tom: That's a that's a good discipline. I mean, it kind of related as an act of discipline I can think of like going to a, like a kiss going to Las Vegas or something and playing blackjack and it's like, oh, do I push it all in on one hand or do I slowly and you're gonna have a better time to her a little bit slower. I guess that kind of really kind of relates to having fun at the casino versus having fun at.   7 Dollar Millionaire: It is a good point because I do the exact opposite. I really don't like being in casinos and when I'm forced to go to them, I put it all in on one hand and literally   Michael: Walk away.   7 Dollar Millionaire: Just like get this over and done with either make a lot of money on one hand, or we are I'd leave and have a better time than I would do by sitting at a blackjack table, losing money steadily.   Michael: I love how you knew kind of exactly where I was going with the question with regard to property investment. Because I mean, Tom you were in a similar situation with regard to you had some cash or cash out refinance, you were looking to deploy it. And in the meantime, you were thinking about putting it in the market, and I think you ultimately did. And then there was some fluctuation in the market. And you're like, Whoa, this is not this is not feeling good. So you pull back a little bit, right?   Tom: Yeah, yeah, just, I think like within, there's more, like risky allocations, and then safer allocations. And I think, being cognizant of kind of which risk profile I was investing, versus the strategy I initially did was go running up to the blackjack table and throwing it all down. And, you know, thankfully, didn't get getting didn't get burned too bad. But, you know, stepped back away and left the casino and invested in a nice asset allocation that was comfortable for the time horizon at which I wanted to spend it. So..   7 Dollar Millionaire: That's I mean, that's, that's, that's also the other point is actually nothing wrong with taking a second most important thing of investing is actually understanding your own psychological needs, because you can't invest against them. It's really, really hard to actually invest in a way that you don't think is correct for you. So taking too much risk. And just I mean, I don't have sleepless nights with what I do for a living. Because I don't invest in a way that is wrong. For me. I actually feel like I understand what I do. Whenever I hear people like they have sleepless nights like that's because your style investing does not match what you actually believe. I mean, that just can't be. That can be the only reason I think what you did, there was smart.   So the only way I've done this in the past is that I buy I bought properties in the past in, in foreign countries I have bought in Singapore, once I buy in the UK, I bought in Japan, I bought in Australia, one of the things when I know I'm going to do that is I immediately switch the money into that currency. If I think it's cheap, I think it's expensive. I don't.   But I try and you know, work because current currency, and I do sometimes take a view on the currencies. So you know, but that's it's that kind of move. So for example, I think I kept I think I kept just cash in a deposit in Sterling for about three years before I bought a property there because I wanted to take away because it was cheap. And I wanted to remove the currency risk, that it would get more expensive at that particular time. Basically, the moment Brexit happened and the pound and the pound collapsed, I put money into Sterling, because I knew I'd be thinking about buying a house not long after,   Michael: I think I've mentioned this to you in the past, Michael, but I really took it on the nose with the currency exchange because I bought a place in Portugal. And it was right around February, January, when we were looking at doing a transaction and the dollar against the Euro was like 94 cents. And it has just continued to climb and climb and climb. And so this is going to be great. This is going to be an equal transaction, by the time I go to actually pull the trigger. And so I waited, waited, waited and then COVID hit and the dollar just tanked. And I really got taken to the carwash on that one.   So I think that makes sense is if if you if you know what it is today, that's worth something and how you feel about it, I think is also important, but also a bird in the hand is worth two in the bush.   7 Dollar Millionaire: Well, it's it's actually a lot of these things is understanding future liabilities, and not just your existing liabilities, but your future liabilities. And that's one of the ones like with kids, right? You're going to have these are future liabilities, you've got costs down the road. And if you know that you've got, you want to have a place in Portugal, then if you think the currencies pretty decent, and you know, you don't have a view either way, you can just put that money into into euros immediately and just remove that risk, right, there's no risk now. Right?   If that money wa s just gonna sit, and you could have it in euros doing something else, I mean, you can still take another risk on top of that, but at least you've closed off that currency risk. And currencies, they move around a lot. I mean, there's, you know, within like a two or three year timeframe, they can really shift. And that's a risk that's nice not to have or even potentially gain you can make rather than, you know, taking that huge risk.   Tom: So backtracking Just a minute, a little bit ago, you were talking about if you were to evaluating buying property in New York, and you know, parking it into a REIT in that space. I never and then you know, you can research that read I never thought of that, because they're sort of there's this is, you know, primarily single family rental investors. There are single family rental REITs out there. And is the idea to maybe to to learn more about that specific REITs that you're going into that asset class like to benchmark what kind of returns you what are my totally hearing this on a different?   7 Dollar Millionaire: I think you know more about the US property market than I do. So I'm, uh, yeah, you're probably hearing things I don't know, all I mean is is as close as you can remove risk, I'm not talking about actually   Tom: Sure getting as close.   7 Dollar Millionaire: Yeah, the closer the asset thing, the asset class you're going to buy, you're removing as much risk as you possibly can. So if it's in similar geography, in a similar asset class in a similar geography, it still may not correlate, and there's nothing you can do about that there may be a problem with the REIT, and there may be a problem with a manager and maybe a problem with something else. But if you're going to buy commercial property in New York State, if you can find a commercial property right, in New York State, yeah, then maybe maybe there'll be reasonably correlated, and you're taking a risk there, that, you know, there's no reason for cash to be correlated to it, there's definitely no reason for any other asset class to be correlated to that thing. So just a little bit of work and probably find you, okay, what's the new what's the New York State REIT, which ones are similar? Bang, okay, that one might reduce my costs and reads tend to pay pretty good dividends as well. So you actually could get paid out while you're doing it. So the return could be stronger, while being more correlated. And that's kind of all you're aiming for. with that.   But I mean, I'm gonna say as well, I don't know, if I mentioned on last couple of one of my it's a small family single, you know, real estate, is actually just such one of the best asset classes to be in as an individual. Just because it's not not something that big corporations do particularly well. And that's where it's sort of maybe steer clear of big corporations tend to do big properties very well, right. It's just like one guy making a decision pushes a button, and then the whole building does x, y, zed, right? Whereas when you look at what we all live in, so small fixer uppers, those single unit setup takes an enormous amount of management to run as a business.   So that's one of the reasons I love real estate as an asset class is because the world's capital is not trying to jump into this, right, it's just individuals doing the thing they do. So we can have an advantage. But within the REIT, maybe less if you get too specific, too granular. And I just sort of aim, you know, and the other thing would be to not get into to smaller thing, right? You want it to be liquid, you want it to be well traded, you know, one reasonably well known   Tom: That makes sense definitely.   Michael: Makes a ton of sense. I'm curious, Michael, do you have generic guidelines or principles when you're teaching, you know, financial education to folks around how much of someone's paycheck or how much someone's net worth should be broken down and spent on the different typical categories? So housing, or transportation or food entertainment? Do you have a pie chart that you that you utilize?   7 Dollar Millionaire: No. I mean, there is one, right. There's the 50 30 20, that is commonly used. And it's a great starting point, I actually think the 50 30 20 is a great starting point. But I think there's just too many examples of people who do way better than that, than I do. You know, you don't want to set the goalposts too easy, right? You know, you just come across people who are saving half or even three quarters of their of their income, and you don't want to tell them, You should save 20 it's similarly right, you know, it's just like, but the only one I really use is like, never go above like a third of your income on property.   And I think if you can keep it below that number, pretty much everything else starts to slide with it. Right? You start your cut, a lot of other costs are gonna be I mean, so in the book Happy Ever After I use 50 3020 as a starting point, but then say, Well, yeah, you know, but what if you could do 30 30 10? Right, you know, 30 30 30 30 30 40, because it would be, because 30 30 10 doesn't add up great. But if you can keep those costs down, all of those extra the 1530, way below those numbers, you're adding up to a much higher number on the 20. And that's the thing, I think, to use that 50 30 20 is a great thing to say to someone who's saving zero, or 5%.   Tom: Sorry, just to clarify the 5030 is 50% is your needs housing, grocery grocery, all that 30% is the ones and 20% savings. Is that the?   7 Dollar Millionaire: Yeah, that's right. Yeah, that's, I mean, it's not that I didn't invent that. I think that's a standard financial personal finance tool. And, you know, as as with the glob of paint, right, it's a great job of paint, unfortunately, it's kind of it sounds to 20 20% is gonna have you if you did it from the age of 20 20% is going to have you retired somewhere in your 60s. It's not amazing, right? That it's it's, it's better than not, but it's it's not amazing, and that's where I wouldn't want to see it to see us as I try to use it just as a general this is dob of pain. 20 is great, but if you want to do better, you should aim for better.   Michael: Yeah, that makes tons of sense. And I think that's great. I love I love that dob of paint analogy. I think it makes so much sense. I'm a very visual person. So that that resonates with me.   7 Dollar Millionaire: Cool. That's good. That's really good. Because it's because I wrote it for for a new book I'm working on. So I'm glad it works. I'm trying it out with you guys.   Michael: Are you really writing a new book?   7 Dollar Millionaire: Yeah, yeah. This is actually the first morning in about three weeks I am, I've got up to talk to you guys instead of getting up to write. But I've been writing to non stop for last three weeks.   Michael: Awesome. Can Can we get a little preview as to what it's about?   7 Dollar Millionaire: Yeah, it's it's an attempt to combine Zen mindfulness practice and personal finance. So I'm trying to map I'm trying to get that Venn diagram. I feel at the moment, those Venn diagrams are like, here, I'm just trying to merge them. But in many ways, I feel that they merge really easily. It's like, you know, it's what is tracking what is tracking your spending, if not being mindful of what you're doing?   Right. I mean, you sit down and journal but journal your expenses, right actually know what you're doing in life, I actually think they they align quite neatly, I just haven't seen anyone do it before. And, and I, one of the things I've realized more and more about personal finance is that the SEC, the same five or six things, we all need to know how to do the basics. But we need to approach every person in a slightly different way to get those five or six things in. Once you're in, you'll learn them really fast, but you need to get in.   And that's why I sort of just occurred to me will be a fun thing to do. So yeah, I need it to be fun. As well, I need to actually want to be able to, if I have to get up at six in the morning, I have to want to   Tom: Yeah, big, big mindfulness fan, I try and do have a personal retreat every year. And man, I can just see how a lot of those concepts of just being present is so relevant. And you can basically apply it to anything and it's so natural into, you know, the currency that, that our resources that we live off of its camp can't wait for it to talk more about it and for it to come out.   7 Dollar Millionaire: Cool. Well it come at it. Well, if I finish it, it should come out next year. That's exactly what it is. I mean, it is this sense of in every place in our finances, if you're not aware, they take control of you rather than the other way around. And if you can be aware and mindful of what you're doing. So even to the standard market to you over emotional, are you under emotional, you know, how are you what's actually going on in you, that is making you do things that are not to your benefit and understanding those things are such important drivers and in the in the space. So addressing all those things. Equally, what's quite nice is I feel like I can recycle the some of the Happy Ever After book as well, because the middle of the middle bit of this book is a man being the same steps mission, money income saving, spending, investing, owning now those steps.   And so rather than to using sort of like the fairy tale, we sort of really creating a path. And as with so many things on sort of mindfulness, this is a path, you have to understand the path and now you hear whether the dob of paint was coming in, right? Don't get upset that you don't know where you're at, you're just putting a dob of paint is just the first dollar painting this will build. And that's Yeah, that's why I'm so happy like the analogy cuz it's right up the front.   Michael: Oh, this is great. I'm very excited to read the book. I want to shift gears here a little bit. And I'm curious to know if you have any tips or tricks or guidelines for folks to have these types of financial, personal financial conversations with a spouse partner significant other, because so often I hear in the Roofstock Academy is Hey, I'm all on board for real estate, but my husband isn't, or my wife isn't or my partner isn't interested? How do you bring them in in a productive way?   7 Dollar Millionaire: Yeah, it's hard. And you know, you, it's okay, we're gonna get back to the mindfulness, but just for a second, and I'll come back to this, right, because   Tom: It's all part of everything   7 Dollar Millionaire: You have to know is that you, you can only affect yourself, you can't create change outside yourself, you can only create change inside yourself. So you, you can't force a partner to come up to your speed when you want them to. So that's the number one understanding. So you got to be ready for them to not be prepared to do this.   The second thing is, it's why I wrote the book is for the original one happy ever after it was to outsource a lot of the conversation with this time, but that time with my daughter to paper, get her to read it. So I don't have to go through an enormous amount of the background of how this works, right? It I can just imagine it. When I realized my daughter didn't know anything about money. I was like, I've got a teach her this stuff. I don't want to spend every weekend for the next year having daddy daughter money lectures, because that's just you know, it's wrong.   Right? So but if I write her book, she can read it in their own pace, and we can have those conversations and she's already up to speed. Right? So to get some level of outsourcing so to encourage, could you read this book, have a look at this, what do you think about this, and then let the person do it in their own time. So they'll come up to speak because again, we go back to that you can only change you they have to change themselves on on their timeframe.   I think the other thing is too, sometimes it's useful just to have like a group budget as a track as a family exactly where all the money goes. Because that That, to me is like, is the starting point we're spending money on on these things. And you know, if there's any dispute, it's like, let's get the, let's get the receipts out, this is actually exactly where all our money went in the in this period. Because I think that's the, I think it's very difficult to jump from an investing mindset. Jump to it, without going through saving. And you have to warn you that that requires understanding your spending.   So those two things combined to be like, okay, we understand that what we're saving and what we're spending, okay, now we can invest our asset class, we can we can move on to as you said, How do I get my spouse to think about real estate, they're probably not thinking about it, because they're not probably not thinking about the saving and spending, the moment you think about your, I'm going to give up this spending to save the money, you tend to get a lot more interested in how much money that money is going to make for you. So you tend to get a lot more interested in the asset class. So I that's why I do see these things as being a 1234. And then you can get them interested in the asset class.   Tom: Maslow's hierarchy of conversations to have with your significant other. Yeah, it's, so this is a one would be, I guess, spending, saving, and then more offensive investing that I understand this kind of triangle correctly.   7 Dollar Millionaire: Okay, I will never allow spending to go in front of saving savings by okay. It's in the dictionary in the book in life saving comes first, right? Get the saving done first. And the saving is how you top up your yield. So the safe spending is cutting down on your spending is how you top up your savings. Right? Did you put the put the savings away first.   But yeah, and then once you've got savings, you need to do something with them. And so the thing you do with them is what asset class and then you can have those conversations. But if the person isn't engaged in the saving, right, then they're probably saying I don't want to invest in real estate, because actually, I'd rather be spending the money on a car.   And you've got to move the people have got to be with you on those steps. And it's, if then if they haven't got those fundamentals like Well, yeah, we could buy the car, but these savings will double in 10 years time and quadruple in 20, et cetera, et cetera. And then we'll be setting we can have as many cars as we want, if that's your thing. But let's just actually understand our priorities today, and where we want to be with that.   But I do think it's really important not to make that a face to face conversation too often, unless you're both open to that and let that someone like me, let an author let a book, let a TV show, do the heavy lifting, right? I mean, and then then have the conversation subsequently.   Michael: So for anybody listening, needing to broach this subject with a partner, spouse, you can either go get Happy Ever After by 7 Dollar Millionaire, that's great.   7 Dollar Millionaire: I couldn't have said it better myself. Love it, love it.   Michael: I know you're not really familiar with the US system of Roth versus non Roth, but we can talk about it in a higher level discussion. And so in the US, we have Roth and non Roth retirement accounts. A Roth is simply you pay the tax on the dollars that you invest on the front end, and then you get tax free growth and distributions on the back end, versus a non Roth is you get a tax benefit of reducing your taxable income today, it grows tax deferred, and then when you go to remove those dollars, it gets taxed at that point in time. Do you have a sense for pros cons, how people might be thinking about this?   7 Dollar Millionaire: The only thing that go into there is I'm assuming there are some other sub clauses in terms of what your access to the money in the intervening periods? Right? So I'm guessing from what you've said, that the one where you get, like, you pay tax now and you'd be don't pay tax on on the eventual money. You can only take it out on a certain date. And if you take it out between those dates, I'm assuming there's some kind of penalty as the as the price of actually getting a tax tax, tax free later on, are tax exempt.   Whereas the other one sounds more like well, if you know, you're actually if you're not being taxed on the money that goes in that's probably fairly similar. But I'm guessing it's probably a little bit freer money in terms of you can probably access it at any point in time.   Tom: The big gating factor between the two is there's limitations on who has access to use a Roth, this one that's taxed up front, and that your income needs to be under a certain level.   Michael: But the access to the funds are fairly similar in that you pay a penalty on both if you remove them before your retirement age. Yeah, yeah, I mean, I think if you can afford it, you probably want to put the money away that you can take it out later tax free. That to me sounds like you know, because then you, hopefully if it's a long period of time, and it compounds reasonably well, that's a bigger number than the money you're putting in. And that's how the only thing I could think of that. Honestly, these things is weighing me up. I people make tax codes way too complicated.   It's just like they make tax codes complicated. And then don't teach financial literacy in schools. The idea of this is beggars believe, right? The problem with making them complicated is very often, it tells people like, it's like, we go back to a dog with pain, right? We go back to our dob of pain, someone is telling you, I need you to paint the Mona Lisa, and you've never painted before, you're scared to put the first piece of paint on, you won't, you'll just, you know, you'll have you'll kind of you'll have like a punk rock moment, and you'll toss the canvas and break it on the wall and walk out the room.   That's what everyone does. Everyone's just like, this is too hard. I'm not doing it. And so you stop people actually getting involved. So I am going again to run again, all of these systems are way too hard. The correct answer is save them money, one of those will be doing deep, it will be better than none of them and don't over stress it.   Personally, I probably go to have the tax deferred later. Because I want the money to compound my age, that's probably wrong. Because I'm you know, I'm probably begin taking the money out in 10-15 years, so might not compound that much. And I might be better off actually having more money now. And I suspect that's where the differential is. That's probably where, you know, that's where the delta is on that. But God, I mean, that's just way too hard. Sorry, not telling you off it. But it's way too hard a question to put to someone who probably has very minimal financial literacy, I could probably work out what the right answer is with a spreadsheet. That means it's a really bad policy to be offering people. Sorry to criticize your country.   Tom: I like it.   7 Dollar Millionaire: Okay, good.   Tom: My wife's a tax attorney and keeps keeps busy. Yeah, moving tax code.   7 Dollar Millionaire: Oh man. It's actually it's actually also one of the reasons why, you know, the financial literacy thing is so important, because you can't trust governments with this stuff. In the we all think that everything we experience from childhood has been around forever. The reality is, before the Second World War, most people were dying around 65 70, they did not get a pension because they didn't need it. They were literally going to last maybe four or five years after they after they finished work, they would expect to work to death. And only after the Second World War, do we get this mass input of pension schemes? And which is why in lots of countries, they're just paid out of government revenues. And I'm not saying that's necessarily a bad thing. But it does. What it means is it's not necessarily going to be around forever. Tax codes aren't around forever. And it's one of the things that I worry too much about putting too much time into worrying about tax codes. Because by the time you take the money out, you'll have been through five different tax codes. It will all have changed so many times that if you try to think long range about tax, you're doing the wrong thing, because the risk on that is enormous.   Michael: That's such a good point. I think so many people hear about Taxco changing scramble to do whatever they can. And then next president next administration comes around things change scramble to do what we can and then you know, over and over and over again.   7 Dollar Millionaire: The people that make the money are Tom's wife. They make all the money!   Tom: She is just there, interpretating whatever, whatever comes out. Yeah,   7 Dollar Millionaire: Yeah, exactly.   Tom: It's good for the Schneider family. It's good for them.   Michael: That's great. Well, I think we just got to wrap this up, Tom, any other questions for the 7 Dollar Millionaire?   Tom: No, I love it. I think of all of our podcast guests. I never have more like impactful like meaningful, like things that I go off and do after the episode. So I really appreciate you coming on super excited about the book coming out.   7 Dollar Millionaire: Yeah, thanks very much for that. It's, it's, um, I'm really excited about it, too. It was the publishers Wiley to appeal to published happy ever after. And they, they asked me when I kind of that they were actually publishing happily ever after they said, do you want to do a follow up? And I was like, No, no interest. The and it because I took that to mean that did they want me to write teaching my daughter how to invest properly, and not as a cop out? That's just too complex.   You know, the reason I write what I write is I'm interested in getting people off the ground up to being able to understand other books. I'm not interested in the other books, those are all great. They've already been done, you know?     And then, you know, while he was coaxing me and saying, Well, no, we have this book series called “The Little Book of“ Series, which like the Little Book of Common Sense investing is written by John Bogle. And I'm like, kidding, right? I get to write a book in series that that goes in. And actually the bigger one for me was actually The Little Book valuation is by Aswath Damodaran. Who, I don't know if you guys know him, but in my industry, he's a god.   Aswath Damodaran book bbout this thick on on, it's just got damodaran valuation. And it's got every way of valuing everything ever. And it's the Bible for my industry. Everyone's got a copy everyone's read it cover to cover. It's literally and it I mean, it's dense. He's I think he's a, he's a professor at NYU stern. And just like, super clever guy. So he wrote the little book of value valuation. And they're asking me 7 Dollar Millionaire if I want to write one of those. So I thought I've got to think about it. So just like so thinking about it. And I was like, still didn't want to write a follow up on investing. Now, I did literally woke up one morning, I was like, the little book of Zen Money. And just that the title just runs so nice. I was like, Yeah, okay, what, what can I do with that, and I was like, then the subtitle came to my head was like, okay, a simple path to financial peace of mind.   Okay. And literally, I'm writing the thing, first word to last word and like, not how you should write, you should break it up into bits. And Right, right, like the middle first, and then the end. And then the beginning. And I'm literally going from the title. And the last word, all right, will be the kind of the end. And just going that direction, because it just makes sense to me all the way through.   Tom: Yeah, it's there already. just pulling back.   Michael: Yeah, gotta get it onto paper.   7 Dollar Millionaire: I stay away from the other analogy. But the other analogy is chipping blocks off the stone, right to make a sculpture. That's what I'm doing with this one. It's there. It's already there. I've just got to find it. enough fun. Yeah, I wake up every morning and get at it part from today, when it's fun to talk to you guys instead.   Tom: Yeah, I mean, one of the takeaways also for these conversations is like, you know, this 80-20 principle where, you know, you get 80% of your value from 20% of the work and that last 20%, like, that's where it gets, like overly complicated moving targets, you know, anxiety, all that stuff, but just getting up and getting that initial blob of paint? I mean, I feel like I'm probably repeating a lot of the conversation, but it's a really powerful one.   7 Dollar Millionaire: Exactly. I mean, you know, it's it really is that that first move separates you from everyone who's not investing, who's not saving. That's it, right that if you were the stat or last year, it was ended. 2019. Right there, 61% of Americans didn't have $1,000 in an emergency fund.   Just having $1,000, that puts you already in the top 39% of the richest country in the world. That is already that that's the 80 20 rule right there. They're taking their money and opening an investing account, bang, you're probably in the top 10%. Right. And taking those actions is what moves you along these things all the time. That's why is is so important.   Yeah. It's the problem, as you said is, someone tells you, you should invest. Oh, and you should invest in this. So what you know, that's just way too complex. It should just be you should save, you should invest, and probably, you know, VTI just go there. He can be a while before you find anything else. So you can overcomplicate it later when you're ready to overcomplicate it, but to start with just go there.   Michael: Love it.   Tom: Love it. And VTi is the vanguard index fund. That's just kind of just blankets. The economy beautiful. Yeah, big fan.   7 Dollar Millionaire: It's, it's the it's the biggest economy in the world. It's the top 500 companies in the biggest economy in the world. You know, when we if you live off grid, you're not involved in the global economy. Fine, right. But that's like naught point naught naught 1% of us that's discussing this properly off grid. The rest of us are buying stuff to live our off grid life anyway, we're in the economy. That's that the most natural hedge just by that.   Michael: And the folks that do live off grid probably aren't gonna be listening to this podcast on their iPhone, in the middle of nowhere wherever they live off grid, so I don't think we have to worry about them.   7 Dollar Millionaire: They probably are.   Michael: Living off grid with faster Wi Fi than any of us.   7 Dollar Millionaire: Exactly.   Michael: Awesome. Well, $7 millionaire Always a pleasure to have you on thank you again for hanging out with us and bestowing some wisdom. And like I mentioned, and I mentioned very much looking forward to the book when it comes out. I know I'll be getting it. We will both be getting it I'm sure.   7 Dollar Millionaire: Excellent. Well, thank you very much. It really it's always a pleasure. Really good fun. Thanks, guys.   Michael: Awesome. Take care. I'll talk to you soon.   Alright, everybody, that was our episode a big big, big thank you to 7 Dollar Millionaire always such a pleasure chatting with him. Tom, I know you and I get so much value out of our talks with him and after all of our conversations, we have going making some changes to our own personal finance realm. So very excited to do that yet again. If you'd like the episode, please feel free to leave us a rating or review wherever it is just in your podcast. If you're checking this out on YouTube feel, feel free to hit that like and subscribe button. And as always, we look forward to seeing on the next one. Happy investing.   Tom: Happy investing.

