Today's guest is Dana Cornell. Dana Cornell is a Certified Investment Management Analyst and Certified Financial Planner, whose passion is to take the uncertainty out of investing and provide consistent returns his clients can count on. Show summary: In this podcast episode, Dana Cornell shares his journey from working at Morgan Stanley to starting his own firm, Cornell Capital Holdings. He discusses his focus on income replacement and tax efficiency strategies, as well as his role as a capital raiser for real estate developers. Dana explains how his licenses and certifications as a fiduciary set him apart in the financial world and emphasizes the importance of thorough due diligence in making informed investment decisions. He also discusses his involvement in development projects, particularly in the self-storage sector. -------------------------------------------------------------- Intro [00:00:00] Dana Cornell's Background and Starting Cornell Capital Holdings - [00:01:11] Walking Away and Starting a New Path - [00:02:16] Focus on Income Replacement and Tax Efficiency Strategies - [00:05:09] The process of bringing capital to deals - [00:08:59] The role of a capital raiser for developers - [00:09:28] The number and types of investment opportunities available - [00:11:59] Building a Team - [00:19:14] Demand for Income Replacement - [00:20:09] Contact Information - [00:21:37] -------------------------------------------------------------- Connect with Dana: Web: https://cornellcapitalholdings.com/ Email: firstname.lastname@example.org Book: https://www.amazon.com/Legacy-Wealth-Blueprint-Create-Investing-ebook/dp/B097KMXSTY Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Dana Cornell (00:00:00) - So by going and essentially becoming an outsourced team member for our developer, I said to them, Look, I'm going to go raise this money, but you're going to pay me the fee, not the client. So it's very efficient from the client standpoint and it's very efficient from the developer standpoint because they're paying me a few percent. The same thing I used to charge a client, basically, but they deal with me. I handle all that. I raise all the money for them. And on the flip side, the is not paying a fee. So it's very efficient for them unless we're doing some deep planning for them, that type of stuff. And I'll just charge a flat planning fee. Sam Wilson (00:00:35) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Sam Wilson (00:00:47) - Dana Cornell is a certified investment management analyst and certified financial planner. His passion is to take the uncertainty out of investing and provide consistent returns his clients can count on. Sam Wilson (00:00:58) - Dana, welcome to the show. Dana Cornell (00:00:59) - Sam Thanks for having me, my friend. Sam Wilson (00:01:01) - Absolutely. Sam Wilson (00:01:02) - The pleasure is mine. Dana There are three questions I ask every guest who comes on the show in 90s or less. Can you tell us where did you start? Where are you now and how did you get there? Dana Cornell (00:01:11) - I'll give it my best shot. So I'm from south of Buffalo, New York. A little town called Olean started pretty typical, you know, middle class family. My father is excavation contractor. My mom was a kindergarten teacher. Didn't really come from money. I didn't know many people that had money. Um, so I started knocking on doors to start talking to people and let them know what I did for a living and see what they needed and how I could help them. That turned into, 17 years later, fortunate to be recognized on the Forbes under 40 list for advisors in the country, best in the state, All that good stuff managed about 1.4 billion with my team and my group at Morgan Stanley and about two years ago decided, you know, I didn't feel like I was doing the best job for my clients, which I'm sure we'll talk about why and how and decided to literally walk away from that, which, as I told you briefly before we started, they asked they asked me if I needed mental health counseling because that's not typically the move in that industry when you reach that level of success. Dana Cornell (00:02:16) - Um, but I felt strongly about it. I knew there was a better way to build wealth. I knew my ultra wealthy clients did it a different way. And so that's how Cornell Capital Holdings was born. Sam Wilson (00:02:26) - Wow. Sam Wilson (00:02:26) - Okay, let's let's let's let's do dive into that a little bit. Walking away because that 1.4 billion in assets under management those are hard earned clients. I mean getting people to put their accounts with you, to trust you with their finances. I mean, that's a that's a tough row to hoe. Dana Cornell (00:02:44) - It is. It is. Yeah. Sam Wilson (00:02:47) - And walking and walking away. And when you leave, you leave all your clients behind, essentially. Dana Cornell (00:02:52) - You have to. Sam Wilson (00:02:52) - Yeah, you have to. Sam Wilson (00:02:54) - No wonder. No wonder they asked you. Do you need I mean, you spent 17 years just I mean, beating your head against the desk, getting this done, and now you're like, okay, I got to go. Like, I'm done. Yeah. Have you, have you Let me let me see if there's a nice way to ask this, since you had that move when you when you made that move, was it just like, yes, this is it. Sam Wilson (00:03:15) - This feels amazing. I'm so glad I did that. And you've never looked back. Dana Cornell (00:03:19) - Are you asking if they were right, if I needed that mental health counseling? Sam Wilson (00:03:22) - Don't know. But. No, no, I wasn't asking that. Dana Cornell (00:03:24) - But no, I have not looked back and I'll tell you why. So, you know, being a traditional financial planner. It's funny. Everybody would always ask me, What's your number? What's the number you need to retire? And it's all relative to what you need, right, and what you spend. Right. But if you reverse that and I talk a lot to my clients now about the reverse financial plan, if you start with income first and buy your time back by buying passive income and being very efficient with it in both not paying tax as best you can and fees to eat away at your your income and your capital. You know that's a it's a much different situation. So when I experienced that for myself investing in real estate syndications and then made the decision that, hey, this is how my ultra wealthy clients have built wealth, this is something I truly you know, I had two little boys show up around the same time. Dana Cornell (00:04:19) - You know, they're five and and soon to be four now makes it just puts a different perspective on things maybe really reflect internally, hey, am I doing the right thing? So I feel great about what I'm doing and I didn't. You know, so the answer is no. I never looked back. And that's the main reason why, you know, I truly believe in how we're doing it now. And. You got to feel good about what you're doing at the end of the day. Sam Wilson (00:04:43) - Oh, you do? Undoubtedly. Undoubtedly. Tell me. So what when you when you launch that on your own. How did you decide and what did you decide to focus on? Because you're basically doing the same thing. You've started your own, your own, you know, financial planning firm. But now you can you can call the shots because now you can tell your clients and you can advise your clients, hey, you could invest in this multifamily syndication or whatever it is. I mean, is that the gist? Dana Cornell (00:05:08) - Exactly. Dana Cornell (00:05:09) - So so, you know, quite simply, to sum it up, instead of being a more of a generalist, we're just more of a specialist. I focus on your your income replacement and tax efficiency strategies or not working with all of your capital typically. Um, some we do, but most we don't. And it just allowed me to be laser focused on what we're doing and what we're offering. So to answer your question, you know, I had started researching and interviewing different developers and there was a gentleman I knew that that had a similar firm he started 20 years ago, and quite simply they would partner with best in class developers in different asset classes of real estate. And I started with self storage. It's the most I did that because historically as an asset class, it's the most consistent, right? Um, that's where I started. Found a really good team to partner with there. Convince them that they could do more projects if I added fuel to the fire and handle the investor relations on their side. Dana Cornell (00:06:09) - You know, and I helped coach a lot of developers now to structure their raise, how to find the right investors, how to do all that stuff on one side, and then on the other side, I'm profiling high net worth individuals looking for passive income and tax deductions and matching them to the right projects and teaching them about the risks and where that fits into their portfolio. So that's how it's come together. Sam Wilson (00:06:31) - Got it. I want to hear your state of the market and interest rates and all of those things and kind of what you're seeing on the development side, maybe as part B here of this showed here today. But maybe before we get there, you said you're only handling portions now of people's income. I think probably previously you're handling the majority of what your clients had and now you're only taking portions of it. How do you how do you structure that? I mean, I think about that just, okay, how do you how do you structure it such that obviously you get paid because you got to still feed your family and I mean, without doing fun to funds and things like that. Sam Wilson (00:07:06) - How does that process work with you as an advisor helping your clients? Dana Cornell (00:07:09) - Yeah, so great question. So the beauty of it is, you know, I had worked previously on managing as much of your assets as I could, doing a financial plan charging an annual management fee, very typical wealth management structure. That's fine, but I thought there was a better way to structure the whole thing. So by going and essentially becoming an outsource team member for our developer, I said to them, Look, I'm going to go raise this money, but you're going to pay me the fee, not the client. So it's very efficient from the client standpoint and it's very efficient from the developer standpoint because they're paying me a few percent. The same thing I used to charge a client, basically, but they deal with me. I handle all that. I raise all the money for them. And on the flip side, the is not paying a fee. So it's very efficient for them unless we're doing some deep planning for them, that type of stuff. Dana Cornell (00:08:01) - And I'll just charge a flat planning fee so it makes it much more economically viable. And the reason I say we deal with typically a portion of their money. Alternative investments are not appropriate for all of your cash. Right. We have liquid alternatives, but you can do that stuff anywhere. You know, I'm not going to charge you 1% to manage your cash and and fixed income exposure. It doesn't make any sense where rates were, especially right now. We can talk a lot about rates if you'd like, but, you know, I'll tell them, look, I can do that for you, but you can do it elsewhere just as efficient and cheaper. All right. Let me add value where I really, truly add value. And that's usually for about half, 40 to 50% of people's liquid net worth. Sam Wilson (00:08:49) - That's that's really interesting because, I mean, a lot of times what we'll see in the I mean, you're a capital raiser in its own right just with a different kind of spin on things. Sam Wilson (00:08:59) - And you're doing this through because you have your licenses. You you know, I don't know what they all are probably at this point forgotten a lot of those. There's a lot of probably reporting. I've had too many FINRa licenses over the years and I've kind of blacked out a lot of that. Yeah, it's like I forget a lot of that, but I mean, you have some compliance things to keep up with in reporting things. Maybe they're different than what somebody who doesn't isn't licensed. So how does how does that process work and why have you chosen to go the route you have in bringing capital to deals? Dana Cornell (00:09:28) - Yeah, you know, I'm glad you brought that up. I appreciate it because I think it's something that sets sets me apart. So from the world I came from, right? I'm a fiduciary based on my licenses and my certifications to the client. Right. A lot of people. And I saw I experienced it myself, you know, going into syndications or a real a private investment of any kind. Dana Cornell (00:09:50) - Doesn't matter if it's a private investment. It's private meaning the information is not as accessible as buying a publicly listed stock or bond. Sure. So how do you if you don't spend all of your working hours and have 20 years of experience like we bring to do the right due diligence to make sure it's the right fit and then figure out how does that fit into your world as an investor, what percentage, how much you should invest in each project, so on and so forth. So I blend both of those worlds. You're right on one side. I'm a I'm a capital raiser for the developers. I just make it easier for them because I'm one source of capital and I handle all things investor relations and, you know, it makes it streamlined for them. They can go further faster. But I'm really I focus. More on the investor side and being that guide and that bridge to making the right decision. So you're not getting burned, you're not over concentrated. You know what the risks are. I think there's a lot of value being that guy in the middle. Sam Wilson (00:10:48) - You know how when you're looking because I'm thinking about this and if you're looking at someone's portfolio, what you how many deals do you guys have as available deals to your clients at a time? Because maybe one type of an investment may work for me. I may want you know, I may want something, you know, my stage in life. Like I really don't want necessarily the cash flow right now. I want it to double or triple in the next five years where somebody 75th May want to just flip the coupon. Yep. So how do you have the like what what is your set number of opportunities look like at any given time? Dana Cornell (00:11:23) - Yeah. So, you know, it's a moving target. It kind of honestly comes by by opportunity and our underwriting process of what deals come through. You're right. So I'm always looking. I spent a lot of my time profiling deals, doing my underwriting, taking it through our process to have different offerings. And we have a menu of probably right now between registered fund offerings that we have access to that you would typically have to put a million or more indirectly to have access and you can get for a much lower minimum with us and the true direct private syndicated deals. Dana Cornell (00:11:59) - You know, we probably have a menu of ten different options at any point in time, but really of the true privates, 2 or 3 going at one time that are more growth focused cash now, cash later, have your tax advantage trying to hit the main points there. Give them enough opportunity. You know. Sam Wilson (00:12:17) - How do you stay in front of maybe you just have an amazing team behind you, but how do you stay in front of that many different opportunities and kind of I mean, because that's a lot of communication. That's a lot of I mean, just just reporting back to investors the status of those opportunities and where they're going and what the different moving pieces are like, how do you manage that whole communication flow? Dana Cornell (00:12:39) - It's leverage. You know, I couldn't do it myself by any means. So it's the the old who to do the whole story. You know, I lean on a lot of other professionals to help me with due diligence to give me third kind of third party non biased opinions on deals. Dana Cornell (00:12:56) - My team here is handling an awful lot of investor relations and summarizing and synthesizing all that information. So I can then take it, you know, and efficiently kind of put my spin on it and relate it to the investors so I can disseminate that to help them make good decision and keep them updated on what's going on. Sam Wilson (00:13:15) - Right? No, I think that's great. Tell me a little bit let's let's let's go to part B here of this of this podcast and talk about the. Kind of the state of the economy, what you guys are seeing, especially because it sound like you're doing a lot of development stuff. It's not that you mentioned the word development a couple of times, so it sounds like that's kind of one of the niches that you've picked. Yeah. What's the what's going on in that world? Give us kind of the the the breakdown of where we are and maybe where you see things going. Dana Cornell (00:13:44) - Yeah. So big question, man. You know, I'm always contrasting in comparing what I call traditional investments, publicly traded stocks and bonds to private alternative offerings. Dana Cornell (00:13:59) - Um, we could talk about stock market and all that stuff all day long, but I think it's no secret that that market is going to fluctuate. It's going to go up and down. We're coming into an election year. It's going to have good periods. It's going to have bad periods at the end of the day. It's consistency of returns and the predictability of those. That that truly changes the game for people. And that's what you see the ultra wealthy focus on. So when I'm looking at projects, I'm looking at what is the predictability that one of course our principal is protected to if it's an income producing project. And that's why like a lot of our self storage development that where I started. We're building in areas where they have three times the amount of demand or partnering with publicly traded companies to run, operate and eventually acquire those properties. They've checked the box that it all makes sense ahead of time from their standards. So you're borrowing some credibility from a publicly traded company and their team and their resources, right? Instead of, hey, I'm going to I'm going to go out and build my own storage facility. Dana Cornell (00:15:12) - And I like this spot because I'm biased towards it. And, you know, I think this makes sense and I hope it works. No, there's a lot more going into the research before I'm going to put my name on an offering and put my own money in it because we're doing that, too. You know, I'm not I'm not suggesting anything that we don't have our own capital in one way or another, you know. So. Sam Wilson (00:15:36) - Think. Go ahead. I'm sorry. Dana Cornell (00:15:37) - Well, I was just going to say so I think that then leads you to a path of, okay, if it's private investments over public investments where. Right. Real estate. There's a bunch of different flavors of private real estate rates going up so fast. You know, one of the things we did was underwrite all of our projects to historical interest rates. Mm. Commercial real estate historical rates are about 6.5%. Give, give or take. Right. That's what we underwrote that to. Plus a cushion. A lot of projects I saw over the last two years. Dana Cornell (00:16:13) - We're underwriting the current rates plus a cushion in their pro forma. Well, I have 20 years of experience of seeing rates fall. I know they're not going to stay low. That's the new normal for people. But that's not our reality. That's not the historical average. We haven't been there in the last 30 years. We were for the last few. But if you're not building in that cushion, you're going to see a lot of trouble in a lot of asset classes within real estate and a lot of individual projects. So those are some of the things we're looking at. That's why you've heard me mention development, because I think you can kind of pick and choose your spots there. Um, not to say there's not issues there. It comes down to the project and the developer at the end of the day. Sam Wilson (00:16:53) - Right. No, absolutely. You've mentioned a couple of things, and I want to hear your thoughts on this. You said the two things that you're really working with people on is income replacement and tax abatement. Sam Wilson (00:17:04) - On the income replacement side of things, how? Because of where interest rates have been climbing, like how how have you combated that in its own right because preferred returns of whatever they were 7% 6% in 2019 were pretty attractive, but 7% in 2023 is like, okay, I can get five and a half at the credit union. So exactly it and I can get it out tomorrow is not tied up for five years. So what are you doing on that front to kind of structure things creatively? Dana Cornell (00:17:35) - Yeah. So, you know, it's I talked to developers about this a lot, so it's knowing your marketplace and knowing where you're at in this market cycle. And you're right. So now the risk free rate of money, you've got to beat five 5% to make it even worth your time to get out of bed. Correct. So how do you change your offer and how do I find offerings that are more income focused in more of a really right now, a lot of what we've been doing is not as much growth focused, right? It's cash flowing properties or soon to be cash flowing properties at enough of a of a current yield to make it worth you know it is the eight, nine, 10% income. Dana Cornell (00:18:15) - Right. Um, and it's looking at other asset classes, you know, real estate's great, but you got to keep your eyes open for everything. We do a lot of small business acquisition as well. Um, you move to where the risk isn't as much and in turn that creates more opportunity. And right now it's higher income tax deduction and less growth type strategy That seemed to work right now. Sam Wilson (00:18:39) - Right. Oh, man, that's really, really cool. I love I love what you've done here. Dana. This is really cool. The just the I mean, leaving big business, leaving a $1.4 billion portfolio of assets under management to go do what you really feel in your heart is the right thing to do. I think is is admirable. And you know, it's it's cool to watch. Just see what you've done that on that side of things. Let's talk let's talk staff, building teams, those sorts of things. We touched on this slightly, but when you venture out on your own and and maybe you already knew, you're like, okay, I'm going to step out and it's going to be a home run. Sam Wilson (00:19:14) - I have no I don't think this would be a problem at all. But or maybe there was some apprehension as you went out on your own and said, we're going to launch this thing. What's it been like building a team around you to help you guys run your day to day operations? Dana Cornell (00:19:25) - Yeah, you know, it's it's been an interesting learning curve. When I left, I thought I could be. I thought I'd be more of a and I still am, but I thought it'd be more of a lifestyle type situation, kind of a one man band, limited staff, that type of thing. What surprised me, even though I knew and it proved concept, was the demand for people looking for the two main issues I solve for, you know, income replacement, passive income by cash flow don't pay tax on it. That's our core thesis, right? So the amount of investors reaching out, wanting help with that, whether it be on the planning side or just implementation of that, was overwhelming. Dana Cornell (00:20:09) - So Morgan Stanley taught me about I mean, that's the beauty of a corporate structure. You see. You see how that works. You see how teams are built, an organizational structure, but it's also done for you, right? So I had to spend a lot of time increasing my learning curve and finding the right people. And that took a while. You know, we went through a few people that I thought were the right spots initially, and initially they probably were. But the business evolved so quickly, you know, we kind of had to increase capacity and increase the capacity of our people to fulfill that spot. So yeah, man, it's been a it's been a learning curve and it's a continuation of that learning curve as we continue to grow, Right? Sam Wilson (00:20:54) - No, that's cool. That's cool. Thank you for taking the time to share that with us, Dana, And thank you all for taking the time to come on the show today and just tell us what motivates you, What makes you get out of bed and why you're excited about doing what you're doing right now. Sam Wilson (00:21:07) - I think it's awesome. And I really appreciate it, too, because me and the number of financial advisors and financial professionals I talked to that are just their hands are tied. I mean, they're like, Man, I love what you're doing. I love, you know, I love that private real estate, private syndication, private business, any of those types of investments there. Like we can't touch with a ten foot pole. We just we're just forbidden from from doing so. So thanks for stepping out and doing what you're doing. This is. Great if our listeners want to get in touch with you and learn more about you, what is the best way to do that? Dana Cornell (00:21:37) - Our website, Cornell Capital Holdings with an you can join our investor network. There's a button on there and you can email me directly. It's just Dana at Cornell Capital Holdings within. Com. Tim Thanks for having me on, man. This has been fun. Thanks for letting me tell my story. Sam Wilson (00:21:52) - Absolutely. Thank you for telling it again. Sam Wilson (00:21:54) - Cornell Capital Holdings. We'll make sure we include that there in the show notes. You get the spelling on that. Exactly correct. Cornell Capital Holdings. Dana, thank you again. The pleasure was all mine. Thanks, Sam. Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Jessica Taylor and Sam Wilson quickly run through what they saw from the Birds Week 3 win against the Vikings before previewing MNF against the Bucs. Learn more about your ad choices. Visit podcastchoices.com/adchoices
Today's guest is Jason Fudin. Jason Fudin is the CEO and Co-Founder of Placemakr, a mixed-use multifamily operator. Show summary: In this podcast episode, Jason Fudin, CEO and co-founder of PlaceMaker, discusses their unique business model that blends different asset classes to create value in real estate. They offer a hospitality living or flex living model, similar to private student housing, and a pop-up hotel model where they partner with developers to run a subsection of new apartment buildings as furnished units during the lease-up period. Jason explains their transition from pop-ups to permanently flexible buildings and the challenges they faced along the way. He also shares his belief that blending real estate and higher utilization will become the norm, increasing the value of real estate. -------------------------------------------------------------- Introl [00:00:00] Jason Fudin's Background and Journey in Real Estate [00:01:12] Spinning PlaceMaker Out and the Opportunity for Growth [00:03:30] The Flex Living Model [00:09:37] The Pop Up Hotel Model [00:10:46] Building a Blended Asset Class Company [00:11:46] The blending of real estate and higher utilization [00:18:44] The transformative impact of the company's model on real estate [00:19:36] Attracting good people to the team [00:20:23] -------------------------------------------------------------- Connect with Jason: Linkedin: https://www.linkedin.com/in/jason-fudin-16613ba/ Web: https://www.placemakr.com/ Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Jason Fudin (00:00:00) - Let's say we're going to go build that 300 unit apartment building, brand new. Well, when you deliver it, the whole thing is empty, right? You got 300 empty, brand new apartment. What we do for partners that build new buildings is we come in and say, Hey, give us 100 units the day you open and we'll run a subsection of your building as an apartment hotel as you lease up. So if you're leasing 20 units a month, it'll take you 15 months to lease up an apartment building. For 12 of those 15 months, we'll run 100 or so units furnished where people can stay. And so we monetize that vacancy during lease up in a temporary way so that if the lease up takes a little bit longer, the developers make additional cash flow and if it goes faster, they make a little less. But it's an insurance policy that's paying them. And then for residents, they get, you know, an on site hotel, they get hospitality services for free. So we blend the asset classes. Jason Fudin (00:00:49) - We're in the business of making real estate more valuable by blending the asset classes. Sam Wilson (00:00:52) - Welcome to the How to Scale Commercial Real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Jason Fudan is the CEO and co-founder of Place Maker, a mixed use multifamily operator. Jason, welcome to the show. Jason Fudin (00:01:12) - Thanks for having me, Sam. Sam Wilson (00:01:13) - Absolutely. The pleasure is mine. Jason There are three questions I ask every guest who comes on the show in 90s or less. Where did you start? Where are you now and how did you get there? Jason Fudin (00:01:22) - I started growing it up up in upstate New York. Uh, I went to college in Canada as an engineer, decided I wanted to be in real estate and not an engineer because real estate blends the community analytical challenges and money. And so found my way into real estate development. Started as a secretary. I worked my way up to running a couple of billion dollars in development and then eventually started my own company. Jason Fudin (00:01:46) - And I'm building something for myself and my team. Sam Wilson (00:01:48) - That is crazy. So the you said it so fast, I missed it. You started as a 90s. Jason Fudin (00:01:56) - You kept me quick, you know? Sam Wilson (00:01:58) - No, no, that was great, man. I love it. I love it. Sometimes you're like, you asked for 90s and it's like 900 seconds. You're like, Wait, that was 90, not 900. So no, you did good. I appreciate that. But the you started as a secretary and then you started running a couple billion dollars. You worked with running a $2 billion real estate development company. Jason Fudin (00:02:15) - A pipeline. So I worked for a senior vice president at Vornado Realty. And at the time, the Vornado office was focused a lot of focus on office and I worked on the residential side, so there wasn't as much focus there. And I got this awesome boss who said he showed up was like, I'm running all these projects, how do you want me to hand them off? And he goes, Look, you seem like a brilliant kid that's going to work your ___ off. Jason Fudin (00:02:39) - Like, let me know if you're drowning. So I just I worked an ungodly amount, learn the industry from some amazing colleagues. And when I left that role, yeah, I was responsible for about 2 billion of development between master plans, individual ground up developments. Um, and then then went over to a regional developer and ended up working with my now co-founder and we bought land and capitalized deals and did regulatory, you know, buildings, condos, apartments, retail, you name it, and then just continue to work my way up till eventually went back to that big company. He was an executive there, ran their innovation division, which was novel seven, eight years ago for a big public REIT and then built what is now place maker within the organization and spun it out. And we're about six years old now. Sam Wilson (00:03:30) - Wow, that's really cool. When you decided to spin Place Maker out of that organization, what was the opportunity you saw in going off and doing your own thing that maybe wasn't there when that company was inside of the other business? Jason Fudin (00:03:43) - So I always expected to go build my own company. Jason Fudin (00:03:45) - And the reason I chose real estate development is it was $1 trillion asset class and I figured there had to be a niche space where smart person could go build something that they were passionate. And so I kind of bided my time. You know, I built a lot of real estate for other people, made them a lot of money. And then when I saw the opportunity to make real estate more valuable, real estate is just a set of cash flows. People become really like emotional about it, but really it's a set of cash flows. And so what became really obvious to me is if you could increase those cash flows in a predictable, nonvolatile way, you'd make real estate more valuable and saw the opportunity to do that. And I started doing that. And a big company, that company is a REIT, so they're precluded from having a hospitality operation in house and so they were unable to own the business I was building. So spun it out. Uh, asked my now co-founder to join me, raised a few million dollars of capital and and off we went. Sam Wilson (00:04:38) - Got it. So you guys spun that out and now we talked about this before we started recording and I'd love to hear kind of what and again, I'm talking out of my league here quite a bit, so I'm going to have to rely. Jason Fudin (00:04:49) - I doubt that, but I appreciate it. Sam Wilson (00:04:51) - No, no, you're you're not too dumb it down for for somebody like me to understand. But you guys and I think the words that you use, you are you said we are a tech enabled operator, which means you guys are a venture. Lincoln said venture capital backed, tech enabled operator. Is that the way the way you said that? Jason Fudin (00:05:09) - Yeah, I said it all jargony, but that's true. I'll dumb it down for you. So basically, a bunch of folks that invest in high growth operating companies have invested north of $70 million in our operating company under the premise that it will become a large public company over time. And so there's two major innovations in our operating business. One is blending multiple real estate asset classes to create higher yield, more viable real estate, the commingling of real estate. Jason Fudin (00:05:42) - The second innovation is operating that co-mingled real estate in a way that depends largely on software and other technology tools in order to maintain lower expense ratios. And so off a more cash flow, more profit on the property base. And so we are those two things. As an operating company, we're pioneers in the blending of asset class classes and were the forefront of using technology to operate those assets efficiently. Sam Wilson (00:06:08) - Can you give me a case, a case study on that? Jason Fudin (00:06:11) - Yeah, sure. So we and we also buy buildings, so I'll put it all in one. There's a building we bought in Nashville, I think you're in Tennessee, right? Sam Wilson (00:06:19) - Am Yes. Jason Fudin (00:06:20) - We bought a building that in. Asheville and the sober neighborhood just off Broadway, its 300 or so units. The cost us about $140 million, $150 million. And so we acquired that with an outside investor. We we bought that asset with the with the plan of blending hospitality and multifamily. So that 313 unit asset has about 200 furnished units today, just over 100 unfurnished units, a single onsite operating team that's probably about a third the size that you'd see at a hotel, the same at the same size. Jason Fudin (00:06:51) - And something like 80% of our arrivals are contact list. And so a lot of that like concierge check and stuff that needs to happen at a traditional hotel doesn't happen for us. All the locks are automated in our backend system. The same if you booked with us the day before, you'd get an automated code to get into your room, you can turn your phone into your key. And so that entire experience happens with a lot less kind of hand-holding. Think about like ordering an Uber today versus calling up a cab ten years ago. So we've automated a lot of that. In addition, we've blended a global workforce with an onsite team, so a lot of things that traditionally would be handled on site at, you know, all hours of the night or whatever else we handle out of, we call it off site supports team in other states, at other properties or in other countries. And that allows us to continue to maintain a pretty low cost of goods sold on the expense side. So that particular asset runs just shy of a 50% margin. Jason Fudin (00:07:47) - Um, and an average hotel runs at a 25% margin and service maybe at 30. So we're, we're doing almost twice as good as pure play hospitality, um, because of technology. Sam Wilson (00:08:01) - Now in that building was a it is a hotel or it is a yeah this. Jason Fudin (00:08:09) - That's like saying like that's like saying on your phone is that the storefront that you went to or it's not that was probably not the right ways to frame it. Right? Our customers fall into four categories folks that rent with us for 12 or more months where they bring their own furniture. It's their home, they sign up for the internet, everything else. Yep. Um, and they have access to hospitality services. So, you know, you could opt in for cleaning or linen service or whatever, you know, it's just. It's a more experiential home. Sure. Um, that's about a third of that building. The other two thirds is furnished. And we have three types of furnished guests. We have long stay furnished. So think like your company is moving you to Nashville. Jason Fudin (00:08:48) - You know, they're like, Hey, for six months, we'll pay for your housing. They just. They just rent a one bedroom apartment for six months. The next is we call it interim housing. Think like two weeks to six weeks. You're a doctor on residency, you're traveling nurse, whatever. You're reloading, you're getting your house renovated. It's too long to be living out of a hotel, but too short to actually sign a traditional lease. Right. Um, and then our last set of customers are transient. You're coming to Nashville Thursday through Monday because you're going to go down to Broadway and hopefully behave a little bit. Um, you're working Monday through Thursday in town on projects on a regular basis. You're a consultant. Um, and so that's kind of the core set of customers we have. And any particular property. Sam Wilson (00:09:30) - And this is the same model you guys like you said, any particular property, It's the same model you guys are carrying to each. Jason Fudin (00:09:37) - Yeah. So, yeah. So we do that in Nashville, we do that in New York City, we do that in Washington, D.C. We optimize like that particular asset will have more than doubled the cash flow from when we bought it within 24 months. Jason Fudin (00:09:49) - So it'll be 24 months here in December, we'll have more than double the in-place cash flow. So that's obviously material for an asset like that. So it's not a hotel per se, it's not an apartment building per se. It's structurally an apartment building with an operating model that leads to higher cash flow. Think one of the easier analogies is to think of private student housing, where they're building essentially apartments. But they're, you know, they're they're structured around a specific set of customers where they can drive more cash flow than a pure play apartment building in that same city. We're like that on steroids. On steroids. Right? Like we're that times a lot more. So that's that's called our hospitality. Living or flex living model. That's about 80% of our inventory. The other 20% we run is that kind of a unique little model we call a pop up hotel. And so let's say you were going to go build that 300 unit apartment building, brand new. Well, when you deliver it, the whole thing is empty, right? You got 300 empty, brand new apartment. Jason Fudin (00:10:46) - What we do for partners that build new buildings is we come in and say, Hey, give us 100 units the day you open and we'll run a subsection of your building as an apartment hotel as you lease up. So if you're leasing 20 units a month, it'll take you 15 months to lease up an apartment building. For 12 of those 15 months, we'll run 100 or so units furnished where people can stay. And so we monetize that vacancy during lease up in a temporary way so that if the lease up takes a little bit longer, the developers make additional cash flow and if it goes faster, they make a little less. But it's an insurance policy that's paying them. And then for residents, they get, you know, an on site hotel, they get hospitality services for free. So we blend the asset classes. We're in the business of making real estate more valuable by blending the asset classes. Sam Wilson (00:11:28) - That's really, really genius. Where did I mean, I've had, I don't know, what's this 800 and something episodes that we've put out on this show. Sam Wilson (00:11:37) - And I've not heard anyone doing this model. Where did you cook this up? Was this your own home cooking or was this a model you've copied from somewhere else? How did you come up with this? Jason Fudin (00:11:46) - I would say own cooking. Um, so when I was at Vornado running their innovation group, it's been a bunch of time looking at how do you make real estate more valuable? And one of one of the there's basically two ways to make real estate more valuable. There's more, but like there's two big ways you take existing assets. One is you get more assets through the door, higher utilization. The other is you sell to the highest paying customer at any point in time, which is commingling uses. And if you think about real estate as a, you know, an evolution of a bond, a fixed income asset, your goal is to throw off more cash flow in a predictable way. And so by doing those two things, you know, the the high utilization is like co-living co-working, shared conferencing. Jason Fudin (00:12:26) - The co-mingling is something like what we do or what a convene does in the office conferencing space. And yeah, it just was really obvious to me. And so I sat down with my analyst at the time, me and her in a room and we were like, What is the easiest way to blend asset classes, to create value? And we're like, Well, what is more wasteful than a brand new empty apartment building? Like is crazy? They were like, Well, if we can there's a there's a duration mismatch between the timing of how you lease up a building correctly, um, and how quickly someone could use it in the interim. They're like, oh, we'll just pair those two things to go build an operating company that blends the asset classes where it's free money, and then once we get good at that, we move to the permanent model. So our business plan originally was start with pop ups until you understand and get good and build the tech stack and, you know, understand customer, customer funnel and OpEx ratios and all that crap. Jason Fudin (00:13:18) - And then once we get good enough, it's no longer free money. We make it the core business. And that's that evolution that we evolved to. We started the company in 17 and my partner and by 2021, so within four years we were buying and rolling out permanently flexible buildings. And today we have a couple thousand units of this stuff. Sam Wilson (00:13:35) - That is really cool. Tell me about some of the operational challenges that you face and how you overcome them. Jason Fudin (00:13:44) - I mean, operations is messy in anyone that anyone that's in the operating business knows that you designed your best set of procedures and structure. You hire super talented people that are empathetic and then you learn by doing. And so every time you make a mistake, you figure out why you made it. You make a right, you make it better. And that's kind of been our iterative process. I'd say we've accelerated it by using technology. We've accelerated by bringing a bunch of veterans on that run, billions of dollars of assets or, you know, hundreds of stores or whatever. Jason Fudin (00:14:19) - We blend. Leadership generally is a mix of people from the multifamily world in the hotel world, so each can take their best habits hopefully, and try to cancel out each other's worst. And I'd say one of the biggest mistakes we made early on when we started the company is we didn't appreciate the value of building the right culture and talent. You know, as developers were kind of like, Oh, we just, you know, you build a building like any bricks need windows, whatever. Like a company's not like that. It's like a living organism. And so one of the biggest mistakes we made at first was not appreciating how critical it was to build that culture, that set of norms. And, you know, we had like core values that couldn't even tell you what they were. So it was total crap. Um, but today, you know, we have three norms of the company. We own it, we make it better, we treat people right. Everyone rallies around that and they know that if they ____ up, but they do it in, you know, an effort for one of those norms that they're going to get some grace. Jason Fudin (00:15:11) - And that's helped us build a foundation of a high quality team. And then people that do a great job, we promote them fast and often and give them more and more responsibility. And so and then we offer people where we feel like they're not a fit. We don't just wait it out as some big company. Sam Wilson (00:15:26) - Oh, no. I think that's that's really, really great. And that was going to kind of be my next my next question behind this because there's you know, I look at what you're doing and obviously don't understand it in a comprehensive way, but it's like getting something like this off the ground. You got to find that multifamily building that that was just built that's empty. Then you got to find that model. How are we going to set up the pop up hotel? And we got to find all the services, all the people to plug in. I mean, that's a lot of things to get all moving in a common direction and get it working out of the gate to where the first one works. Sam Wilson (00:15:59) - Then you can go out and do it like you've done across the country. I mean, that just sounds like a monumental undertaking. Jason Fudin (00:16:05) - Yes. Yes. I mean, that's the business. You know, certain innovations are kind of like blue ocean, like AI or something else where basically, you know, human technology has never, you know, cross that chasm. And so it's a very different kind of innovation. You know, like you fundamentally change the way something works, like when the world went from like pulleys for lifting weights to hydraulics, you know, like it was just a pure technological change. In our case, the reason I called it a tech enabled operation is that's exactly what it is, is we're solving thousands of little problems in a cohesive way so that the outcome leads to higher profitability, effective, you know, customers, a customer product. Our Net Promoter score is close to the Ritz-Carlton, even though we're at that much lower. So, yeah, we had to solve a million problems and we have another 10 million to solve, but that's what makes the operating company valuable. Jason Fudin (00:16:58) - It was just a small little like jump leap, whatever. No one would pay us the money. They pay us on a contracted multi-year basis to increase the value of the real estate. Sam Wilson (00:17:09) - Right, Right. Yeah. No, I like that. Yeah. There are thousands of problems to solve. Do you feel like what you guys are doing? I mean, feel like it's you're on the you're on the front end of this kind of model? I mean, do you see other operators beginning to copy your, your kind of. Jason Fudin (00:17:27) - Yeah, we've seen people do pieces of it. So to your point, every piece that we do is complicated. So we've seen people run furnished apartments like a hotel where they sign leases and have to deal with the management contracts and the structure. We've seen people run apartments this 30 day plus corporate housing. We've seen people buy the stuff and bring another operators. We've seen we've seen every version of we've seen folks in the hotel space just try to use technology to make them more efficient operators. Jason Fudin (00:17:51) - So we've seen like all of the pieces of our business, I would say that no one effectively like we does. We do bring it all together and to bring it all together is where the real value is created. It's the flexibility, you know, building in the optionality into the real estate. But yeah, we've seen a lot of people touch around the edges and then there's a number of buyers and developers that pursue just the real estate strategy and they bring us in as their partner. We either power their stuff or we operate their stuff or whatever. Um, the company today is on a trajectory to be worth a couple billion dollars over the next few years as kind of a niche player. So if you think about, again, private student housing, that's a small market relative to real estate United States, but there's multibillion dollar players in that space. And like if our view of the world is wrong and what we're doing is niche, we become a couple of billion dollar company, we create a few billion dollars of creation of value in real estate and. Jason Fudin (00:18:44) - Pondered. We go. My