In this episode, Devin Redmond from Stessa gives us a peek under the hood of the Stessa asset management software. Deven explains Stessa's functionality, reporting tools, and how to use it with a live demo. --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Tom: Greetings, and welcome to the remote real estate investor. On this episode, I'm joined by   Michael: Michael album.   Tom: And today we're gonna dig into some of the Stessa features and functionality. Devin leads the customer success team at Stessa. So a lots of great things we're going to walk through note this episode, while it's valuable to listen to, and it's gonna be extra valuable if you check out our YouTube channel as well. So worth checking out both. Alright, let's get into it.   Devin, let's get a little bit about your background. So you lead the customer success team at stessa. Let's talk about let's roll back, roll back a little bit further. How did you get to stessa? Are you an investor as well? Let's hear about it.   Devin: Yeah, yeah, sounds good. Let's Well, we'll set the stage a little bit. So yeah, I started with Stessa, about three years ago. So I've been there almost since the beginning. And Stessa, from the beginning has been a financial management platform for rental property owners specifically. So at the time, you know, a few years ago, there's Mint, Personal capital, a lot of these platforms coming out that were more sort of stock market oriented or other investments, and there wasn't much for real estate investors to efficiently track their portfolio.   And so that was the original idea for Stessa. It's the word assets spelled backwards. And since then, we've, you know, introduced through a steady stream of new features over time, that have come together to be a sort of all in one platform for tracking your your tenants, your income and expenses, you can store real estate documents, and you can run all your financial reports there as well. So that's kind of the quick overview on Stessa. It's great for whether you have one property five properties growing portfolio of 10, plus single family rentals, smaller multifamily. That seems to be kind of the sweet spot where people get the most out of out of the platform.   So I run the customer success side, I spend a lot of my time talking with investors, understanding what their challenges are, and figuring out ways that stessa can can help address those. And then I'm also an investor myself, so invested in property, both in California and Hawaii. And I self manage a lot of that so that, you know i'm i'm in investor shoes, seeing what the issues are working with vendors, and building relationships with tenants every day. So that's that's part of what I'm doing what I'm bringing to my job at Stessa.   Michael: Oh, man got to go show a vacant property in Hawaii, poor you.   Devin: Yeah, it's it can be pretty tough. Sometimes I've actually been doing that remotely. So like, I'll get on FaceTime with someone. And they'll go hit the lockbox and get in, we'll sort of tour together. And it's actually worked out really well so far. I don't know if it's just that market, or it's not a cheap property, right. So I've been able to kind of like screen tenants in advance and make sure they're qualified. And then they come for a tour. And I've had really good luck with it so far.   Tom: I remember talking to you about this before, it was interesting learning the rules in Hawaii. Where is it? Right, you have to own it for a certain number of years before doing short term like you have to do long term first, or I thought that was just kind of an interesting factor on the rules. And why do you mind elaborating on that?   Devin: Yeah, yeah, no problem. I mean, it's pretty complicated. Each island has its own rules. Each island has its own County, and the rules are kind of determined by county for the most part. But yeah, getting into short term rentals, there are certain areas on each island where short term rentals are sort of de facto allowed. And you can buy one of those and start doing short term rentals, you know, day one.   On the rest of the island. And a lot of the neighborhoods, they've really cracked down there were a ton of illegal short term rentals going on like that. And those have those have been shut down. There's huge fines for doing that. So on Maui specifically, you can if you buy something in a you know more of a long term rental neighborhood, you've got a five year waiting period before you can even apply to do short term rentals. So everything I'm doing over there as long term rental, it's pretty tricky to manage short term rental from that far away without a property manager and that's kind of how I've preferred to do things so far at least.   Tom: I wonder if it's like the resort lobby. like trying to like snuff out? I don't know, being conspiracy theorists, Tom over here. Like,   Michael: They send someone in to lobby for Marriott. Hey they're killing returns?   Devin: Yeah, definitely part of that I mean, and then there's you know, understandably there's local opposition to and when long term rents are going up you know a lot of that frustration gets directed at people who are doing illegal short term rentals which you know, they shouldn't be doing. Tom:: Sure is and just kind of curious on longer term strategy. Do you see that as like retirement spot as well or I love interesting places where people invest in Maui's awesome,   Devin: Yeah, yeah, I mean, that was definitely part of the objective that it has that option, as a place may want to retire or semi retire in a while. You know, it's a little tricky to spend a lot of time over there. Now, pandemic, there were some opportunities to do that when everyone was working remote. And that was a nice sort of bonus, because one of the properties has a little in-law unit that my family was able to tuck into for a few months, and we got a feel for what it's like to, you know, to live in Hawaii, not right on the beach in a rental condo.   So yeah, and that's one of the ways I think about investing is Okay, is there some reason that apart from just getting getting a good yield, or return that I would need or want to be in this place? Right? So is there some other reason to get on a plane and go there and deal with the property meet people start building a network in Hawaii kind of fit the bill for me on that front?   You know, I have family in Cincinnati, and my family's from part of my family's from Nashville originally. So like, there's other places that also have that, that sort of angle that I think is one way investors can kind of think about things so that it's not just about yield, or just about the math and the model. I think it's nice to have some other ways for things to work out in a positive way for your life overall.   Tom: Optionality for sure. Well, I, we could probably talk about investing in the islands for a long time. But getting I guess we'll save that for another episode going deeper on that. But let's let's circle back into Stessa. So what I wanted to do within Today's episode is to walk through some of the key functionality and use cases, just to give listeners a better idea about what what is the product? What does it do? You know, how is it different than property management, all of that good stuff?   Devin: Yeah, absolutely. So I think the first thing to note is that when you think of property management, you think of really being in the weeds, vendors, maintenance requests, you know, long list of items that have to be taken care of rent collection, etc. Stessa, we've thought about this as more asset management. So this is a layer that kind of sits on top of property managers, or on top of the DIY owner who's doing a lot of property management on their own. So, you know, think of it 10,000 foot level, rolling up a lot of the data and information to help you understand how you're doing on a more macro level.   So, to that end, I'll go ahead and share my screen here. And you can see our dashboards. Can you guys see my screen? Okay,   Tom: I can and note for listeners on the podcast, we have this all the the video is on YouTube, but we're going to talk through it. So you get a good idea on what is within the the dashboards and functionality.   Devin: Yes, so when you set up a test account, it's pretty easy. It's, you just enter a property address. And we go ping a bunch of different public records and put together as much information as we can, then you key in your rent roll some other basic information. And pretty quickly, you'll see a dashboard like this. So this is for our demo account. This is overall portfolio view. And you'll see you know, kind of key metrics like value, set return, if you've set up all your acquisition information, will track your occupancy, we'll do the math on the projected income, you can put in all your mortgages. And then you get a portfolio you know, for if you've got a big complicated portfolio, you might have 10 properties, a bunch of units here, this math gets pretty hard to do on your own. So this is a nice kind of quick reference.   In terms of tracking actuals you get a net cash flow by month chart here, where this blue line is your actual results. And this dotted black line is your pro forma your budget. So you know, one of the things that we learned very early on from talking to investors is a lot of them don't necessarily have a great idea as to how they're doing month to month. You know, you may check in with your CPA, your accountant once a year when it's time to do your taxes. But that's not really enough to know how to operate better during the year, he really kind of need to track your results month to month to know what adjustments you can make along the way so that when it does come time to file taxes, you're making as much money as possible.   So this is a great a great way to automatically track things. As long as you have all your bank accounts set up and your your data is coming in smoothly.   Michael: This is so powerful. And debit, I just want to pause here for one second, if you scroll up just a hair, so we get back to the bar graph. So for anybody not watching this on YouTube, what we're showing is this bar graph, which shows the breakdown of the income and then the expenses that get paid. And then the cash flow is being being tracked. And it looks like for any other math nerds out there, like the sine wave, which basically goes up and down and up and down, and up and down. And that's what we project, that's what we anticipate our actual cash flow to look like. Versus when we're modeling, we assume that it's uniform, every single month, we'll make the same amount of money. And every single month, we'll have the same amount of expenses going out, which if anybody owns properties, you'll know that's not the case, because you might have property taxes due once a year, and you might have your insurance payment once a year. And you might have a big expense once a year, or whatever the case may be if your individual property. So I think it's so important to recognize and understand that it's not smooth, it's not uniform. And this is a really great visual for this.   Devin: Yeah, absolutely. That's a good point. Yeah, property taxes, insurance, these are lumpy things that happen throughout the year. And you want to make sure you're managing your cash flow to accommodate that, right. So this is this gives you a nice visual of what's actually going on and how things really work.   Michael: That's great.   Devin: We've also found that this is really helpful for for some investors who don't necessarily have an appreciated how much capital can be required on certain investments, right. And so when you were accurately tracking all your capital expenses, you can see that that introduces some some lumpiness as well.   And then we also do a cash on cash return down here, which, in the early, early days of an investment is a great way to understand, you know how you're doing in terms of the actual cash dollars you've, you've put into the deal. less important over time, we try to focus more on ROI and ROE over over the long run. But in the beginning cash on cash is is pretty useful.   Tom: We love some cash on cash metrics that Michael and I it's, we have big fan of that one, I think one last thing that I that I love about this is, you know, you may have some dashboards with your property manager that you're using. But if you have multiple properties across multiple property managers, I mean, this is one where you can aggregate it all together, you can, you know, look at you know, perhaps, you know, perhaps part of your portfolios in Texas, you just want to see the Texas properties great. You can run all these reporting for just that specific or all of them, or one of them. It's just really granular, cool reporting.   Devin: That's right, yeah, you can easily switch back and forth between portfolio and a specific property up top here.   Michael: Well, it's something to keep in mind too, is your property manager has a limited insight into what the property is doing. And only from their perspective. So they might be paying the management fee. And I've been the expenses of any kind of repairs that come up. But you as the owner are likely the one paying the property taxes, the insurance, you might be paying some vendors specifically if there's a big a big capital improvement that's being generated or going into the property. So it property managers so often don't have the full picture Oh, and the mortgage, like duh, that's the biggest, oftentimes the biggest expense, they might have no idea what that looks like. So this is Tom, you mentioned, it just aggravates it altogether, one place becomes so nice. You don't have to do that for yourself.   Tom: Great point, Michael.   Devin: Yeah, absolutely. So while we're talking about property managers, and data, let's maybe go under the hood a little bit here and see where all this information is coming from. So the transactions ledger, it's kind of the real engine of Stessa. And this is where all your data gets consolidated in one place. So just like mint or personal capital, you can link directly to bank accounts, you can link to your lenders, you can link to your credit cards, and you can link to various property managers depending on which software they use. So if they use Apfolio or Property Ware we can tap into those reports directly. So when everything rolls up into one place, you can pretty easily go through and categorize all of your income and expenses. Most of these categories align really well to Schedule E on your tax reporting. So, you know, we try to get you to kind of the five yard line before taxes and want to coordinate with your CPA to get over over the finish line. But you can get pretty far just with these quick tools in the in the transaction ledger.   Michael: And just just to clarify that analogy, Devin, you're talking about the five yard line, very close to scoring as opposed to your own five yard line, almost getting saftied.   Devin: Yes, yes, that would be very far. Absolutely. I would imagine a lot of people feel like, you know, especially during I don't know, I felt this, I don't know if you guys experienced this, but like CPAs were just totally overwhelmed this past year. And so I always felt like we always we had a long ways to go just to like, get the conversation started and get someone engaged and working and asking me questions. I don't know what your guys's experience was, but it's been, it's been hard lately.   Michael: I'm still holding my CPA to get my state tax returns. He just got my federal over to me. So I feel that sentiment 1,000%.   Devin: Yeah, yeah. So you know, when you can roll it up and give someone a nice report that's got all your information where you've done a lot of the categorization, which is sometimes hard for CPAs to do, because they don't know your business as well. They don't know your properties, they don't know how you like to do things. I feel like it does kind of put you in the pole position to get you know, better attention from from your CPA and get things done.   So, the transaction page here, this feeds all the reporting all the dashboards, it's very easily searchable. So if you're looking for something like let's say you wanted to say, okay, where did I? Where did that Home Depot, receipt go. Or what did I spend money on last month, you can really easily search and pull that information up. Everything's pretty responsive.   For any particular transaction, you can also attach a receipt so you can drag and drop a file here. And then we also have iOS and Android apps that do receipt scanning. So when you scan a receipt, it'll automatically create a transaction for you attach that receipt here. And then you have a great reference. And you don't have to store store papers at home.   Michael: Awesome. And Devin, if I have regularly occurring expenses, every month, I pay the property management fee every month I pay utilities, or whatever the case may be, will Stessa start to learn that type of stuff, or do I still need to go in every month and manually update what this expense was and categorize it?   Devin: Yeah, in terms of the categories, we do have algorithms that pay attention to your patterns over time. So to the extent those expenses are coming in with the same description from the same source every month, once you categorize it three or four times in the same way, our engine will pick up on that and start to do it for you going forward. So it's not perfect, but it does over time, the more you put in in the beginning, the more time you save down the road.   We also support file imports. So this button here allows you to import Standard Bank files, like OFX and QFX, you can also bring in CSV files. So if your local bank happens to not be supported for a direct connection, you can still get your data in efficiently. Of course, you can also add transactions manually, if something, you know for whatever reason slipped through the cracks, and you just need to track it.   Michael: Awesome.   Devin: So that's the transactions page. I'll show you reports. Next, maybe since this is another place where the data feeds into, we've spent a lot of time building out the report center to be very focused on what investors actually need. So you know, some general accounting programs will give you like a sort of vague p&l for a business. But that doesn't necessarily break down the way you want it to to understand how your investment properties are performing.   So we've got a net cash flow report. This is somewhat influenced by how, you know commercial real estate investors look at things, very detailed operating expenses. So you can see line by line, each category gets a breakdown by month. This is all clickable. So if some numbers seems out of whack, you can just click on it. And so we'll look at what was this $390 and February looks like it was travel, we click here and boom, there it is. Okay, it was a looks like a plane flight to somewhere. So it's a great way to cross check your data. By going through through your reports.   Michael: This is such a powerful report. Devin, I just want to kind of highlight this for a minute. This is one of the first things that I asked for when I'm looking at a deal to purchase is I want to see the T 12, which stands for trailing 12 months of numbers on that property. And also ask for Schedule E from the seller to make sure that those numbers are aligning that they're telling what they're telling me is the same thing they've told the government and as far as operating expenses and costs associated with the property.   And so if you're someone that's thinking, Oh, I'm you know, going to be selling a property, I might not have any use for Stessa because I'm going to get rid of that property. This could be an actual perfect case study to use Stessa because you'll be able to generate these numbers and provide these report to a potential buyer. I mean, this is really, really, really powerful because this aggregates everything that we were talking about previously, all of the property manager expenses, and combined with all the expenses that you're paying as an individual, as an owner, we get to see it all in one place. And so you can show somebody, hey, look, here's living proof of what this property, how it's performed over the last 12 months, or whatever timeline you're looking to, to acquire.   Devin: Yeah, absolutely. I mean, I would have way more confidence in a seller in a property that I'm looking into buying if they provided me with something like this, that looks professional, or all the numbers add up, and it's clear that they've been paying attention, right?   Michael: Hmm. I hate getting the handwritten stuff.   Devin: Right. You wonder well, what else has been kind of like, you know, Jerry rig here? nicest on the property. Right?   Tom: Canary in the coal mine.   Devin: I always one of the things I always look for is is what kind of conditions the mailbox in is it? Is the pole straight? Is the mailbox, like painted a new or is the thing like, all, you know, sideways and falling apart, and no one's bothered to notice?   Michael: That's a good one.   Devin: It's amazing. It's amazing how many slanted like you know, rundown mailboxes that are out there.   Tom: Kind of unrelated kind of related. I. So Have you guys heard that story about rockstars saying like in their writer, you know, in their dressing room, they only want like red m&ms or something like that,   Michael: Like being very particular about their wants, specifically for red m&ms.   Devin: This is this is a great story. This is that I think it's Van Halen.   Tom: Yes, exactly. And I think Devin, you may know, you may know where this is going. But they included this like really detailed thing and the writer kind of buried in there. And what was happening during that time, the electronics and a lot of these stages were sketchy and people were getting electrocuted. So as a way to kind of check that the venue in the team there locally, like was on their game. They had these really kind of obscure requests. And if it wasn't there, that was a huge red flag that, hey, this place might not be safe. Oh, well, we put in our contract that has to be you know, in there, or we're getting paid. So kind of similar to you talking about the mailboxes looking at these like kind of external things to making sure if there's issues there, there may be one of those things. If you find one bug, there's probably 10 bugs hidden in the wall. It was the same sort of reason. It wasn't about being a diva. It was like testing kind of testing the water for some other risks.   Devin: Yeah, yes. I remember a Van Halen specific rider was we need a big bowl of m&ms in the in the waiting room. And it's all the brown ones have to be removed. It was like something crazy like that, that they could immediately walk in and tell whether they had read the vendor had read the contract or not.   Tom: Yeah, in the mailbox. I love that Devin, like super similar. One of the things that you would, you know, easy to overlook if someone's not kind of paying attention and potential risks and other places. Love it.   Devin: Yeah, like they probably haven't maintained the HVC system either. Right? And yeah,   Michael: Yeah, that's really smart. That's really smart. But also kind of silly, because everybody knows that brown m&ms are the best. So Van Halen threw that away.   Devin: There was a cost to it. Kind of the full look at all the reports that we support at the moment. So beyond that cash flow, there's also a balance sheet, which pulls in your bank account balances and then also ties into your valuations for each property and gives you kind of a net portfolio value. You can track your your rent, roll and report out on that. So this one's helpful. If you're buying a new property and your lender needs to see all your underlying data, you can run a quick rent roll, tenant ledger, this tracks, you know, payment status by tenant who owes you how much when their last payment was scheduled real estate owned. This is kind of a full full summary of the portfolio from a high level lenders often like to see this to get an understanding of what your obligations are and what all your holdings are.   General Ledger allows you a full export of all your data line by line. And then you can do whatever you want with it and excel CapEx just what it sounds like. You can also track useful life and date placed in service there. So this is a good one to give your CPA it's pretty helpful. And then tax package is something that a lot of folks use in March and April. This runs a an email with links to all of your key reports that you can then share with a forward to a CPA or spouse or investing partner.   And then we also have a stress test, which is a modeling exercise we did during the pandemic where you can understand what would happen to your portfolio if suddenly your recollections fell to 70% of normal or 50% of normal, just as a kind of pressure test on on your situation. Tom: That's it. stress test is so cool. I mean that just kind of like speaks to the agility of the reporting in the in the company at Stessa where it's like hey, this isn't really you neat feature that could be really helpful right now. Really neat, neat, neat functionality in reporting.   Devin: Yeah, and this is only built as a as a built in model where you can actually change the inputs right here and see how it how it affects performance.   Michael: This is just goes to show you that this stessa was created by investors for investors. If this kind of stuff that you find so helpful and useful, as you continue your investing career.   Devin: You won't find this in any standard accounting program.   Michael: No.   Devin: But that's the fun thing about doing something that's purpose built for niche for an audience that you know, rather well as you can, you can get into all this more sort of esoteric stuff that that you just can't find anywhere else.   So in terms of setup, I'll jump over to the Properties page here, just a high level portfolio overview is a great sort of SREO schedule real estate owned, it shows you what's going on in terms of acquisition price, your market value, so your valuations are easily set through, you can click there and do a short cut on this to this property details page, where you can toggle between different valuations. So it's a little bit of a modeling tool here, you can enter a custom valuation. We connect to Zillow, and you can get updated real time values.   You can also do it based on gross rent multiplier or capitalization rate. Especially if you have a larger portfolio, this high level view calculated equity on these property is a really quick way to see you know, what your current status is, overall. These loan balances are tracked. So if you have your lenders connected through the automated, external account page, this will update automatically as you pay down principal.   Michael: Yeah, I've got a quick question for and this is more so for me as as kind of a teachable moment. In terms of gross rent multiplier grm. I see it all the time I see it used regularly. It's not a it's not a metric that I ever used. So I'm just curious what, you know, what people are using it for it and how it can be helpful to folks who who find it valuable?     Devin: Yeah, I don't actually see it used much on single family rentals. But I do see it on smaller multifamily properties, more sort of industry standard. So, you know, in a typical market, the gross rent multiplier might be 12, or 15. It certainly changes over time as investor return requirements change. But it's a real quick and easy way to say, Okay, let's take my current current rents, and let's apply a, you know, 12 grm. What's that imply for the valuation?   Let's say maybe this market is pretty hot, and the grm is more like 18. What does that mean for the valuation? Well, it's 982. It's a lot higher than what Zillow is saying. So it's an alternate way to kind of like check in a given market that may have a bunch of comps that support a particular range of grm. What does that mean for my property?   Michael: Got it. Okay. All right. Thanks for that.   Devin: So let's spend all the time on leases and tenants. This is where you key in all of your rental information and manage your tenants, which is a big part of owning property, right? That's where all the revenue comes from. So we found talking to investors, a lot of them, if you've got property manager, maybe you got two or three property managers, sometimes it's hard to appreciate what's actually happening on the ground, who's paid rent, who's behind. Sometimes property managers aren't always on top of it, especially during the pandemic.   So I've got overloaded try, just trying to keep track of everyone. And the leases and tenants page is easily sortable by portfolio or property. And we've got these flags here that give you a quick heads up as to who's current who's due, and in who's late. For any particular tenant, you can then dig in. And you can track a lot of detail here. So if you have complicated lease structures, where rents are changing over time, you can key those all in here going forward. You can also track phone numbers, basic contact information for reference, each lease you can renew or set as month to month. So we handle a lot of different scenarios there.   And then down here at the bottom, I think this is the most powerful part, at least in the tenants page, you get a ledger that automatically creates charges in this column based on the information you've set up up here for your reference And then all this payment data is coming automatically from the transactions page. So you can quickly see when someone got behind how behind are they, and what the total balance due here is, which is calculated right up here.   If you have tenants that reimburse you for utilities or any other sort of random expenses or damages, you can add charges. You can also add credits here, if you're say, crediting them for for something off of their rent. So that makes it easy to kind of rebalance the ledger and keep everything tied out.   Michael: This is great.   Devin: And then you also get a reference of all past tendencies. So this is great for you know, if you're, if you've owned a building for a while, you can really keep track of how rents have changed over time who was there, etc, which is something you know, new buyers, if you ever go to sell, probably want to see.   Let's see, let's also talk about document storage. So police's, mortgages, vendor contracts, all this paperwork that seems to accumulate when you own real estate. It's hard to keep track of and it's often difficult to find the right document when you need it. If a lender asked for it. You know, when does my insurance expire, these are all sorts of questions that come up pretty often. And by keeping everything in one place, it's very easily searchable, retrievable, you can look things up and keep going.   So we find a lot of investors have hundreds of documents uploaded to their Stessa account, because they just want to know that when they need something, that's where they can find it. In the past, I've had a bunch of different folders on two or three different laptops. And sometimes it takes half an hour to find the right thing. And organizing and consolidating it all on on stessa in one place. makes that really efficient.   Tom: Yeah, I love this feature, having recently refinanced a few properties and you're collecting tons of documents also going through tax time. This I love the document management part is super helpful.   Devin: Cool. So those are kind of the highlights. You know, we talked a little bit about bank and external account linking. That all happens on on this page here. And you can see we just have one demo bank account connected now. But you know, we have many investors with accounts that Chase and Wells Fargo and BofA. And then they've got a credit card somewhere else and to property managers. And you can have a lot of data connections set up here. And it's incredible how much time it saves to have that information coming in automatically, versus having to create transactions, or go through, you know, checking account statements, credit card statements, separate out which ones are you know, rental investment versus personal. A lot of that can happen for you automatically.   Michael: And Devin, a concern that I had when mint came about and any of these other companies and services were basically it aggregates data and pulls data from from various financial institutions. So you have to go put your your account information and username and password in. And so from a cybersecurity standpoint, maybe you can speak to that a little bit about folks who are entering their username and password. How are they protected against cyber hacks?   Devin: Absolutely. So we use a third party called Yodlee Investnet, who handles all the secure connections. So when you add a new bank on Stessa, you don't actually share your credentials with Stessa. You share them with with Yodlee, who does this for 1000s of companies and organizations around the world. And they go directly to your bank to access the data. So no one at Stessa can see or, or pull up credentials, it all happens through Yodlee. And then, in addition, there's a few of the major banks have moved to this new open banking standard, which which we actually really like, it's a little smoother in terms of getting the data in real time. And they also have you log in directly. So you'll for chase Wells Fargo BofA now, when you add one of those banks on stessa, you'll you'll get redirected to their site where you log in directly and then it actually establishes a connection without having to share your your credentials.   Michael: Awesome.   Devin: So I'm hopeful that things kind of keep moving in that direction. And it's more secure. It's more seamless. It's just a better experience for everyone.   Michael: Yeah, that makes total sense.   Tom: Awesome. Yeah. I mean, Mike was alluding to it earlier, like, going through it, you could pretty much tell that it's you They're not made by a bunch of marketers. It's definitely made for real estate investors. Love it. Love it. Love the demo.   Devin: Yeah. One other quick thing I'll mention is, we also have this alerts and insights page, which is relatively new. And this is where we bubble up interesting things that are happening across your portfolio. So, you know, might be something like we noticed an LTV guy is it this loan to value is pretty low on this particular property, right. So maybe that's an opportunity to refinance or, or cash out in some way, right to redeploy the equity elsewhere.   Things like expiring leases, that's another one where we've got a word set up 30 and 60 days out, so you can get a heads up on something before it's, you know, too late to reach out to that tenant or deal with the situation. And then we'll also surface interesting things about what's going on with expenses recently. And you know, we're spending a lot of time on this particular feature to, to develop even more specific insights around, okay, if certain expenses way out of whack if there's a water bill that's too high, sort of that sort of intelligence that, you know, can help you save money and things you might not notice on your own. So we plan to introduce more of these in the future.   Michael: And this is so great, Devin, and I think it speaks to what you mentioned at the beginning of the episode is that this is more of an asset management layer. And then that, you know, your property manager is not going to tell you, hey, things, you know, your value has probably increased. We're seeing a lot of comps sell higher in the area, you should think about refinancing that's kind of outside their purview. So adding a tool like this into the fold can be so helpful to have that macro level.   Devin: Yeah, absolutely. I mean, these are the things that you know, investors often reach out to other investors to understand, right, like, how do I think about hold sell? How do I think about growing my portfolio? What happens when my LTV gets so low because the value has gone up a lot? Right, like good situation. But how do I handle that? What do I do? And so yeah, Stessa does really try to focus on helping you answer those questions.   Tom: Awesome, Devin? Well, this is awesome. Thank you so much for going through this, you know, another pointer kind of feature within Stessa. That I think is really great. Is the the forum committee that you guys have set up where people can, you know, ask questions about products, they can upload feature requests, you want to talk just real quickly about that?   Devin: Yeah, sure. I can actually do a quick screenshot of that as well. I think it'd be helpful. Let me share a screen here.   Devin: You guys see the forum?   Tom: Yes.   Devin: Great. Yeah. So this, this forum is organized by different threads. We've got set up in support, we've got tips and tricks, these are kind of ways to optimize your Stessa count. bug reports. They do happen sometimes, and we really try to jump on them. And then you've got the wish list, which is very popular. This is for new feature requests. So, you know, we found that as this has community has grown, people have started helping each other solve their own problems with Stessa or get more out of the product. And it's developed into a place where investors can talk to each other directly, which is great, that was kind of what we hoped would happen.   You know, particularly things like the wish list. This is where we often go to understand, okay, what new features should we be looking at building next. So when you sort by popularity of views, all the wishlist items, you can see that, you know, back in 2020, people really wanted an Android app. So we built an Android app. Before that, people wanted cash on cash metrics. So we built that. Tenant ledger by unit status of rent payments. That's something that I shared a little while ago. So you know, we, we really like having our users, our investors involved in what we're doing. And they've been really great at it, about sharing ideas, and, and we'll often develop a beta version, and then post on the forum here. Hey, like, who wants to be part of the beta? We'd love for you to check out this feature. And I've been really pleasantly surprised at how involved people get and how much great feedback they give us that that makes us a better and more useful for everyone.   Michael: That's great.   Tom: Awesome. Well, thank you. Yeah. Thank you so much for coming on, Devin.   Devin: Yeah, thanks for having me. Appreciate it, guys.   Michael: Take care. Talk to you soon.