belief, my strong belief is that the blending of real estate and the higher utilization of real estate will become the norm for new projects because it's more valuable, right? And that will be reflected in land pricing. And as soon as land trades at a price that reflects a higher and better use. Developers won't have a choice but to build versions of our model as a physical asset, right? And when that happens, we're not a couple of billion dollar company. We're competing with the biggest hotel companies in the world, the biggest public companies in the world. And we're powering a new generation of real estate assets and corporate markets. Sam Wilson (00:19:19) - I love it. No, I absolutely love it. This is this is an episode I'm probably going to kind of mentally catalog or putting my my, my brain bank and say, okay, you know what? We're going to we're going to go back to this 1 in 7 years like a what do they call those? One of those things we did as kids, whether you'd like. Jason Fudin (00:19:34) - Right time the time capsule. Yeah. There you go. Sam Wilson (00:19:36) - The time capsule, You know. You know, first grade. I want to be a firefighter someday. Like, okay, open this in 20 years. So I'm going to come back in about seven years and say, okay, where did Jason and his company go and how his real estate really shifted? Because you're absolutely right. Like the highest and best use with what you guys are doing is transformative in the way that these buildings are operated and owned. And I think this is this is really, really cool. I got one final question for you here, Jason, before we sign off. And it really comes down to bringing good people on your team, what would you say? Because I know you mentioned this there. You said, hey, you know, we've brought on some of the brightest and best that we could. How did you attract them to what you were doing and make it an attractive place for them to come come to work. Jason Fudin (00:20:23) - I think actions speak louder than words. And so if you see the way me and my partner run the business, we run it in the way that we'd want to be treated as employees. We've built a culture of transparency, of hard truths and a, you know, the best answer wins, not the most senior person. And I think that that attracts a players and they bring in their other friends and people they've worked with. And it's kind of contagious in that way. I think also structurally we've made ourselves accessible to a bigger pool of talent. So we on the corporate side are remote first, and that means that we have team members in some 30 states. That means that anyone in America that has access to high speed Internet can work on the corporate team. In fact, that means anywhere, anyone, anywhere in the world technically could if we structure their contract correctly. Right. Um, and that's been, that's been huge on the non property side is there's a lot of overlooked, highly talented people, whether they're new moms or otherwise, want to live in places that don't lend themselves to a corporate office. Jason Fudin (00:21:23) - So we've, we've, you know, dipped into that largely. And then on property, you can move up within our within an organization so much more quickly than you can like pick a big apartment operator hotel where it's like, well you do two years at the front desk and you do like, ___ that, man. Like if you're doing exceptional work and you're having an impact, we're going to give you more and more. And so for our property team members, they're able to move up quickly and get that responsibility. Everyone gets stuck in the company from our cleaners through the executives, and we built the company where hopefully we all went together. Sam Wilson (00:21:53) - That's awesome. That's awesome. Jason, thank you for taking the time to come on the show today. This has been awesome. Learned so much from you and love the model you guys are bringing to the market. If our listeners want to get in touch with you or learn more about you and your firm, what is the best way to do that? Jason Fudin (00:22:07) - Yeah, just shoot me a note on LinkedIn. Jason Fudin (00:22:08) - I do a pretty okay job of checking it. I'll get back to you. And then we always have positions open, so please apply for them. You can mention you heard me on this podcast and come stay with us as a guest. Sam Wilson (00:22:19) - Sounds great. Jason, thank you so much for coming on the show today. Certainly appreciate it. Jason Fudin (00:22:23) - Thanks, Sam. Thanks for having me. Sam Wilson (00:22:25) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Adam Gower. Adam Gower Ph.D. is a 30+ year real estate veteran with over $1.5 billion of CRE investment and finance experience who today builds digital marketing systems for real estate professionals who want to raise equity capital online (aka ‘crowdfunding') and he Show summary: In this podcast episode, Dr. Adam Gower discusses his background in real estate and his transition to digital marketing. He emphasizes that while the medium may have changed to online platforms, the fundamental triggers that motivate investors remain the same. Dr. Gower shares his journey and how he now helps real estate professionals build digital marketing systems to raise capital online. He discusses the challenges of navigating the world of digital marketing and advises testing different marketing ideas. The conversation also touches on the importance of addressing investor concerns and maintaining open communication to attract capital in a challenging market. -------------------------------------------------------------- Intro [00:00:00] Introduction and background of Dr. Adam Gower [00:00:55] Building digital marketing systems for real estate professionals [00:03:12] The challenges of digital marketing [00:10:51] Applying traditional marketing techniques to online platforms [00:12:38] Testing and iterating marketing ideas [00:17:44] Changing Capital Raising Strategy [00:21:23] Addressing Investor Concerns [00:23:31] Regular Communication and Education [00:26:22] -------------------------------------------------------------- Connect with Adam: Linkedin: https://www.linkedin.com/in/gowercrowd/ Twitter: https://twitter.com/GowerCrowd YouTube: https://www.youtube.com/gowercrowd https://www.youtube.com/gowercrowd Facebook: https://www.facebook.com/GowerCrowd/ Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Adam Gower (00:00:00) - And the way that people interact with sales materials and marketing materials hasn't changed the same exact triggers. Will will motivate somebody, an accredited investor, to want to learn more and then to actually act and invest with you. Nothing's changed. Even though it's online, the the techniques are the same. What's cool about the tech is figuring out how to how to read the data, right. And understand which ideas you have that you're testing are working better than others. But apart from that, nothing's really changed then. Welcome to the How to scale. Sam Wilson (00:00:43) - Commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Sam Wilson (00:00:55) - Adam Gower, PhD, is a 30 year real estate veteran with over $1.5 billion of commercial real estate investment and finance experience. Today, he builds digital marketing systems for real estate professionals. And for those of you that don't know, Dr. Adam Gower came back on the show. Oh gosh, it was earlier this year, April 10th, 2023. Sam Wilson (00:01:15) - So we're catching you kind of right, mid quarter, first third of the year. Then we're catching the second quarter of the year. Adam. For those that didn't catch that first episode, there's three questions I ask every guest who comes on the show and I'm going to ask you to answer them again really quickly if you can, in 90s or less. Where did you start? Where are you now and how did you get there? Adam Gower (00:01:34) - Right. First of all, thank you for having me on. And I always I love being on these shows where the you know, the pre conversation is really mellow and quiet. And then you go into the introduction. Adam Gower is like, like it's like the radio voice. Sam Wilson (00:01:51) - Absolutely, man, we got it. We got to make it entertaining for those that are listening. Otherwise they're going to put everybody to sleep. Adam Gower (00:01:58) - I need to I need to take notes from your book, Sam, because I always do my introductions afterwards. But anyway, to answer to answer your question, where did I start? Okay. Adam Gower (00:02:08) - I started hundreds of years ago, actually in the early 1980s. It was very interesting time to start because in those days, mortgage rates I remember Sam, when I first put money in the bank in the early 80s, I got 12% interest on deposit. Imagine that, 12% zero risk guaranteed money and and mortgage rates were pushing 20%. It was a very different time. Remember that might that might figure in what we're going to talk about later today. So that's where I started. I started pulling wires for an electrician and then eventually started raising money for a ground up multi-family developer. Second question was, you got a room? I've got a I've got a memory of, you know, whatever, a steel trap, a memory like a steel trap can only hold one thing at a time. Sam Wilson (00:03:02) - And it's very difficult to get anything out of that trap completely. Exactly. Adam Gower (00:03:06) - Yeah. It just. Just sits there kind of dormant. Weird. Sam Wilson (00:03:09) - You start. Question number two is, where are you now? Adam Gower (00:03:11) - Ah, right. Adam Gower (00:03:12) - So spinning forwards, however many years that is unfortunately 40 odd years. I don't like to admit that it makes me seem really old. But anyway, so today, so what we do is we build a digital marketing systems and help people build digital marketing systems so they can raise capital online. We've focused exclusively on commercial real estate. Our clients manage probably over 35 billion AUM and have raised over $1 billion using our systems over the last few years. So that's that's what we do now. I just I got addicted to the idea of digital online syndication when it became legal. I raised over half a billion myself and it would all been in-person, sitting with people, traveling, having people travel. To me, it's just brain damage. So when it became legalized, I'm like, Goodness, that you could do it online. I just decided to switch and and that's what we do. It's what we do now. Yeah. It's I really enjoy it. It's like a hobby. I enjoy it so much. Adam Gower (00:04:20) - Like a hobby. It's like. Sam Wilson (00:04:22) - A hobby. Good for you. Yeah. I don't know that. Going to work as a hobby for me yet. So maybe I need to take a page out of your book. Adam Gower (00:04:29) - Well, you know, it's what I tell my boys. You know, you got to do you? I've got, you know, three sons, and I'd tell him, you got to do what you really enjoy If you if you do what you enjoy, you'll never work. Right? It'll always be just joyful. And, you know, you just look spring out of bed in the morning and look forward to the day ahead. Sam Wilson (00:04:49) - Oh, that's for certain, man. I've always wondered that about about people that watch the clock. Like when when 430 or 5:00 happens and I know I got to go hang not don't have to, but I get to go play with the kids because I know I can't leave all the kids at home with just my wife. So it's like, okay, I've got to wrap up work, but like, how in the world is it 430 or 5:00 already? Like, I never look at a clock and say, Gosh, I wish it would speed up. Sam Wilson (00:05:11) - I'm always going, I wish it would slow down. Adam Gower (00:05:13) - I need more time in my life. Right? Sam Wilson (00:05:16) - I've never gotten to Friday afternoon. I'm like, Man, thank goodness it's Friday afternoon. I'm like, Is it really? Adam Gower (00:05:21) - I got everything done. Yeah. No way. It says. Sam Wilson (00:05:24) - Right ever. Adam Gower (00:05:26) - Exactly. All right. So what was a question? Sam Wilson (00:05:28) - Three questions. You already answered it, which is, Where are you now? Adam Gower (00:05:30) - Oh, so that was question. Okay, good. Sam Wilson (00:05:33) - Start. Where are you now? Oh, no, that's a lie. See, I can't remember my own question. Adam Gower (00:05:36) - Where do you start? Where are you now and where you're headed? Sam Wilson (00:05:38) - How did you get there? Oh, how. Adam Gower (00:05:39) - Did I get that? All right, I will tell you that. But I'll connect the dots between pulling wires for an electrician and raising money for multifamily and what we do now. So the simple story is like this. So during the and it's important. It's a good question that you ask and it's. Adam Gower (00:05:54) - Probably since the last time we spoke because of where we are in the in the cycle in the commercial real estate cycle at the moment. So the last major downturn and this is a major one. This one we're going through now was 2007, really is when it really started with a vengeance. And I in in summer of 2007, I sold everything I had actually really liquidated everything, just got out. And I ended up working for East West Bank. And one of the major actually the biggest regional bank in California. And they were really they had some challenges because they had, they had done, um, a lot of real estate collateralized lending. And a lot of those real estate deals were all those those loans were non-performing, right? People had stopped paying. There was a lot of problems. And so they brought me in to help clean the balance sheet by selling the notes. I did some workouts and then subsequently I ended up at I'll cut out a couple of steps, but I ended up at Colony Capital working on a $7 billion loan loan portfolio or portfolio of non-performing loans, and that was a whole different cycle as well. Adam Gower (00:07:14) - Um, and um, and then when the, then when the market started to pick up. And around 2012, I started doing seed investing. Totally different. You know, I've made some money. The downturn actually treated me very well, and I started looking at these little startups. It was like a different world. I moved into a interestingly, you know, a lot of these things kind of dovetail into what's going at the moment. It wasn't a we work, but it was similar to a we work, it was a startup incubator. It was like this huge warehouse with open desks and open seatings, and you could rent a desk permanently. So I had all my stuff on my desk, but it was basically working in a warehouse. Sam I absolutely loved it. It was fantastic. I was surrounded by these bright students, you know, half my age and more. And I did some teaching at the university as well. But it was just the vibe in there and the energy. And you could hear people talking and doing presentations and walking around. Adam Gower (00:08:23) - It was just really high energy. And so when the Jobs Act and I was investing in some of their little startups, I wrote some checks like, that sounds kind of cool, but they were talking a different language. I'd never heard this language before SEO and SOS and Google Analytics and you name it website. That was like everything was brand new. It seemed like rocket science to me, like it was completely impenetrable. Um, but the Jobs Act passed in 2012. So you said 90s maybe 90 minutes if you don't stop me. But the jobs that passed and it suddenly allowed sponsors just allowed anybody to technically sell securities online. What that meant was that you could raise money online. I just saw that and thought, Oh gee, this like my entire life has been chasing around, trying to find good investor leads and then nurturing them in person. And now I can scale that like absolute scale, perfect scale, right? You can reach everybody all or to everywhere, all the time online, instead of having to knock on doors like kind of literally knock on doors, Hey, is there somebody's home? Right? Do you want to invest? And so I started to learn the the art of digital marketing, of marketing online. Adam Gower (00:09:52) - And I forgot your question again already, but I'll just kind of wrap up anyway. How did I get to where I am? And it just went from one thing to the other. In fact, I started some interest and I started with a podcast and, and I taught myself how to produce a podcast, how to build, which isn't trivial. You know, you're sitting there with lots of 800, how many ever episodes you've got on a big you've got a gorgeous mic and, you know, nice background. But when you started, you scratch your head, right? What do I do? Oh my God, how am I going to record? I'm going to clean up the audio. Is it going to be video? How do I get it out? Where do I put it? What is libsyn? How do I distribute? It's like a million different questions. So it's actually. Go ahead. It's like you don't. So I figured this out just like you did. And then I built websites and then I built marketing funnels. Adam Gower (00:10:44) - Then I started putting them all together for clients. And that's what we've been doing. That's basically how it started. Sam Wilson (00:10:51) - That's really cool. I think one one word that you used that is it's a common feeling as especially here recently on gosh, because we have our hands in the laundry business and then we have our hands in the RV resort business and, and then setting up all the marketing campaigns for those various businesses and hiring third party ad agencies to handle all of that online. You said impenetrable. Like, I look at this and literally I got the the the the I don't know what the wrong the word for it. You use the right word for it, but basically said, here's the plan of action. And like you said, they're throwing out acronyms, they're talking geofencing, they're talking this and that and the other and how we're going to I'm just like, Uh huh, yeah, okay. Just where do I can I just mail you? Can I just give me the credit card and just. Adam Gower (00:11:38) - That's right. All I want is more business. Get it, get it, get it for me. Sam Wilson (00:11:44) - Needs to be there. That's it. It's like, yeah, you know, I don't care if it's ten grand a month. Adam Gower (00:11:48) - I actually find the whole process really interesting, actually. You know, what's what's particularly interesting about it? I'm looking at my as I look up here, I have books that my entire room is books, by the way, apart from this whiteboard behind me. But you know what we're talking about actually. These are tactics and techniques and strategies for selling and marketing and selling that have been around for a very, very long time. The reason I'm looking up here is there's a couple of books. There's Robert Collier. Book. This is amazing. It was written in 1920, I think. And then there's my life in advertising, scientific advertising. What is it called? Scientific advertising by John Hopkins. And there's a bunch of books like that. What's cool about it? Applied Business correspondence. Adam Gower (00:12:38) - What's cool about is this stuff was written 100 years ago about the way that they did marketing direct mail where they'd send out literally send out mail to sell some of the things, you know, three by three feet of books as well. One of the things that's the coolest idea by three feet, five pizza box for your bookshelves, you know, whatever and pay on the drip and here's a coupon or whatever. But the tactics and techniques are exactly the same online. Why? Because human psychology is not changed now. The way and the way that people interact with sales materials and marketing materials hasn't changed. The same exact triggers will will motivate somebody, an accredited investor, to want to learn more and then to actually act and invest with you. Nothing's changed. Even though it's online, the the techniques are the same. What's cool about the tech is figuring out how to how to read the data, right. And understand which ideas you have that you're testing are working better than others. But apart from that, nothing's really changed then. Sam Wilson (00:13:52) - Right? No. And that's and that's it. I mean there comes. What do you recommend to people? I mean, because there comes a point where we we all can't be experts in everything. I can't, I cannot and I don't have the mental bandwidth to become an expert in online digital, you know, paperclip marketing. I really don't. It's I know it's not rocket science. You know, as you said, it's you got to figure it out. But I don't have the the cognitive bandwidth to absorb and understand that. Right. Is that the gap you are filling in your business? Yeah, we. Adam Gower (00:14:24) - We do that. I mean, the way to decide whether or not it's worth doing. Right. Just talking to you, it's interesting that you bring this up so we can talk hypothetically. We can talk very specifically. So being specific about your comment. So the way to do this is to you've really got to look at how much money you're putting in to the process and how much money you're getting out at the back end. Adam Gower (00:14:48) - It sounds kind of, you know, a bit silly to say it's because it's so obvious, right? But that is what you want to do. So let's say you've got a laundry, a laundromat somewhere, and I'm not that experienced in laundromats, to be honest with you. But I imagine that you still you can do what you can advertise and you can get contracts, you know, from local sports teams. And there's all kinds of things that you can do to, you know, kind of scale the thing up. But you also want local students to know about that. You do coupons, promos, I really don't know. You put in tech, there's all kinds of stuff that you want to do, but you also want people to know about that, right? So whatever your total cost of advertising is, you want to be looking at what is the return on that spend, and the acronym is return on ad spend. So that's going to include however much you're spending on the advertising. By the way, this applies 100% exactly the same to raising capital for for equity. Adam Gower (00:15:45) - Well, actually doesn't it's actually more technically it's harder for equity because in your case, you would you would say, okay, I'm going to run a campaign. I'm going to pay the agency however much a month. We're going to actually invest, however much we're going to invest in this in the you know, in the paid ad itself. I love emotional spending that let's say you spend 10,000 and I'm pulling this out. My. I have no idea how much money you make in a laundromat at $0.25 a pop. I don't know how that works. But anyway, let's say you spend 10,000 or $1000 on your advertising and your agency. You know, pretty much if you have made that money back, if you do the campaign properly, right, you could do a coupon, right? You do a coupon for a certain period of time and you can see how many people actually use that coupon. Was it worth the ad spend or wasn't it Right. Was it worth it? You've also got to look at lifetime value, right? Somebody comes in for the first time, they might only spend $10. Adam Gower (00:16:45) - I don't know. Again, I've no idea. But now, suddenly, if they buy a membership, I don't know if you have membership, if you've got a recurring membership model and they sign up now, you know you've got this lifetime value. So you can start looking at it in that context and determine whether or not the campaign worked. The key, though, with any kind of marketing these days, as it was or even 100 years ago, was to test ideas. Don't be afraid of trying something. You know, I've just pulled an ad campaign that we've got on Facebook. It wasn't doing very well. All right. Most of my campaigns, you know, they run positive. I make more money than the campaign we're running. Just kill the campaign this morning. There wasn't losing money. It's like, you know what? Let's kill the thing. Can't be bothered and actually don't even want to revamp it. I'm just going to stop the campaign. But the key is to test and the chances are that you will test multiple different ideas and ways of let's get back to raising money for real estate. Adam Gower (00:17:44) - You will test all kinds of different ways of raising money, finding accredited investors, nurturing them and converting them. And probably nine out of ten, those of those ways won't work. You know, nine out of ten ways that we try don't work. Oh, my goodness. But the ones that do, we double down on. And those are the ones that we roll out to our clients. So actually invest a lot of money testing different ways of marketing. Most of them lose. I know that fails, but the ones that win, those are the ones that we take to our clients. And then we we we double down on those. Sam Wilson (00:18:18) - Right, Right. And that's and that's having that patience, that kind of that that kind of iterative patience to go, okay, we're going to put this campaign out there. We're going to see how it does. Do we like it? Did it perform? Yes. No. Analyze it. Start back over. I mean, that that process sounds like it's ongoing for you. Sam Wilson (00:18:39) - I mean, really for the life of however long you're doing this. Adam Gower (00:18:41) - Well, yes. But I think life is like that, isn't it? I mean, I was I just was reading your some of the stuff on your website before we connected. And you did multifamily and you did forget not mobile homes, but something else. And now you're focused on laundromats. Well, that is the same process, right? It's a process of trial and error. You try something, you work. It either does well, it doesn't work well. It sucks up your time. It doesn't suck up your time. You find that you've got a niche, something. So you double down on that and you just focus on it because it's the one that really worked for you. And everybody's different. So it's not anything. It's kind of got a little bit more esoteric, I suppose. If we talk about life, the universe and everything, but it is life. That's how you kind of deal with life. You test ideas, you test stuff, you go on vacation. Adam Gower (00:19:29) - Let's why don't we try such and such? Never going back there. Right? You try it didn't work or you go somewhere and it's amazing. And you book the minute you get back home for next year, right? As life is like that, you just try stuff. And if it works, you do more of it. And if it doesn't, you move on. Sam Wilson (00:19:47) - You move on. That's exactly. Yeah. I've got one of those vacation memories in my book here. Adam Gower (00:19:53) - The good ones are the bad ones. Sam Wilson (00:19:54) - It was a bad one. Unfortunately. I was like, You were never doing that. Adam Gower (00:19:58) - I'll tell you something. I'm going to tell you right now. I went to a hotel. My kids were just at camp. I took my wife. I like to go to the you know, we kind of splurge when the kids are right. We went to this supposedly fabulous four star hotel resort. I figured we'd go away. I treat my wife, we spend a lovely time, kind of a staycation here in California. Adam Gower (00:20:18) - The bloody room had duct tape holding the thing I could not sweat. Whose duct tape on the floor instead of a I couldn't believe it. I was absolutely disgusted. And I know this business. I know the owners. I know the management companies like guys, this is not cool. I got out and you know what they offered me? They came back. The manager, the hotel manager wrote and complained about this thing she offered me. She said, We'll give you a free night. But no, wait a minute. I'm just complaining. It's like going to a restaurant saying the food is dreadful. And they say, All right, I'll tell you what. Why don't you come back again? We'll give you some more dreadful food. Speaker 4 (00:21:00) - What? Sam Wilson (00:21:01) - That's. Oh, man, that's a very, very. Yes, very. Through the way you live and learn, though it's an iterative process. Just Hey. Adam Gower (00:21:08) - Listen, hang on. Sorry. We're kind of going off on a bit of a tangent because I'm a bit hyper caffeinated, but what your what are your listeners want to hear about raising capital at the moment? Let's give them something really tangible and, you know, something you can use when you leave the call today. Sam Wilson (00:21:23) - That's absolutely I'm glad we're making this segue because there's there's two things I want to talk about. One is how you are changing your capital raising strategy because capital raising has become immeasurably harder, I think, for everyone. I'm certainly seeing that in what we're doing. People are sitting tight. They're holding on to their wallets. They're just kind of going, Oh, crud. Like you said, maybe it was you that said this or maybe the last podcast Guest I think it was maybe the last one. We were talking a seven on a multifamily deal. Just isn't that compelling when I can get five and a half at the credit union, right? Like what? What are you guys doing? What are some strategies you're taking right now that are and again, not that we want to convince people to invest, but we want to give them compelling reasons to invest. What are you guys doing differently? Adam Gower (00:22:12) - Well, yeah, I would say that it's not that you want to convince people to invest. You want to give people a solutions to the problems that they have, and that is if you've got a good asset class and you are able to make money, then you have what investors want. Adam Gower (00:22:28) - You've just got to be able to articulate what it is that you have. That's that's kind of the way I think about this business, is that really, you know, a successful real estate sponsor has exactly what everybody wants, right? We've got ongoing income, passive income, which is just an IRS term, but you're offering ongoing income on your investment and to build wealth. Who doesn't want that, Right? Everybody wants that, Right. The challenge is that investors, everybody is skeptical. So they hear about you the first time and you say, here, I'm going to give you a passive income and build your wealth. That's what they want. But they're skeptical. They don't trust you. They want to be sure that you're not, you know, in a basement somewhere, you know, putting it in your pocket and whatever, buying Rolls-Royces all the time with their money. Right. Right. So you've got to get over that hurdle. Now, during the good times, it's actually not difficult because people are making money hand over fist and they're just looking for alternatives. Adam Gower (00:23:31) - They're less skeptical because there's less bad news and in the news. Right. About what's going on. So during a downturn and this is also true, in fact, during good times, but particularly during a downturn, there are two things that you have to do, right? So these are practical with underlying this podcast to this point, whatever minute we're at here right now, this is something you can actually take away and use immediately. The first thing that you have to do is address the concern that your prospects have immediately. So whatever that concern might be, don't hide away. Don't hide that and pretend it doesn't exist. Deal with it immediately. Because if you don't deal with it immediately, no matter what else you say, the conversation that your prospect is going to be having in their own mind is, Yes, but what about this? And today and we know this from the advertising campaigns, we run for clients and also from a multi sponsor investor sentiment survey that we ran recently. Investors, including you, probably you as in you, dear viewer or listener to this podcast, are concerned mostly about protecting your money. Adam Gower (00:24:50) - You don't want to be losing all your money when values drop. And and you're seeing the commercial real estate really hitting some some choppy waters. So the first concern you have is not to lose money, right? So when you communicate with sponsors I'm sorry, with prospects at the moment, the language you want to be using, language patterns you want to be using or specifically protecting the investment, protecting your investment. Don't use clever terms like principle preservation. You and I know what that means, but investors use a different kind of language and you always want to use the same language your investors use because you want to be understood. So protecting the investment is very important. So in your communications, this can be on any kind of ad campaigns that you have or any kind of newsletter you put out, any kind of pitch that you put out. Start with how you protect the downside. What are you doing exactly? How much debt are you taking on? Is it fixed? Is it a variable? If it's variable, why are you choosing to do variable today? What kind of leverage have you got? Have you underwritten your deal? Do you want me to stop? I see you. Sam Wilson (00:26:09) - We are. We are in the final 30s and we got it. We got to hang hang it up, unfortunately. But this is gold. So I want you to finish out this thought because I think I will do our investors, but our listeners are really going to get something out of it. Adam Gower (00:26:22) - Yeah. So this is really important. So. So you want to be addressing how you're going to protect their investment. That's the first thing. And then you can start or at least that needs to be the bulk of what you of your communication. The second thing that you need to do, communicate regularly. Oh, my goodness. Don't just not pitch all the time. Educate, talk about what's going in the market, what are going on, what are you seeing? How are capital markets? What's going on with interest rates? How are you dealing with them? What are you doing at cetera? Be don't pitch educate about these key issues. Those are the two things that we should have started with that Sam. Sam Wilson (00:27:00) - Now think it's been great. Dr. Adam Gower, thank you for taking the time to come back on the show today. If our listeners want to get in touch with you and learn more about you, what's the best way to do that? Adam Gower (00:27:08) - Gower crowd. Go to Crowd Gower. crowd.com. Sign up for the newsletter. You'll get an email from me on Wednesday with the latest newsletter. If you want to ask me a question, hit reply. Sam Wilson (00:27:21) - Absolutely. Thank you, Adam. Do appreciate it. Have a great rest of your day. Adam Gower (00:27:25) - Thanks, Sam. Sam Wilson (00:27:26) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Daniel Holmlund. Daniel started the Alternative Investing Club which helps educate people in creating an ownership culture. He is also an active real estate investor who partners and mentors with others. Show summary: In this episode, Daniel shares his real estate journey, from flipping single-family homes to founding Good Samaritan Capital, a syndication and private equity real estate company. He also discusses the growth of the Alternative Investing Club and offers advice for aspiring club organizers. Daniel and Sam then delve into the current market conditions, including inflation and interest rates, and discuss the strategies implemented by Good Samaritan Capital. -------------------------------------------------------------- Intro [00:00:00] Building the Real Estate Club at Intel [00:03:19] Moving the Club Externally [00:08:28] Scaling the Club and Membership Growth [00:06:29] The Real Estate Club and Networking [00:11:12] Impact of Interest Rates on the Market [00:12:52] Good Samaritan Capital Growth Fund [00:18:19] Daniel's contact information [00:22:31] Expressing gratitude [00:22:54] Closing[00:22:55] -------------------------------------------------------------- Connect with Daniel: Facebook: https://www.facebook.com/danielwholmlund Linkedin: https://www.linkedin.com/in/daniel-holmlund/ Email: firstname.lastname@example.org Web: https://www.goodsamaritancapital.com/ Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Daniel Holmlund (00:00:00) - We went and raised a large chunk of money for them and negotiated with them for better terms, and then an individual would get coming in. And it really dawned on me this year that being able to find better terms is the name of the game. And the only way you can really do that is through scaling. Welcome to the How to Scale commercial real estate show. Sam Wilson (00:00:23) - Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Daniel Hamlin started the Alternative Investing Club, which helps educate people in creating an ownership culture. And he's also an active commercial real estate investor in Daniel. I know that that bio just doesn't even remotely capture everything that you've done in commercial real estate, but either way, it's great to have you on the show. Daniel Holmlund (00:00:53) - Hey Sam, it's great to be here. I love seeing that you put out a daily podcast and I know a little bit about the rigor that that entails. So congratulations to you too. Sam Wilson (00:01:02) - Well, we have to I can't say it's daily anymore. Sam Wilson (00:01:06) - Regrettably, we did seven. I don't know who is. We? We got a mouse in my pocket. I did. I do have a lot of help. So maybe it is we it is definitely a we. Podcasting is a wee wee sport, but we did 720 episodes. So two years straight daily and then we've moved to three days a week. So it yeah, we're only at three days a week now. I can't claim a daily real estate show anymore, but either way, Daniel, this show was about you, not me. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Daniel Holmlund (00:01:38) - Sure. So when I was little, my grandparents bought a apartment complex. After my grandfather retired from International Harvester, it was only after he retired from his full time job and bought real estate that he actually amassed a new wealth. And that kind of struck me as a ten year old. Daniel Holmlund (00:01:54) - So I started right out of college, buying properties in single family homes, usually adding a little value there, flipping them. That was in 2002. I invested as hard money lender from overseas, actually all during 2006 to 2008. I ended up through the 2008 with a couple of houses that hard money lenders didn't want to pay me back for. Kept those for a little while and then founded Good Samaritan Capital, which is a syndication and private equity real estate company in 2018. And I have been working on private equity commercial deals ever since. Sam Wilson (00:02:34) - Okay, that is really cool. I mean, but you've also held a W-2 here until recently, if I'm not mistaken. Daniel Holmlund (00:02:42) - Yeah. Yeah. So I until just this year, I was full time at Intel where I worked on video and and artificial intelligence was a trainer for these. So didn't actually write the software. But I trained people in how to use it. And I also started the real estate club at Intel, which has been going now strong for four years. Daniel Holmlund (00:03:04) - It's just exited Intel and we rebranded ourselves the Alternative Investing Club. And it is we bring a speaker in every single Friday and just learn from great people who are out there doing it. Sam Wilson (00:03:19) - Let's stay there for just a second because I think this is something really cool that you set up there at Intel. You guys, like you said, you had a weekly meeting. You brought in a speaker every Friday. I think you had, you know, parameters around it which make all the sense in the world. It's a no pitch educational only. And I actually got to present there for you. Daniel Holmlund (00:03:36) - Yeah you did you it on syndicating parking lots. Sam Wilson (00:03:38) - Yeah. This was three years ago. Daniel Holmlund (00:03:40) - Three years ago. Yeah. Yeah. Sam Wilson (00:03:41) - 3 or 3 and a half even. But it was fun. Yeah, it was great. It was great. It was great to be there. One. How did you build that club and then what advice would you give to somebody else thinking about that? Because, I mean, you guys are at Intel. Sam Wilson (00:03:54) - You're not there to talk about real estate. You're talking, you know, microprocessors and all the other probably 800 billion things that Intel involved in. Daniel Holmlund (00:04:00) - Yeah, Yeah. And you know, actually, I not only helped to build the club at Intel, but in 2021, I started just a small pro-bono mastermind helping other people start clubs. And we, we helped start the club with me over at Walmart, over at Netflix, at Cisco, at We revitalized the club over at Apple. We started one at Facebook. And so we we built a little bit of a network there and they're actually totally independent from me and off doing their own deals, starting their own clubs. But in Intel, I basically went into and said, I see you've got a stock company or a stock club. I see you've got a startup club and I want to run the real estate club. And my advice to people wanting to do that is figure out who to talk to at and make sure that you you frame it in terms of I am making this company a better place to be, right? You know, Intel needs to be a great place to work. Daniel Holmlund (00:04:58) - And because of that, we're starting this club, which is purely educational and and also networking. Sam Wilson (00:05:04) - Right, Right. That's cool. That's cool. Yeah. Love that. I mean, again, I've never spent a day in corporate America, so wouldn't even know where to start on that front. Like, oh. Daniel Holmlund (00:05:14) - Hell, some corporations are. Ah love the idea that you have the enthusiasm, some are really conscientious and they'll put like the the compliance officers in the audience to, to monitor you, which, you know, you should be compliant. You should be running a purely educational club. Right. So, you know, just work with them and make sure that you keep the people happy and provide great speakers to your club members. Sam Wilson (00:05:40) - Right. Right. No, I think that's great. How long did it take for you to get traction on that front? Daniel Holmlund (00:05:45) - Oh, gosh. You know, my first four months running that club, I was embarrassed to go out to speakers. I was like, We're the Intel club. Daniel Holmlund (00:05:53) - We've got like 12 people that are showing up. Yeah, but around what I did that actually grew the club is I went to other clubs and there's a, there's a 20 and 30 professional club called called Next Gen professionals at Intel. And I said to them, Hey, can I get on your calendar? And this is what we we do. So I went and networked with other clubs and that's actually what caused my my growth to explode. And you can see a very nice progression up over the last three and a half years. We're now at almost 1100 members. Sam Wilson (00:06:29) - Wow. That's really, really impressive. And that's something I mean, I'm assuming you've done essentially with no marketing, no advertising. Daniel Holmlund (00:06:39) - In fact, I was forbidden from doing that. It didn't sell. It was all word of mouth. Right. Sam Wilson (00:06:43) - Right. Oh, that's really, really cool. I love that. And I think that's the other thing is I think even back to launching a podcast or it was like, you know, I don't know where we are 800 and 3050 episodes, somewhere in that range. Sam Wilson (00:06:58) - It's like the first few episodes. It's like, Man, why am I doing this? Like I think I had? I think God bless the guy that came on with seven downloads, I think was on my first episode published like, Oh, after a week I had seven listens whoop de stinkin do. Why are we doing this? And obviously that's changed. But I think anybody starting out scaling what they're doing just has to note there's that incubation period, there's the embrace, the suck period of like, well, hey. Oh yeah, Pat in your hand, will you come talk to my 12 friends at Intel? Daniel Holmlund (00:07:30) - Because our group is at the very beginning of the club, we actually used to reserve a room and physically go there. And I realized one particular time nobody showed up in the room, but there was like 15 people online. And I looked at them. They were all in the same building as I was in. They were just at their desks. And so you go through periods like that, right? Right. Sam Wilson (00:07:51) - And did you go and did that change the model or the way that you did it from then on? Did you do it all remote after that? Daniel Holmlund (00:07:56) - It's completely remote. Most of our most of our attendees, the number one spot is actually from Folsom, California. Number two is Portland, Oregon. Number three is is Phoenix, Arizona. So we're a lot of West Coasters. There's some Texas and Virginia and other places thrown in. But but, yeah. Sam Wilson (00:08:13) - Got it. Oh, that's really, really cool. I love that. And so how did you how did you take that club out of Intel? I mean, did you just take all your email list and say, All right, guys, we're going to move this club? I'm not hosting it here at Intel anymore because I've stopped working for. Daniel Holmlund (00:08:28) - Pretty much, yeah, over over about a eight week period. I said, first of all, we posted all of our videos internally at while the club was happening in Intel, only Intel employees were allowed to go there. Daniel Holmlund (00:08:41) - So we posted our videos internally. We couldn't even send them to our speakers. Right? And well, actually, that's not true. We could send them to our speakers, but we asked they not share them. Right. And so and the reason why is because Intel wanted to protect the the privacy of their employees. And that was the policy that we had to abide by. Right. And so going out of Intel, it's been a big process. We basically told everybody, hey, if you want to continue coming to the group, sign up on this external emailing list in order to get on the group and we're going to go through all the videos and make sure that names are blurred out that you know, and anything that reveals any sort of employee name or data is taken out. And which was hard because we did question and answers where would say Bob is asking da da da da da da, right? And I realized actually early on that just using first names and not whole names was a good way to go because it meant a whole lot less editing. Daniel Holmlund (00:09:40) - Right? But basically we just told the told the group that we were moving externally and we moved over to Alternative Investing Club. Com and that's where we're hosting now. Sam Wilson (00:09:51) - That's really cool. Yeah. I love I love the idea of protecting the kind of the privacy of the people who are in the meeting. I made it here's a here's a rookie mistake I made the other day. Daniel I was doing a webinar and I didn't and I was using Zoom and I'm too cheap to pay for the, the like the webinar version of Zoom because it's like another, you know, I do like two webinars a year. So I was like and I pay for obviously. Daniel Holmlund (00:10:15) - Like 400 bucks isn't it? It's something like that. Sam Wilson (00:10:18) - But a. Daniel Holmlund (00:10:19) - Month. Sam Wilson (00:10:19) - It's high. When you tack on the webinar feature, I'm like, Man, I don't really care about that. And you can do speaker only view because none of that, none of the attendees in the webinar needed to be there. But I failed to do that. Sam Wilson (00:10:30) - And so it had everybody. His name's who was attending obviously a webinar for our clean Laundry fund. And I'm like, Oh, crud, there's all the type of video editor get in there and blur everything out and like. But it just wasn't quite the same, same but same idea. Or it's like, Oh crud, everybody doesn't want to get advertised. Hey, I was in this meeting and none of my investors want to get advertised to the world that, hey, they were attending a webinar for a clean laundry fund. So it's just like you got to protect those things. So very, very cool. We've talked a lot about the club and how you started at Intel, what you've done to move it to taking it out of the corporate America structure. What are some things you're doing differently now inside of that club that maybe you couldn't do before at Intel? Daniel Holmlund (00:11:12) - Uh, well, for one thing, we're beginning to bring in actual, you know, pitches to the club. So if people want to come in and talk about their clean laundry fund, we're doing more of that where it actually is listed to the attendees. Daniel Holmlund (00:11:26) - This this is is a pitch for a particular fund. And this is, you know, this is not a non educational one. One thing that I want to back up and say, actually, is that the the real estate club for me was my launching platform for Starting Good Samaritan Capital. So it was a networking group and I did a ton of networking, never using company resources, always called on Zoom outside of company resources, never doing anything like that. But I built up my investor list that way, and Good Samaritan Capital over the last over the last five years now has participated in 12 syndication deals, um, and two of which we have sponsored and then two fund to fund deals, I'm sorry, three of which we've sponsored and two fund to fund deals. And so our goal was to bring a new high quality vetted investment out to the