Paul Moore, from Wellings Capital, joins us to talk about how to leverage inflation to your benefit, transition from single-family rental properties to multifamily and commercial real estate, force appreciation, and how his company is giving back by helping combat the horrors of human trafficking. Paul Moore, wellingscapital.com Find Paul's podcast here: https://www.wellingscapital.com/podcast --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of the remote real estate investor. I'm Michael Albaum, and today I have with me a very special guest, Paul Moore, you may have heard of him from BiggerPockets, you may know him as the founder managing partner of Wellings Capital, or you might know him better for his fight against human trafficking. And today, Paul is going to be talking to us about some pretty hot topics, specifically with regard to inflation, commercial real estate, and also what Paul and his team are doing to fight human trafficking. So without further ado, let's get into it.   Paul Moore, welcome to the show. Thanks so much for spending the time.   Paul: It's great to be here, Michael, thanks for having me on.   Michael: No, of course, of course. So, before we started recording here, I was learning a little bit about your background. But for all of our listeners who might not be familiar with you would love to learn a little bit more about kind of who you are, where you came from, and how you're involved in real estate today.   Paul: Yeah, absolutely. Um, let's see. So in the early mid 80s, I got an engineering degree, which was my first mistake. And then I went on and got an MBA went to Ford Motor companies spent five years there I actually really liked for but I had this desire to be an entrepreneur. So I quit started my own company. I ended up being entrepreneur finalists for Entrepreneur of the Year, Michigan a couple times and we sold that company to a public firm and 97 came to Virginia started flipping houses, then I started flipping waterfront lots then I built some modular and stick built homes. And I learned something you shouldn't build a house if you don't know how to tighten the doorknob on your own house. I don't know just something I just thought I'd tell people that. And, you know,   Michael: Word from the wise.   Paul: Yeah, right. So but that's one of the values of working with a company like roof stock, you know, you you know, if you're flipping houses or building houses yourself, you know, you might have a full time job or something else, you might not know what you're doing. And it's great to be partnering with somebody who does. That's just a side little advertisement for you guys. But anyway,   Michael: I appreciate the shout out!   Paul: Yeah. So but over the years, I was wondering how to get involved in commercial real estate, but I didn't know how. And so I actually started a website to generate residential leads for buyer's agents. And actually, we I mean, I had like 40,000 people on our list at one time that have come through our lead gen. And sold those to realtors that I'm still getting, you know, leads all the time. I got that running in the background, but at the same time, I started a multifamily and slash hotel and we build it I should say from in North Dakota. Then we did another one next door. My business partner did a hotel, I jumped back into multifamily syndication. And now I do self storage and mobile home parks as well. We have we're on our fourth fund with my company right now.   Michael: That's awesome. And what is the name of your company if folks want to get involved in that space?   Paul: Yeah, that's Wellings Capital.   Michael: Awesome. Is that Wellingscapital.com is the website people can go to?   Paul: Yeah, that's right.   Michael: Hmm. There's so much I want to unpack here, Paul. And we, it sounds like we'll have to have you on for another episode. But I'm just curious, getting back to your engineering degree. What kind was it? And I know, you said it was a mistake. But do you think that there was any value in terms of being mathematically inclined or numbers inclined with that degree to helping you in real estate?   Paul: You know, Michael, I'm glad you asked that. No one's ever asked me that. But I think it really is true. Because like I said, I went on to get an MBA and some things that were really simple to me, like, you know, calculating, you know, weighting weighted averages and things. Other people were just like, what, you know, so, yeah, so yeah, I think it did. I think the discipline of getting an engineering degree did help. I got a petroleum engineering degree.   And it was funny, when I went in in 1982, there were seven graduates coming out of that program, and they had seven job offers each and oil prices were high, you know, and when I got out, four years later, in 1986, there were 89 graduates and they had seven job offers total. And, you know, the oil prices were up and down, and you know, I should have learned right then I should have learned, you know, getting a degree in something like that is quite speculative. I mean, you know, it's not like industrial engineering or other things that have a steady demand. It was kind of like swinging for the fences, even back when I was 18. I joined that program.   And Michael when I got out of when I sold my company, In 97, and started investing and doing other things full time, I should have learned the lesson, but I had to learn it all over again. And that's the difference between investing and speculating, you know, speculating is when your principal is not at all safe, and you've got a chance to make a return. And investing is when your principal is fairly secure, and you have a chance to make a return. And over time, investors went over speculators almost every time.   Michael: Yeah, I'd agree with you. But I think it's such a sad story that we hear so many of these big stories about the speculators hitting it big, you know, Bitcoin AI billionaires all overnight. But what you don't hear is the other 100,000 people that lost it all, in that same speculation.   Paul: It's exactly right. And that's, you know, again, that's, I think that's what your company and our company are both about. And that is, you know, investing, you know, and, you know, expecting a stability and a, you know, an expectation that's not based on a war in the Middle East, or a rumor or a tweet from Elon Musk. I mean, we're talking about the value of Roofstock's. And our real estate didn't go up or down when Ilan musk tweeted, because it's based on real math, writing real foundational stuff, you know,   Michael: Yeah, yeah. No, I love it. I love it. So kind of speaking about speculation, we were chatting before the episode and talking about a topic that I think is really, really relevant to today that I want to dive deeper on. And that's inflation. And so, talk to us a little bit about, in your estimation, why you think real estate is such a great hedge against inflation? Because I think so many investors hear it all the time. Oh, it's a great hedge against inflation. But unless you really understand why I think it becomes so much more impactful to really get the reasoning behind it.   Paul: Yeah, you know, I didn't understand it myself till I really dug in when this inflation started heating up. This is a, this is some $10 trillion bills, these are real from Zimbabwe. And you know, and there's other ones back here from Venezuela. And, you know, inflation is real, I don't think that United States will, in the short term, at least experience any kind of hyperinflation like that. But we obviously have real inflation.   I mean, I think I read that in June, the Consumer Price Index, which doesn't even cover, everything was up point 9% in that one month, and it's up like 5.8% for the year. And if you included all the stuff they used to have in there, I think it would be much higher Cantillion, I believe it was Richard Cantillon, was a famous economist, about three or 400 years ago, and he had something that was called I can tell you, in effect, he basically said that those closest to the printing of the money stand to gain or lose most from that printing.   And if you think about who's you know, the two most powerful forces in the world are the Federal Reserve. I don't mean just the US, but any federal reserve and the government. And you've got a chance here, by investing in real estate to align yourselves. Even if you don't like those guys, the government and Federal Reserve, you've got a chance to align yourself with them by investing in real estate.   Now, here's how specifically, you can look back 5000 years and I'm serious, they did a study on this and interest rates are the lowest they've been in 5000 years. Yeah, yes, you can go back to ancient Egypt, just Google it. And it's, you know, there's some semi credible, I'm kidding. There's some credible sources on there, showing that they've studied this back for 1000s of years. But even if it was just the last 100 years, what a powerful moment in time to have interest rates this low, my son recently got his first house. And now he's a young guy, and he got like a 2.65 or 2.7% interest rate.   We just closed on a commercial a large mobile home park with a 3.0% interest rate with many years of interest only. I mean, it's powerful. But think about this. If you can get your largest expense locked in for years or even decades, at a very low interest rate, and then watch the revenue climb due to inflation or words, the rents are going to go up right in line with inflation. And actually with the housing shortage right now, in America, they're going up higher than inflation. I mean, there's reports of lots of places where houses went up 20 and even 30%. Last year, I know one place that went up 60.   And so we've got rents that are going up, way higher than then inflation but leaving if they stay with inflation, imagine the increase in rents with your largest cost being fixed for either 10 years, 12 years in commercial or 30 years. In residential, it's a powerful, dynamic and the ability that delta, the difference between that increasing revenue and that fixed largest cost is you're increasing cash flow, and then increasing equity you have in this property.   And importantly, for me, we talked about speculation. Also, as that gap widens, you're increasing your margin of safety in case anything goes wrong. So it's three powerful reasons that inflation is a great time to invest in real estate, when there's inflation, it's a great time to invest in real estate. But when there's low interest rate debt, it's even better. I remember the late 70s and early 80s, when, you know, inflation was in the mid or high teens, but so were interest rates. Now we've got a very different situation. We've got increasing inflation, but low interest rates. Very, very amazing time to invest in real estate, take action, folks. Now's the time.   Michael: Yeah, I love that just the visual of your arm saying, okay, here's your revenue, but your your costs and your expenses stay fixed. And so just for everybody listening, that might not even be familiar with the term inflation or really what it means. at its base level, it's the value of the dollar tomorrow is less than the dollar today. So if milk costs $1, today, tomorrow, it costs $1.03. It costs more money to buy those same goods and services. And so if you're not investing in something that generates a higher return, or that keeps up with inflation, your dollar gets left in the dust. And so a lot of people talk about putting their money in their mattress or leaving it in a bank. And you can actually lose money in a sense, because if the value decreases with time,   Paul: Yeah, it's true. And I told somebody the other day who got a 2.9% mortgage or something, they were really young guy, it wasn't my son, it was somebody else. And I said, Do yourself a favor, don't ever pay that off. And he gave me the look, you know, like I said, don't pay extra. Don't try to pay it off early. And he gave me that look, because I think he'd studied Dave Ramsey, and So Robert Kiyosaki said this well, because I've for years gone, okay, Dave Ramsey's, right, but he's not right. And Dave, Kiyosaki said it well, we were in Belize together with the real estate guys about a month ago.   And he said, I'm friends with Dave Ramsey, and he's right, for the vast majority of people, they should pay off their credit cards and their bad debt. But there's also a good kind of debt. And that's the debt against an increasing an asset that's increasing in value, like real estate. And so that's where Dave Ramsey's thinking would get you wrong, you know, he'd say, don't have debt or pay it off quickly. And all that stuff. You know, getting fixed rate debt for a long, long time in real estate is a fabulous move. And it's a way that people have got extremely wealthy for many years, Sam, Zelle said, was one of the keys to his wealth. And he is the most successful real estate investor in America, possibly in the world. And Sam Zell said, that's one of the ways he got wealthy by getting low, low for him six and a half to seven and a half percent interest debt in the 70s. And having an increasing inflation against that.   Michael: Yeah, I think I think it makes so much sense. And once again, people can start to wrap their head around that delta and how that Delta Works over time 99% in their favor, it starts to become blatantly obvious that, hey, this is a really great place to park money,   Paul: Right? It's so true. It's so powerful. And even as I talk about it again, I just want to jump off this podcast and go buy something else, you know.   Michael: Yeah, and something that we talk a lot about in the RoofstockAcademy is running the numbers and really getting a grasp upon Okay, well, how are my dollars working for me? What What is the return look like? And just at a very high level, I mean, if you're borrowing money at 3%, and earning a five 6% interest return on those dollars, you've just created a spread out of thin air. And you know, you've created arbitrage and that's what banks do, they lend money out at certain and then they borrow it at a different rate, and the spread is where they make their money. We're doing the exact same thing.   Paul: Hmm, that's right. And the wealthiest people in the world understand this. And, you know, banks, whether they're loaning money at three and a half percent, or 13 and a half or whatever, it doesn't matter as long as they got that, you know, a couple points spread that that arbitrage is where the you know, where the profit is.   Michael: Love it. So, Paul, let's change gears here a little bit, since I know that you're a multifamily guy. I'm a total the total multifamily guy as well. Talk to me about how you made that transition from single family into commercial multifamily, or how you've seen others do it really well, because I think for a lot of people, it's this whole new landscape. It's a whole New World, commercial mortgages. I could never I could never do that. Yeah. What have you seen successful people do?   Paul: Yeah. So my mentor had about 110. I think it was single family homes, around Cincinnati and other places. And he realized, wow, what if I could buy 110 unit apartment building? Would that be more efficient, and he so he started drilling down and studying that realized, you know, one loan, one big parking lot to scrape snow off of one,   Michael: One roof,   Paul: One set of roofs to repair. Yeah. And so he thought it was a really good idea to go into commercial. And so he did that. And he found, you know, that he ended up selling his single family homes at that point. And a lot of people have made this transition, though, you don't have to, I mean, there's companies, you know, out there that have hundreds or 1000s of single family homes, and they're doing well also.   But at any rate, that the difference really is that one of the big differences I want to point out is this in the residential realm, your value is based generally on comps. So if I bought a house for $200,000, and I added, like 300,000, and improvements, you know, I put in gold plated fixtures and a big, expensive fence, I build out the attic, in the basement made an addition, you know, and I had 500,000 it but I was in a $350,000 neighborhood, it would be hard to sell it for a profit, you know, if I had 500 in it.   In commercial real estate, the value is based on math. And that math is quite simple. It's kind of similar to the P e ratio price to earnings ratio in stocks. The math is this, the value or the value increase is based on the net operating income, or the noi increase divided by the cap rate or the rate of return.   And so let's go over that. So the value the price is based on the income stream. And so it's the gross revenues minus the operating expenses, that will give you the net operating income, that's the numerator. The denominator is the rate of return. So if you're looking for an eight or 10% return, you divide by eight or 10%. Now it's really hard to get deals like that anymore. But cap rates these days are typically four or five 6%. So people are tolerating, if you will, a 5% return.   And so here's the math on that if you have $100,000 a year net operating income, not including the mortgage, and not including any depreciation. But if you have $100,000 noi, and you're willing to tolerate a 5% rate of return, that's a 5% cap rate 100,000 divided by point 05. That'll give you a $2 million value, and you'll have to pay 2 million to get $100,000 annual cash flow stream.   And so if you are the seller, you can think about ways that you could force appreciation Hmm, let me see, if I'm a self storage facility, I could add you know, I could take some of this paint this unpaved grass out here on the side, this three acres and create you know, RV and boats parking and create additional cash flow. If I'm a mobile home park, I could put in like we literally saw a guy we invested with him. He put in a one acre fenced, paved area and added boat and RV parking to a mobile home park added $10,000 a month and let's do the math on that.   Okay, this is crazy. So let's say it was a $5 million mobile home park 3 million in debt 60%. LTV, 2 million in equity. So he had 2 million in cash and we were one of the investors in this okay. Now he added a $100,000 paved fenced parking area. And he said to all the people who had three or four or five or six cars sitting in front of their trailer, you have to park it out here and you can't park your work trailer and your boat and your RV in your yard anymore. So they cleaned up the place which allowed them to increase rents By the way, but they also charge people and they were making a total of $10,000 after a while, renting these slots out in this paved area out front to the people in the park and the community. 10,000 a month. That's 120,000 a year 120,000 divided by a 6% cap rate and it's 120,000 divided by point 06. If I'm not mistaken, that's about a $2 million increase in value. Wait a minute, there it is $2 million.   They only have 2 million in equity in this so they just double the equity and over to the investors got 100% return on their money by this one simple change. Now, my friends, that's called forcing appreciation. It's a very, very powerful thing that commercial real estate has, so if sometimes you can raise rents by 10%. But with leverage, like I just showed you, you can increase the value of the equity by maybe 30%. Or you can add additional empty lots, you know, to a mobile home park, or like I said, parking to a self storage facility, or you can increase occupancy by 10%. There's so many ways you can force appreciation.   So buying from a mom and pop seller, let's say have a mobile home park, that you know that the owner doesn't have the desire or the knowledge or the resources to increase value, buying from them and paying them what in their mind would be a huge price. And then making these improvements can really juice the returns for investors.   Michael: Yeah, that's something that I realized a while back when I first got involved with multifamily is that you're limited on the single family space to comps. If your neighbor's house doesn't take care of the neighbors and take care of their house that affects you. But in multifamily and commercial, if you're able to create because essentially you're buying a business, you're buying and selling businesses, and so that's why it's valued based upon the cash flow. So if you can create and creative ways to generate additional cash flow that has a lot of value.   And in that example, I mean, I'd love that $100,000 investment yields 2 million in value. And the cool thing about that, that I think I want to harken back to is that they don't have to sell that to realize any of that 2 million in value, you can go do a cash out refinance, you can establish a business line of credit and tap into that. So it's usable, tangible dollars that you can access for doing the work. So I love that example.   Paul: Yeah, I mean, you're you're making me think about a self storage facility in Colorado Springs by doing something like that. They were able to just refinance and return all the equity to investors. Now the investors have no risk left on the table. There's nothing they can really lose, because they got their principal back. And now everything is pure profit from then on.   Michael: That's awesome. That's awesome. So if we scale it down a little bit to smaller multifamily, so commercials of five units and plus, where do you see people really succeed in making that leap between single family to commercial multifamily? And then by that same token, where are you see people get burned?   Paul: I think one way, and I'm not sure this will perfectly answer the question, Michael. But one way that it works really well is if you see intrinsic value. And here's what I mean, Michelangelo, the greatest sculptor ever said, I saw the angel inside the block of marble, all I had to do is chisel and chisel till the angel came out. And that sounds silly, but it's really, really powerful. Because basically, it's he was able to identify intrinsic value, meaning he didn't see it as a $300 block of marble, he saw it as a extremely valuable sculpture, and he was able to pull that sculpture out.   And so a great operator can see value where there is not any in order to the extrinsic value, the sale price is, let's say, a million dollars, but he can see, you know, a possibility of increasing that to say, a million and a half by doing something creative. And so I'm thinking back to your question now about the five units. If you can find land that is that like, maybe there's an extra acre there, but nobody seemed to have noticed that and you can go get permits, you know, to add five more units, that is where a lot of value can be created.   One time I bought a five acre parcel of waterfront property that was absolutely not subdividable. But I actually found a way to legally subdivide it into five one acre lots. I mean, there's obviously that was a huge, huge win.   I'm thinking of, Oh, I have a friend. Now this is a little different. But this is kind of cool. He was he had his clients. He's a large realtor in Minnesota. He was having his clients buy these, I thought overpriced, large single family homes near campus. And he I was in the car with him once he was on the speakerphone. And he was telling this guy to go ahead and pay 400,000 for the single family home that rents for 1600 a month and I said that didn't sound like such a good deal, Eric and he smiled. He said it's near campus, all we have to do is furnish it, put two beds in each room, we can rent it for like 600 a bed. And it's the math on that, like he'll make like, you know, his his gross revenue will be over 4000 a month on you know, a property that he paid 400,000 for now, that is a smart way of extracting intrinsic value out of a single family home.   Michael: That's great. That's great. I love it. I'm I'm in the midst of a redevelopment project myself, it was a three unit residential with I think four units commercial three stories trying to out 20,000 square foot building. And I was realizing that the area was starting to pop, and you could even see it just coming down the street, the the transition and changes were coming. And so I'm making it into 15 residential units and two commercial units. So I talked a lot about it on the podcast and prior episodes about some of the brain damage and lessons learned. But once it's done, I'm very excited.     Paul: Oh, you sure? Well, especially in these times, and adding inflation on top of that,   Michael: Yes, yes. And I think just one of the pieces of intrinsic value that people can keep an eye out for, and it's something I talk about all the time when chatting with with newer investors in the academy is look for under market rents. And I think that's so counterintuitive. But if you can find an asset that's priced upon today's rent, but you know that it's undervalued, all you have to do is buy it, increase the rents, and now the investment should be returning even more than you bought it for.   Paul: Yeah, that's absolutely true. You just reminded me You are fond is considering investing with a multifamily operator that does a couple things, he goes in to a municipality and he actually negotiates he'll find an asset that's like $200, under market rents, then he'll go negotiate with the municipality and get a huge tax abatement. And so he'll go in, then he'll be able to raise the rents by let's say, 200, over, say, two years, you know, you don't want to do it day one, necessarily. But if you can take your taxes, which is probably most of the time your second largest expense behind the mortgage payment out of the equation, he's able to get like an 80% tax abatement, sometimes in these opportunities zones, or whatever. It's a massive win for investors.   Michael: Wow, that's incredible. So yeah, I think just to wrap this up with a bow, look for opportunity, where other people might have overlooked. And   Paul: Exactly, I think it's the way to do it.   Michael: Yeah, I think too, that there's this semi vicious cycle of on properties, if someone sees it and passes on the opportunity for whatever their reasoning might be, then it sits a little bit longer on the market, another person might come take a look at it not see an opportunity sits a little bit longer. And so by the time you get a look at it, it might have been on the market, 30 6090 days, whatever. And so you think that there must be something wrong with it. And so that's the reason you pass on it. Versus people might just not be looking at it through the right lens. And so I think give every you know, give every property give every opportunity a shot, and try to look at it through a really objective lens.   Paul: Yeah, it's really true. My son buys land that way, and there's a guys who they're like six or seven land is a very risky thing to invest in. I'm talking about large land tracks, you know, in the mountains, but there's like seven uses for land. Now, you can do solar, you can do cell towers, you can do timber, you can do carbon recapture, and sell those credits to companies. And there's all kinds of things. You can rent to farmers, you can in the Blue Ridge Mountains where I am, you can rent to hunters. I mean, there's so much you can do with one piece of land that might have been overlooked by hundreds of people for years.   Michael: That's incredible. That's incredible. Yeah. So remove, remove the box, and the opportunities become limitless.   Paul: Yeah, right.   Michael: So Paul, I know that you're a pretty big advocate and fight involved in the fight against human trafficking. We'd love to learn a little bit more about that.   Paul: Michael, you wouldn't believe this man. You can take the record profits, not the average, the record profits of Apple, General Motors, Nike and Starbucks, add those together triple that number. And that's less than the annual revenues generated by human trafficking right now. It is a huge problem. I'd like to believe if I was alive in the 1800s, I'd have been like with William Wilberforce fighting to stop slavery. Or I'd like to believe if I was an adult in the 1960s, I would have been fighting for civil rights.   Well, this is a civil right, it is slavery. And it's happening right under our noses. So my company, Wellings Capital, is putting together a program where everybody who invest with us, we are attempting to free a slave for every new investor that comes in and then we're going to give those opportunity those investors access and opportunities to help that person, you know, get back on their feet, etc. So we're doing this through organizations, we're vetting. I mean, as a company, we've that real estate opportunities, but as a company, we are also now and as individuals, we're trying to also that the very most effective organizations who are getting this work done, and man really excited about being part of this.   Michael: Wow, that's really exciting. That's really, really exciting. Thank you for the work that you do. I mean, that's really incredible stuff. And so where can people learn more about how to combat the issue? you other than, of course investing with your company, what are some things setting steps that people can can take action on to help combat the issue?   Paul: Great question. So the first step I would take is I would go on YouTube or anywhere else online and find the movie Nefarious. Nefarious does a great job explaining the problem laying it out there demonstrating, you know, from videos around the world, from Las Vegas to Thailand, what is really happening.   Exodus was put out by an organization that I highly recommend people check out. It's called Exodus Cry. And that's Exoduscry.com, and you should be able to go there and learn all you need to to get started and fighting this.   Michael: Fantastic. Well, thank you. Thank you for that. That's, that's fantastic.   Paul: You bet.   Michael: And so to kind of wrap things up here, I know that you've written several books, and are quite an accomplished speaker, and you're involved with bigger pockets would love if you could share that the titles of your books with everybody listening?   Paul: Okay, great. I wrote a book on residential real estate in 2008. That's more localized here for Virginia. But I wrote a book called a very humble title about multifamily. I don't know what you think. But it's called the perfect investment. And we found out that the perfect investment isn't necessarily perfect if it's overpriced. And so be careful with that title, watch out for that guy. And then my new book coming out from bigger pockets publishing in October, is going to be called storing up profits, how to capitalize on America's obsession with stuff by investing in self storage.   Michael: Amazing, I love it. This seems to be an asset class is beginning a lot of attention. In the last couple of years.   Paul: It really is, you know, self storage and mobile home parks are getting, they're sort of like on the heels of multifamily for getting maybe too much attention. But this book is attempts to just lay it out for a beginner or for somebody who wants to invest in it remotely.   Michael: Okay, that You took the words right out of my mouth, I was gonna ask is this are these books great for beginners who are looking to learn about the asset class and about how they might be able to invest in it?   Paul: Yeah, both of the books are designed for people who want you know, it's as a beginning primer for somebody who wants to get into the asset class, but they also double as an opportunity for somebody who wants to find a great operator and invest with them. It's kind of given a baseline of knowledge, to know where and how to invest.   Michael: Awesome. Well, Paul, this was great, man, I so appreciate you coming on and taking the time to hang out with us. Any final thoughts for investors that are just getting started? And primarily in the single family space?   Paul: Yeah, I would, you know, so when I heard about single family investing, it was 2000. And I was kind of in this weird time, we had started a nonprofit organization here in Virginia. And we were trying to figure out next steps. And my friend, and I said, you know, what, we've learned a little bit about this, read a lot, you know, read a little bit, read some books, read, you know, done this and that, we need to go take action.   And so what we did is on December 20, 2000, we went to our first home auction on the courthouse steps of Martinsville, Virginia, there was snow, there was ice. And we didn't take any money because we said you know what, we're just not ready yet. We're not ready to jump in. We've got to just be careful. And so we went with no money at all. Well, we went and comped the house first. And we came to the conclusion it was worth $65,000. It looked like it was in perfect shape. We peeked in the windows of the vacant house. It didn't look like it needed anything that we could see.   And so we went to the auction, we said, of course, we didn't know what we were talking about. But we thought man, if this comes out anywhere, like 50,000 or below, it'd be amazing. What came out at like $33,000. And there was nobody else bidding on it. We didn't have any money, so we couldn't take action.   Well, we were able to manipulate. I mean, talk the auctioneer into going to Taco Bell for lunch while we ran into the bank and got a cashier's check. And we actually, we actually bought that house. And we had to give them you know, like $3400 down you know, it was about 10% down. And literally Michael Three weeks later in January, we put it back on the market and had a for sale by owner sign in the yard Monday at 8:30am. And we had a full price buyer for $65,000 by noon, and we were off to the races.   So I'd say this, if you've been studying this a while if you're just looking around kicking the tires, take action, jump in, get involved, because there's literally never been a better time that I know of to capture this incredible delta between inflation and low interest rates.   Michael: Love that a better time may have been 6000 years ago prior to that study, but a second to that.   Paul: That's right. Good. Good point.   Michael: Awesome. Well, Paul, thank you again for coming on. Really appreciate you. Sharing all your knowledge and wisdom with folks really appreciate you combating the fight against human trafficking, both really noble causes. And we look forward to I'm sure we'll chat with you again.   Paul: All right. Thanks, Michael.   Michael: Alrighty, everybody, that was our episode a big, big, big, big thank you to Paul. It was a lot of fun, learned a lot. We talked about some really great issues facing kind of humanity as a whole as well as real estate specifically, and we definitely look forward to having him on for future episodes. As always, if you'd like the episode, please feel free to leave us a rating or review wherever it is using your podcast. If you're checking us out on YouTube, hit the like and subscribe button at the bottom of your screen. And we look forward to see you on the next one. Happy investing