attendees or people, rather not the attendees, but the people on my investor list. There's actually a lot of people attending who were not on my investor list. Daniel Holmlund (00:12:32) - Um, and bring it out once a quarter. So we've, we hit that goal every single quarter except for Q4 of 2022 where interest rates were starting to peak up really quickly and liquidity was drying in the market. This is still the current conditions that we're in and I'd love to talk about that as well too. Sam Wilson (00:12:52) - Yeah, shoot, man. No, let's let's talk about I mean, that's a lot of deals to get done. And that's and you, you essentially what you just said, if I can recap it and clarify is that you built your investor list by hosting these events and by starting these clubs. Daniel Holmlund (00:13:09) - Absolutely. Yeah, absolutely. You and it's straight out of, you know, the best ever real estate syndication book. Right? Create your thought leadership platform, create a thought leadership platform and become the expert to a group of people that you know and earn their trust through repeatedly being there. Our club has actually had for an average of 49 events on Friday for the past four years. So we we usually don't do the Friday after Thanksgiving and maybe 1 or 2 in December. Daniel Holmlund (00:13:41) - But other than that, we're there like clockwork and that that's a way to create trust. Sam Wilson (00:13:47) - Yeah, absolutely. Absolutely. Very, very cool. You wanted to talk about interest rates not getting a deal out in the last quarter. What what what has been your focus and where are you going now that we've kind of, you know. Daniel Holmlund (00:14:02) - Things, things. Yeah. Yeah. So so it's interesting. I think that a lot of people that are in the real estate market right now are realizing and and actually in the club we've been warning for two years I was joking in back in 2021 about which is more transitory inflation or the Fed or the Fed's reputation. Uh, and and I think now it might be the Fed's reputation, right? And that's, that's actually what we thought back then too. Um, but the writing was on the wall for quite some time. And in fact, one of the reasons I started a real estate company is because I knew I needed to convert all my stock market funds into real estate and hard assets because we were going into an inflationary period. Daniel Holmlund (00:14:45) - And my my thesis was always that inflation is starting to pick up. The way that governments are spending is going to necessitate that inflation picks up. But all it's going to take is a shock to the system to make it really jump up. Right. And we've seen lots of shocks to the system. Of course, nobody thought Covid would come around, but it only takes the shock to the system and shocks to the system happen a lot. The economy tends to position itself right on the knife's edge, right where, you know, we've borrowed just enough to make inflation. Not a problem if everything goes right. Well, what if everything doesn't go right? You want to be in assets that are tangible and that actually go up in value in inflationary environment. Since that was the core theme to my business, you know, five years ago and the writing was on the wall since, you know, 2013 where we anyway won't go down that route. So, so we, we now are in a period where inflation is kicking up, expenses are going up, the interest rates are going up. Daniel Holmlund (00:15:50) - This is drying up a lot of liquidity in the market. A lot of lenders have drastically pulled back. I see deals right now that, you know, used to be underwriting for underwritten for 75% LTV loan to value and now they're doing 65 or 60%. And so syndicators are raising a lot more capital in order to. If they're deals done, they're paying, you know, 7%, pref, 6% pref, whatever they happen to be paying, which is, you know, not as competitive as it used to be when interest rates were down at 2%. Right. You know, if you can borrow money at 2%, why pay 7% pref? Well, now they're getting a lot more closer to each other which is causing pref to move up potentially in some types of deals. And so a lot of lenders are pulling back and it's it's creating demand for private equity for increased amounts of equity and for mezzanine debt, particularly with operators who are running into cash flow issues or maybe didn't buy a rate locks. And so a lot of distress is starting to come into the market. Daniel Holmlund (00:16:58) - And that's that's kind of been our theme this year. Last year, our theme was in the two years before actually was flight to quality assets, where we invested in A-minus and B plus multifamily assets. We also bought our industrial asset in Kansas City, which is doing well. And this year it's going to be opportunistic to a certain extent deals with pref equity. And so Good Samaritan Capital has shifted its strategy a bit. Last year in our flight to quality deals, we started what's called a fund fund of funds, and we went and invested with large operators like Rise 48 and Lone Star and, you know, big operators who had a good track record of paying out dividends, not dividends distributions. Um, and so we, we went and raised a large chunk of money for them and negotiated with them for better terms. And then an individual would get coming in. And it really dawned on me this year that being able to find better terms is the name of the game. And the only way you can really do that is through scaling. Daniel Holmlund (00:18:11) - So I'll stop there because I've been talking for a little while. I could keep going, but I'll let you get an edge. A word in? Sam Wilson (00:18:19) - No, this is good. I'm loving here in the thought process how you guys have shifted, what you are looking for, what you previously invested in. You know, we're running out of time, but I do I do want to hear about because we've kind of got the back picture on where you've seen things and where how you guys are shifting your strategy, but you've launched a growth fund. I do want to highlight this before before we get off the call here, which is talk about your growth fund, because I think inside of that, when you talk about the four different things you guys are doing will really help kind of backfill the rest of what you were previously talking about. Daniel Holmlund (00:18:55) - Yeah, it's realizing that scale was needed in order to be able to come to the table and get better terms. We've launched the Good Samaritan Capital Growth Fund. It's a 506 C fund for accredited investors, and we are targeting four main strategies which we think are are particularly good in this environment. Daniel Holmlund (00:19:16) - In fact, I think there's a short window for it in this environment. And the first one is, is new construction. In the short term, we're going to see a lot of cash flow crunches. And so I want our focus to be on the areas where we can deliver for our investors, and that's in long term, long term growth. So we're looking at new construction, particularly new construction of land that is already permitted and already has the the architectural diagrams signed off by the counties. So we come in, we'll buy the land, the permits and the diagrams and then partner with new construction companies in order to build midsize multifamily 30 to 40 to 50 units. That's strategy number one. Strategy number two is, is a continuation of our previous flight to quality strategy, where we invest in multifamily that is long term and is either A-minus or B+. And usually I like to see some sort of tax abatement. Taxes are the largest expense in a multifamily deal. If you can reduce that expense, which a lot of a lot of municipalities right now are offering tax abatements because there is an increase in affordability. Daniel Holmlund (00:20:34) - So the county is coming in and helping you subsidize your your renters in many cases. And there's different types of deals. The second and third, I'll do really quickly, there is an opening right now for pref equity deals are beginning to become cash flow constricted and maybe they just need to finish off the last couple of units that they're doing. So there's a pref equity play which is in high demand right now. The the drying up of of markets and the unwillingness of banks to lend or the or only lend to large players has created a vacuum there. And there's an opportunity to step in with pref equity. And then just slightly further up on the. Capital stack is the mezzanine debt. There's a great opportunity for mezzanine debt financing as well. So the long term plays are the new construction and the value add and the shorter term kickers that generate a kick in the fund are the pref equity and the mezzanine debt. And so those are the areas we see as being good places to target this year. Sam Wilson (00:21:36) - Daniel And then. Daniel Holmlund (00:21:37) - Probably next year. Sam Wilson (00:21:39) - Absolutely. No, that's incredibly insightful. I mean, we could spend the next two hours really just breaking down each of those different components, how you vet, how you choose to work along, who you choose to work alongside and, you know, not winding up like you did in 2008, owning assets that you don't necessarily want. You know, how do you guys structure? And we could get into all of that. So maybe you need to come back on the show and we'll re re kind of go or not recap but go through all of those and get it get a little bit deeper. Dive into that. For those of you who don't know, Daniel was one of the early people here on the podcast that came on. Daniel, last time you were on the show, it was December 16th, 2020. And you goodness, I know you were episode number 17, So thanks again for coming. Oh, you came on early, man. Thanks for giving thanks for gambling on me. Sam Wilson (00:22:31) - Certainly appreciate you having you come back on the show here today. Daniel, If our listeners want to get in touch with you and learn more about you, what is the best way to do that? Daniel Holmlund (00:22:38) - You can reach me at Daniel at Good Samaritan capital.com and our website Good Samaritan capital. Sam Wilson (00:22:45) - Good Samaritan capital.com or Daniel at good Samaritan capital.com make sure we include all of that there in the show notes Daniel thank you again for coming on today I do appreciate it. Daniel Holmlund (00:22:54) - Thank you very much. Sam Wilson (00:22:55) - Hey thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Zachary Beach. Zach is an Amazon Best-Selling Author of The New Rules of Real Estate Investing and revised edition of Real Estate On Your Terms. He has been an authority in real estate for 8 years now and has personally completed hundreds of real estate transactions and mentored investors to complete thousands of transactions. Show summary: In this podcast episode, Zachary Beach, CEO and partner at Smart Real Estate Coach, shares his journey in the real estate investing business. He discusses the challenges of traditional financing options and highlights the importance of creative financing and direct negotiation with sellers to achieve better cash flow. Zachary emphasizes the value of personal development and mindset in his success and shares insights on acquiring properties through creative financing. -------------------------------------------------------------- Intro[00:00:00] Zachary's journey into real estate investing [00:00:53] Adding value to a business relationship [00:02:39] Becoming a Virtual Assistant and Acquiring Real Estate [00:08:49] Determining Good Deals in Creative Financing [00:11:10] Buying Commercial and Multifamily Properties [00:14:25] The importance of positioning in real estate deals [00:18:59] The seven steps to acquiring a property [00:19:56] Free book [00:21:29] -------------------------------------------------------------- Connect with Zachary: FREE BOOK:: https://wickedsmartbooks.com/sam3/ Website: http://www.smartrealestatecoach.com Podcast: https://www.smartrealestatecoach.com/podcast Facebook Page: https://www.facebook.com/smartrealestatecoach Google +: https://plus.google.com/+Smartrealestatecoachchannel YouTube: https://www.youtube.com/smartrealestatecoach Instagram: https://www.instagram.com/smartrealestatecoach LinkedIn: https://www.linkedin.com/in/zacharyrbeach Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Zachary Beach (00:00:00) - You know, if you're looking at it through a traditional lens and you're either going to go raise a bunch of money or you're going to go get, you know, institutional financing, there's typically a lot higher of a monthly payment that you're going to be dealing with. So you're not gonna be able to cash flow as well compared to if I approach a seller and I say, Hey, I need my payment to be here, but I'll give you your price then, Now all of a sudden we can walk into a lot more cash flow versus having to raise the debt. Welcome to the How. Sam Wilson (00:00:27) - To scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Zachary Beach is a three time Amazon best selling author of Real Estate On Your Terms. He's also the CEO and partner at Smart Real Estate Coach. And lastly, he's the co-host of the Smart Real Estate podcast. Zachary, welcome to the show. Zachary Beach (00:00:53) - Sam It's a pleasure, my man. Zachary Beach (00:00:54) - I'm excited to be here with you. Sam Wilson (00:00:56) - Absolutely. Zach. The pleasure is mine. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Zachary Beach (00:01:06) - Hundred percent 90s You're talking like Massachusetts here now, so we'll fly through this. So I was a bartender and personal trainer, um, just a short nine years ago and was burning the candle at both ends and was getting extremely exhausted and tired because, you know, as you can imagine, late nights and early mornings. So actually approached my father in law, who is now my business partner in multiple business ventures. And at the time he was he was revamping his his new real estate business as he got crushed in 2008. And he was, you know, coming out of the crash and got involved in this thing called creative financing and real estate investing. So I ended up joining him. And then about six months later, I was able to get my first my first property under contract, my first creative financing deal went ahead and burned the candle at both ends or burn the bridges, I should say, dropped every other job except for real estate investing. Zachary Beach (00:02:01) - And from there on out, just continue to build up that local buying and selling entity. And then also grew a real estate coaching business at the same time and kind of brings us to where we are here today. Sam Wilson (00:02:12) - Man, that's awesome. I love that there. I guess there's a few things here that I would I think some of our listeners would would pertain to them. When you said, Hey, I'm going to approach my father in law and say, you know, can I work with you? Can we learn how to, you know, kind of learn to do what you're doing or can I add value to you in some way? What was that conversation like then? Sure. And then how has that changed? Zachary Beach (00:02:39) - Yeah, well, the relationship's dramatically changed. Right. So was 24 years old. Um, it was December of 2014, and. And I was approaching him because I just was exhausted. Me and my wife were. Remember, it was one morning, it was like 4 a.m. because she was also a bartender at the time. Zachary Beach (00:02:58) - It was like 4 a.m. And we looked at each other and we were like, we got to figure out something else. And right. We were in bartending for about four years. Of course it was. It was a blast. It was like my second college. But there was a time and a place and now it was the time to to make the transition. So I said, Hey, I don't know if I'm gonna like real estate investing, but maybe I should talk with your father and see if, you know, we could fit into his current business and and see if we can create something bigger. Because I'm extremely ambitious, and I know he is as well. And let's see how we can take this to the next level. So when approached him, I said, you know, I don't know if I'm going to be good at this or not, but, you know, if you'd have me, I'd be interested in doing some things in order to generate, you know, some value to the company. Zachary Beach (00:03:40) - And, and, and I got the sexiest job in the world, but I when got was a list of names and numbers of expired listings people that had a property on the market at one point in time and it didn't work out and he said call these people. I'll, uh, I'll work with you on your sales scripts and let's try to generate some, you know, some warm leads. And once we start moving those leads to the funnel, then we can go ahead and start making some offers and trying to do some deals together. And that's kind of where it all started. And really at the end of the day, we kind of ate what we killed. So it wasn't like he wasn't that he was going to take a massive risk on his end, but eventually, you know, ended up taking a big leap as I started to learn it and then eventually said, you know, if I'm going to really be a real estate investor, then I got to I got to really focus and I got to cut everything else out. Zachary Beach (00:04:28) - And, you know, did that after about 4 to 5 months in the business and can hit the ground running from there. Sam Wilson (00:04:34) - Wow. Okay. So you made an important point there. You said eat what you kill. So you brought value in father in law or not, this would pertain to any business relationship where you're looking to learn from someone who's ahead of you. And I think that's the name of the game is how to scale commercial real estate. And I certainly have employed that tactic where it's how do I add value to you? What can I do now? Maybe that isn't asking you to write a check so I can come to work for you per se, but yet I want to work directly with you. So I love I love the way you approach that and say, hey, you know, eat what you kill. You went six months and you got your first deal under contract. So what? And he handed you a list of names and numbers and said, Hey, call them up and just see where it goes. Sam Wilson (00:05:17) - What was that process like in I guess, you know, it sounds like you had success with it six months in. So tell me how you stuck with it. Zachary Beach (00:05:26) - Yeah, it's it's mindset is everything, right when it comes to real estate investing. And the interesting thing is I still use that skill set today, right? Is the it is the building block of real estate investing in in my perspective, which is communication. Because once you communicate properly with people and solve their problems, understanding their motivation to understand the financials, I don't care if it's single family or commercial. Once you are able to communicate and solve people's problems, well, that's where the real estate deals come into place. Any brand new real estate investor that I communicate with am always like, This is not a real estate business. This is a communication business, this is a people business. And once you're able to solve people's problems, well, now, now you're going to be able to really start to be able to build some wealth in real estate. Zachary Beach (00:06:09) - So that's what I built upon consistently. And that's why I say, like to this day, I still use that skill set because if we enter into a new market, I just say, give me a list of expired listings and let's start let's start talking with some sellers in order to get some deals done, get straight to the source. Um, so during that, during that process, I mean, it, it was hard. I mean, for the first 2 to 3 years, real estate investing for me was hard. It wasn't natural to me, although, you know, it may say, well, you had a bar, you were a bartender, you know, you should be able to speak with anyone. And that may be true, but if you have zero real estate experience and you don't understand how the dynamics of a real estate investment deal, whether it be a traditional mainstream deal or, say, a creative off market deal, that's still a huge learning curve that you get to take on as well. Zachary Beach (00:06:55) - So it was it was hard and it was challenging. And the only way I was able to really stick with, you know, building this out. And as I started doing real estate deals, I started to find the love for for business in general. And the only way to be successful in any type of business is to consistently work on personal development. So I found myself, you know, listening to, you know, why I was setting up the bar, you know, And I just started, you know, doing real estate deals. I was listening to Jim Rohn, not music. I had my headphones in listening to personal development. So what I noticed, though, was as I continued to work on myself personally from a mindset, from a personal development, from behavior standpoint, that my my real estate career started to get better and better and better. So then I start to make that connection that said, All right, if I can control what's up here in my mind, then you know the business is going to grow in itself anyways. Zachary Beach (00:07:47) - I think I can't quote the exact person I used to say it, but they said, you know, your your income will never outgrow your development. So then I just started focusing on how I can develop better in order to increase my income and increase my wealth long term. Sam Wilson (00:08:02) - I love that. I love that. And that's so true. That is so true. Your income. Well, I couldn't have said it that way, but I like it. Your income. What? How'd you say your income will never outgrow your development? Yeah. So that's. That's really cool. And you and you've transitioned. I think, you know, even in your roles inside of the company, I mean, the company obviously is not what it was nine years ago when you came on board knowing nothing about real estate. So what have those role in kind of transition's been for you as you've grown the company along with your father in law? Zachary Beach (00:08:36) - Yeah, what's interesting is it's like I would say day one, but since probably about the first year that I started investing in real estate, I've always been simultaneously growing two companies at the same time. Zachary Beach (00:08:49) - So it wasn't like I've ever just invested in one. So we've we have our own personal buying and selling entities, so we still buy and sell real estate with the exact techniques that, you know, we teach our students. So we have our own portfolio in southern New England. And then at the same time we have a real estate coaching company that teaches people the exact same strategies, tools, techniques, you know, process systems, tools to grow and scale their creative financing business as well. So we've always had those two business simultaneously growing. So I've evolved in both, right? I've evolved from being, you know, from day one, being a virtual assistant, basically, right? Somebody that's prospecting consistently. And then eventually I became a very well paid virtual assistant and then eventually get to a point where then I was heading up all the entire acquisitions. And at one point in time, me and my brother in law and father in law with a couple support staff were doing four to, you know, 4 to 10 deals a month, you know, with with creative techniques that most people either aren't aware of or say that it doesn't exist, like owner financing and subject to's and lease options. Zachary Beach (00:09:59) - But then at the exact same time, I was also, you know, the CEO of our coaching company and a coach teaching people how to do this and helping them acquire real estate into their portfolio. And eventually, as that started to evolve, became more in a deal structure mode. On the on the investment side and CEO of the coaching company, which happened over the past 12 months. Sam Wilson (00:10:24) - That's awesome. What so you guys so let's go back to this very first deal. You're looking for commercial real estate or even maybe at that point, residential real estate, I don't know. But what's your. Zachary Beach (00:10:36) - Residential at that. Sam Wilson (00:10:36) - Time? At that time. Okay. Primarily residential. So let's fast forward maybe then to now, like when you're looking for commercial real estate for, you know, because you have two companies, you're running there for your own personal investing, What's your buy box on other finance deals and why? Zachary Beach (00:10:55) - Yeah, I actually got this question asked for me like just yesterday because I'm communicating with this with with a gentleman and he's been providing, say, leads because he does wholesale fix and flips, but it's trying to get involved in the creative space. Zachary Beach (00:11:10) - So he's been providing leads and I've just been sharing with them how I've been doing it. So he said he asked me that exact question. So he goes, How do you know that this one is a good deal? And I said, Well, first and foremost, the seller said that he's open to creative terms mean that automatically jumps to the top of my list. Um, considering considering that the the challenging part of the conversation is, is asking the right questions to understand motivation but then understanding the the challenge that can be solved with a creative financing technique. Um, because everyone I mean, literally everyone has been taught one way of buying real estate. Typically if you're brand new and that's through traditional means, you go, you, you work hard, you get 20%, 25% in your pocket, you go put it down on a piece of property. Then you go ahead and you go get the rest of the rest of the financing from a bank or an institution. And then now you have doesn't matter if it's a single or a multi or commercial. Zachary Beach (00:12:10) - Now you have a property, um, and that's how everyone's taught. So most of creative financing is an education process for the seller, so it's okay. Mr. Seller I understand your problem. Here's how we can solve it, and here's some techniques that we can utilize or some different strategies that we can utilize in order to get you to their end motivation, whether it's they want tax or estate planning benefits, whether they want a higher price, whether they want cash flow on the property. Um, it's just now providing that solution. So that's step number one. That's what I always want to know. Number one is I know it's a good deal if somebody's open to it. Um, at least I know that that's the hot lead. Then from there, it's what types of terms can I create with that seller? Because just because they're open to it doesn't mean it's a good deal, but it's definitely at the top of my list. So now I need to understand it's typically five terms that are involved in, say, an owner financing deal. Zachary Beach (00:13:08) - So owner financing would just mean that we're going to take out the bank and we're just going to go direct the seller. The seller is going to be your bank. This is going to finance the property for you. So there's typically a handful of terms that are involved purchase price down payment or not. We have lots of deals where we put no money down. We have if there's an interest rate or not, there's lots of deals in which we do that are 0% interest rates. We have, you know, length of time and if there's a monthly payment. So those are like the the generic terms that we're that we're going to be now crafting. So once we've established those and now those terms make sense for us to buy, meaning the terms look good, we're going to be able to acquire what we're going to be able to cash flow it. We're we're going to be able to either have our exit in mind or know that we can keep it for a certain period of time to improve the value of the property. Zachary Beach (00:13:59) - Now, once I have that, now it's okay. We got ourselves a good deal. The motivations in line, the finances are in line. Now let's just figure out the best way to go and close on this. Sam Wilson (00:14:07) - What type of assets are you buying right now? Assuming purchase price down payment, interest rate term, which all of those then equal of course your final payment. Yeah. But what type of assets in the commercial real estate space are you acquiring right now? That makes sense. Zachary Beach (00:14:25) - Yeah, it's a good question. So we've acquired our own commercial building that housed all of our offices, also housing all state and a couple other local businesses. So mixed use, but we also will acquire multifamily, typically up to ten units. And and it's not because like we're not willing to buy bigger units. It's just because usually up to ten units or mom and pop jobs. So they're more open to doing a creative strategy like owner financing because it's usually if we get a hold of it, it's been either inherited or they've owned the property forever. Zachary Beach (00:15:01) - Or talk about what happened with Covid. You know, you have a certain amount of vacancy or you have a certain amount of people that are not paying and you're going through evictions for a mom and pop shop if that's their only building or they only own a couple of them, that's a big hit for them. And now that creates a big fear factor. So we'll go ahead and buy properties just like that as well. And so we'll just accumulate them in in those lower lower unit ranges because typically if you get past ten units and above, you're starting to deal with more of an institutional or other investors like ourselves. And it's it's just not as likely for you to go ahead and get good terms that you want to go ahead and acquire owner financing. Sam Wilson (00:15:40) - Right. And you may you made a good a good clarification there on typically who the owner financier. Financier. Yeah I don't know whatever who who that is right. It's like, oh okay. It's going to be a mom and pop. They're not going to they're not going to have a massive portfolio, probably. Sam Wilson (00:15:57) - Maybe they do. And they just can't get rid of it. But let's but so like the kind of clarification of who the type of potential owner finance seller is, how do you not wind up with dog assets? Because if something's inspired listing like or maybe I could ask that a different way, which is what are things that typically lead to an expired listing that then make it a desirable acquisition for you? Zachary Beach (00:16:23) - Yeah, and I'll give you some clarification. So if we're buying commercial, it's typically off market. They more than likely weren't on the market at this point. So single families we we acquire a lot from expired listings. Um, so, so typically if we're going to go up to a multifamily, we'll do a specific mailing to a free and clear list. Man, you can grab those on prop stream or whatever database you're using. Debt free houses, usually they own at least one, if not multiple buildings or attached to them. And of course, I mean, you love and out of state owner as well, especially if they're a tired landlord. Zachary Beach (00:17:03) - So just approaching those and then we'll send out a mailing. And if we get one deal out of each mailing, which you know, cost you, you know, a couple thousand bucks and in succession, then that's a we're in a good spot. And to tell you about like dog listings or things like that, again, the two things that we tend to care about are are the motivation of the seller and the finances on the property. Because if you're looking at it through a traditional lens and you're either going to go raise a bunch of money or you're going to go get, you know, institutional financing, there's typically a lot higher of a monthly payment that you're going to be dealing with. So you're not gonna be able to cash flow as well compared to if I approach a seller and I say, Hey, I need my payment to be here, but I'll give you your price then, now all of a sudden we can walk into a lot more cash flow versus having to raise the debt and the equity on the property in no way have to pay a more people or an institution so we can actually walk into properties that you typically wouldn't be able to cash flow as well. Zachary Beach (00:18:00) - And then then of course, the end result would be one of two things. Either we'll hold on to it. Secondly, if you wanted to, even though we typically don't, you could fix improve it and then refinance it and keep it and bring in some traditional financing or do what we've done with a couple of our multis, which are go buy them on owner financing, make principal only payments for say, 48 months on the property, improve the units, turn up the units now, improve the cash flow on the property, and then let you know some of the bigger investors out there that are looking for units. Go ahead and acquire your property at a higher price because you've established the rents and made the improvements on the property. Sam Wilson (00:18:41) - Right? That makes a lot of sense. What do you do to inspire confidence in your sellers that you're going to perform? Zachary Beach (00:18:50) - Yeah, that's a great question, right? Because that's at the end of the day, that's what every everyone's looking for, especially if they first got the first game involved in real estate investing. Zachary Beach (00:18:59) - A lot of it is I mean, some of it I lean on, you know, we have you know, we got a history, right. We've we've been doing these deals. I mean, I've done or participated in pretty close to 500 creative finds. It deals at this point in time nationally so I can lead on that. Secondly a lot of it just positioning at the end of the day, if you if you want the deal, you know, you need the deal like you need water sellers can tell. Um, so just keeping a good positioning and don't try to ever force a deal because it's never one of my coaches said this really well and he said it's not your timing, it's the seller's timing. So it's all about following up and being consistent and being helpful. But most importantly, I think what I always try to do my best at and what we teach our students is to is to not prejudge the asset or the person. Um, so we have this thing called seven Steps to a Taken, which is basically seven steps to acquiring a property. Zachary Beach (00:19:56) - And our, our comps and comparables is actually step five, not step one, a step five. And the reason why is because I want to meet the seller. I want to see the property. I want to have an open dialogue without any preconceived notions before I start negotiating, because usually the seller is going to tell you what they're looking for and what they're willing to do. Now, does it mean that that's exactly what you need to do? But they're going to tell you. And if you have preconceived notions of, hey, what about that property and what about that property? And you know, what's going on here? All of a sudden you're you're already on the opposite side of the table with the seller. So we always want to get on the the same side of the seller, same side of the table as a seller. That way we can now show them a solution. And if the solution works for both parties, then you got yourself a good deal. Sam Wilson (00:20:43) - Man That's fantastic. Zach, Thank you for taking the time to come on the show today. Sam Wilson (00:20:48) - This has certainly been enlightening. I've learned so much from you. I love your story. Going from bartender and personal trainer. Man, you were you were literally grinding it out, like you said, going to bed late at night and then getting up early morning and probably doing personal training and everything in between. And you've really just gone out and yeah, done some really, really awesome things. It's been cool to see the way you have grown both your personal investing business, but also your coaching company, the way you guys approach creative finance, finding deals off market, the types of assets that you buy. You've dropped a lot of really, really good stuff for our listeners here today, so I certainly appreciate it. If they do want to get in touch with you and learn more about you, what is the best way to do that? Zachary Beach (00:21:29) - Yeah, absolutely. Sam, I appreciate that. So I want to make sure that anybody that's interested in creative financing, any of your listeners, that we're able to get the our Amazon bestselling book in their hands for absolutely free and don't mean like a PDF. Zachary Beach (00:21:42) - I mean, we'll actually ship you the book to your house. All you have to do is go to wicked smart books.com/sam and the number three that's wicked smart books.com/sam three. Go ahead and grab our first Amazon bestselling book real estate on your terms. We'll ship it out to you and probably some other goodies in there as well that you can start diving into what it actually means. Become a creative financing real estate investor. Sam Wilson (00:22:06) - That's fantastic. And if you're listening, yes, indeed, they will ship it for free. I got my own copies here in the mail about a week ago. I think there were several books there in that package. So thanks for sending those on. I haven't had a chance yet to dig into them, but they are in my in my queue of books to read. So Zach, thank you again for coming on today. I do appreciate it. Zachary Beach (00:22:24) - Yeah, Thank you, Sam. Sam Wilson (00:22:25) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. Sam Wilson (00:22:38) - If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Chris Rawley. Chris is the CEO of Harvest Returns, an agriculture investment platform. He has invested in real estate and income-producing agriculture for over two decades. Show summary: In this podcast episode, Chris discusses the opportunities in agricultural investing, emphasizing the importance of agriculture in providing food for the growing population. He suggests investing in specialty types of agriculture products that are more immune to commodity fluctuations. Chris also explains how Harvest Returns attracts farmers and ranchers looking for financing options, offering creative financing solutions tailored to their specific needs. The conversation covers the benefits of grass-fed beef, regenerative soil practices, and the platform's ability to diversify investors' portfolios. Chris also shares insights on managing deals and investor communications. -------------------------------------------------------------- Intro [00:00:00] Chris Raleigh's background [00:00:48] Opportunities in agricultural investing [00:03:34] Ranchers seeking financing [00:10:17] Challenges in funding grass-fed livestock [00:11:11] Expansion and financing options [00:12:02] Working Harder and Time Allocation [00:20:15] Investor Communications and Management [00:20:49] Deliberate Growth and Learning from Experience [00:22:11] -------------------------------------------------------------- Connect with Chris: @harvestreturns Web: https://www.harvestreturns.com/ Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Chris Rawley (00:00:00) - Agriculture. And I'd say real estate, too, is the are the two industries that touch every single person on the planet. Everybody's going to have a place to stay and everybody's got to have something to eat. So it's not a it's a growing industry, just like real estate. As the population grows, people are going to consume more food, more calories. And so there has to be more farmers and farms to produce it. And as that happens, we have to do it more sustainably. Sam Wilson (00:00:23) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Chris Raleigh is the CEO of Harvest Returns, an agricultural investment platform. He has invested in real estate and income producing agriculture for over two decades. Chris, welcome to the show. Chris Rawley (00:00:47) - Thanks a lot for having me here. Sam Wilson (00:00:48) - Sam Absolutely. The pleasure's mine. Chris There are three questions I ask every guest who comes on the show in 90s or less. Sam Wilson (00:00:54) - Can you tell me where did you start? Where are you now and how did you get there? Chris Rawley (00:00:58) - Well, like a lot of people in my real estate investing career, I started with single family homes, um, just rental property. And that quickly evolved into multiple single family homes and duplexes and that evolved into land. And then that evolved into I wanted to invest in a farm and there wasn't a good way to do it. So I decided to go the hard way and built a platform for not only myself to be able to invest in farms and ranches, but other people as well. So we've put together over $30 million syndicated farm and ranch and agribusiness deals and been going strong since 2016. Sam Wilson (00:01:36) - Okay, fantastic. Tell us about the opportunity in agricultural investing. Chris Rawley (00:01:43) - Yeah. So, you know, the first thing that it's important to know about agriculture is the basis of it is food or the basis of food is agriculture. And we take that for granted. You know, we all go out to eat. Chris Rawley (00:01:57) - We go to the grocery store, we pretty much got whatever we want 24 over seven, 365 Food is in. Produce is always in season because it's shipped in here from Mexico and South America and beef and lamb shipped from Australia. So so we have we're very blessed in the United States to have access to food and other countries are not they don't have that same benefit. So if you're an investor and you're interested in where your food comes from and how it's produced, investing in a farm or a ranch or an agriculture business is a great way to kind of make that connection and get a little bit more in tune with the food system. On top of that, you know, agriculture and I'd say real estate, too, is the are the two industries that touch every single person on the planet. Everybody's going to have a place to stay and everybody's got to have something to eat. So it's not a it's a growing industry, just like real estate. As the population grows, people are going to consume more food, more calories. Chris Rawley (00:02:55) - And so there has to be more farmers and farms to produce it. And as that happens, we have to do it more sustainably. So that's kind of the other dynamic that's going on within agriculture right now as technology is being applied to produce food more sustainably and more efficiently. Sam Wilson (00:03:13) - Right? No, undoubtedly the need is obvious. You know, the need for food won't go away. Tell us about if there is an opportunity from an investment standpoint, like where are you? Where are we in the investing in agriculture kind of cycle if there is even such a thing? Chris Rawley (00:03:34) - Yeah, you know, there are cycles in agriculture. They revolve around commodities for the most part. So prior to Covid, you know, there's base commodities, things like soybeans and corn. We're kind of in a in a downslope and beef. And now they're there on the especially with food inflation that we've all experienced. Every single one of us has seen that whether you're going to Chick fil A or a five star restaurant, you know that food costs more these days. Chris Rawley (00:04:04) - And it's it's part of that cycle now. We try to avoid that cycle by investing in kind of specialty types of agriculture products like grass fed livestock that tend to be a little bit more immune to some of the commodity fluctuations. And and indoor agriculture is one of our little specialty niches and and some more other niche things like, like wineries, vineyards. Um, so those are things that, that we hope are inflation proof but also not so impacted by fluctuations in commodities. So if you're looking at farmland itself, there's a lot of people that want to invest in farmland. I would say they're at the top of the cycle right now. Farmland appreciated quite a bit over the past 3 or 4 years, especially what we call row crop farmland, which is things like wheat and soybeans that everybody's familiar with. But for the smaller specialty niche sort of ag spaces that we like to invest in, I think we're not really in a market cycle necessarily. Sam Wilson (00:05:07) - Got it. Yeah. I want to I want to touch on on that for just a second and then hear kind of what you guys are seeing, where you guys are seeing the opportunity because yeah, I mean, we've seen everybody from Bill Gates to I mean, just everybody and their mother, it seems as investing in farmland. Sam Wilson (00:05:22) - I actually had lunch with a I'm based here in the Mississippi Delta, of course. So we've got row crops galore across the arc. I mean, we're ten minutes from Arkansas and I got a buddy over there that buys just, you know, he's a broker, but also just buys tons and tons of farmland. And he had never done syndications. He said, hey, you know, we're trying to pull some investors together. I want to do an investigator, you know, and we started talking return profiles. And it was in like 1% annually and returns on cash on cash basis. And I'm like, who's investing? Like who's like, who are you getting that cares about a 1% return? Right. And farmland and obviously it was row crop. You know it's again it's it's the it's the commodities it's the like you mentioned soybeans, corn, wheat, the stuff that everybody grows. But I just wondered from an investment cycle how you guys were different. It sounds like you are like you're not just Yeah. Chris Rawley (00:06:14) - That yeah. And you know for your buddies that there is that 1% which is probably the annual rents from the cash crops. That's yeah. Sam Wilson (00:06:22) - That's it. Chris Rawley (00:06:23) - Land appreciation you know land is they're not making any more of it as all saying goes and especially farmland becomes more and more scarce. But you know, it's, it's an overbought market. That's my personal standpoint right now kind of kind of farmland. That doesn't mean you can't make money over the long term. And it is a long term sort of thing. You're dealing with a speed of biology. You know, people like tree crops. We've done some things like hazelnuts and things like that where you might plant a tree, but it's going to take you seven years or so to start getting some sort of cash flow. So people have to be patient. You have to be creative in the way you structure these deals. You have to be creative in the way that the companies are able to achieve cash flows. So it's it's a lot different than just going out and buying land. Chris Rawley (00:07:09) - If people want to do that, that's great. And there are ways to do that. There's farmland, REITs and publicly traded stocks and things like that. You can do that. But for our particular investments, something like grass fed livestock, we're actually investing in a ranch operation. There may be a land component, might be a high yield debt that's secured with land or the cattle themselves. We've done both or combinations. So there we tend to pride ourselves in our creativity and these structures, these investment structures, whether it's high yield debt or equity or even convertible debt, we've done all three of those and seen some nice returns. Sam Wilson (00:07:47) - Can you walk us through I mean, this is really fascinating. I think for me and probably also for our listeners because I think all of us are familiar with the multifamily syndication at this point. We understand the waterfall return, know the splits, all that. I mean, it's just it's we've been down that road more than once on this show. But things like what you're talking about, we've covered almost not at all. Sam Wilson (00:08:08) - And I forgot to even mention this here at the beginning of the episode. For those of you who don't don't know, Chris actually came back on the show or came on the show. He took a gamble on this show back on December 4th of 2020. So if you want to go back, I think we're at episode we're north of 820 at this point. It was episode five. So you can find Chris back on December 4th, 2020 and kind of get a preview as to what he was working on then and what Chris is working on now. So just wanted to put that plug in there. If you want to get kind of both sides of the coin of what what he's done in the last almost three years now. But let's get back to this creative structures side of things. I mean, I think I think this is fascinating. Can you give us some case studies on how you guys structured it, how you found the deal and kind of what what was the win win between you and the operator? Chris Rawley (00:08:55) - Yeah. Chris Rawley (00:08:55) - So one of the niches that we like is livestock. There's very few places for a investor to get into purely investing in a ranch where you are helping a cattle producer or a sheep and lamb producer, that sort of thing grow their business. And we kind of stumbled upon the the method of collateralize the livestock themselves. Since then, we've combine that with collateralized land and collateralized equipment. But these are high yield notes. We've done, gosh, probably 12, 15 million of them, I think, and never had any default. You know, of course, past performance is no indication of future