In this episode, Corbin Marcotte from The Investor's Broker, tells us what we should know about investing in the Tulsa OK market. Learn about the particularities of the market, a real estate agent and seasoned investor. We cover return metrics, the different areas and asset classes, who you are competing with, and what makes Tulsa an investor's market. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everybody, welcome to another episode of the remote real estate investor. I'm Michael Albaum and today I'm joined by my co host, Mark Woodling. And we have a very special guest with us today. Corbin Marcotte with the investors broker is going to be talking to us today about all of the things we as investors should be aware of in the Tulsa Oklahoma market. He is one of our Roofstock certified agent partners out in the Tulsa market. And I am very excited to hear what he's going to share with us about the market as a whole and what investors should be keeping their eyes peeled for as we go into a deep dive in the market. So let's get into it.   Hey, Corbin, thanks so much for taking the time to come hang out with market I today. Really appreciate it. Yeah, absolutely. So you're out in Tulsa, Oklahoma. Right.   Corbin: Correct.   Michael: And we You and I were chatting a little bit before we started recording here about your background. But for those that weren't able to be part of that conversation, would love to get a little bit about your background, what you do in real estate and kind of what your personal the personal side of real estate for you looks like.   Corbin: Right? Absolutely. So I kind of have a interesting story. I started out actually bought my first house when I was 16 years old, and started buying stocks when I was 15 bought my first house when I was 16. And started kind of way you did a me and my brother, we did a flip and turned it into a rental. And then we did another flip and turned it into a rental in this in a town outside of Tulsa claremore which is a really great market. It's a little university town. And we went from there, we kind of split up me and him decided we didn't want to do that anymore. So at that point, I got licensed.   So I was 20 years old when I got licensed and started selling real estate at that point went from Coldwell Banker to Keller Williams. And, you know, I built the sales team through the sales side, all the while I was doing some investing, not super aggressively, but I built the new construction, I did an owner finance deal, a couple things here and there, learned a little bit about wholesaling and things like that. And then I just really focused on the brokerage the sales side, and I grew this team, and I just realized I wasn't having the best time, you know, I was doing traditional sales. It was okay, but I just wasn't in it. And the things I got the most excited about, we're always the investment transactions. I liked analyzing the numbers, I liked seeing value add opportunity, I felt like there was more of a value creation in that area.   And so, at that point, I decided, you know, I'm gonna open my own brokerage, I'm going to name it the investors broker, and I'm going to full niche down working with investors here in the Tulsa area and probably expand out over time, you know, we actually have an office in OKC, as well, but primarily here in Tulsa, just selling investment properties. You know, we've sold them all from large to small, you know, little $25,000 houses up to I did a 46 unit apartment complex not long ago.   So handle them all. But I'm an investor myself, you know, I'm actually in the office of my nine unit apartment right now. And so I have some small apartment complexes by downtown. I've done the single family and I've just kind of transitioned myself up. But, you know, single family is such a great, reliable space here in Tulsa. That, uh, it's hard to beat I think.   Michael: Oh, that's awesome. I just got to know something before we move on. How does this 16 year old buy a house? I mean, now you're making me feel bad. You know, what was I was playing with, you know, Legos and stuff when I was 16 goofy friends.   Corbin: You know, it was kind of an interesting thing. My parents were regular parents. My dad was a fireman here in Tulsa. My mom managed like some retail stores, things like that. So they were really into the financial area. And when I was young, I just decided that I was kind of rebellious as a kid. I like to skateboard and things like that. And so I always thought about things differently. And I knew that I didn't want to work for other people my whole life. You know, I knew I wanted to kind of do my own thing.   So I was referred some books on business when I was 15 by my brother's friend, and started reading these business books, and they opened my eyes to the world of, you know, you can start your own business, you can be your own boss, and I loved that idea of that freedom that it provided. And so, I started buying stocks, I mowed lawns, I worked for a farmer from the time I was 12. I, my dad was a really hard worker. So I learned from him, you know, working hard as valuable. So I worked for this farmer, I saved up some money, then my dad start a lawn mowing business, I saved up some money doing that. And me and my brothers went in halves, and bought a house there in Claremore for $8,000. and fixed it up ourselves over the course of basically a year. And yeah, that's how it all went down.   Michael: That's awesome. That's so cool.   Mark: That's one of the best stories Corbin because it, you got to move out of your parent, you could have moved out of your parents house. So I almost see it as you planning for that right age 18. Right.   Corbin: So years later, I'd rented that house out for four years or something. Yeah, about four years. And I sold a house and I actually moved into that house and I house hacked it I rented one of the rooms to one of my friends that was going to college there in Claremore. And so he paid my mortgage on it and I lived there for free.   Michael: Okay, there's so I have so many questions that I want to ask you. But we I know we're here to talk about Tulsa. But the one other follow up question I want to ask you, so you bought it with your brother for eight grand? How much did you put into it? And materials? I know you did all the labor. But then what did it rent for?   Corbin: Yeah, we did a we did a lot of work on it. I mean, it was extensive. I mean, from the floor to the ceiling, we read it at all. And I actually I worked for a contractor, I got a job off Craigslist working for a contractor. And I learned how to do construction. So I took that knowledge and went and fixed up the house. And he was a good enough guy that he actually helped me on some of the stuff you know, and and let some of his time. Honestly, one of the better contractors I've ever met really good guy helped me with that.   And we put about, I think we were all in about 55,000. And we rented it for $950. I think the first two years and then I think we bumped it up to like 1050 or so in 1050 bucks for the next couple years before we sold it when we sold it for 100,000. So we made about 45 off of it.   Michael: I love that. All right so we we could do a whole episode just about kind of your personal background. But let's let's dive into Tulsa here. Someone never that's never been to Oklahoma. I would love for you to kind of treat me like a total newbie, because I am. Talk to me a little bit about Tulsa as a whole give us a 10,000 foot level of what's going on in that market. Who are some of the big employers Why are people moving to the market are moving away? What do you what are you seeing in the market?   Corbin: Right, right, Tulsa? You know, I feel like I was born in the right place at the right time living in Tulsa and being a real estate investor and having The Investors Broker. I mean, it's just an amazing real estate market right now. I've loved it. Because, you know, Tulsa, kind of if you look back 510 years ago, really downtown Tulsa was nothing. Nobody wanted to come to Tulsa. It was just a dead zone.   And they kind of initiated this vision 2020 for Tulsa. Right. And they started in 2008-09 roughly. And what they started doing was revitalizing downtown Tulsa. You know, there's like, over in South Tulsa, there's a mall, and it's Woodland Hills Mall, that kind of used to be the hot area over there. Well, you know, these are 80s 90s 2000s built homes. There's not a lot of opportunity in those. I mean, for turnkey, they can be great. And don't get me wrong, you know, depending on the model, that area has some great property. But the downtown area started getting revitalized. And it took all of these areas that had been really C class property for a long time and started making it you know, B to A class so rapid appreciation.   And Tulsa with the George Kaiser Family Foundation, which if you've looked at Tulsa, it's one of the top things you'll hear about. He donated $256 million and built the gathering place which has been ranked the best us attraction for several years. And it's a free Park that's hundreds of acres. It's amazing. It's like a free amusement park. Almost kids love it. There's ponds. It's right on the river. And so they did this massive development over there. That's just this amazing spot that got us national attention.   And then downtown Tulsa His foundation as well obviously he's an oil guy. You know being from the old oil capital of the world is what Tulsa is known as. He has a foundation that funds for artists to move to Tulsa. And he also has Tulsa remote. So he's been paying people $10,000 to move to Tulsa. If they meet a criteria, most of those are their economic drivers. These are people that do real estate stuff. They're people that own their own businesses. They're driving the economy and the remote workers. And then he's been given him a $10,000 bonus to buy a house in Tulsa.   And so that's been amazing. They just brought in another 1000 people on that program. And that's been great. Tulsa's economy's just been doing wonderful. We just opened one of the it was the largest hiring of people in Tulsa was the Amazon center that just opened up, you know, we got national attention. Tesla was looking at building their cybertruck facility here. We came in second behind Austin. And you know, people are like, Oh, it's too bad. You didn't get it? Well, that got us national attention. So all of these big companies, when they see that Tesla's thinking about moving here, they're going, Okay, why are they thinking about it?   Well, because they realize the cost of land, the cost of the property, the tax rates, everything like that makes it a very attractive place to live, you know, they can find 1000 acres, that's within 25 minutes of downtown Tulsa, which is the cool spot to be, so they want their workers to have a place to go to, like downtown Tulsa, it's attracted a lot of stuff. Some of our largest industries are like aerospace, American Airlines just did a huge expansion out at the airport. And you know, it's like in Tulsa, everybody jokes, everybody knows somebody that works in American Airlines because it's such a large employer here. There's, you know, the energy sector, obviously, there's a lot of oil and gas.   And because we were the oil capital of the world, you know, in the early 1900s, people think that all that's in Tulsa, but really, that's not even the biggest sector and Tulsa aerospace is bigger than the energy sector in Tulsa, which they're also doing some really cool innovations with energy, I think there's going to be some changing from oil and gas to some of the newer technologies. A lot of that's being developed here. Then there's healthcare, there's technology, direct tv is a giant employer here in Tulsa, Bank of Oklahoma. And yeah, those are some of the the major employers here in Tulsa.   It's kind of a broad view. And, you know, we were just in Forbes for being the fourth fastest appreciating real estate market in the US. So another national attention, which is, I mean, prices, it's gone up, you know, 25% in the past year, roughly, and depending on the neighborhood, and everything, of course, but just rapid expansion and also, and rents, rents have gone up to you know, I owning my properties. You know, I've seen a three bed, one bath, you know, last year, in the areas I'm in, I would have thought was, you know, about $900 just rented a three bed, one bath for $1400. Holy smokes. So, getting some dramatic rent increases as well,   Mark: I was just on a website called Tulsa's future.com. And it's basically the economic development group that just compiles a bunch of data, it said that the cost of living is 12%, below the national average. So if you have rent increases, that are hanging in there, but it's still low cost of living, it's kind of a win win, right? You're bringing in people that you can still afford and not spending their whole paycheck on the rent, but the rent is going up, which is great for you. So compared to the price of housing, that's kind of the win win situation.   Corbin: Yeah, yeah. It's, it's just so affordable to live here. You know, and even, you know, our cost of transportation, everything around horses, it's just affordable, which is one of the reasons I like it so much. You know, I mean, you can get a house for people can buy a nice house for $150,000, you know, and then they can turn around and rent it out for $1500 bucks. So, you know, there's good rates of return steady appreciation. And, you know, one of my favorite books, the ABCs of Real Estate Investing in there, he talks about, you know, talk to the Chamber of Commerce, talk to the people in the city. And that's where you'll hear, should I invest in this market?   You talk to the people at the Chamber of Commerce, and they're stoked on what's happening in Tulsa. I mean, they're thrilled, and it's because of all these great things, all these great partnerships. And downtown's became, you know, I moved downtown because it's became an amazing entertainment area. every night of the week. There's things to do. There's wonderful restaurants, you know, and in 2020 We were set to open 25 restaurants, we're coming just to the downtown Tulsa area. So tons of new places opening up, of course, 2020 kind of threw a wrench in those plans, but many of them still opened.   And also, that's another, you know, economic factor is the way the government everything's handled the Coronavirus and Tulsa, you know, our eviction processes has stayed fairly easy. If you do have trouble. You know, I bought a complex that had existing problem tenants in it. And, you know, I was able to get those people out in 30 days. And, you know, it cost me about $200, to get them out. Whereas, you know, if you're looking at some of these coastal states, you're paying 1000s of dollars, that takes you a year to get somebody out of a property, you're losing all that rent, you know, here, it's like, you might miss out on a month worth of rent, if somebody starts, you know, not being a great tenant. And so the process for that's very easy, it's a landlord friendly state. And, you know, we didn't close down our restaurants, things like that didn't close down in Tulsa. And so our economy kept going.   Michael: So Corbin you kind of touched on it a little bit already, but curious to dig in a little bit deeper. So for investors that are looking for cash flowing properties, I mean, what did what are the different kind of neighborhoods or sub markets within Tulsa that people should be aware of? And then what is your average? I'm doing air quotes for anyone that watching this on YouTube. What's the average purchase price that someone could expect for called a three two? Because that's kind of our, you know,Colt 45? And then what would the rent look like in some of those different sub markets?   Corbin: Right, so there's a West Tulsa is a very Tulsa's grid is set up very efficiently. So when you go to learn Tulsa, it's a very easy city to learn. You know, we have downtown and then there's East Tulsa, West Tulsa, Midtown, South Tulsa.   Michael: Easy enough,   Corbin: That's pretty much the break up. Yep, very easy. And was Tulsa. There's a lot more manufacturing on the west side. So it's a lot more blue collar style. There's tons of manufacturing plants on the west side actually live just west of downtown. So I'm kind of over in that area. And, you know, you're going to look at, you know, purchase prices over there for three, two, or maybe around 120. It's maybe you know, the blue color style, that's going to be a little lower price point. And those are written for probably 1500 1400 1500 bucks a month on that side of town, that's West.   And then East Tulsa, there's east of Tulsa, there's a chunk of other kind of manufacturing stuff. There's a lot of construction workforce over there, things like that. And so that area, it's kind of similar, maybe a little higher price point, the houses tend to be a little bigger over there. So the houses in West also a lot of your average house, you know, is around 1000 to 1200 square foot for a three bed, two bath. On the east side. It's more like, you know, 1500 to 1800 square foot for their three bed, two bath, larger houses. And those, you know, they're selling for around 150 for three, two, and they're written out for 1500 1600  dollars a month.   Midtown is kind of a higher price point. Everybody, you know, we we make fun of the Midtown people because they're all fancy, you know. It's a it's a nice neighborhood. That's where you get close to that gathering place Park, I mentioned Brooksides over there. Really nice area, there's some really high end stuff in that area, they call the old money part of Tulsa. And there's some really big houses but you know, you can find houses, there's, you're getting like a three bed two bath, they're around 210 for a small three bed, two bath in that area. And their rents are going to be higher, they're going to be closer to 1800 a month or so. So you're not getting quite the return. But really great area, really great appreciation and you know, they just they never have any trouble selling or renting out. The high end. They're more A class, I would say the Midtown area is.   South Tulsa. That's new money. And so that's the you know, a lot of larger houses. That's like the Jinx area, the South tall so the Bigsby area. Lot. That's where a lot of new construction pushed out and the hierin in South Tulsa. So you know, it's hard to find a house for under 250 in that area. And they're bringing rents, you know, 2200 bucks a month, things like that. You know, Jinx is the best rated school district around that's in the south Hall. The area. So that area is just really nice and a lot of high end restaurants and nice things like that over in that area.   Michael: Right on.   Mark: So Michael, I want to ask a quick question to Corbin. So you know, so the listeners at home really understand who you are, you're a part of the certified agent network, you know, so you're basically one of our partners, but you're the one that identifies the properties that go on to roof stock, that are in the roof stock select program. So maybe, you know, if they go there today, they can see probably about 20 properties that are in the Tulsa market, but you're the one that handpicked them. So maybe give a little idea to the listeners of you know, what you are looking at when you were identifying some of those properties, because there's quite a bit of variety, you know, north, south, east and west that you picked out?   Corbin: Yeah, yeah, yeah, yeah, we, you know, I like to appeal to everybody, and everybody has different choices and what they're looking at, you know, some people aren't very comfortable with an older house, some people are very comfortable with an older house. And, you know, and like, there's no old houses and South Tulsa. So just picking properties based on for the class of property, we got to meet a criteria of a return on investment, you know, and the nicer the property, obviously, we can accept a little lower return, because there's not as much cap ex, it's gonna be a nicer property, you know, you may be paying a little more in taxes on those properties, but trying to set it up so that, you know, there's a diverse group.   And if you're comfortable with a little B class, we don't really do like, you know, what I would call like, C, or lower the lower end, you know, we really try and stay, maybe the lowest we do is like C plus, low B, and then up from there. And, you know, give that spectrum from where you can get a higher return, but the property may be a little older, you know, it may need a water tank, there may be things like that down the road that are gonna happen sooner than buying these nicer, higher end homes, and trying to make sure we get that that right rate of return for the investors.   Michael: That's great.   Mark: Awesome.   Michael: And in that same vein, Corbin, what do property taxes look like in Tulsa, and maybe some of the if there's different counties that make up Tulsa. And then a second part of that is, what expenses might be unique to Tulsa, that investors should be aware of,   Corbin: You know, it's funny, I talk to people from out of state all the time, obviously, you know, and I even I think when I was first talking to mark, I was telling him about our taxes here. You know, our taxes are very affordable compared to most places. You know, when I talk to people from Dallas, or, you know, anywhere in that area, their taxes are almost double or triple what we're paying here, you know, for a 15 $150,000 house, I kind of look at like $1500, roughly, okay, for taxes. Yeah, right. in that range, I kind of base off like a 1% rule type thing. And it's kind of roughly what to expect. Michael: Okay, that makes the number that makes the math really easy. And then do you know, is there any kind of reassessment or change in the property taxes year over year?   Corbin: Yeah, I believe that in Tulsa, the most they can bump is 2% a year. Now, whenever a property transfers, ownership, obviously, they're going to reassess based on the value that was purchased. So you know, depending on the last time that property was sold, if it was sold 20 years ago, the taxes are probably gonna bump fairly, fairly well on that purchase. Now, you know, if it was sold two years ago, it's not going to be a very much difference  in the tax rate,   Michael: That's great to know. So for everybody listening, this is a super critical point, because I know a lot of investors and I talked to a lot of investors and they'll say, Well, I go on Zillow, and I look at the historic tax that's been paid over the last couple of years. And to your point, exactly, if that house was purchased 1520 years ago, the tax rates going to be based on that purchase price. So we need to bring that forward into today's dollars at today's purchase price to get an understanding of what your future taxes are going to be so great, great point. Thanks for clarifying.   Corbin: Right and there's just to hit on the county's most of Tulsa is Tulsa County. But if you happen to step to some of these other areas, you know, one of the I mean, we post in the suburbs of Tulsa too, because everywhere is the 25 minute drive in Tulsa, you know, we don't have any traffic. It's like, I can go to Claremore in 25 minutes, and that's a great rental market. You know, we just sold one on Roofstock in Sapulpa, which is just right outside Tulsa, great rental market, and good area, and she really got a stellar house actually I was like, Oh, this place is nice. It was freshly remodeled.   And but those counties is like a Rogers County, Wagner county Osage County, they're going to have cheaper taxes than Tulsa. And so your, your percentage wise is is quite a bit less my properties in Osage County. And, and they haven't realized how much work I've done to it. So I'm on the low end. But you know, I think they have me assessed at like, 100,000. And, you know, I think I paid like $600 a year in taxes. $550 a year in taxes is what I paid last year. So some of those, some of those outlying counties are very cheap in taxes.   Michael: Okay. Also good to know,   Mark: In addition to some of those taxes real quick, what are the common things that you see on the inspection report that come up that maybe is a little bit more customary for your local market? That shouldn't scare buyers? But you know, they're gonna see it in? It's gonna, it's gonna be something that's kind of par for the course.   Mark: Yeah, yeah. Termites is one. There's an Oklahoma we have very, and I'm not an exterminator. But just kind of paraphrasing. What I've been told by exterminators is in Oklahoma, we have very slow moving termites. And so but they're everywhere. There's no avoiding termites in Oklahoma, they're everywhere, they give a number on how many are per square how many colonies per square mile in Oklahoma. So it's not if it's, when are termites going to hit your property, but because they're so slow moving, as long as you're taking care of treatment on a regular basis, it's almost never going to affect you.   So as long as you get it treated, have a termite inspection, I definitely recommend a termite inspection and have it treated, you know, once a year, they'll come out, they'll do a spray, and that'll take care of that problem. And kind of protect you now, you know, I have seen properties where nobody did anything for 100 years, and they're eaten up, you know, but, I mean, this, this building, I'm in my nine unit, I had termite damage in here. And this building was built in 1920. So it's 100 years old.   And you know, we were able to rip out replace the wood rot, and it wasn't too extensive because, and it's never been treated, they just overtime, they just kind of move on to the next thing. So you know, that's definitely something to watch for.   Roofs, we get a lot of hail here in the Tulsa area. So you know, making sure that the roofs checked out checking for hail damage. Now, that's an opportunity where if there's hail damage, likely the seller only has to pay their deductible. So you might be able to negotiate for a new roof. If there's hail damage, or wind damage there is when, we're talking about the tornadoes beforehand. And you know, yeah, everybody from out of states like tornadoes, it's gonna be crazy, you know, the movie Twister. You know, it's really, it's really, I mean, so rare that a property gets damaged by a tornado. But we do get a chunk of wind damage, primarily that's on roofs. And so just making sure that the the shingles, you know, it's pretty apparent, often they'll curl, things like that, that's another Insurance Claim set up. So making sure that you have the proper insurance, when you buy the property, that's going to take care of that roof. With a fair deductible is going to be important.   You know, I would say everything else is pretty customary, you know, little leaky faucets and little things here and there that are wrong. On the one we just did. The front porch posts were old. One thing to think about too, in Oklahoma is almost nobody puts gutters on houses. And it, it's beyond me, it drives me crazy. Every time I buy a property, I immediately put gutters on the place. Because you know, that's going to be the number one cause the foundation issues is poor drainage. And so getting that water away from the house is very important. You know, a handful of them do, but I'm always watching out for gutters. And to make sure I'm getting that water away from the house.   Michael: Maybe Maybe it's the foundation contractors that are in cahoots with the Home Builders that say all right, well pay not to put gutters on it because we'll be in business later.   Corbin: Right? Yeah, yeah, it's crazy. I just, I've and I've had so many people, you know, buy here and there like there's no gutters on anything, but they're very affordable. You know, I mean, I just did a house with a walkout basement. And it was about 1200 square foot upstairs and another chunk downstairs, and two storey on the backside and cost me $950 to put gutters on it. So that can be a good investment for sure.   Michael: That's awesome. That's awesome.   Mark: I was gonna ask a little bit about your competition because you know, we can get into the real estate deals all day. And you know, the properties that you see on roof stock or either exclusive listings, but the ones that you're identifying are the ones on MLS. So how competitive of a market? Is it? How much inventory is on the market? You know, and what's what's a realistic expectation for a buyer that wants to come in and make an offer and say, Hey, what's what's gonna be an offer that can compete? You know, so what do buyers need to know there?   Corbin: Yeah, yeah, you know, like most everywhere else, right now, it's challenging. And, you know, we submit a lot of offers, and don't get a ton accepted, you know, you got to submit several offers before you're going to get one accepted. Because people are just, there's a lot of migration happening to Tulsa. And so there's a lot of people that have sold homes and states with much higher real estate prices, and then they come here and buy houses in cash. And they can't believe how cheap it is for How nice of a house it is. And so they'll pay, you know, 20,000 over asking price.   So that can be challenging. And, you know, a lot of what I try and target, though, are not those properties, I'm trying to target properties that, you know, maybe are more attractive as rental properties than they are for, you know, a personal residence, like one of those opportunities can be in Oklahoma, everybody drives big trucks and stuff like that, you know, so garages are really important, we're like the Do It Yourself state, you know, everybody changes their own oil and build stuff and everything like that. So that's like, everybody wants a garage, you know, well, if you have a rental property, almost, I would say most of the rental properties don't have garages.   So, you know, a house without a garage, you're going to be more likely to get an offer accepted, because you're not competing against the people that are buying to live there, and they're willing to pay more, whereas we're looking at return on investment, you know, really, you're not going to get much more of a return for having a garage. So if anything in almost offsets, because you pay more, and you don't quite get that same bump.   So that's one of the opportunities is locating those properties that, you know, you're not as competitive against, but, you know, full price offers are to be expected, even on the properties that, you know, have those little nuances that maybe make them better rental properties. And, you know, whenever I get an offer, I'll look it over, I'll look at the property, I'll talk to the other agent, and then I'll reach out, I'll send an email to the buyer, I might give them a call, depending on how Hurry hurry it is. And I'll tell them, here's what I'm thinking, you know, I see you submitted this offer. But I talked to the agent. And he says there's five other offers coming in, you know, if you really want this house, if your numbers can make sense, I might suggest we you know, we make a higher offer. And of course, it's up to the client at that point what they want to do, but I want to empower them with that information. So they can realize, okay.   You know, and you never know, you never know, that's one of the challenges of the way the market is right now you you don't know somebody is going to offer 20,000 over, all you can do is run your numbers and make your best offer, you know, and then a train some of these properties I upload, maybe they've been on for 30 days or so, you know, we are I feel like one of the rare markets where some of the properties, maybe they were rented out and they just got a tenant out some different things like that, where some of these properties have set on the market for longer, or maybe they had it listed too high. And they finally started doing some price reduction. So it's been on the market for 30 days, 60 days, those properties, we can offer a little less than asking price a lot of the time and still win those deals. It's all about me filling out how many other people are looking at this right now, you know, what do we need to do to make sure we get the best deal possible?   