results. But, you know, knock on wood, we've done pretty well. Our investors have done well with them and they're seeing double digit returns. And, you know, which is nice. It's not as nice as it was when CDs were paying 1%. Now CDs are paying 5% or Treasuries, you know, 4 or 5%. You can get those those safe returns. But if you're looking to build beat inflation, getting something north of 10% is always is always good. Sam Wilson (00:10:05) - Oh, yeah, absolutely. So how do you how do you find a rancher that is in need of capital without finding a rancher that is a bad rancher? Chris Rawley (00:10:17) - That's a great, great question. You know, the first part of that is they find us. We had a little success, kind of by luck. Um, our deal flow really started to accelerate as we started doing more successful raises that the ranchers that come to us, in some cases they already have conventional land loans, maybe they have equipment loans on expensive piece of. And for anybody that knows ranch equipment is is very, very you know, six figure high six figures to get a tractor or something like that sometimes. Um and they need to expand their herd. So they've got all the pieces in place. Maybe they have a piece of family land that they inherited from their grandfather. So that's generally the biggest expense in these operations is land. So they have that, but they're just starting out. Maybe they grew up, you know, feeding cattle, raising cattle. Chris Rawley (00:11:11) - They know all about it. They're ready to start on their own. We have a lot of husband and wife's teams and they come to us and say, hey, starting out, we know what we're doing, but we can't get a loan because we don't have a track record. You know, USDA, the AG finance system, the AG credit union system is pretty much optimized for those row crop farmers, right. Like we talked about. And if you're doing something out of the ordinary, if you're doing like grass fed, regenerative livestock, that sort of thing, it's much harder to get funding. So we'll, you know, we'll look at all the pieces of their operation, look what their cash flows can sustain, and then we'll put together some kind of instrument that will work for them, whether that's debt or equity. Sam Wilson (00:11:55) - Got it. So you guys will come in and structure this debt or equity or both potentially. Chris Rawley (00:12:02) - Generally we won't do both. I mean, we have done convertible debt, which is, you know, debt that turns into equity. Chris Rawley (00:12:07) - But we have worked with other pieces of a capital stack where they've got a bank loan and then we'll bring in equity to kind of make them a down payment or help them be able to get a bigger operation. Because like anything else, there's economies of scale and we're trying to help smaller farmers get bigger and make more money and get higher margins. And of course, that's a good thing from the investor standpoint. Sam Wilson (00:12:28) - Oh, for sure. For sure. And doing things like grass fed beef again, I think that that you're I don't know what the yield is or even the right way to put that because I'm not a rancher clearly. But it you know the dude do those cattle then of course fetch a higher price per pound when they go to they. Chris Rawley (00:12:48) - Do generally the other piece of that grass fed is that you know grain fed. So all cattle has the same cycle. Life cycle, you know, starts out on milk, mother's milk, then it eats grass and then either becomes grass, finish where it spends its whole life on grass or grain finish where generally it goes to a feedlot and they'll feed grain. Chris Rawley (00:13:08) - And we have nothing against feedlots. We've supported those. We will continue to support those. But a lot of consumers are really looking for this grass fed grass finished. It takes a little longer to get a product because the cattle doesn't grow as fast as when you're shoving, you know, soy or corn down its throat. It takes a little while. So it's a premium product. Some people say it tastes better. Some people say it's better for you. I'm I'm agnostic. Don't make those judgments. But it's a good market. So we like it. And those those ranchers, the other piece of that is regenerating the soil. We're working with a lot of ranchers that are doing that by, you know, animal agriculture gets a bad rap for a lot of reasons, and most of them are unfounded and produced by misinformation and bad information. But it's really a healthy product and it's a sustainable product when it's done right. We're not talking about clearcutting Brazilian forest, you know, hardwood floors, which a lot of people think about. Chris Rawley (00:14:06) - That's not the kind of ranches we work with. We work with American ranchers and the Great Plains and Texas and Georgia that are doing their best to to maintain healthy animals and healthy soil and healthy watersheds. Sam Wilson (00:14:19) - Right. Right. No, there's a lot to be said for that, man. I I'm a big I'm a big fan of grass fed beef. I've got about a cow and a half in my freezer sitting here on the other side of my office wall. So it's. Yeah, I know. I know where it came from. I know it's actually grown by my family in Alabama, but same idea where it's like, Oh, hey, I know the farm this came off of. I don't know exactly. It's, you know, start to finish grass fed. No, it's great, great beef. Anyway, so I'm a believer in the in the great beef strategy that you're employing there. I think I think it's absolutely awesome. So you guys have found a niche it sounds like inside of. Sam Wilson (00:14:53) - Being basically banking the kind of unbanked sectors of agriculture, if you will call it. That's true. Chris Rawley (00:15:01) - I mean, part of it is I don't necessarily like the term unbreakable, but it's sure, we're creative in financing in banks for various reasons or not. And we are. So that's that's always a good thing. And that's why these producers keep coming back to us. Sam Wilson (00:15:17) - Yeah, I'm sorry. I shouldn't use the word un bankable unbreakable. Sounds like they are, you know, some reprobate that can't can't get a credit card. That's not not what they're saying at all. But there are creative structures that you're setting up. Chris Rawley (00:15:29) - But you know, it's that's just as the banking system becomes more and more regulated and that's what happens. Anybody who's tried to, like, go out and purchase like more than one rental property or more than five rental properties, you know, the drill is, is there's just it doesn't matter how much money you have, how much equity you have, the banks are kind of hamstrung with their with their metrics and their limits. Chris Rawley (00:15:53) - And it becomes you're essentially unbreakable, even though you're a great credit. You know, you might be a very experienced investor. Sam Wilson (00:16:00) - Oh, gosh, yes, absolutely. And and I seem to consistently find myself investing in things that are outside of what the norms are because of the opportunities like you're describing, where it's like, oh, hey, you know, we can hit double digit returns, we can do this and this and this, and it's just, it's, it's, um, you know, it's blue ocean for you as an investor, but yet finding the creative way to get that financing across the finish line can be at times a bit challenging. So you've invested in ranches. You talked a little bit about tree crops. I mean, is that something you guys are still active in or is there. Chris Rawley (00:16:34) - Yeah, I mean, we get probably about 30 deals a month across our desk and maybe four, 4 or 5% of them actually end up on a platform in front of investors. And that's as part of our due diligence process. Chris Rawley (00:16:46) - But yeah, we do livestock. We're looking at vineyards right now, we're looking at tree crops right now. We're looking at, um, agriculture, technology companies is something we kind of came in, stumbled upon a couple of years ago. These are companies that provide technology to help farmers grow more sustainably and efficiency efficiently and all that. And it's it's obviously a higher risk. It's more like an angel startup investor. Right? But it makes it kind of put some juice in somebody's portfolio. And the beauty of our platform, I think, is, you know, our minimums are fairly affordable. If you've got enough money to kind of self direct your money into a. You know, whether it's real estate or whatever, outside the just dumping money in your 401. Every month and the stock market index, it's supportable because you can spread your 1015 K across multiple deals, spread your risk, but also spread your exposure into different parts of livestock or agriculture. Sam Wilson (00:17:45) - Right. You mentioned the term platform a couple of times and then you said spread your risk out. Sam Wilson (00:17:50) - Describe that for us because it sounds like there's something you guys have built maybe that the average syndicator doesn't have. Chris Rawley (00:17:57) - Yeah. So it took us a while to get here, but we've got the deal flow and we've got all the technology in the back end that we launch a new offering about every 2 to 3 weeks. Wow. Um, so we're, we're constantly, you know, we're serial issuers. I guess you would, you would classify us where we've got offerings going. And these are farms and ranches raising anywhere between and businesses, you know, $200,000 to several million dollars and and sometimes that's part of a much, much bigger project like we've done where we were just a piece of a capital stack of a $50 million project, but we may have only invested 500, 600,000. And then we've done some where we were a big chunk of of a, you know, new farmer, that new rancher that described kind of getting off their feet. But maybe they maybe they're sitting on $1 million piece of land and they just need a few hundred thousand dollars to go out and buy some fences and chutes and cattle and things like that. Sam Wilson (00:18:51) - How do you manage all of I mean, a new issue every 2 to 3 weeks is that's a lot of parties. That's a lot of ranchers, you know, don't even know what you call them. Guess you farmers, I guess, is what you call people growing, you know. Yeah. Tree crops and all those sorts of things. I mean, how do you manage all of those various entities and people? That's a lot of communication, I would think it is. Chris Rawley (00:19:16) - And you know, started out just me and my partner Austin Manus back in 2016. And we would launch, you know, we launched our first deal on 17 and we launched, I think, maybe two deals that year. Um, maybe, you know, it's just grown. We've grown the team, we've, we've improved our processes. We've got a lot of automation in our due diligence process and our asset management process. So it is a lot to juggle. You know, we send out like 1600 K ones. I think this year it's quite a, it's a, it's a lot, but I've got a super accountant, super, you know, resources that we tap into. Chris Rawley (00:19:50) - We've got some third party providers that do all the sort of background compliance stuff. So we just kind of put all the pieces together and that was the hardest part of starting or getting to where we are is organizing the pieces. We didn't know what we didn't know. And now we have learned lessons the hard way in some cases, and we've got built a system kind of systematize our building our business, and we're able to iterate it over and over again. Sam Wilson (00:20:15) - Do you feel like you work harder now or did you work harder in the earlier stages of your business? Chris Rawley (00:20:21) - That's a great question. I'd say the amount of work is about the same. It's what we spend our time on is different. So there was a lot of head scratching early on and trying to figure out what we didn't know. We've learned those lessons. We built a network of contacts and providers that now we spend more of our time, like you said, just dealing out lots of communications. We're constantly on calls. I'm still the chief sales officer. Chris Rawley (00:20:49) - I get on almost every single sales call when a deal gets to the stage where we think it's viable, you know, I'll get on that call after it's kind of going through the initial processes. And so it's and then once we get the deals up and running, of course there's that the management piece, which is investor communications and tax documents and distributions and all those sorts of things. And we get fortunately we've got all the pieces in place to do that. Sam Wilson (00:21:17) - That's cool. I'm sorry. Go ahead. Chris Rawley (00:21:20) - Yeah. And that wasn't easy to get all in place. And it's not necessarily always easy to execute and you're always kind of dealing with the, you know, the one investor that needs a little bit of extra attention. And that's just the reality of of being in the world that we're in. Sam Wilson (00:21:37) - It really is. Yeah. There's there is, there is that there's always the one investor that needs a little bit more, which is, okay, it's all right. There's also there's also lots of investors that you know that I'm sure you have these too, where it's, you know, they require almost no attention. Sam Wilson (00:21:53) - And so it probably all washes there in the end. When you review the last, say, 5 or 6 years, if you could do one thing to have either made the process easier or maybe made a mistake that you could have otherwise avoided, anything come to mind on those fronts? Chris Rawley (00:22:11) - Yeah, that's really hard because I we people take pain to learn, right? Austin always says this is like the best way to learn is through pain. And so think a lot of the things. That we have in place now. And, you know, a couple of deals that have gone bad and things like that we wouldn't have learned unless we experienced them. So although I have no regrets. Yeah, sure, there's deals we wouldn't have done or, you know, we would have changed something or automated processes sooner or later. But we didn't know what we didn't know. And, you know, we built very deliberately our processes and our team and our systems and grown very deliberately. We tried not intentionally not to grow too fast by raising a lot of money as a company or some of our competitors did that and, you know, haven't ever had to lay anybody off having ever, um, you know, been involved in lawsuits and, you know, any kind of issues, negative issues like that. Chris Rawley (00:23:08) - So we're, you know, we're happy and we're going to continue to move very deliberately and fund as many farms and ranches as we can. Sam Wilson (00:23:14) - Right? I love it. I love that word. Deliberate. That is, um, that's something we think about a lot here on our side of things where it's like, hey, you know, we have unlimited opportunity, but do we want or are we prepared to take that on right now? Like I think I think you should be as much afraid of too much growth, too fast as you should be a failure, because I think they can both lead to the same place, which is. Chris Rawley (00:23:42) - That's very, very true. You can you can fail. You can grow hard and fast and you can fail hard and fast. And it's it's you don't want to be there. Sam Wilson (00:23:50) - You don't want to be there. Yep. Deliberate. That's a great word here for today. Chris, thank you again for coming back on the show. It's been a pleasure to hear just where you guys have gone and almost, again, almost three years since the last time you and I got to chat. Sam Wilson (00:24:04) - If our listeners want to get in touch with you or learn more about you guys, what is the best way to do that? Chris Rawley (00:24:10) - Yeah, the best way is just harvest returns. Of course, we got social media and all the different platforms, but harvest returns, dot com. Sam Wilson (00:24:17) - Harvest returns.com will make sure we include that there in the show notes. Chris thank you again for coming on. I certainly appreciate it. Chris Rawley (00:24:23) - My pleasure Sam. Thanks. Hey, thanks. Sam Wilson (00:24:25) - For listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Jerry Miller. Jerry has been a full time Information Systems professional for many years and is making a transition to full time real estate investor. Show summary: In this podcast episode, Jerry Miller shares his journey from full-time IT consulting to full-time commercial real estate investing. He discusses his experience with single-family homes, becoming a limited partner in a multifamily syndication, and eventually transitioning to being a general partner in commercial real estate deals. Jerry emphasizes the importance of communication in dealing with unexpected events like hurricanes and the need for a clear plan. He also talks about the time commitment required for real estate investing and the role of a team in commercial real estate. -------------------------------------------------------------- Intro [00:00:00] Jerry's journey from single-family homes to commercial real estate [00:00:58] The role of a team in commercial real estate [00:04:13] The illiquid investment and options for getting out [00:09:56] The importance of communication and dealing with unexpected events [00:13:52] The role of a team in commercial real estate [00:14:45] The importance of transparency in real estate investments [00:17:38] Safe ways to get started in commercial real estate [00:19:07] Understanding the evaluation of an apartment complex [00:19:29] -------------------------------------------------------------- Connect with Jerry: Linkedin: https://www.linkedin.com/in/jerry-miller-948b7a17/ Instagram: https://www.instagram.com/jerrymillerrealestate/ Facebook: https://www.facebook.com/largogroup2011 Web :www.largogroup2011.com Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Jerry Miller (00:00:00) - We've got a deal on the west coast of Florida. You know, it got hit by a hurricane. Like how do you how do you control that? Well, the answer is you don't. These are physical assets and stuff happens. But I think, you know, communicating what's going on is absolutely key. And then communicating your plan to deal with whatever's going on is also an important key that think separates, you know, an operator from a from an excellent operator. Welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Jerry Miller is making the move from full time it to now full time commercial real estate investor. Jerry, welcome to the show. Thanks, Sam. Glad to be here. Absolutely. Jerry The pleasure is mine. There are three questions I ask every guest who comes to the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Okay, so guess it was 18 years ago. Jerry Miller (00:00:58) - I got started in investing in single family homes. I've got a nice portfolio of single family homes, but two years ago I invested as a limited partner in my first multifamily syndication and was very happy to to get involved in that. Once I started digging in and trying to understand, well, if you're if I'm making a 15% return, then what are the general partners making and how is it that they're making such great returns? And once you begin to understand how to value a multifamily property and, you know, what does it worth, why can it be refinanced for you really do see where it's a better option to work on than, say, single family homes. And so since then, I haven't really looked back. I've been doing commercial real estate as a general partner. Now this is I'm on my fifth deal and I'm very excited about the possibilities of commercial. Wow. That's that's a lot of movement. And in your. Sam Wilson (00:01:50) - Bio, you said you're making the moves, making the move from full time it into full time commercial real estate. Sam Wilson (00:01:56) - So you're still in that transition period? Jerry Miller (00:01:59) - That's right, Sam. I've got my own consulting company. I'm kind of a one man band. I do work in software consulting. I've enjoyed that. It's been a great living. I'm looking at, you know, I'm coming up on 58 years old and within a couple of years I would expect to no longer consult at all, but exclusively do commercial real estate. Sam Wilson (00:02:20) - Got it. Now that's a lot. So you're you run your own consulting company. You are also and you said you have 1 or 2 day jobs. I guess you're consulting companies, one company one day job, but you have another. That's right. Jerry Miller (00:02:32) - Well, my, my, my real estate sometimes feels like a full time job. Right? Obviously, that needs to be as much nights and weekends as it needs to be. But occasionally it conflicts, you know, where you've got day job type appointments. And so I just have to manage that. I do have a little bit of flexibility in my consulting job that I still need to just deliver. Jerry Miller (00:02:49) - At the end of the day, I need to make sure that my client needs are met. And so if I'm not available at a specific time on a specific day, that's usually not a problem. Sam Wilson (00:02:59) - Right? Right. What would you say or would you say that you've estimated the amount of time being a full time real estate investor is required? Did you estimate that properly undershoot it, overshoot it? What do you think on that front? Jerry Miller (00:03:13) - Um, well, it's a great question, Sam, but the reality is there's, there's the minimum of what you can do, but you don't come into real estate thinking minimum. You come in thinking, I want to cover all the bases. So you really do raise the bar. You know, if you do estimate ten hours and you realize, well, it's going to take double that, you know, 20 hours a week to get this done, well, then you commit the time to get it done because you can't you can't do this halfway. You can't you can't you know, you can't be questioning, you know, is my valuation solid? Is my asset strategy firing on all cylinders? You really have to bring your A game. Jerry Miller (00:03:48) - And and I would say that this is where you know, I think commercial real estate is a team sport. You need to be really clear on the roles and the responsibility within your team so that you and your team members can carry that ball. Sam Wilson (00:04:00) - What have you done on the team front? I mean, getting into commercial real estate as a as a general partner, you know, takes a lot of effort. But talk to me about team. What is what does that mean to you when you say that? Jerry Miller (00:04:13) - Good question. So I got started in commercial on the general partner side. One of the syndicators that I invested with was a limited partner. Um, they were on the verge of potentially having to make a capital call. This was my guess. It was the summer of 22 where the bank was requiring more seasoning, you know, more reserve in the bank. And he had an investor that wanted that needed to back out. There was some personal thing going on and think most people know that syndications are illiquid. Jerry Miller (00:04:39) - That's one of the, you know, potential weaknesses of a syndication. But this was a general partner that had a heart and he wanted to be able to give that investor his money back. And so he he he had asked me because we were on great terms, he was like, hey, do you have any more to put into this deal? And at the time did not. Um, but then he asked, Well, do you know anybody that you think would be interested? Said, Well, I think I can call a few friends. We were only actually talking about a couple hundred thousand dollars and, you know, made like ten calls and I raised $300,000 in like a week. And I thought, wow, this was easy. Um, it's not it's not easy. But these were close friends who I knew, you know, had the money and had a had a serious interest in real estate. And I just needed to explain the syndication concept. And once, you know, once I kind of walked through the the risk and reward profile there, like Jerry, this is absolutely something that I want to do. Jerry Miller (00:05:28) - I'm not planning to retire for a while, so I'm good with this money, you know, not being, you know, being tied up in a deal for 3 to 5 years. And so that's. Started me on a path where he was he was very pleased with with my performance and was frankly very pleased with my performance. I wasn't thinking commercial real estate as a as a full time gig at the time, but he and I chatted about, well, hey, we want to do bigger deals. And if you think you can continue to raise money like this, then we can do bigger deals together. And that was that was a turning point where I