Mark: So just setting a realistic expectation. And I know list prices are you know, sometimes they're high, sometimes they're low. But you know, when looking at a property, what's the average percentage of list price that offers are getting accepted? Add that? Yeah, just give a little context to the buyers   Corbin: About the average is about 105% in the current market 105% of list price to sales price.   Michael: Yeah. Great to know. Interesting.   Mark: Yeah, we hear that across a lot of the markets that we're in right now. So in my last question is do you have  ibuyers? Do you have institutional buyers in the area? Or are you really up against the the mom and pop investors and then owner occupants,   Corbin: You know, so we're, we're starting to be looked at and I've had some conversations, you know, obviously I'm one of the first people they talk to when they see the name of the brokerage and so I'm starting to talk to some of those larger institutions. But really, Tulsa hasn't met their metric yet. You know, and that's a million people basically their metric. And we haven't surpassed that. So a lot of those larger places are not looking at Tulsa. So a lot of it's competing against, you know, smaller time investors, people without that much leverage, but they're, they're starting to move in slowly, you know, and I think now is a good time for Tulsa. Because five years from now, it's going to be hit by all those people, you know, and that I've already seen it happen, you know, the out of state investors, because of the solid properties and good deals. They're moving in, they're moving money into Tulsa. And it's driving up prices, you know, and once it hits the level where the institutional investors can come in, they're gonna make another big push, you know, we're gonna hit a whole new level of, you know, the real estate market here. So I really think now's a good time, because it's going to be drove up once that does happen in full force. Mark: And that's one of the reasons why we called you to bring these properties on from the MLS. And knowing you know, your your brokerage is what caught my eye too. So I'll be the first to say I fell for it. So good job. But you're backing it up with with his expertise. But yeah, I was just studying again, that Tulsa's future website, they said that Tulsa MSA, comprises of seven counties, and it's an aggregate population of 995,000 people. So right, when it hits that million mark, or wherever the next census update is, get ready. It's gonna take off.   Michael: To the moon.   Corbin: Yeah, yeah, we're right below it. And so I think that's kind of got some of them starting to go away. They're close enough, you know, but a chunk of them, you know, they just have this system, and it doesn't meet that number. So they're not there yet. But it's, I mean, there's a lot happening   Mark: To me, if there's no i buyers, and there's less institutional capital, this is our chance to bring, you know, out of state buyers in without having that crazy amount of competition, like you would have in Dallas and Houston and Charlotte, and Atlanta, some of those bigger markets. So yeah, I think this is a sweet spot for sure.   Corbin: Yeah. And one more little more positive I see of Tulsa is, you know, historically, because we're a very steady location. You know, there's not we don't have these crazy fluctuations, you know, historically, I'm not saying that's not possible. But, you know, we have not had these crazy market fluctuations, you know, we're just kind of slow and steady, and just more people move in, more businesses open up. It's real. It's a real study market compared to a lot of places in the US.   Michael: And I'm curious Corbin, does The Investors Broker also have property management connections or property management arm of the business?   Corbin: Right? I have, I work with property managers, I did the property management, and I pulled back to just do it for myself. And so I leave that to the pros. You know, it's one of those businesses that what I found is you almost want somebody who has a large property management business, because they've earned the level of efficiency it takes and, and to run a large property management business, you have to be efficient, because their margins aren't huge. It's a it's a wild game to be in.   So, you know, Key Renters one of them. I work with Renters Place, you know, I think the most recent one was like Ascension. And so there's some really good property managers here in the Tulsa area, that I would definitely recommend people to. Michael: Fantastic, fantastic.   Corbin: You know, when if people need contacts for insurance agents, I mean, I even you know, I have a gutter guy, I got some contacts like that. So if somebody needs something, I'm more than willing to, you know, refer them and let them make their own decision.   Michael: Great. Yeah, I think that's one of the biggest hurdles that folks are trying to overcome being out of state or remote investors is, yeah, I love the Tulsa market. It sounds great, but I don't know anybody there. So reaching out to someone like yourself or utilizing some Roofstock's contacts, hopefully can overcome that pretty easily for folks.   Mark: What are the expectations that you have as an agent that you really need buyers to be prepared for, you know, what, what is it that's going to help them say I'm ready to invest in Tulsa or I'm ready to start purchasing, you know, any properties through you on roof stock.   Corbin: You know, I've had a really good experience and working with everyone from Roofstock because of your educational piece. I think people understand. urgency is going to be a big deal. You know, once you get that over, when I send the paperwork, we got to get it signed, we got to get it submitted because there's these offer deadlines or things like that. And so just being quick about handling everything, you know, earnest money It's going to be wire transferred from out of state buyers. So, you know, making sure that's done within the 48 hour deadline is really one of the the main things of ensuring happens. But other than that, you know, just just being quick on the draw.   And, you know, have the conversation, if you have questions, if you if you're wondering, you know, what, should I bump this offer up? Where am I at, please send an email. And I'll let you know, you know exactly what my thoughts are on it.   Michael: Awesome.   Mark: That's awesome. And you have a nother employee that's coming on board that's going to be working with you on the roof stock account named Garrett Ayres, is that correct?   Corbin: Right. Yeah, yeah, Garretr, it's been a longtime friend, me and him had a real estate team back in the day at Keller Williams, when we were there. He's a smart guy. He loves the investment space. And he's been doing some traditional sales, but he's to the point where he's ready to make the jump and go all on the investment side.    So he's actually in the moving over process right now. And he has, you know, much more availability of time and things like that, and is just very diligent, and very ethical solid guy that I could trust anything with. So I think he's gonna be a really, really great added benefit. He actually comes from the tech industry. So locating deals is almost a good niche for him, you know, he's able to find those nuances. And he's great on really digging in on the computer. So I think it's going to be really great to have him on.   Michael: Oh, that's good to hear. Very excited to see where are you going, Garretr? Go. And just the last thing for our listeners, Corbin if folks want to reach out to you have additional questions, what's the best way for them to get in contact with you?   Corbin: Yeah, probably my email address, which is corban Corbin@tib.com like the investors broker realty.com   Michael: Awesome. Corbin. Thank you again for taking the time to hang out with Mark and I and answer all of our questions. We're getting giddy over here. So I gotta let you go. But we look forward to stay in touch.   MarkL Awesome. Corbin. Hey, thanks for joining us.   Corbin: Cool. Thanks so much.   Michael: Awesome, everybody. That was our show. A big big, big thank you to Corbin. A lot of fun. I know that I learned a ton about the Tulsa market. We definitely doing some deeper dives into the market as a whole and having some follow up conversations with Corbin and his team. As always, if you liked the episode, please feel free to leave us a rating or review wherever it is you listen to the podcast. And if you're checking us out on YouTube, feel free to like and subscribe. Or leave us a comment on any kind of episode that you want to hear in the future. Happy investing

Last year we hosted a debate over what is a better asset class - single-family rentals (SFR) or multi-family rentals (MFR). In this episode, we look back on the performance of our portfolios over the last year to see which asset class performed best. --- Transcript   Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Emil: Hey, everyone, welcome to another episode of The Remote Real Estate Investor. My name is Emil Shour and I got my co hosts with me today who are   Tom: Tom Schneider,   Michael: and Michael Albaum.   Emil: And today we're gonna be doing a little bit of a look back episode. So we're slowly crawling out of the pandemic and we're going to do a look back at our single family rentals and our multifamily rentals and we're going to do a comparison How did each do during the pandemic? Alright, so let's hop into this episode.   Alright guys, before we hop into this theme, let's let's do quick updates. Always love hear what's going on in your portfolio. So Thomas, kick us off what's going on, man?   Tom: What is going on? So not a whole heck of a lot I mentioned before have done a bunch of refinancing and big milestone, it's a new month. So the new payments came in a little bit thinner on the old cash flow because those loans are a little bit bigger, but the interest rates are a little bit lower, but net a little bit of a higher payment. So you know, getting getting used to that and still in acquisition mode, underwriting properties doing all that I'm doing the work like doing the investing work. So Go Bears? Yeah.   Emil: You're in a couple markets. Right, Tom?   Tom: I am. I'm in three markets, Atlanta, Pittsburgh, and Orlando, Florida. So debating adding a new one, but I don't know, I'll probably take a note from a meal and just densify densify. But I don't know we'll see. You know, I'm not limiting myself right now.   Michael: And are you looking at multifamily Tom or single family?   Tom: Looking at both. I am looking at both. I mean, I don't want to steal the wind from the episode but single family has been awesome. So you know, and it's simple. Great. Probably 70 30% I go 70 70% I go single family some more. But we'll see.   Michael: All right. All right. All right.   Emil: You anticipated my question I was gonna ask if you are going into marquee already in or if you're looking at new markets, or what's kind of your next step. So good anticipation.   Tom: You know, it's such a funny double edged sword with appreciation is awesome. You know, you have these properties are appreciating value, but it's it's time for Acquisition time. It's like, oh, man, everything's appreciated a lot. There's still acquisitions to be had, but not not like the good old days. good old days, Wild West.   Emil: I feel like, every real estate investor will say that for the end of time, just like the good old day like it. We're gonna be like, Oh, man, remember and remember in 2020 or 2021? Gosh,   Michael: I was so cheap back then. Yeah.   Tom: Here's the thing is the good old days, like always, like, I mean, we're probably in such a weird time where it's been, you know, hockey stick for a little bit, is it but it seems like it's always like four or three years ago, like we look back three years ago. Oh, man, that was great. And he looked back three years from now. Oh, that was great. Like, I think we're in a particularly weird time. But I know the good old days is always just a few years ago, no matter where,   Emil: Unless you're in 2011 2012. No one was looking back to 2008 2009 2008 2009 thinking, Man, those were the good old days.   Tom: Yeah, if you were buying that was the good old days. And I think it's probably more circumstance that were just such a weird stretch of 10 years, 1012 years, but that 2009 2008 it was that was one of my earlier jobs working for one of this fund that was buying and you listen literally like couldn't walk out. You couldn't what can miss a saying that I'm totally botching, like you broadside of a barn was just everything was just crazy. high cap rates. You couldn't miss Yeah, I think you You said it right. So anyways.   Emil: What a time.   Tom: Take the baton from me.   Emil: The good old days,   Michael: The true good old days.   Emil: Michael, what about you, man, what's going on.   Michael: So I'm in the middle of two single family flips. So I've got one out in Kansas City that's now listed on market for sale on the MLS, which is exciting. And I got another flip out in Birmingham, Alabama, that is now been listed for lease I'm going to sell that with a tenant in place as a turnkey rental. So that should hopefully get leased up. Ideally sooner rather than later. But it sounds like they've got beginning a lot of applications which is exciting. So those are kind of the two big projects I'm working on. I sold the six unit which was great. So now I'm able to focus on one of the other 11 units that I have out there.   I need to repave that parking lot which is a bummer. I got Notice from my insurance that they're going to cancel my insurance once I get that done here very quickly. So hoping to have that wrapped up, ASAP, and then just focusing on the development project and seeing the big bills roll in. But we're almost done, we got a big hurdle, we got some new electrical service brought in. And that was something that we were waiting on for a while, both in terms of getting the part delivered, and then some work couldn't happen inside the building until that got installed. So we're seemingly over that hump, and then just a waiting on the last of the insurance settlement to see where that cookie crumbles, so to speak.   Emil: How did your insurance company find out that your parking lot needed to be paved?   Michael: So they came out and did an inspection when I initially bound insurance, and like the way it works is so stupid, like, it's so backwards. So basically, you go binded insurance, you go bind with the new insurance company, they come out and do an inspection and tell you all the things you have to do in order to keep the insurance otherwise, they're going to drop you. And it seems like if they are going to be accepting you for insurability, they should be doing that inspection on the front end and say, Hey, if you want to come on board if as you need to do a, b, and c, but after they've already g otcha. Then they say oh, by the way, you need to do ABCD, whatever. So I did a bunch of that stuff. The parking lot was really expensive.   This was last year, or maybe two years ago. And they said, hey, you've got to do this. And I said, it's just too expensive. It just can't happen. I did everything else you've asked, but this is the one thing I can't do. They said, Okay, we'll give you till next spring, which is now 2021. And then we had a quote to get it done. And so we're now we're getting it done. But that same day that we got the quote, they came back and said, Hey, you need to have this done by today. I was like, wait, what you get like, there's got to be like, you need to be a little bit more proactive and giving folks heads up. So they extended it another month.   But that's the last, the last extension I'll get so it shouldn't be a huge, huge deal. But if it's a couple grand, we got a quote to rip out the whole thing and repave it and bring all new asphalt that was like 15,000. So we're getting away with this is a great example. Repair versus replace. The repair aspect repair option seems to be a lot more beneficial. Just more cost effective right now. And it's a it's a parking lot. It's not like a you know, as a parking lot. Yeah, like it's not, it's gonna add zero noi at the end of the day. So which is a bummer. But again, it's one of the things you have to do.   Emil: Yep, just like busted pipes.   Michael: What do you got going on Emil?   Emil: For me, I got some good news. I got some good news. Recently, we, my single family home in St. Louis was up for renewal, the tenant agreed to a 2% increase in rent as a single family home, which is going to kind of play into this episode will be a good segue. So they're staying put agreed to 2% increase. So that's getting signed. And then I think I've been talking about the triplex unit for a while we've got a couple bids in. I actually have a call with my property manager right after we get off this podcast to finalize and start moving forward with that turn which should take about four weeks to get done. So a little bit longer than I was expecting but.   Michael: Nice. Do you want to save it for the episode? Do you want to tell everybody kind of what the bid looks like and what the rent increase you think you might get is?   Emil: I think we should I think we should make that its own episode. I think it'd be fun to maybe do like a post mortem. Like, here's how it all went down. I'd love your guys's feedback on like, what would you have done differently? versus like how did it go? I think that'd be a cool episode for us to do in the future.   Michael: Awesome. Love it keep everybody in suspense cliffhanger. We're gonna start calling you cliffhanger Emil.   Emil: All right. All right. All right. So what I like to do man you know I work in Marketing so you know you got to keep people on their toes got to keep them coming back.   Tom: Create the urgency!   Michael: Yeah, scarcity.   Emil: It's like there's a word for like open loop there's something it's like basically a cliffhanger where you just keep like, anyway let's get on with this episode.   Michael: Yeah. I get so many great isms.   Emil: Alright, so we're gonna be talking about basically how how did our different properties perform single family verses multifamily. Tom, you are almost all single family. Michael, you are predominantly multifamily. And I'm at this point basically split right down the middle of three single family houses and then a triplex. So three and three. So I think it'd just be fun for us to talk about, like, you know, how did things end up? Tom, you're our single family. Master why don't you kick us off. How did it go for you the last year, year and a half?   Tom: Yeah. Last 12 months have been remarkably boring. I mean, we talked about it kind of expecting this big cliff. Boring in a very good way. We expect this cliff of kind of like vacancies and not being able to pay and I'll let you guys speak to your portfolio when you speak but like, I don't know, at least within the properties I have there there was no issue. I did have one turn, but it was kind of a more or less like a scheduled turn. It wasn't like because of any like hardships, it was just because like the people were moving. I had two renewals, the other ones were on longer than one year contracts. And both of them renewed at a higher rate one of them at like a pretty significantly higher rate, it was like seven and a half percent increase or something on the rent, which is just like the best as a as a as a landlord.   So, a really ho hum, boring in the best of ways, kind of a year saw a ton of appreciation. I when I refinanced four of the properties i as i mentioned earlier in the episode and on some previous episodes, and even after doing like a pretty aggressive cash out refi I'm still like under 70% loan to value and receiving these you know notes from open doors and these I buyers of like, Hey, we want to buy your property at like above what I refinanced it at SFR has been a total home run.   Not a lot of like downside to be said. But you know, with with, as we've talked about in previous episodes, you know you have these honeypot of a year, you know and they are they're going to help cover the years where the roof needs to be replaced, or the H fac does. So it was super positive year with regards to rental appreciation, price appreciation, still being disciplined, you know, not getting too over my tips by getting too big of a cash out refi. But all in all a lovely boring ho hum year.   Michael: That's, that's awesome. And has there been one particular market in the market that you're in that you've seen has just blown the others out of the water? Are they performing fairly equivalently.   Tom: So Orlando has just been doing really well. And so is Atlanta, a smaller market that I'm in up in the Midwest in Pittsburgh, hasn't seen the type of appreciation. And I mean, there's a there's a lot to be said to, to having sort of a balanced view, and not just chasing cash flow. Because these these properties have appreciated so much more and so much faster. With these big eye buyers coming in, they're just driving the prices up. So the bigger markets have performed better on an appreciation wise, and I'd say not too big of a difference on with regards to to rent, but I mean, meaningfully, probably, you know, in the last year, they've been pre increased in price, probably 15%. Were these other properties that I have in up in Pittsburgh, you know, they've maybe they've been they've increased maybe 5%, which is still like, awesome. Like, if you can do that, you know, rinse and repeat all day. But the bigger markets have just achieved these just massive appreciation.   Michael: Yeah, that's awesome. And just to give some of our listeners a little bit of perspective, I want to put some numbers to to all of this. So when we talk about cash flow versus appreciation, we have investors that are biased one towards, you know, towards one or the other usually. And I've always argued that cash flow is great for today, you can live on it, it's tangible dollars right now, but appreciation is what generates really massive wealth. And so if you've been seeing 15% appreciation over the last year, let's just take a number and call it 150 grand. And if we take 15% of that, that's $22,500. So if we take 70% of that, which is about what you could cash out in terms of a cash out refi, that's $15,750. So you might be how you may have the ability to tap into an additional call at $16,000 at the end of one year via appreciation versus on the cash flow side of things. You might walk away on $150,000 property with I don't know two grand in cash flow.   And so while Yes, I would argue that they're both important cash flow is a great defense, cash flow is usable dollars today, being able to take an extra $16,000 out of that property and go put it into something else can be so much more impactful, long term to generate really massive wealth. So I think it's important just to keep that in mind, especially when we're talking about such unbelievable appreciation numbers when we have seen rents stay strong, but not they're not going through the roof. Like the appreciation value side is.   Tom: That's a great point. I mean, there's a saying I think I've tried to say before, it's like you know, a smart rat has multiple hole holes to run to, you know, one whole being the appreciation one whole being the cash flow on the yield. And I don't know in my experience so far like the appreciation side has been definitely out weighed where a lot of the return has come in through that, you know,   Tom: Are you referencing what we're talking about before the episode how I was saying, I look like a wet rat? Is that what reminded you? A wet rat has multiple holes to go to?   Tom: Yeah, yeah. Michael has some, some Fabio long hair. This is probably more relevant for the YouTube watch. Right. And he said he felt like a wet cat. I think it was.   Michael: A wet rat.   Tom: Yeah, but a smart rat has multiple holes to run to they you know, and the equivalent investor, you know, running towards a both appreciation or cash flow.   Michael: Yeah. Makes a lot of sense.   Emil: Tom, you might have mentioned it, but you have any vacancies over the last year and a half?   Tom: I had one. Yeah. So I had a one. As I said, it wasn't tenant. It wasn't like, you know, payment related. It was just somebody was moving. It was maybe slightly longer than I had written like in vacancy, like, in pro forma wise, I'll maybe estimate like a month of vacancy. And I think this was closer to 45 days, but it released a slight increase in the rate, in the rental amount. But there was some vacancy. But again, it wasn't necessarily pandemic related. And there ended up being a little bit of an increase in the amount of what the rent was.   Emil: Did you have any speaking on late payments? Did you have any tenants who had late payments had to catch up anything like that?   Tom: Yeah, I've got one tenant who has kind of a funny schedule. So we just more or less like move their payment schedule, like, around like, two weeks or something just because of like the timing of like, when they're getting paid. So like, if you look at the balance sheet within my portal, have my property manager it looks like they're always a little bit behind, but they always pay regularly and we just shifted on when they're paying. But no, there's no beyond that thing, which is, you know, not a problem. No real issues around cash flow and payments,   Michael: Noice!   Emil: All in all pretty solid year and a half. I mean, real estate investing, speaking obviously.   Tom: Yep.   Michael: You didn't feel like the grass was greener on the multifamily side of things this year. Hmm. Yeah,   Tom: I like to dabble in some stuff. So. I mean, I wouldn't be surprised if I go mid family, but it's like, part of me is like it is not broken. Like why fix it? Why?   Michael: Because it's a better toy.   Tom: Yeah. The other saying though, is if it's if it's not broken, you can still fix it….. There's a fox in that house. There's a cat in the Okay, anyways. I might dabble in the multifamily just because I feel like I want to exactly if I'm a dabbler. Anyways, we should we should switch it to someone else. Emil, are you the next right person? Because we're kind of transitioning to all multifamily.   Emil: I want to I want to give Michael the floor cuz he's a heavier multifamily. And then I'm a 5050 with my current portfolio mix. So yeah. Michael you go next?   Michael: Yeah, so we talked about it last year, probably around April, when things got really, really crazy. With a pandemic here in the States. And everybody was predicting, like Tom, you mentioned this wave of non payment or late payments, and all these, all these types of things. So I was bracing for the worst, I think, like so many other investors. And I was just really clenching my teeth and waiting for this tidal wave to hit and it never did, thankfully, and I'm knocking on wood here that it continues to go that way. But it's been very smooth sailing, for the most part.   So I had some really high end units that I had just finished renovating right when the pandemic hit. And so I was really nervous and having a little bit of issue getting them leased up. Because again, they were on the higher end for that particular market. And so we gave a couple of concessions, we lowered the rent a little bit, to incentivize people to move in, we were able to get them filled. And then renewals came around a couple months ago. And I said, Hey, we got to get these things closer up to market. And so we were able to get seven to 10% increases on pretty much all of those across the board, which has been really exciting. And then I've had several other multifamily properties that have had a couple vacancies. And as those tenants move out, and we turn them with relatively basic turns, we're getting another seven to 10%, pretty much across the board.   So 7% is kind of that the bottom floor of what I'm shooting for rental increases, both on new leases as well as on renewals. And thankfully, we've had a lot of folks renew, because just the rents in these markets that I'm in have gone up and so the deal that they're getting even at the rental increase is still really great.   So again, that's something to be thinking about for other landlords is the cost of getting a new tenant is often so much more expensive than people realize. So between the property management fee that you'll pay for a new tenant placement fee and the turn costs and the cleaning costs and the vacancy when you factor all of that in, even at a higher rent, you can often still be behind as opposed to just keeping the rent the same, or giving a slight increase to still stay under market rent, but above where you currently were.   And I mean, I know you and I have talked about this at length. And I know we've talked about it on other episodes, but I really encourage people, I felt like the Hawks, I really encourage, really, I would really, really, really encourage people to go through that exercise. Even if you don't have something coming up for renewal, just, you know, play that game and say, Okay, if I could get $100 a month rent increase on this $1,000 a month unit, that's a 10% increase. But what does that truly cost me if I have a month of vacancy, it turned cost here, property management placement fee here, you'll start to realize, I think that in most cases, it doesn't necessarily make sense, which is very counterintuitive. So again, go through the exercise.   But so I was I was fortunate enough that the rents have gone up, they've really kind of skyrocketed around me, which has been made it very easy to both keep folks in place as well as get rental increases at the same time. So I've been very fortunate I have not had a lot of vacancy, where I've been really getting hammered is on my multifamily renovation project, because the cost of materials have just gone through the roof. So this is one area where being in multifamily has just totally sucked, to put it bluntly.   So if you're building homes, you've probably feeling that too. But from I would argue, I would assume most single family investors are not doing new construction, they're just doing maintenance or rehabs or repairs. And on a single family, that tends to be a manageable margin for the additional cost of materials. When you're physically constructing 15 units inside of a commercial property. I mean, it just it's a bummer. So but again, overall very, very happy with the vacancy, very happy with the rental increases and very happy with the amount of rent that's been received and lack of non payment and lack of late rents.   It's funny where I did feel it is in my single families. The two single families that I own, that are long term buy and hold are in California, Southern California and an expensive market. And both of those had issues paying. And so we gave a rent reduction to one person that was the condo I owned, which I sold earlier this year. And then in the single family, the true single family, they had issues paying and so we gave them a break, and they're still quite behind. So my property managers looking at getting them put onto a payment plan. And also looking at getting them some rental assistance, because there's several programs out there, you just have to apply for them. But I had that was pretty interesting that really the folks that struggled the most were but again, I think it makes sense in that it's a very expensive market.   Emil: And California shut down a lot more than other places, right. So I'm sure people were more negatively affected by the shutdowns in California versus, you know, in the Midwest where they didn't have as strict of shutdowns. And that was it.   Michael: I think that absolutely, absolutely   Emil: Interesting. Okay, so, yeah, you already answered kinda all the questions. I was gonna ask Tom, like, did you have late payments and this and that, that's really interesting that it was on your single families and that they were the California ones.   Tom: On the construction side, too. I mean, I thought that was really interesting in that, you know, with with multifamily there oftentimes is more Rnm if the leases perhaps are shorter in and then on the other side of the matrix, if you're doing more development work versus turnkey, like there was way more pain in that just because of the supply chain and materials costs and all of that. It you know, it's it's like a matrix with all of this. It's okay, single family multifamily. Okay, more turnkey versus more development. And I think like in that quadrant, it's that the more development stuff is felt a little bit more pain from all the secondary effects that we're seeing from country going through a pandemic. very insightful. very insightful. Michael.   Michael: Pretty insightful for a wet rat, huh?   Tom: Yeah, pretty insightful. For a wet racket, the new. I'm gonna I'm gonna start giving more compliments. You know, I think that's uh, oh, that's very good questions you had earlier.   Michael: One thing I will say on kind of, because Tom, you're talking about the appreciation on the single family side of things. So on the multifamily side….   Tom: Good memory Michael, you're right!   Michael: That's too good. On the multifamily side, there has been a significant amount of appreciation as well. And when we talk about appreciation in the multifamily space, we typically would call it a cap rate compression. And so we see cap rates are either increasing or decreasing, expanding, compressing, and so when you have a cap rate compression, the cost to a new buyer increases because the equation is noi, which is net operating income. Which is simply your annual income minus your expen ses, not including your mortgage payment divided by the cap rate equals your sale price. So when we decrease the denominator and make it a smaller decimal, I know this is really math heavy episode, but the sale price increases. So play around with those numbers if you're not familiar with the concept.   But basically, I've had numerous agents reach out to me in some of the local markets and say, Hey, are you interested in selling cap rates are going crazy. And so I have a property that I purchased in 2018, it was a five unit, I bought it for a song, put a little bit of work into it. And I think I've talked about it in the past. But the thing cash flows like an absolute machine, I've got some really great long term debt on it, it's a 10 year fixed note on it amortize that 25 years. And for the commercial world, five years, 10 years is fairly common in terms of fixed, and it's at three and a quarter percent interest rate, which is really, really awesome in the commercial side of things.   And it's, it's doubled in value, basically. So over that three and a half year period. So things are very, very hot in the multifamily space as well. And part of that was just because it's in a good market. And part of that was because we did a bunch of work and manipulated the noi, and it really stabilized the building.   Tom: Is this the one that you're you're you're you're selling because of the appreciation that you got?   Michael: No. So that was a six unit. And that was one we rehabbed, we bought it as a buy and hold rehabbed it, but then just decided that it wasn't it was kind of a pain in the butt. It's kind of a headache. And so we said the market that area isn't as exciting as we thought it was. And we can just make a quick buck on this. I can pay back my cash partner, get them their money back plus profit, and I can walk with some profit too. And just spend my time, energy and focus elsewhere. Thanks, guys.   Michael: All right, Emil, the 5050 man,   Emil: So my single family has been more like Tom been pretty awesome. So I talked about it on a prior episode, I had the Indianapolis single family that I did a cash out refi we pulled out all our cash and then some. And because we lowered our rate like a point and a quarter or monthly mortgage payment only went up like 2030 bucks. So cash flow wasn't affected too much. So basically did a full cash out refi just thanks to Mr. market, which was awesome. That tenant also renewed their lease recently for a two to 3% increase. So that's been great.   The Jacksonville property that one we thought the tenant was going to leave like a couple months into the pandemic, it looked like they were moving for a job or something. Turns out they ended up staying at like a very slight bump. I think it was like a 2% rent increase as well.   And then St. Louis, which I just mentioned at the beginning of the episode, we just got a thumbs up that they renewed their lease at a 2% raise. So all the single families I've had all three of those, they've had the same tenant since I bought them so they're going on like three, four years of having same tenant which is awesome. Gotta love that about single family.   Michael: Awesome.   Emil: No issues with payment. I mean, one tenant had let like early on, I think they paid like two three weeks late on one payment and then they caught up and everything was good. So it's been ho hum in a very nice simple way on single family. On the triplex, which I bought in November, we had our tenant just leave. I think it was a probe knows may they just, we just found out when we were doing some work that the unit was vacant, like they just left in the middle of the night or whatever. They took all their stuff. They didn't trash the place but they just left without giving notice.   And it was funny I asked my property manager I was like is this is this normal? And they're like honestly, we've had this happen like two or three other times and it's been only during like the last couple months in multifamily around St. Louis so seems like more pandemic related for like smaller multifamily units that they've managed that they've seen this but again, you consider two or three times to happen. That's very, very small. Like we just got bad luck. Not the worst thing in the world. This thing is way more under market rent. I think they were renting at like 495 a month. We're going to be doing some renovation I'll tease a little bit of this future episode we're talking about I'm thinking with the renovations we're gonna do probably get it up to around 650.   Michael: So this way you didn't have to pay cash for keys.   Emil: Exactly. I mean, in in Missouri, you don't have to do that. It's a It's very simple. You can get once the tenants lease is over, you can give a 30 day notice to ask them to leave. In fact, so that same property there is a triplex one side it used to be a four Plex, they converted one side into a townhouse. So it's like a top and upstairs downstairs townhouse. That person they said they were not going to renew their lease, but they didn't give us a date on when so they've kind of just been month to month for a while and because we don't want this to drag on into winter. Where it's much harder to rent and you don't get as much rent, we're issuing just a 30 day noticing a essential month month and not planning on renewing, just asking that they leave.   So it's one of the nice things about Missouri, you know, very landlord friendly rules. It's not like we're kicking them out, we're giving them a full 30 day notice. And we extended them a renewal and they just chose not to accept it. So we've asked them to leave, which is nice, much harder. I think California, everyone knows can do that stuff.   Michael: Very different beast. Yeah. Emil: So that's, it's it hasn't been bad at all. I mean, you know, people get up and leave. It's part of it. I'm not gonna say that's just a multifamily thing. So overall, I think it's been nice. The single families like Tom said, all the appreciation has been amazing. you couple that with low interest rates, and you get to do cool things like a cash out refi and basically not change your payment, and pull out all your money. So single family had a really good, as we all know, we've talked about so yeah, I'm glad. I'm glad I have a little bit of both. I'll say that.   Michael: If you had to choose one that you were more thankful to be in is a multi or single family over the last 12 months.   Emil: Single Family for sure.   Michael: Single Family. Yeah,   Emil: I've heard of less people having issues with their single family, lot of appreciation, basically, in every single market. Whereas multifamily I've heard more people saying, you know, we've had issues with collecting payment none of us have, which has been great. But that from other investors I've talked to seems like multifamily more. So that issue if it did   Tom: Not super related, I just kind of like a weird Rnm repairs and maintenance things on one of the units. I feel like I've been very much Oh, you know, you know, blue skies and butterflies and all kinds of good stuff. I just had a, a break in on one of the units. Thankfully, everyone was okay. But it's like, Yeah, I don't know, they just sent some pictures of like, the door, like kicked in. I think it was a nobody was home, thankfully. But it was, uh, you know, that. I think everybody's okay.   But, you know, still still, even though it's, you know, you know, positive, there's still like, some costs and like bad and getting scary stuff, you know, happening on on some of the properties. I don't know, there's just, I just looked at this the other day, where they were sending someone out there to fix everything and get it all right, but I don't want to, you know, make the illusion that like, everything is always like so. So great. I know, there's things that things that happen and Yeah, I know, I just made me think of it. It was the first time I've ever seen that. And one of the units that kind of repairs and maintenance thing. Again, thankfully, yeah, everyone. Okay, but there's still, you know, stuff that stuff that comes up.   Michael: Yeah,   Emil: Great point, it ain't all rosy.   Michael: And so for that time that you reported to your insurance, you're just paying out of pocket is is lower than your deductible?   Tom: I've never reported that kind of thing to my insurance, I should because it might as well as like, put it towards my deductible, right?   Michael: So the insurance property insurance works a little bit differently, like as compared to medical insurance, so it's a per occurrence deductible. So if you have $1,000 deductible, and you have a $500 repair, they're not covering it, and they'll actually they'll put it on like your oftentimes, they'll put it on your like permanent record that, hey, this, they had a claim but didn't didn't wasn't covered because of lower than deductible. So I always check to see what the repair is going to cost. And compare that against my deductible. And if it's way lower than my deductible, or even around my deductible, I just eat the cost I don't even tell the insurance company because I don't want that to merit on my permanent record. versus if it's way higher than that deductible. And you know, it's gonna be sometimes you can't wait for a repair quote, like my younger brother just had a big pipe leak and the problem is I call the insurance is gonna be big so he you know, of course called him he got a repair person out there immediately and it was covered.   But for breaking stuff, it's normally changing the locks replacing a door, the lowest property deductible I've seen is like 500 bucks. And so that's likely going to be the repair to that is likely going to be less than your deductible. So if it were me, I probably wouldn't even report it.   Tom: Yeah, I wasn't planning on it, but I never even crossed my mind of doing that. But I like it good. Got it. Got to take away Yeah. On that got that dollar that per occurrence. structure.   Michael: Yeah, yeah.   Emil: All right, guys. anything. Anything else? Add or is this a good spot for us to wrap this one up?   Michael: Yeah, I know. This was great. I mean, it's awesome to hear that the single family has been going gangbusters. That's what we hear about in the news. And that's what we're hearing from from you all. So it's very, very exciting stuff. We'll have to do another post mortem in 12 months to see who will reign champion the next time bum bum bum!   Tom: I like it, the mid year episode mid year check in episode. I like it.   Emil: I like a good idea. Alright guys, thanks for sharing your experience love episodes like these where we just kind of dive into stuff that's been going on in our personal portfolios, was surfing with a buddy of mine and he was like so what's your what's your podcast about I was like, you know, we kind of just talk a lot about what's going on in our, our own lives and worlds and yeah, we'll you know, we'll talk about high level stuff, but it's a lot about just our own experience. And he was like, that's really cool. You don't hear a lot of podcasts like that. So yes, I don't know. I don't know what else.   Tom: You're complimenting. There we go!   Michael: It's it's that a lot of that but also like a lot of isms, you know, so if you're looking for some decent isms come check us out.   Emil: Yes, Uncle Tom's isms?   Tom: Yeah, making up isms: it's a rat in the hen house. A wet rat.   Emil: Alright, guys, ready here. Alright, so we're gonna do that future episode. And if you want to make sure you don't miss out on it, make sure you subscribe to our YouTube channel if you're listening on YouTube. Or if you're listening on your favorite podcast, make sure you subscribe there. Happy investing everybody. check you out in a future episode.

Single-family rentals (SFR) are having a moment, with significant momentum in rent levels and values. Build to rent is the gateway drug to SFR, with new groups entering the sector left and right. Aggressive assumptions and favorable deal terms are necessary to execute a portfolio transaction. Considering this, how do investors get in on the action in such a competitive market? Roofstock's VP of Business Development, Clayton Wyatt has answers for you in this episode. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of remote real estate investor. I'm Michael Albaum, and today I'm joined by Roofstock, VP of Business Development, Clayton Wyatt. And Clayton is going to be talking to us today about some of the things investors need to be aware of, and things they can do to win portfolio deals. Alright, let's get into it.   Clayton Wyatt, thank you so much for taking the time to join us today. Really appreciate it.   Clayton: Yeah, happy to be here.   Michael: And so I would love if you could give our listeners a little bit of background on who you are as an individual and what your role is at Roofstock specifically.   Clayton: Yeah, who am I as an individual, I don't know if I want to bore the audience. But I mean, I'll give a little bit of background, you know, came from real estate, private equity and investment banking, you know, background, you know, Rich and I both spent a lot of time at Jeffrey's covering the single family rental space, including, you know, waypoint which obviously Gary was the the CEO of and, you know, all the way, way back to when waypoint was ramping up to go public. And we ended up merging them into, you know, a spinoff from Starwood into a public reit, and, you know, covered them as a public company. So when, you know, rich, and Gary and Gregor had co founded Roofstock, I stayed behind and had done some, some read coverage, mostly in the residential space, but also started a cover, you know, some prop tech companies, as we started to see more of these technology companies getting into the real estate space.   And so, you know, groups that were like an Opendoor, or an Offerpad, or, you know, Point or Unison, or some of these mortgage companies really starting to see a lot, a lot more of those, those groups come into the space, because residential is a massive asset class. Right. And so similar to, you know, Roofstock there was there was a big Tam available for for groups to cover. So it's been a little bit of time there. And then, you know, finally got an opportunity to come over to Roofstock, about three years ago, and primarily spending, you know, my time in the in the business development team, which, you know, obviously, we handle the portfolio transactions, but also a lot of the, the JVs and interesting relationships that we've got going on there, including, you know, the recent announcement we had with JLL, that made an investment into rootstock, and then obviously, we set up a joint venture with them and with the acquisition of stessa. So I would say, majority of time spent there, but also, you know, at a at a corporate level, you know, any any capital markets activities, so rather that's, you know, US structuring, you know, debt or equity, but also on the investment services side, where we have clients coming in that are looking for advice on putting credit facilities in place or debt products, spending a little time there with with the broader team.   Michael: Right on.   Clayton: Does that work for an overview?   Michael: Yeah, that was great. That was great. And so for those of our listeners that might not be familiar with the private equities market, what is covering something mean, you talk about covering a read or covering SFR? as an asset class?   Clayton: Yeah, So just as an investment, you know, banker, you're, you're really a, it's a client, you know, driven business. And so covering a company is really, you know, you're the point of contact for that company for all the services that, you know, the bank can offer to them. So rather, it's advisory on selling a large portfolio, or accessing the public markets for either equity or debt. You know, we're a coverage officer in the sense that, you know, if, if you want to do any of those services, we sort of help you set up any of those products or access those markets.   Michael: Perfect. Okay. Thanks for clarifying. So today, what I really wanted to chat with you about is what you're seeing in the marketplace, in terms of how to win portfolio deals, both on the institution side of things, and then also for your individual or retail investor. What are some things that have changed in the in the landscape and what are some things that folks are doing to win portfolio deals?   Clayton: Yeah, so I mean, a couple of things that I would say just stepping back First, you have to recognize the size of this market. Right. And single family rental is not a new industry, it's not a new marketplace, but it's been new to institutions, just over even the last decade. And SFR, we've been saying this for a while, but SFR is definitely having a moment. And the market is very hot, you're just seeing record amounts of new capital, particularly at an institutional level flowing into the space. And if you compare that to, you know, other real estate asset classes, there's there's a massive gap between the the percentage of ownership at an institutional level versus the smaller retail, you know, investors one off investor.   So within let's just look at multifamily residential as a comparison, I think the the quote unquote, institutional ownership in that space is 30 35%. And it kind of depends on how you classify institutional investors could be a little bit higher, within SFR, it's still two or 3%. So you've got this, 10x, opportunity or more right, to to capture more of that class from an institutional level. And once use in any of these real estate classes, once you've seen institutional money come into a space, it's not like it retracts and then exits the space, right? It just continues to be more and more institutional, so that that's a huge opportunity, I think from a, you know, from a retail ownership or a smaller, you know, investor ownership, because that means that your portfolio is likely going to be worth more money, you know, tomorrow than it is today, because of this cheaper cost of capital, you know, coming into the market.   And so it really has been, you know, from one of the trends, I guess, it's been a supply problem, not a not a demand problem, right? So is with an ever increasing amount of money coming into a, you know, sort of a fixed asset, you know, base, you're going to have more competition at every turn. Yeah. And so I think that's one of the major trends that we're just we're watching closely. And as we take out portfolios for sale, we're just seeing more and more investors interested and more and more, quote, unquote, real buyer showing up to bid on processes. And I think people are looking for ways to differentiate themselves, and for ways to, you know, get get proprietary access to different deal flow channels.   I think from a, you know, how do you, how do you win more deals in the market? I think it really is, goes into that differentiator, right. So you can, you know, in any in any process, you could pay more money for a deal, right, you can be a more certain buyer. I mean, ultimately, if you pay more money for a deal, you're gonna win that deal, right? If you're the if you're the, it's kind of, you know, simple to say, but if you pay the most money, in any process, you're gonna win the deal. But I do think that when you're a seller, getting that, that certainty of close is important, as well. And so when we always tell our sellers, and we tell the buyers that are bidding, it's really three things, it's, you know, how do I win a deal, it's price, terms of the contract, and then certainty of close, right, so you can win, win, win or lose a deal on those three deal points. And I think that applies to, you know, anywhere from the, you know, a 10,000 home portfolio deal all the way down to a 10 home, you know, deal or even to a, you know, a single, a single home. So, from a perspective of what are we seeing, and what does it take to, to win deals? It's really those three things,   Michael: Yeah I'm curious to just get your personal insights and opinion as to why do you think SFR has become this explosion? airy, if that's a word asset class, into the institutional world, and the multifamily commercial industrial has always kind of been there. But why now, all of a sudden, are we seeing institutions so interested in the single family space?   Clayton: Yeah, I mean, I don't know if that's a word, but we could we could invent it here. And we could we could try to get it into the dictionary,   Michael: We'll go with it.   Clayton: Well, I think it's, it's it's a couple of things. This has always been an asset class. And it's always been a really important way that investors have been able to to grow wealth over time. It's just now becoming more relevant or, you know, apparent institutions. Because, I would say in large part technology, and companies like a Roofstock that can create a marketplace can eliminate some of the friction Out of the transaction or out of the management and the ownership of these assets.   If you, you know, back up to, let's say, you know, 2011-12-13, when companies were, you know, institutions were buying these assets, and then getting ready to take them out as public companies, there were a lot of investors that really do this as a trade for institutions and didn't believe that you could manage, you know, a scattered site portfolio of properties, at the same efficiency, or at the same scale as multifamily properties, which, you know, could be units all in one building vertically, right? Technology, change that, because you could now, and it's been proven out now, like, I don't think that there's any question anymore of, can you can you manage a, you know, 80,000 unit portfolio of single family rental, at the same level as you can manage 80,000 units of multifamily. And so I think you have have that, let me, let me put a pin in that for a second.   But the other piece of it is, we've just been through a crazy pandemic, where on its face, I think everybody would have thought real estate, you're going to see another massive dip in real estate values, and what actually happened over the last, you know, 12-18 months, values went up, right, and it's, it's a supply problem, we over the last, you know, decade, we have under built in terms of supply. And so why you see a lot of these home builders rushing to build even more, even if you look back at the last decade, we there's, there's so many more homes that need to be built to even catch up with that normal, you know, curve in terms of the amount of product that that we need, as a as a country. So I think that's, that's magnifying the problem.   But in terms of this is an asset class, the reason it's so interesting to institutions is because you can manage it at scale, the technology's there to do it. And it's, it's a hedge against, you know, downturns people, the value of home has become so much more important even during this pandemic. And I think it Listen, it was apparent in the last downturn, that the rental income is very durable, even during a real estate depression when prices go down. And so, you know, during this, this pandemic, it was actually it was a huge winner, because not only were the was the the rental income durable, but prices were actually going up, right during a during a downturn. And so, I think those those things have kind of made this an important asset class for investors. And, you know, you also see this, you know, iterating, in, in, in different forms, right, like the build to rent, you know, asset classes has become much more, it's kind of like the the in vouge thing to do right now. Right, is to own build around to go accumulate assets. Yeah, from my perspective. And why is that? Like, that's, that's not a new concept.   I mean, if you look at Europe, they've been doing builddirect for decades, right? It's, it's just in the US, where I've been calling it the gateway drug to scattered site, single family rental, because if you're a, you're a residential multifamily investor, you're used to having 200 units in one building. And so you weren't quite as comfortable saying, I'm going to go buy 200 units in Phoenix in a scattered site, where I have to manage all these these assets in different places across the MSA. But if I can buy 200 units that are contiguous, and it's a build to rent community, it's an easy way for you to start getting into that, that single family rental portfolio. And I think that, you know, that's important because it gives investors a comfort level that you can you can own and operate these similar to, you know, other residential asset classes.   And so I think in the future, it's not just going to be Is it a single family rental, you know, residential portfolio, or is it a multifamily residential portfolio, it's just residential. And rather, it's, it's it's multifamily or single family, you're owning a house for somebody to rent, right. And that's an that's a very important thing. Because where you wake up and how you feel about your home, like, I think it permeates so many other areas of your life. And, you know, the best thing you can do is provide a roof over somebody's head that, you know, gives them a safe and happy like place to live. And so that's never going away, regardless of if it's multifamily single family or, you know, we figure out ways for people live in, you know, co living situations or what have you. So I think it's an asset class. That's, that's been important for years and years and years, but it's just been institutionalized and technology has helped accelerate You know, our ability to do that efficiently?   Michael: I think that makes a lot of sense. Makes a lot of sense. Alright, so let's jump into talking about a little bit more in depth some of the three points that you brought up in terms of what it's taking to win a portfolio. So, so price terms, and then certainty of close. So let's start with price. Where are you seeing these portfolios go with regards to list price, versus what they're actually being purchased for?   Clayton: Yeah, that's a hard one. Because, you know, list price is difficult. And I think in some scenarios, having a list price could even hurt you particularly in, in, you know, in an appreciating market, right. So if yours, you're setting a list price, you might be setting that list price too low,   Michael: Someone could be willing to pay more,   Clayton: In some cases, it's Yeah, and and on an individual asset basis, I think it's a little bit easier to set a list price, because you've got, you know, sort of some insight into what that looks like. But at a portfolio level, I think it gets a little bit more difficult because you, you're starting to see capital, underwrite the cash flows. And we have this broken system of appraisals or bpos or AVMs, that, you know, generally do an okay job on, you know, just law of large numbers, like you're gonna get some wrong up or down. And on average, it's pretty good.   But it's really built for, you know, the one off home that that's probably going to be occupied by an owner occupant, it doesn't take into account, you know, what folks are willing to, to receive in terms of cash flow, like on a yield basis, right. And I think that's a huge problem. Because if you're not evaluating what that cash flow stream is worth, to any institution, and in a market where institutions are, are looking for yield, or you know, where debt is so creative, that they're able to pay lower cap rates and cap rates are compressing, then you're gonna miss the valuation of these portfolios. So, you know, again, I think it's very difficult for, for, for me to just bogey like what what are all portfolios trading at in terms of like a quote unquote, list price, because a lot of times these AVMs are, are actually not very helpful in terms of determining where the price is going to go.   And I do think it's actually a little bit of a tale of two cities here, because there are the portfolios that fit very well, for an institutional investor in terms of, you know, what are the top 10 markets in the US that the portfolio is in? What's the vintage of the house? What are the areas that it's located in? Is it a high school score neighborhood? You know, is it a high neighborhood score, is it you know, is it in a market where rents are appreciating very quickly.   And I think groups are very willing to pay up today, for those dynamics in a in a well defined stabilized portfolio, and we are starting to see groups pay up, pay a premium, quote unquote, for a stabilized portfolio. So, you know, there's cases where we're seeing, you know, if you back up two years ago, I would, you could say, you might see us pricing portfolios, or guiding on pricing and portfolios at a at a discount to a BPO value. Today, I would argue that for the best portfolios, you're actually seeing a premium to BPO. And, and on an individual basis, it might be a little bit a little bit closer to, you know, that appraisal or BPO. But on a portfolio level, you've got a couple dynamics that are are working in your favor in terms of being a seller of portfolios, because the cost of capital today is is very low. And it particularly on the debt side, you're seeing institutions able to, you know, securitize these portfolios and get debt at a leverage point that's in the mid to high 80s. And at a sub 2% cost of capital.   Now, obviously, there's some some expenses in terms of structuring that dealing and and and selling it into the market. But if you've got a 2% cost of capital on the debt side, and you can get very high leverage, that's gonna make, you know, a portfolio very, very accretive on a current cap rate basis, and so we're seeing compression of cap rates. We're also seeing That because rent is, you know, accelerating in some of these markets very quickly, that groups are able to really underwrite the loss to lease, or that discount to quote unquote market rent. Because there's a there's a real tangible increase, you know, year over year or lease over lease in terms of the, those rental bumps.   And so I think it's, it's a combination of all those things to say, you know, don't I, the one warning, I would say is, you know, don't don't miss price the portfolio or set your, your bar, you know, necessarily too low. But I do think it's helpful for sellers to be realistic, you know, I'd be remiss without without hitting the other side of that coin, which is, there are portfolios where it's a little rougher, and if it's not right down the center of the fairway for these these institutions on where they want to buy, what markets they're in, you know, what the product type is, as soon as you start to, you know, diverge from that a little bit, you're, you're starting to see bigger discounts, you know, to a, quote unquote, market value for those portfolios.   So rather that, you know, small multifamily units or townhomes that don't necessarily fit a investors buy box, or is it you know, lower rent band homes or a little bit older homes. So I do think those things come into play. But for the very best, you know, well located portfolios, we're seeing premiums to, to to a BPO or quote unquote, market value.   Michael: Man, that's awesome. So in a nutshell, to wrap that up with a bow, that we are seeing premiums being paid on the best located and best manage portfolios, because we are seeing rental increases shoot through the roof, coupled with very low cost of capital for these buyers, institutional buyers. Is that a fair way to sum it up?   Clayton: Yeah, I think that's right. And so to, to just highlight maybe the two points, I think that we even shot out, there's like, you got to really underwrite the upside, because it's real. It's not just, you know, theoretical upside. And there's embedded, you know, gains in some of these portfolios. And it's, it's, you know, don't focus on these these AVMs because these AVMs are flawed. And it's really about the cash flow that you receive. So, you know, real cash flow matters to institutions. And that's what's important versus you know, what some automated valuation methodology tells you.   Michael: Yeah, interesting. It's, you know, I back in 2014, or 15, I bought a portfolio for four duplexes right next to one another, and they were bank owned. And so we were able to get them at a discount. And it sounds like So Long gone are the days of Oh, well, you're buying multiple properties and the portfolio, you should be getting a discount, because you're doing the seller favor. The Costco effect, if you will, buying in bulk. It sounds like that's, you know, that's no longer in play here, which is so interesting.   Clayton: Yeah, I don't want to say that completely gone. Because obviously, like a distressed portfolio, a, you know, some of these loan pools that are purchased, where it's a non performing, you know, loan pool, you're still gonna see discounts like that, and where there's, there's quote unquote, hair on a deal. You know, you're gonna have to work through to get get those portfolios, but I'm just saying, like, you know, previously, where you might have a perfect, quote, unquote, perfect, you know, SFR portfolio where it's, you know, great rents, great real estate, new product, and SFR was getting a discount, just because it was a new asset class, like those days are gone. Right there, you're gonna, you're seeing a convergence of multifamily cap rates and the SFR cap rates.   Michael: Got it. Okay. All right. And do you think the same is applicable on the retail side of things for retail investors and maybe looking at a portfolio of 510 15 properties? Should they expect the same things? And would you advise, recommend folks looking to underwrite in a similar fashion? And that the upside is, is this tangible as well? Or does does the dynamic shift? When we go into that smaller retail investment scale?   Clayton: I gotta be a little bit careful here, because you know, that that individual investor, you know, still has to be fairly disciplined in terms of, you know, what their cost of capital is and what their return thresholds are. Right. So I would say you still have to think about that on a personal, you know, level. But yes, I mean, if there's, if you're buying a group of 10 properties that's in you know, Phoenix, Arizona, and the, you know, the in place rent is 12 $100. But you know, that the market rent is 15 $100. You should be underwriting the upside, right? Because that's a market where it's a very tangible You know, upside in the market rent and and it's not as big of a risk to to underwrite that upside if it's really there, right.   So I think that those sorts of things matter, and then finding ways to operate your portfolio even more efficiently, you know, that we always talk about, you know, the gross yield or the net yield, right? Like, what's your noi margin? Well, if you've, if you've found a way to operate a portfolio at a, you know, a 70 plus percent margin, and somebody else is underwriting it at a 50% margin, right to be extreme, you're going to more often than not beat out that other that other buyer, because you've got a more efficient way. And it's actual more dollars of cash that are coming into you as an investor.   Michael: Yeah, yeah, I talked about that all the time in the restock Academy is look at the current rent, but also look at what the true market rent is. And if there's a huge disparity there, there's real potential there for true value add, and maybe you don't even have to do anything. So I always look look to see if you can't see those those opportunities through that lens as a positive, as opposed to Oh, well, the market rents 1500 but the property in places only getting 1200. That's a demerit sure, if you can switch your thinking, you really have a lot of opportunity.   Clayton: Yeah, I think that's right.   Michael: Okay, great. So let's move on and talk about terms. What are you seeing now? And how folks are winning portfolios with more aggressive terms?   Clayton: Yeah, it's super interesting, because I think, you know, early on, in structuring these deals, we may have done, you know, all of ourselves a little bit of a disservice, because we, you know, we viewed these, these portfolios of assets, really as individual assets, and they are not getting priced or sold today as individual assets, right, like, in early days selling a portfolio, rather, it was, you know, $500 or 5000 homes, buyers? Well, number one, there was there was a smaller group of buyers, right, so So, you know, if it was any sizable portfolio, there was probably a handful, three or five groups that you could go to, and really hope that, you know, you'd have two or three of those groups, you know, in a, in a final round, sort of bidding against each other to take down the portfolio.   Today, I mean, there's 30-50 groups that can take down very sizable portfolios, I think the terms really matter. Like before you could cherry pick, and, you know, if there was 500 Homes for sale, you could bet on, you know, 300 or 400. And, and, and really, the seller would figure out, Okay, what I do with the remaining assets, do I sell it, you know, these 300, this, this buyer and these 200, to another buyer? Or do I sell, you know, some of those on a retail basis, it's a seller's market. And so you're, you're definitely seeing contracts become more seller friendly, to get to get deals done.   So, again, that and those terms, it can can differentiate you as a buyer in the market, if it's a quicker closing, it's a you know, a shorter diligence period, more money that's up, you know, in escrow that becomes hard, you know, sooner in the process, there's, you know, no kick outs to a portfolio, you're buying the entire portlet portfolio that's there for list. I think that that has become key in all these contracts. And I think that, you know, without getting into the, the individual details of what a PSA looks like, on these portfolio deals, I just think it's becoming much, much more seller friendly.     Michael: So you're seeing institutions willing to overlook some of the warts, if you will, to take down the portfolio, because they're seeing the value upside, potential there.   Clayton: Yeah, and some of it was just kind of, you know, like, you know, I know, there's a bad example now, but like having like, a huge environmental indemnification on a single a pool of single family rental assets, is is not going to be received well from a seller. Because these are homes that have gone through, you know, environmental checks, right? Like, is there a possibility that you've got, you know, some massive, you know, spill on a on a property, maybe if it's a vacant lot, but like on a on an at an in place, single family home, like, that's a limited risk. So just kind of eliminating some of these quirky things that maybe buyers got got away with in the past. It's pushing more of that, that risk from the seller, to the buyer in these deals.   Michael: Got it. Right. It's really interesting.   Clayton: And it makes sense, right? Because if you're a seller and you've got you've got two buyers and one's telling you I'm going to give you, you know, again, let me just be extreme like I'll give you a 10%, you know, deposit up front, no closing in 10 days. And, you know, there's, there's no, you know, liability post close or anything like that I'm buying it as is, versus someone that's saying, I'm going to give you, you know, a half a percent upfront, and I'm going to take, you know, 90 days to close. And you know, I've got all these other hooks and options in the deal, like, you're going to choose the one that has much better terms, and that that is a differentiating point in these processes.   Michael: Yeah, I know I having recently sold a couple of properties, the path of least resistance is so often the easiest choice. And it's interesting, because you were mentioning these talking about these three different points, and one is the the price the terms and then the certainty of close, which we're going to get to in a minute, but you can really play around with two out of the three, to get a better to do better on that third, right. So if you come in with super aggressive terms, and a very high certainty of close, even if you're not the highest price, you still have, you know, the opportunity to win those bids. So I think if you can really be creative around structuring your deals, there's a lot a lot to be had here.   Clayton: Yeah. So if you that's why that third point, I think, is very important, right? It's certainty of close, which is really saying, like, are you a credible group? Or, you know, do you have a reputation of closing deals? Or do you have a reputation of, of retreating and not closing deals. And so that's, that third point really ties the first two together, because if I gave you the best price, and the best terms in a deal, but I was a high risk to close, because you've never done, I've never done a deal on the sector before. And, you know, I'm just a new entity that that, that doesn't have that reputation of closing, that's gonna hurt you. Right. And or I should just say it the opposite way, if I've got a reputation of being a bad trading partner, and re trading deals, or not closing on time, or anything like that, that matters to a seller. And so, you know, is that worth, you know, 1% 10% in a deal, I don't think it's 10. But, you know, maybe it's worth 1%, I think the each seller has to individually sort of weigh that risk. And they might say, Listen, I've closed with this, this buyer before, I know, they can get something done quickly. And so even though their their price or their terms may not be, you know, as good as some other unknown buyer, I'm going to close with them because I know they can get the deal done. And so that I think that does matter in this market.   And and I should say all else equal, all else equal on if you had the same price and the same terms, then you the certainty of clothes definitely matters as well, because that's the thing that's going to tip them over the edge.   Michael: Right, right. And I think it's such an important point to drive home and for all the sellers listening, even that, you know, the one off individual sellers or retail sellers, it's so important to weigh this in your calculation when looking at offers that you've received. Because I know that I did it, I got multiple offers on a property I was selling, the first day it hit the market, and somebody offered way over ask. But they were known to do this kind of janky thing where then they jerked around a little bit once the appraisal came in. And then I got another offer that was slightly above ask, but they put some terms in there that are really attractive. And I said, you know, let's go for that, which technically, at the end of the day was less money, but I knew that the deal was going to get done. So I think it's important not to get shiny object syndrome and just look at the number when there's so much more that goes into a deal, a real estate deal.   Clayton: Yeah, and this, and this is an important point for especially new investors coming into the market that say, Well, you know, I don't have a track record. And so, you know, is that gonna hurt me in my first deal? And, and maybe it does, but like, the best way to, you know, to overcome that is to, to do some deals, and, you know, make sure that you're building a good reputation as a buyer, and you're not re-trading in any deal. Yeah, like if that that is kind of like a poison pill. If you go into a deal, and, you know, listen, absent something that's really material that wasn't you know, understood or there from the seller in the beginning, you should not be retrading deals, you should avoid that at all costs, because that is really going to hurt you, as a buyer in the market. If If you come out of a deal. And you you you agree to go in at x, let's say it's 100. And then you you you change the terms it during diligence or closing to you know, 100 minus x, right? You You really have to start now building a reputation as a good buyer and not retreating deals because I think that's just your poison pill to the market.   Michael: Yeah, that makes a lot of sense. And so How do you think about retraining with regard to kind of individual investors retail investors with one off properties that are now getting an inspection report to review after they've made an offer? So they made an offer at 100, they get the inspection report, it's got some hair on it, let's call it $10,000 worth of work that needs to be done to get the property safe and rent ready for your next tenant? Are you still thinking that re-trading is off the table at that point? Or is that something that you would you would consider?   Clayton: It's such a dangerous game to play, going into a deal thinking that I'm going to get an inspection and bring the price down? After I get an inspection? A couple things like that's nitpicking on inspection list is is just trouble, right? Because you you inspect any house, I don't care how perfect it is a brand new builders inspector can find, you know, anything wrong with it, right.   Michael: It's what they're trained to do.   Clayton: And I think it's got to be, yeah, I think it's got it Well, there's no, there's no upside for them to miss things. Right. Like, it's, it's a cover your ass sort of analysis. And so I think, you know, there are going to be circumstances where you've got a material issue, and you're going to need to, you know, solve that. And if that's an a material issue, issue to you, as a buyer, it could be, it's going to be a material issue to another buyer and the seller, you know, items that the seller is going to have to fix, regardless, I think, are items that are up for discussion, but it all depends on, you know, sort of level setting going into a deal, right? Because if the seller saying, Hey, here's the deal, we know that it needs a new air conditioner or something else, and then you get in with a with a buyer. And the buyer says, well, it needs a new air conditioner. So I you know, I need another, you know, 5000 bucks.   Well, it's it's all I think just kind of level setting when you go into the deal. So you know, kind of, here are the items if any of it's a problem. I'm just telling you like that easy going buyers are going to win more deals. Right.   Michael: Yeah, I think that that perfectly sums it up. I think that perfectly sums it up. Man Clayton, this was awesome. This was awesome. Any final thoughts you think for for investors out there that are looking at picking up portfolios or starting to think about investing in portfolios?   Clayton: Yeah, I mean, listen, I would, I don't want to come off like, too negative here. And in terms of like just saying, Hey, this is this is a too hot of a market. And it's too hard to compete, because institutions have a cheap cost of capital. And so you know, you should, you should just not even invest. That's not the like takeaway at all, I think the idea is like, as a bar is having a moment, but I still very much view this as a 10x opportunity for investors, because, you know, we should be an aggregation mode, because the asset class works at the numbers that are out there today. Even though you see cap rates compressing, like, again, this market is going to go from a two or 3% institutional penetration all the way up to 20 or 30%. Over, my prediction is over the next, let's call it seven years, right?   So if you just stand back and say, you know, how many homes need to be purchased? It's in the millions, right? Over that period of time. And so there's a lot of homes that need to be purchased. And, you know, don't don't feel like you're not the institution, because guess what, you might not be the institution today, but you're the institution, you know, tomorrow, right. And so, you know, we can define institutional ownership at different levels, rather that, you know, you own 100 homes or 1000 homes. The smaller investors today are the institutions of tomorrow, right? If you look at multifamily, that's a very real thing. You know, the these groups can grow over time, we're still in a very attractive market for investors to own this, this asset class. And it's, it's only going to be you know, it's it's going to make more and more attractive over time.   At some point, are we going to hit like too hot of a of a market? And it's going to, you know, go back down? Yes. Because that's, that's, that's what real estate does. And it might be, you know, for some other reason that we're not anticipating today. But I do think that owning residential real estate is just a very durable way to collect current income and to build wealth over time. So it should be viewed as more the takeaway should be, it's still an attractive market to go out and own this asset class. Right.   Michael: Love it. But no, and I couldn't agree more. And I'm just curious from your perspective, I mean, what size portfolio is really gaining traction and interest from institutions because we, we talk about institutions, we throw that term around a lot, but I think a lot of listeners might not be familiar with what that is or what size portfolio those institutions are. are interested in investing in So do you have a gut feel or a sense for kind of where where they look at what size either in dollar amount or door count?   Clayon: Yeah, it's changing, it's kind of the wrong question anymore. Because, you know, before institutions didn't have the capability, the platform, the technology to buy, you know, portfolios that were smaller than, you know, let's just say 100 owned. Today, you know, there are institutions that are buying, you know, upwards of 1000 to 2000 homes per month, on an individual basis, one by one by one. So I don't think that it actually matters anymore. It's, it's more like the channels that you can deliver. So if you're a seller, and you've got one home, don't think that you don't, you know, you can't sell it to an institution. They're, they're buying homes on a one off basis. Right.   Michael: Interesting. Okay. I would have I did not know that. Very cool. Well, maybe call depending on how you if you're a buyer or seller,   Clayton: Yeah, I mean, obviously, Market to Market matters. But no, I mean, it's, it's, it's, it's a very efficient market. And, you know, you can sell and you can buy on a one off basis, or you can buy and sell on a, you know, a portfolio basis.   Michael: Awesome. Well, Clayton, this was great. Thank you so much for taking the time this was gave me a lot of really great insights. And hopefully, our listeners got a lot out of it, too. I hope you have an awesome and we'll have to have you back. Because before the episode we were chatting about some of the additional topics we could cover and I think you'd be a great person to do that. So look forward to picking up the conversation then.   Clayton: Yeah, absolutely. All right. Appreciate it.   Michael: Alright, everybody, that was our episode. A big big, big thank you to Clayton for coming on the show today. A lot, a lot. A lot of meat on the bone there. Lots of good, interesting topics. I learned a ton. Hopefully you did too, as well. I know that I've been in the portfolio purchasing space for a little bit. If you are thinking about that, definitely give us episode a listen to and we look forward to seeing on the next one. If you liked the episode, please feel free to give us a rating or review or subscribe wherever you listen your podcasts and look forward to seeing on the next one. Happy investing

Today, we have a guest who's democratizing access to private investing. Ken Nguyen is the co-founder and CEO of Republic, a multi-asset investment platform for private markets. Ken is a pioneer in the private markets investing world and a serial operator who knows how to build businesses. He's helped grow Republic to hundreds of millions of dollars in gross transaction volume over the past three years after Republic spun out of AngelList. After Ken was an instrumental part of building the investment and regulatory infrastructure at AngelList, as their General Counsel, Ken founded Republic to create a leading equity crowdfunding platform for both nonaccredited and accredited investors. While their incredible progress on the retail crowdfunding side is remarkable, Republic's platform and vision is so much more than simply a retail crowdfunding platform. They also have an accredited investor platform and they enable investors to invest into everything from real estate to e-sports and gaming financing to small businesses. Republic has done the hard things first. They built the investment infrastructure for private markets. And they combine that with a Robinhood-like investing experience for private markets, for both retail and high net worth investors alike. They've also been innovative in how they engage consumers by creating a Republic Note, a security token that has created network effects on their platform for users.It's been really fun to watch this team execute at a blistering pace from the time that they started out with the idea of enabling investors to invest in startups at twenty dollar minimums, to building out a comprehensive private markets investment platform. Ken has been instrumental in that success with his infectious energy tireless work ethic and drive to create democratized access to investing for people around the world.This was such a fascinating conversation. We talked about Ken's drive for starting an investment platform that could enable everyone to participate in wealth creation in private markets, how investing and owning equity is part of the American Dream, how Republic has unlocked access to private markets for all investors, “Lean back vs lean forward” framework applied to investing (h/t Rishi Garg of Mayfield Fund for the “lean back vs lean forward” framework), and how community is such a big driver of Republic's growth and success as a business.I hope you enjoy.TranscriptNote: This Transcript was created by an AI software package. It is not an exact translation of every word in the podcast.Michael: [00:02:30] Ken, welcome to the Alt Goes Mainstream podcast. Ken: Michael, thank you so much for having me. It's such a pleasure to be here. Michael: Oh, it's great to see you. I love that background of New York. Ken: I am in New York. So, art mimics real life or the other way around. THE FOUNDERS STORYMichael: [00:02:46] Well, you've had a busy year, so congrats on everything. But before getting into Republic and all the things that you're doing, I'd love to hear your story. I mean, you've had such an incredible story of how you've gotten to Republic. So what is that story? Ken: [00:03:01] Yeah. Thank you, Michael. I definitely have a bit of an unusual founder story.My family immigrated from Vietnam to the Bay Area in California. And so growing up in the late nineties, early 2000's, you hear these stories of companies going IPO and tech and Google and Facebook. But just because you were smack in the middle of Silicon Valley, it doesn't mean that I or my family had anything to do with it.We definitely weren't accredited, but that fascination early on, I think, ended up, staying with me. I ended up going to law school. Started out as a litigation attorney in New York and went into finance. And along the way, I think the story, the headline news that caught my attention the most was always tech companies. You know, you hear more and more of Facebook and then Airbnb. I had the opportunity to go back to the Bay Area and academia. I spent two years as a Teaching Fellow at Stanford and studying corporate governance. But Stanford happens to be also a tech hub. And so more and more, the different stages in my life just inserted me more and closer into the tech ecosystem and then I had an opportunity to join AngelList when they first launched their first syndication product. So I joined. I think the first non-engineer hired as the General Counsel back in 2013, 2014. Part of that work led to a change in the law, which is regulation crowdfunding in 2016. And I'm sure we're going to go into it. But in short, between the Great Depression in the 1930s, all the way to 2016, you had to be a millionaire to invest privately. In 2016, all of that changed. It's like opening up the flood gates. And that's when the team and I set out to found and launch Republic. DEMOCRATIZING ACCESS TO INVESTINGMichael: [00:05:04] That's fascinating. And it seems like you really have a variety of experiences. Everything from the kind of legal and regulatory side to working in startups, to working in private companies. Was there really a specific moment in your life that has driven you to make it your mission to democratize access to investing? Ken: [00:05:25] I think there were three moments. Thinking back, probably the first moment was when my oldest brother who was 15 years older than I am and was already very established by the time I graduated college and he was an accredited investor – the first one in the family to be accredited.And he was like, Hey Ken, do you know how I can invest in this company called Facebook. And I was probably one of the earlier users, one of the earliest users of Facebook. And I'm like, great question. I'm an Associate at a law firm and I have no idea how you can do that. I asked around - no one knew how. Right in the middle of New York City, every law firm partner is a multi-millionaire and they're like, yeah, this is Silicon Valley stuff.So I think that piqued my curiosity, but also I had a desire to be like, Hey, I want to be in. I use this product. I really like it. And wanting me as a stakeholder to be a shareholder. So, I would say that that was the first moment.The second one was when, after two years of spending my time at AngelList, I realized that the accredited only model could only go so far. AngelList did open up the venture ecosystem to a lot more people, but you still have to be in the know, have to be accredited. And, I think that moment when AngelList shifted their attention to focus more on upstream institutional family offices, that's when I was like, wait, there is this law that's going to be effective very soon. And this is exactly what I, as a teenager growing up in Silicon Valley, wish that it was the case that I could get in. So, I think those two moments, rather than three in combination, probably culminated in the idea and the passion for retail investing. Michael: [00:07:31] Well, you're bringing up a really interesting point, right. And it's been during a time where value creation in private markets has far outpaced value creation in public markets. And yet, so many people really up until the past few years with what you're doing with Republic and others have done opening up access to private companies, is enabling people to access some of this value creation. How do you think about that and why is it important for people to be equity owners in things. Ken: [00:08:00] Well, investing has traditionally been dominated by large financial institutions and ultra-wealthy investors at the earlier stages. Right? And so, when a company matures from inception to raising more and more capital to the point of going IPO, much of the wealth generation, much of the upside is captured during those private stages.And that world - private investing - traditionally has been dominated, if not exclusively, the purview of the ultra-wealthy leaving the vast majority of everyone else on the outside, looking in, and really limiting the diversity of ideas and founders that I think can shape our future generations.So, being able to invest or allowing and encouraging and enabling people to invest earlier, I think that aligns passion with profit. It aligns power with profit. And I think particularly the next generations – Millennials and Gen Z - that's what they're looking for. By the time a company is listed on the NASDAQ, your ten dollars, your hundred dollars, your thousand dollars matter almost nothing to the company. But, when a company is still growing with 10,000 investors or customers, and not a million or a billion, that thousand dollars of investment, of purchases that you make, matters a great deal. So, I think enabling people to align their passion with the desire to generate profit is at the heart of the retail revolution that we see.Michael: [00:09:49] Passion and profit, power and profit. I love that. I love that way of describing this and I think we are seeing this groundswell of interest into private assets or investments where people feel they have some level of kind of interest or passion for them to your point. THE WHAT AND WHY OF REPUBLIC?Michael: [00:10:00] What you're really getting at is equity, right? People are now able to have a share in something that they might not have had a share in before. And that's kind of the underpinnings of Republic and it's really open to everybody. So, what is Republic and what's the vision for the business?Ken: [00:10:24] It's funny that you mentioned, or that you pick up on, how we describe what we do in between power and profit and passion. Our tagline is profits to the people. And what we are is that we are hopefully the leading, or one day the leading, investment platform that empowers people to invest in the future that they believe in. Invest in startups, in real estate, in crypto, in music, in sports, and yes, one day, even public companies. If you are very passionate about Apple and Nike, we want you to be able to do that on Republic one day, as well. Right now, we are focusing on the more rarefied, the more difficult ones, which is early-stage private investing. But yes, our goal is enabling, powering people and catalyzing profits to the people. Michael: [00:11:26] And why offer this comprehensive platform across private markets, across various assets, rather than just a single asset and private markets.Ken: [00:11:36] That's a great question. When the decision of building a business ultimately, a founder or a team has to ask, what is the ultimate goal? Why are we doing what we are doing rather than just the profit or how we are generating revenue? So, if the goal is just to generate revenue and build the easiest business model, focus is easier than distraction from a diversified suite of products.But Michael, our goal is, as I mentioned, to be the go-to investment platform where people can go and invest in whatever they're passionate about. So, how can you roll out any platform with that mission and interest. Enabling healthcare or sustainable companies, they're powerful missions to love, but many people are more passionate about blockchain technology.I'm certain that many of the older generations, in particular, are more passionate about real estate. So, we want to make sure that people can come to Republic and find and match their passion with potentially profitable investment opportunities that speak to them. Because of that, we have no choice. Our mission requires a multi-asset, diversified suite of products so that we can, hopefully, one day have billions and billions of people coming to cast their votes with their investment and their dollars. Michael: [00:13:16] So, you talk about something which is really interesting and a strategic decision to some extent, which is, you want all sorts of people to be able to access different assets based on what they're interested in and passionate about wanting to invest in, and see returns potentially in.When you think about that, how have you thought about constructing the platform in the context of, should this be completely self-directed where investors get to really choose what they want? Or should it be more structured? Because there's a real question, a philosophical question, in the Alt Space of whether or not investors should just access structured products. So, products that are manufactured by these platforms and diversified in and of themselves. And then investors just get exposure to a broad space or completely self-directed where somebody goes onto Republic and can invest in any startup they want to. So how do you think about that balance of self-directed, kind of choose your own adventure, versus a more structured or curated way of building investment products in the platform?Ken: [00:14:19] Mike, when it comes to structuring investment product, rather than types of products or types of industries to offer, we also want to provide a range of options for people, because I think investing, the new world of investing, has three main elements. So, passion is one and experience has to be another one and the third one is convenience. Now everyone's time and attention span is so limited. So those three things are taken into consideration. We all know that hardly anyone is passionate about mutual funds. If you put ten dollars into a mutual fund, you're not thrilled about it. You know that it's going to generate consistent returns over time. So, for those whose interest is low on passion and want upside exposure to a certain asset class, we definitely, we currently, and will build products that enable them to do so in a simple, maybe in a diversified basis. But for some people like myself, getting to know a company, getting to know a technology, getting to know a founder, is much of the value and the fun of private investing. And so, that ability to invest directly and have a conversation with that company, with that team, I think that probably still is going to be the dominant part of Republic as an investment platform for the foreseeable future. But we also will have structured products as you describe, as we continue to grow. LEANING BACK, LEANING FORWARD, AND LEANING DOWNMichael: [00:16:25] What you're getting at is something so fascinating, which I'm going to give credit to Rishi Garg, who's a partner at Mayfield, who was talking about this with me in the context of consumer social apps, like Clubhouse and things like that.He made the contrast between lean back and lean forward apps. Where lean back is totally passive, totally unengaged, but you can do it and maybe benefit from it. But lean forward is like an app where you actually have to spend time engaging on maybe it's Twitter, maybe it's even in-person.I think there's actually a real interesting analogy there in the context of what you just said in investing. So how do you think about that kind of lean back versus lean forward mentality when it comes to private market investing? Ken: [00:17:07] I love it, Mike, with that analogy. I have not heard that before except for I think Sheryl Sandberg's book called Lean In but in an entirely different context. One is about being more proactive, more intentional. And I think obviously intention and proactivity - another way of describing it is passion, right? So, when people want to do something that they really care about, it's leaning forward and caring about maybe, you know, social issues. It may have nothing to do with the core reason why you invest, which is always return on capital. But if you can add on other things that speak to you, that makes you more intentional and proactive, that's leaning forward. Leaning backward is for, you know, let's say you are a retired lawyer or that you're a Goldman MD. And you're like, hey, I just want to have exposure to this asset class known as crypto. I don't understand it yet. I think it's a little crazy. So, I want to have some exposure into it. So, can I just basically invest in some major pieces with a small amount and lean back? I would add a new category which is lean down. There again, you don't have to do anything. And, you know, we are thinking, not thinking, we have already integrated, but we'll definitely even push that product even more - retirement funds, illiquid. Currently, everyone, most people, have tens of thousands of dollars, most professionals, in their IRA deployed in some random mutual fund. So that's our lean down approach, which is you can use money, not from your checking account, not from your savings account, that you can't touch for another 30 years. Leave 5% of that or 2% of that and through Autopilot, diversify into real estate, crypto, female founders, whatever it may be, but you can just lean back and let it generate a return. So, between lean forward, lean back and lean down, we hope to capture them all over time. Michael: [00:19:28] No, that's a really interesting point on the IRA assets because the self-directed IRAs are really a great fit for longer-dated assets, private equity, startups, which may take seven to 10 years to mature or have a liquidity event, so that seems to match really well with the timeframe of an IRA. I do want to touch on one thing that you said around the lean forward part of really getting involved and engaging with the companies, the investments that people make. You've done some really interesting consumer things with Republic, in terms of having people create profiles, sharing with companies where people can help. Talk about how and why you've done that and how the creation of community is maybe different than how we've been experiencing investing in the past. Ken: [00:20:19] I would observe two trends, two technological and social trends in the past four or five years that I think have influenced our product ideation and creation. One trend is the digital community adoption. You even see Facebook now driving or focusing a lot more on Facebook groups. That's how people interact now. Clubhouse is a fantastic example of - we are just at the early days of - new iterations of communities. So that trend - humans by nature will work as community, social creatures, but technology has enabled the formation and the sharing of information in a way that wasn't possible just a half a decade ago.The second trend is the intentionality of generation after generation that Millennial moreso than the generation ahead, in Gen Z even moreso, on wanting impact on and caring about the consequences of their actions to the larger society. My parent's generation, as an example, when they were in their twenties or thirties, recycling wasn't a thing. Buying products that would help the world to be greener was not in anyone's psyche.So over time, in the Seventies and Eighties, people started seeing the impact of what they buy - their purchasing power. And I think when it got to our generation, and now the newer generation, is the shifting of everything that you do, even the clothes that you buy, but more than that, investment, even in public companies, I think the need for, or how much people care about the consequences, the social consequences of their activities are definitely amplifying over time. And that's a great thing. It's really amazing.So the two of the trends in combination, I think led us to focus a lot on building products that have community potential and that can enable people to learn not from a single source of truth, not from a long newsletter or blog that we send out about the value of the Black Swan Theory or the Black-Scholes Model or Black Swan events, but about normal everyday folks sharing maybe even 20 video clips on Twitter and TicTok explaining why they're passionate or why they think an investment opportunity is good for them and learning from that.So I think those two trends definitely dictate or play a heavy role in our product and ideation process.FUNDING ON REPUBLICMichael: [00:23:21] And are companies that come to your platform to raise from the community of Republic investors - Are they finding this valuable or is that one reason why they're actually coming to the platform to raise capital?Ken: [00:23:32] That's a very interesting question, Michael. It goes to the question, it relates to another question that I often get - Are people looking to community funding, retail funding as the last resort and you can't get VC capital. Then you come to us. And that question is related to yours in this way.Any company that is consumer-focused, obviously wants to engage their customer, even more. If you can get a customer who loved you so much to part ways with their $50 that he won't see anything back for a while, why would that be a bad signal ever for any institutional investor or sophisticated investor?That's an excellent signal. So, the type of companies that I think in the early phase of the retail revolution definitely lean heavily on B to C. These are consumer-focused companies and because of that, the customers, their consumers, matter a great deal. So, Republic managed to attract not only companies that have large customer bases, but we get rave reviews for the product and how easy it is to use.And, hopefully, we're going to grow it and maintain that reputation. But I think that's a key part. Republic has two sets of customers - founders, but also investors on our platform. Companies are not going to be happy unless their customers are having an amazing experience on our platform and because of that we focus on building products that seem to be targeting or emphasizing engagement and education or an interaction, just to give everyone a very good inclusive experience. But Michael, if I may make an observation about what you said earlier about how, if you are a shareholder of Apple or Starbucks, that statistics show that you are more likely to buy Apple over Samsung or Starbucks over Pete's coffee.And I think it is so true, but it's even more true when you're an early investor. Let's say there's a small coffee shop owned by a couple down the block from everyone. And it's down the block from where we live. And you're able to invest a hundred dollars into that couple's coffee shop business.And whenever you go back there, you have a little table for investors. I imagine whether you are a student or retiree, whether you're a lawyer or a carpenter, when you go and buy that cup of coffee or a glass of water and hang out with your friend, you're naturally going to go to that coffee shop, right? The same with an early investor in a beer brand, in a vodka brand, in anything that, that we consume.So that psychological alignment is a remarkably powerful value. That's why a lot of companies look at retail fundraising, not for money, not for a source of capital as the primary motive, but as a marketing and engagement force. Michael: [00:27:04] You've now built the infrastructure to enable people to invest into startups, crypto tokens, real estate, even venture funds. So, talk us through both of those things. So, one, quality control and curation, which is key to any marketplace, and then two, the infrastructure that underpins that. Ken: [00:27:23] We are an investment platform, first and foremost, and return on capital is ultimately our customer's number one objective. They can add passion and impact to their investment decisions, but if they don't make money in the long run, we are going to have zero customers. So, because of that we focus heavily on curating what we believe to be credible, high-quality investment products, but venture by one area of return, is just one type.A coffee shop in the example that I just gave you earlier is unlikely to ever be acquired or raise venture financing and go public, but it very likely can generate robust revenue. And, if you enable customers to invest under the form of revenue sharing, out of one hundred dollars the coffee shop generates, it passes back ten dollars to early investors. It is very aligned and still can be a very attractive, compelling investment product, for many. Real estate in the same way. You are never going to see a 10X return, rarely ever. And you very rarely see a one hundred percent loss. In an early-stage tech company, doesn't matter if it's YC or backed by Sequoia, if you invest in one deal in the seed stage, the probability of losing all of your money - doesn't matter if it's on Republic or anywhere else - is exceedingly high. So, all of these things we have to deliver in terms of information, but we want to make sure that what we bring on and curate and present to our community are credible and are, in our best judgment, of high quality. In the long run, I very much believe that there's a thesis as to what we do here, which is the crowd of retail investors. You will have case studies I think in a few years out that show that companies, backed by the retail investor in the earliest of stages that were outside of the venture lens, just in tech, may be just as competitive in terms of viability and how robust of an investment opportunity they are. So, this is a notion of wisdom of the crowd. And I just want to focus in on tech as a vertical first, because that's still the main dominant vertical on Republic.There's a narrative here that you only want to onboard companies that are either already backed by VC or that are venture backable, because those are deemed to be of high quality. There's definitely truth to that. A company backed by you, Michael, or by Alfred Lin at Sequoia is more likely going to succeed. But what about the founders and companies that don't have access to you, don't have access to Alfred Lin. And statistics very much show that mostly female, older, or founders who aren't in Silicon Valley or the two coasts, have very little access to venture capital. So, we do present investment opportunities that we find to be credible and hope that if they speak to a larger retail public, that they may get the capital they need to grow and grow to be of a stage where they can be appealing to you and to Alfred.So we view venture retail investing as additive, contributive in the long run to the ecosystem rather than being competitive, so to speak. It's a long-winded way of answering your question, Michael, but we value very much on traditional indications of quality, as well as testing out models that can speak to people's passion, even if they fall outside of the traditional VC lens of credibility. Michael: [00:31:42] Well, you're hitting on something that I think is so important, which is that early-stage investing, in many respects, is about finding outliers. But in some cases, finding outliers means going outside of the mainstream or what's more traditional or even going outside of different networks.We've talked about community in one sense, which is having people and investors, consumers support companies. But you've also built community around creating a diverse set of people who can help you find the right companies, funds, and assets to put on your platform that may be overlooked by others. So, I'd love to talk about community in that respect because that's something that's so core to what you're doing and so different from what many others have done.Ken: [00:32:29] The notion of inclusion and access I think has to be looked at under both lenses, which is the founder's access to capital, customers, and businesses. You know, it's a crazy statistic, but even when it comes to business loans by the government, apparently female founders representing fifty percent, give or take, of all small businesses comprise less than fifteen percent of small business loans, which are supposed to be pretty much, if you have revenue, you get the loan. So, this lack of information and access permeates all throughout the different forms of capital sources and businesses. But then you also have the customer, the investor base on the lack of opportunities. You know, it's funny, but we noticed, and we hope, that as Republic continues to grow, that we make it easy and comfortable for that high school student, perhaps in Detroit, whose parents are not sophisticated investors, but in a classroom, instead of Fidelity or Apple donating computers, maybe they donate a thousand dollars in grants to the entire high school class.And each student gets a chance to invest ten dollars for fun on a platform like Republic as financial education. I imagine if you do that, even with any sense of life skill, you're going to have a whole new generation that are much more financially sophisticated. Certainly would be more than me. My niece and nephew now are more financially sophisticated than me when I was in college or law school even.And I think that financial equity is very much a solution to social inequities, the many inequities that we see. So, our focus on access and inclusion applies on both sides of our customer base. Michael: [00:34:30] I love that - financial equity is a solution to social inequity. I mean, that really gets to what you're saying here, which is that talent may be evenly distributed, but the opportunity is not so you have to help find that - help people find those opportunities. So, what have you done in terms of building out this community of venture partners and this network of people who've helped you find investments in different places where others may not have been able to look? Ken: [00:35:00] Michael, I can't really take credit on my own because I've been - one of the most fortunate thing about my journey building Republic has been able to convince such a committed, talented, and most importantly, diverse team of colleagues to join. So, my colleague, Cheryl Campos, who heads Venture Growth and Venture Partnerships for Republic, through her work she has launched a Venture Program and now does a Venture Fellow Program for those still in MBA programs.And soon she will do a Venture Associates Program that's meant to go even deeper to undergrad. But the notion here is that in order to attract diverse founders, and to improve access inclusion in the space, you also have to incubate and support diverse venture capitalists as well. And I think that, as when I first started out at a law firm, I may have been the only Asian American law associate in a class of approximately 60. Now, across the board, some 15 years later, it's much more diverse.And I think that with the proliferation of venture capital as a business model, you now have diverse talent in venture as a percentage, much higher than what you saw 10 years ago. So, the Venture Partner Program is to build a community to support, and to also get them to help evangelize for what we are building because the notion of access and inclusion certainly applies to venture as well.I would not be able to do that myself because I'm just one voice, one lens and one experience. And I think that to build a community, you need people with the same mission, but all different backgrounds so that we all can communicate and understand and a different lens and get more to join the mission and the journey.THE REGULATORY ENVIRONMENTMichael: [00:37:12] Interesting. Interesting. And then to some extent, the regulatory environment, which you've actually been leading the charge on - you've been in DC, helping legislators, regulators figure this out. What's been going on from a regulatory perspective that's enabled you to unlock access to private markets to retail non-accredited investors? Ken: [00:37:36] Well, since the great depression in the 1930s, in the infinite wisdom of Congress, someone decided, hey, if you're not a millionaire, you should not invest privately because it's too high risk.I mean, it makes no sense. It stopped making sense a long while ago. In 2010, for example, private investing was legal for most people. Gambling wasn't but buying lottery tickets was highly promoted. So, it obviously is not making sense. But I think that people are truly waking up to the power of that false narrative - this is the example of the Reddit and Game Stop saga that we saw very recently. It used to be that people thought that the public markets were much more low risk or safer for the individual retail investor and it's decidedly not so. Market timing, insider trading, and predatory behavior can result in very, very risky and just pitfalls that you don't see in the private markets. So, I think both in Congress as well as at the SEC regulatory level, people understand that, people see that, and they are taking a close look.And there's no question in my mind, that you're going to see more and more easing of the rules and regulations around allowing retail investors to invest in more asset classes. At the end of the day, you have to make sure, and that's the goal and the rule, and the reason why the SEC exists is to protect investors, first and foremost, but what it means to do so, and how to do so, changes with time. Technology and society change faster than the law, just by the construct of it.But there's no question that laws and regulations will follow. They have been following and I have no doubt that they will continue to follow. So, you are going to see this retail revolution, is really driven in part by a more relaxed regulatory framework around investing. THE REPUBLIC NOTE TOKENMichael: [00:39:51] Well, so retail revolution - I want to extend that point that you're talking about. So, one part of that is fractionalization of assets, which you are in part, along with some others in the Alts Space, kind of a pioneer on, and it's really unlocking opportunities in all sorts of alternative assets. You've done this in a few different ways, but one way you've kind of extended this even further is with the Republic Note. So tell us about this Note, because it's really an innovation in private capital markets. Ken: [00:40:23] Michael, if I may first share a view about blockchain or distributed ledger technology and how it relates to FinTech and to Republic and how it is so core, instrumental to our mission of global adoption of private investing.My ultimate goal, and I think right now we have a community of over a million members, it's not a success until we have a community of like a billion members, but I think it would make me happy, and I definitely would smile when my distant cousin in a small village in Vietnam can invest five dollars into a startup or some investment products on Republic. Currently, that is not possible. To make that investment cross-border, the fee is like 30 bucks and they don't have bank accounts. And most banks in Vietnam don't synch so easily with JP Morgan and Bank of America. Now Vietnam happens to be a very crypto friendly country. Surprisingly, enough people, even in small villages do own a fraction of Bitcoin or Ether. So, the ability to enable global participation at a tiny scale, five dollars may not be a lot for a college student in the US at Columbia or at the University of Michigan, but it's a lot of money for a single mom, middle-class woman living in Hanoi, Vietnam even today. Right? So, how do we enable more investment, more activities, more transactions at scale globally? You cannot do that without blockchain, without this technology. And it has already enabled, to accept investment globally at a far smaller minimum amount than we did before.So the ability to factionalize and automate, factionalize any assets to tiny, tiny pieces, therefore lowering the minimum amount and the ability to automate and streamline the process of confirmation payment settlements are key parts of FinTech and retail adoption. The Republic Note Token, we do have our own token as you mentioned, this currently is the only, as far as I know, revenue sharing digital token in the US and it happens to be available to our entire community.So, the theory behind that, Michael, is that we want it so that even people with just a dollar can somehow share in Republic's success, as we are still a very private company. We have a million members plus. If they want, or they used to be able to, buy or earn some tokens, some Republic Note Tokens. And, as we continue to grow, they're going to earn a little bit of payout potential and dividends.So the goal, the ultimate goal, is this: In the year 2030 or 2028, a company that had raised on Republic in 2017 and now is as large as Uber or Coinbase is going public. And this is the headline news across the New York Times and the Wall Street Journal about company ABC's IPO. You know what Uber did then? About a thousand early investors had a big smile on their faces and about 200,000 Uber users and drivers had a big frown because they got nothing – it was not relevant. We hope that when company ABC that raised on Republic a few years ago, and in eight years goes IPO, that you can have, not only the early investors in that company but 5,000 investors in that company, being very happy, but every Noteholder, hopefully, at that point a hundred million. They may get five dollars back. It's not going to make anyone rich. They may get three dollars per Note, but for once they feel like a part of the story on that front page, in that newspaper. And I think that's what people ultimately want and care about. Money and making profit and investing is not just making money for money's sake. It's about buying happiness and security. And you know what, being a part of something, feeling like you matter in a larger society. Two dollars payback, but yes, you are a part of this narrative. I think that part of our mission of what we are building is that we hope to contribute a little bit to a societal sense of fairness and hopefully, more societal stability, especially compared to the year that we just went through in 2020 and earlier this year.Michael: [00:45:29] And it also sounds like they get access to everything that's on the Republic platform. So, they're getting this diversified access to private markets, which as you continue to build that flywheel of private companies of crypto assets, of real estate projects, of video game financing projects, they're going to get access to everything. Ken: [00:45:46] Yes. I'll give another shot at defining the Republic Note Token a little bit more succinctly. So, the Note is a revenue-sharing digital token. We can share a portion of that upside back to the token holders. So, in many ways, it's like a perpetual bet into this growing basket of companies. And even if a thousand companies fail, if one company succeeds, a little bit will go back to each and every single token. And that's what I meant earlier by saying that we hope that by doing that, and if we truly made sure and become the go-to platform for every and any company that looked to raise and grow, that the Noteholders have broad exposure and would be linked to the success of literally tens of thousands of companies and more down the road.Michael: [00:46:58] That's really cool. Because it just gives people access to all sorts of assets in the private markets that some of which may be very successful, others which may not work out as well. But by having diversified access, then they can benefit from everything on the platform, which I think is such an interesting innovation. Ken: [00:47:18] Michael, it just occurred to me that the Note Token may be the ultimate example of the lie down and lie back example. Michael: [00:47:25] Yes it is. Ken: [00:47:27] You can earn the Notes if you don't want to buy the Note and then have broad exposure to the entire ecosystem and be part of this story without having to do anything. Michael: [00:47:38] Yes, that's fascinating. So that maybe that is the right definition of the lie down part of the lean back-lie down lean-forward, and you can participate in any of those ways. If you want, to your point, to get engaged in and help some of these companies on the Republic platform, you may be able to earn tokens for that.Ken: [00:47:56] I am going to have to give credit to you when we file that lie down-lean back investing trademark application as a description of Republic.Michael: [00:48:06] Oh no. Give credit to Rishi. He was the one who shared that with me. But yes, I'm sure he'll appreciate that as somebody who's worked at Twitter and Square, so he's seen it, he's seen things from kind of the financial services perspective and the consumer social perspective. But, no, that's fascinating. THE ROUND ANNOUNCEMENTMichael: [00:48:22] I think we have to touch on some of the big news that just broke. So, you raised a substantial round to grow your business. People are very excited about what's going on with Republic. Why did you decide to raise capital and what are you going to do with this additional capital?Ken: [00:48:40] Okay. Thank you so much, Michael. It's been four-plus years. And part of the reason why we raised this financing round was to show to the world, and ourselves, that what we are building now is of institutional-grade - is no longer like a fringe, quirky business model. So, we're first of all, so honored and Broadhaven, of course, has been an early supporter and we're delighted to be a portfolio company of Broadhaven, but Galaxy Digital, Nomura, and Naspers are in the round together with Motley Fool Ventures.So these are traditional brands. Nomura, it doesn't get more traditional and institutional than that. Naspers is one of the largest, I think they go by Prosus now, is one of the largest venture firms in the world, and they've never backed a crypto project before. The Republic Note Token is Naspers' very first crypto investment.So, all of these institutional investors involvement, I think not only validates what we do at Republic, but also the industry. That is the retail industry, the blockchain industry as an ecosystem, and this notion of the future of why adoption of retail investing is a model.Michael: [00:50:08] That's fascinating to see the traditional financial services worlds blending with the next gen version of financial services, which is the democratization of access. But that's both in terms of traditional company equity and also the crypto world and the DeFi world, which it seems like you're really with your investor base, but also with what you're building kind of the blending of all of those things as you institutionalize and bring more institutions onto the platform like a Nomura which is fascinating.Finale: Favorite InvestmentMICHAEL: [00:50:39] So to wrap up, I always ask everyone what is their favorite or best investment idea? Ken: [00:50:47] I'm going to share my investment idea that I came up with when I was in college, no first year of law school. I don't think I was of an age to invest in college. Once a week, my recommendation now to my sibling's kids, my nieces and nephews, is that vice that you spend money on once a week, or at least once a month, just cut back on that vice, that one vice. Use that dollar to invest. Buy stock, public stock back then, and now invest in whatever it is that you care about. But be consistent. So, don't one day put it in shoes on StockX and on another day put it in wine. Just pick one thing and be consistent with it. Literally, one cocktail in Manhattan is like eighteen dollars, in a college town maybe like six dollars. These things add up. And if you do that, it's going to be a really fun learning experience. In my case, I can't tell you what I've been reliably putting my money in, but it has done very well for me over the years, but I'm old. MICHAEL: [00:51:59] Well, no, I mean, I think what you're getting at is something really fascinating, which is, and it's ironic that you're drinking a Starbucks right now while we're having this interview. But basically if people, and I saw a statistic on this the other day, that if people had the three or four dollars they're spending a day on coffee, if they had put some of that money into crypto or Bitcoin, or it could be in startups or the Republic Note Token, that capital has the chance to appreciate in a way that those three, four dollars spent on a Starbucks coffee every day may not. So, I think that that's fantastic, fantastic advice. Even as you drink your Starbucks. Ken: [00:52:37] Michael, you asked me a question that you ask everyone. What is their investment idea? May I ask you a question that I've been meaning to ask people that I know, but I have yet to, which is, I think the future is no longer about investing in a given range of options, but the question is what would you want to invest in that you currently are not able to. Because that desire for people to want to invest in new things, I think necessarily will make that happen.So, I would love to hear what is one thing that you have not been able to invest in. For any reason that you really want. MICHAEL: [00:53:22] That's a great question. You know, I think it's actually starting to become true already with some of the infrastructure that's being built. We're just starting to see the early days of this. But I think so many people in the world love sports, me included. I played soccer. I collected football cards, basketball cards, growing up as a kid. And I think the ability to marry - exactly what you said - passion with the ability to invest, is so powerful. Right? And there's so much to learn. For people who've never learned or understood investing in a more traditional sense, because maybe they find it really boring or hard to and inaccessible to learn about stocks. They may be able to do that with something like sports cards if they love LeBron James and they could learn all about LeBron James. So, I think we're starting to see this. Some of the infrastructure is being built in the sports card space, where people are now able to invest in sports cards in either fractional ways or in more, or in larger ways and invest into cards.But I think, I would love to see that happen because, for me, I love sports, but the ability to marry that and combine that with investing, I think is just the kind of perfect collision of those two things. So, it's not something that's not totally possible. It is starting to become possible, but I'm super excited to see that become more of a reality and financialize itself as an asset.Ken: [00:54:52] Michael, I promise you, I will do my very best to bring sports investing to Republic within this year. MICHAEL: [00:54:59] Well, the other one is, is not just cards, but sports teams, as well. I think talk about the kind of combination of community and fandom with the ability to invest in something. And I mean, sports teams are, whether it's English, you know, English football teams, and it doesn't have to be the Premiership teams, it could be the local town teams where people grow up as fans and they love those teams with a passion. They pass that down to their kids and their kids' kids. Imagine if they had the ability to invest in that as well, not just be a spectator on the sidelines, but have the chance to be in the game with the team and the owners and the players.I think that would actually be a really, really cool thesis. Cards are a financial asset or representation of players, but sports teams themselves are proving to be potential good investments as well. I mean, you look at the value of MLS teams have gone up massively. I think we'll see the same in women's soccer with the NWSL.So, that's actually one where if the Republic platform could give the crowd and fans the ability to invest into sports teams, I think that would be super cool as well. Ken: [00:56:10] Maybe we give every investor an NFT that is issued by the sports team. If they hold onto the investment they have that NFT. If they sell the investment the NFT goes with it.  Michael: [00:56:25] All the leagues are going to have to contact you because I think there's absolutely something here that they should be thinking about.Ken: [00:56:32] Send it my way. But yeah, anything that anyone is a distinct holder in - fan of a sports team or a fan of a movie, I think they definitely should, and hopefully one day you can become a shareholder or stakeholder.Michael: [00:56:52] That's a great way to end this podcast because I think you've touched on community, you've touched on passion, you've touched on profit, and it's just also so exciting to see, having known you for the past four years and seeing you when you were just starting out Republic, just to see you build this business into something that really is based on the passion that is associated with investing, the community that's associated with investing.I mean, you're truly democratizing access to financial services, which is such an important piece of what the next wave of financial services looks like. Ken: [00:57:24] Thank you so much, Michael. And thank you for all your encouragement and support along the way, even during days and months, that that was so new and early and no one believed in us just yet and you did. Michael: [00:57:37] Hey, the one thing I've learned is never doubt Ken Nguyen. So …Ken: Thank you, sir. Michael: Awesome. Well, thanks for having you on the Alt Goes Mainstream podcast. Ken: Thanks for having me.Michael: [01:08:34] Thanks for listening to this episode of Alt Goes Mainstream. I hope you enjoyed it. You can find more episodes of the podcast at any of your favorite podcast sites. And you can read more about Alts on my Substack AltGoesMainstream.substack.com and follow me on Twitter at @MichaelSidgmore and @GoesAlt[01:08:52] Thanks a lot. Have a great day. Republic Disclaimer: With regard to any reference to an issuer reference in this notice that is gauging interest in a potential securities offering pursuant to the Regulation A exemption from the registration requirements of the Securities Act, including opportunities to “reserve” securities as indications of interest in the potential offering, please note that pursuant to SEC Rule 252 (i) no money or other consideration is being solicited thereby, and if sent in response, will not be accepted, (ii) no sales will be made or commitments to purchase accepted until the offering statement for the potential offering is qualified by the U.S. Securities and Exchange Commission, (iii) any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance is given after the qualification date, and (iv) an indication of interest is non-binding and involves no obligation or commitment of any kind.  

An episode where I almost light Audacity on fire. Mike & I discuss what we're watching this week, the Tenryu retirement show, Breaking Ground, MOST FIRE & TRASH WRESTLING THEME SONGS OF ALL TIME, and a retrospective of one of the best monsters in the game: Michael Awesome. RIP mang.