kind of set my mind on what will it take, you know, to be a full time commercial real estate guy. And the answer is, you know, you need a set amount of passive income. I've already got a decent chunk of passive income from my rental property, so I just had to cover the remainder of meeting, you know, my basic expenses. Jerry Miller (00:06:20) - And so that definitely put me on a on a on a pretty serious path to spend time getting involved as, as a general partner. And honestly, I've really enjoyed it. It's been a lot of work, but it's been very rewarding. Sam Wilson (00:06:32) - Yeah, I would say so. I mean, that's, that's one of those things that. When you get into syndications as a general partner, you don't necessarily think that, hey, I'm going to have to have income coming in in order to cover what I'm doing as the general partner because it takes it takes time to ramp up, right? Your general partnership, income side of things. Jerry Miller (00:06:53) - So very true. Sam Wilson (00:06:54) - Yeah. So that's an interesting point I think you've made there is that there needs to be some residual income and or savings in order to cover that lean period of really growing your side of your business. I want to hear about this deal a little bit because you mentioned the word it was on the brink of a capital call and an investor needed money out. Sam Wilson (00:07:13) - Talk to us about that deal. I mean, to me, that's that sounds like it has hair on it. Jerry Miller (00:07:18) - Well, that may be fair. So this was a, um, this was a pre entitlement land deal. We're building 29 townhomes in Charlotte, North Carolina. It was a it was an 18 to 24 month play where, you know, you put your money in. There was a there was a nice return when they when they, you know, get entitlements, build build the units and then you know, these all were going to be individual sales. So they've got a sale you know all 29 and then they were going to cash out the investors. Um, I don't necessarily recommend the the land deals as a first deal for folks, you know, getting involved in syndications. I would kind of recommend the, the multifamily value add where you're buying an existing apartment complex and you're going to execute an asset strategy to make money in a probably a 3 to 5 year time period. I think they're they're a little safer think they're like the dividend versus growth stock. Jerry Miller (00:08:10) - This analogy that I use with my investors, if we think about a growth stock, you don't get any dividend, but you have very high appreciation that you're hoping to get somewhere down the road. That's your land deals in the multifamily space, there's great upside potential, but there's risk that it's not going to go according to plan and therefore you can't bank on any of that money versus your your, you know, your value add play. Well, that's your dividend stock, right? It's it's very unlikely to have huge appreciation. What it's going to have is nice stable rent paid over a period of time and over a long period of time you might get to enjoy a little bit of that that that that growth from, you know, the net income increasing, but it's less likely to produce the same return as the raw land deal. So this was think this was my third limited partner investor investment and I knew the team well I knew that they'd been doing pretty much all the things right. And so, you know, I was comfortable working with them to, you know, basically recruit friends into a deal that I was already in. Jerry Miller (00:09:11) - And I was I was very upfront about that. And, you know, they were they were happy to to be a part of that. So there was some risk that, you know, we did need to put more money in the bank. But that's not an all bad thing. That just means your reserves are higher than they were. And we didn't have to cash out this investor right on the dotted line. They've signed that. They're illiquid. But we wanted to because, again, we want people to do what they want with their money. So I actually liked the heart behind it. I don't want to work with somebody that's, you know, kind of a, hey, that's too bad, right? I want to work with somebody that's like, Hey, we just got to go the extra mile to find the investor to sort of buy out their position, which is exactly what we did. And everybody sort of got what they wanted out of that deal. Sam Wilson (00:09:53) - Right? Yeah. And that's that's a good point you're making there. Sam Wilson (00:09:56) - And I don't know, you know, I'm sure there are sponsors out there that would be, you know, kind of hard nosed about it, like, well, I'm sorry. You put your money in, go fly a kite. Um, I think most of us would probably be like, Yeah, all right, get it. Like you, you want to cash out for whatever reason, and we'll work to try to find a way. That's right. And, you know, it may take a little time, but you can work. And let's talk about that. I mean, this show is called How to Scale Commercial Real Estate. You're getting into a nuance there that I think most of our listeners probably understand because it's a pretty high level show here. But just just tell us about that illiquid investment and what the options are that most investors have if they want to then get out of an illiquid investment. What are those options, generally speaking? Jerry Miller (00:10:38) - So it all depends on the contract that you signed with that general partner, right? Is it a is it a JV? Is it a joint venture deal where you're part of a partnership and you have very clear, you know, buyout arrangements where one of the other one of the other partners is potentially going to buy you out? You know, most of the syndication language is very much a once you put in your money, it's totally up to the operator when you're going to get cashed out. Jerry Miller (00:11:02) - And it's typically going to look like a 3 to 5 year, either a refi or a sale of that asset. Right? Um, it tends to not be in the limited partner's favor for the syndication because it kind of can't be. What you want to do is find a general partner team that kind of has a heart, that has the ability to raise capital on a regular basis. And you know, again, if you're getting started, then probably take that minimum investment. Don't don't overextend yourself to where you think you might need that money down the road. But take a take a more limited, you know, lesser position. And then if you get excited about syndications and you want to do it again, then six months later, maybe do the same, you know, same amount with the next with the next investment. And that way you're sort of diversifying a little bit of your risk and your your understanding. You know what a good syndication deal looks like. Right. Sam Wilson (00:11:52) - Right. And I think I think one of the things that we've seen, you know, commonly see both in deals I've invested in and also our own in-house deals, is that the sponsor or the general partner, If if a limited partner needs out, generally has the first right or first refusal. Sam Wilson (00:12:09) - So if you invested with me and you came back to me six months later said, Hey, Sam, you know I'm going to need I need my hundred grand back, I'd say, All right. Well, that's fine. I may want to buy you out personally and take over your limited partner position. Right. Or do just like you guys did and went out and found some other investors to then take your spot. I mean, it's exactly it's possible. It's possible. And, you know, the bummer about that is that no, it's never in because you got there's there's cost there's there's fees associated with it and it's a little bit of a paperwork trail. It's never in the LP's best interest to cash those out because it's like, well you know, at this point you're probably going to get your money back and that might be the end of it. And there might even be a little bit of a haircut just from associated fees that go along with, you know, attorney's fees, etcetera, re papering stuff and trading all that stuff out. Sam Wilson (00:12:57) - So it's but at least it's an option. It's always an option there in in your. Jerry Miller (00:13:02) - That's right. That's right. Yeah. And the timing of course matters right. We like to have, you know, interest in every deal because we like to be able to say, hey, we're, you know, we're into every deal. But then three deals actually came along between about March of 22 and about June of 22. And so every one of us was sort of tapped out. We already had money in the you know, they were in different states. Right. But the point is, we had already kind of committed to that. So we weren't in a position at that particular time to to buy them out. But you're right, It's it's all dependent. I think I think honesty and transparency are just absolutely key in this industry. If you can't buy them out and you just straight up tell them what's going on in the why. And hey, 3 to 6 months from now when I get my, you know, earnest money back from a deal that's going on right now, there may be that possibility. Jerry Miller (00:13:52) - I think people understand when you're doing the best you can for them, even if even if they don't get the desired result, at least you're trying on their behalf to, you know, to help them with whatever their situation is. And that's that's been key for me. I've had, um, you know, we've got a deal on the west coast of Florida. You know, it got hit by a hurricane. Like, how do you how do you control that? Well, the answer is you don't. These are physical assets and stuff happens. But I think, you know, communicating what's going on is absolutely key. And then communicating your plan to deal with whatever's going on is also an important key that think separates, you know, an operator from a from an excellent operator. Sam Wilson (00:14:34) - How do you vet or what things do you do differently now when you look at general partnership opportunities that maybe you didn't do on the first one? Jerry Miller (00:14:45) - Uh, good question. Um, well, on the first one wasn't lead, so I would say I wasn't really the one making the shots. Jerry Miller (00:14:54) - I was depending on the folks that had done this many times before. And my piece of it was, you know, specific to capital raising and asset strategy on what I thought we could do and when. So I was, I would say, a contributor in the early days, and now I'm stepping up as as more of a lead. And I think the answer to your question is it it being a team sport, you need to be very clear. What expertise am I bringing to the table? What expertise are my team member or members bringing to the table? And you know, and do does that skill set cover all of the things that you think you're going to need? That's that's a really important thing if you know, the deal I'm working on right now has a development component. And so one of my partners is is a general contractor and he's got a lot of experience on what is the price per door and what does it take to build things and he's got a he's got a skill set that I that I don't have. Jerry Miller (00:15:47) - I've got the underwriting side, I've got the asset management side. And so what's nice is we complement each other extremely well. Sam Wilson (00:15:56) - That's great. That's absolutely great. Let's talk a little bit. I mean, you've said you've been in real estate for 18 years. You made the leap to. A limited partnership in multifamily syndications two years ago. Or maybe it was. It was more than that, but maybe it was two years ago. You did get my notes mixed up here. But talk to me about the size of the deals and just kind of what velocity looks like for you compared to your first X number of years, investing on your own in single family and now what you're doing commercially. Jerry Miller (00:16:28) - Uh, great questions. So, you know, when I, when I invested, um, when I got started, we, we took down a, I think it was a $10 million asset. Again, the, the syndicator, uh, was, was two, two guys that were, you know, seasoned, done this before. Jerry Miller (00:16:47) - They were both full time and real estate. I had a good relationship with, um, with one of the principals because he and I had actually worked together in the consulting space. So I already knew that, you know, he was a really solid guy. So it was, it was a it was, it was a win win for me to get started. And again, my role was, which was much smaller. And so we we did kind of the same thing for then a a $20 million asset where we, you know, had to raise a little bit more. It was a it was a little bit more involved in the reserves and the asset strategy and that was a nice step up. Um, you know, the, I was involved in a, um, two different land deals that, you know, that were pre entitlement. And there's sort of a set of risks associated with, hey, we think we're going to build X number of units. But the reality is the permitting may not come back at what you plan for. Jerry Miller (00:17:38) - And so, you know, we chatted a little bit about what does it take to raise money for those. And it's it's transparency. It's hey, here's the blue sky version of what we think is going to happen. And here's the what I call the Debbie Downer version. Like this might actually happen. And so what what I'd like to describe to my investors is what does that cone of uncertainty look like, right? What is best case? What is worst case? And then what is most likely case so that they can fully appreciate, you know, how much is their money at risk? Because the reality is the the pre entitlement, your money is much more at risk. And people need to understand that. That's why you get such a better return than the typical value adds. And it's up to you to decide do you want to allocate, you know, a portion of your your nest egg in that? Because again, you can make better returns, but you're at greater risk of principal loss, Right? Sam Wilson (00:18:32) - Right. Sam Wilson (00:18:32) - No, I think that's great. That's great. Yeah. I mean, so you've done quite a bit here in the last two years. You've been involved in a variety of really unique assets and or yeah, new assets and unique strategy that a lot of people aren't. Mean, it's a little more advanced doing entitlement and land and all that stuff. I think you said it early on that, hey, you don't you don't necessarily recommend that. But what what would you say is a safe way for someone to get started in commercial real estate? Because it sounds like you went head long and there's other options out there that you'd say they're a little bit more on the well-beaten path. Jerry Miller (00:19:07) - I would say for somebody that's brand new, get into a multifamily value add deal. So that's an existing apartment complex where the operator's got a plan, you know, to to grow the net income, you know, that means they're probably driving rents up and they're probably driving expenses down and then taking advantage of that increase in net income. Jerry Miller (00:19:29) - I would say as a limited partner, the one piece you probably need to educate yourself on is how do banks and general partners evaluate the worth of an apartment complex? You know, at the end of the day, it's all about that net income. But but understanding how to get to that net income is an art. There is there is quite a lot of detail that goes into that. And so as the limited partner, you can just point blank ask how are you going to drive, you know, net income, what's the strategy? And you know, for somebody that's doing the underwriting model, they have to go line by line and understand our property tax is going to increase by the cost of inflation, our rents going to increase by, you know, and just go through what that looks like. And then we typically do a 3 to 5 year forecast to see where do we see that this asset is going. And so that's a deep understanding for the general partner, that the limited partner just needs to have a working understanding of how did they arrive at the numbers that they're at. Sam Wilson (00:20:24) - Right, Right. That's awesome. Jerry, It has been so much fun having you on the show today. I've learned so much from you. It's been a blast to see your journey through the single family space now into the commercial real estate space. You've gone headlong into it. You've certainly making some really great strides, and I love the information really brought to us today, both from, you know, how to get involved in it, things to look out for, ways to get started into it. What has taken for you to scale the amount of effort and work? I think that goes into being a general partner. I mean, that's again, something that we talked about that is often probably mis estimated. So I just really appreciate you taking the time to come on today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that? Jerry Miller (00:21:08) - Well, Sam my website WW dot largo group 20 11.com. Yes that was the year that I founded Largo group there folks can you know can can hit me up on you know LinkedIn, Facebook or Instagram if you're interested in potentially looking at our next deals, go ahead and schedule a call. Jerry Miller (00:21:29) - I need to get to know you a little bit and understand what your what your goals are. But but really, that that website is the front door to to reaching me. Whatever, whatever folks want to do. I've always got the free e-book you can you know, for getting started in real estate you can just plug your your email in there if you want to just kind of sit back and watch, we'll send you some some good content via email. That's it's really up to you what level of engagement you'd like to have. Sam Wilson (00:21:53) - Fantastic. Jerry, thank you again for your time today. Certainly appreciate it. Jerry Miller (00:21:56) - Thanks, Sam. Great to chat with you. Sam Wilson (00:21:58) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. Sam Wilson (00:22:20) - So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Malcolm Turner Malcolm has over 25 years in the financial services industry but specializes exclusively in commercial lending. In 2007, he co-founded Castle Commercial Capital LLC, a national commercial mortgage banker and brokerage based in Southfield, MI. Show summary: In this episode, Sam interviews Malcolm Turner, co-founder of Castle Commercial Capital LLC. Malcolm shares his journey into commercial lending, starting with his background in financial services and his transition from residential lending to commercial lending. He discusses the challenges and opportunities in the current market, emphasizing the importance of finding the right financing options for different types of deals. Malcolm also talks about the benefits of bridge lending and gives examples from the self-storage industry. -------------------------------------------------------------- Intro [00:00:00] Starting a Commercial Mortgage Brokerage [00:00:49] Surviving the Financial Crisis and COVID [00:03:21] Specializing in Multifamily and Bridge Loans [00:05:46] The importance of speed and time in closing deals [00:11:34] The risk and challenges of unbankable deals [00:15:40] Strategic repositioning of a hotel property [00:19:16] The challenges and opportunities in the current market [00:22:27] Using premier properties to feed applications and keep occupancy high [00:23:34] The importance of meeting with a finance guy ahead of a deal [00:24:36] -------------------------------------------------------------- Connect with Malcolm: YouTube: @CastleCommercialCapital LinkedIn: linkedin.com/in/malcolmturner/ Facebook: https://www.facebook.com/malcolm.a.turner Twitter: @CastleLoans Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Malcolm Turner (00:00:00) - A lot of people that were doing bridge loan deals that shouldn't have. Mm. And so now with the price increases, okay, they're not competitive and it's like, oh, bridge loans are bad. No, that deal should have never been in a bridge loan in the first place. Sam Wilson (00:00:14) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Malcolm Turner has over 25 years in the financial services industry. He specializes, though, exclusively in commercial lending. In 2007, he co-founded Castle Commercial Capital, LLC. They are a national commercial mortgage banker and brokerage based in Southfield, Michigan. Malcolm, welcome to the show. Malcolm Turner (00:00:46) - Thanks, Sam. Thanks for having me on. I'm honored to be here. Sam Wilson (00:00:49) - Absolutely. Malcolm, The pleasure is mine. There are three questions I ask every guest who comes on the show in 90s or less. And you tell me, where did you start? Where are you now and how did you get there? Malcolm Turner (00:00:58) - I started in. Malcolm Turner (00:01:01) - Well, how far you want to go back? I started in financial services as a financial advisor. And then the laws changed with Glass-Steagall, where everyone got in everyone's backyard. You know, insurance guys selling brokerage and broker, selling insurance and got into residential lending. That was a tremendously lucrative at the time. You couldn't do deals fast enough. There wasn't enough appraisers to do them at that time. This is oh five, oh six, and was having a conversation with my pastor and his office one day about me doing the right thing for a client, which meant putting him in a fixed rate FHA loan, and my manager wanted me to put them in an option arm that would have blowed up three years later had we, you know, you know, new had a crystal ball. And I was like, Yeah, but this guy is a single guy. First deal. We should do the right thing, right? Oh, there you go, Malcolm Talking about that. Do the right thing. Stuff, you know, and I said to my pastor, why he's doing the right thing. Malcolm Turner (00:01:57) - A batch of dishonor. And he says, Well, if you were going to do a company, you know, mortgage broker, brokerage, how would you do it? I'm like, well, do commercial because commercial is about the numbers. It's not about the kitchens and the bathrooms. It's the math. You know, And we talked about I said, you set up an office and you have to build relationships with lenders and do this, that and the other. And that's about all it would take. It goes, Great, let's do it. I was like, Oh, I thought we were talking hypothetical. He's like, No, I love you like a brother and I trust you with money. We should do it. And I was like, okay. I was like, Well, I love you too, man, and I trust you. But the only thing about mortgages. So we would be doing all the work and we're splitting the money and I don't want to mess up our relationship. Malcolm Turner (00:02:41) - And he's like, Yeah, you're right, Malcolm. I totally get that. Tell you what, you you don't have to train me. I get it. I'll be humble, let you coach me. Um, let's build a legacy for our families, and I'll fund it. And you set it up, and then we'll be evenly yoked. I was like. Okay. And that's how Castle Commercial Capital was born 16 years ago. Sam Wilson (00:03:06) - Wow. That's a that's an unconventional story. I love that getting into lending in 2007 doesn't seem like the most favorable time to start a company like that. Malcolm Turner (00:03:21) - It was not. Our saving grace was the residential market crashed first. Commercial really didn't get pounded until 2010. That's about when the, you know, it finally caught up to commercial. You know, but since then, we've survived the great financial crisis. We survived Covid. You know, we've even survived just the latest rate increase over the last year because there's been quite amount, quite a bit of turmoil, especially on my side of the table. Malcolm Turner (00:03:54) - You know, lenders have gotten and all lenders are going out of business. You know, when lending stopped during Covid and in March of 2020, by the time June and July rolled around, some of those lenders didn't make it, you know, and we're still here. So I'm I'm I'm glad to do that. But, I mean, that's not because I'm special or anything like that. But I've always recognized like when Covid hit, I said, okay, no one's funding right now. Not sure when they're going to kick up. So let's redo our website. It's a great time to do it. Let's redo our marketing. As a matter of fact, let's come out with a commercial mobile lending app. Let's do that. You know, and so I've always tried to stay out front and say, okay, you know, like Wayne Gretzky said, you know, he's great because he skates to where the puck is going. Not to where the puck is, you know. And that's up the side. Malcolm Turner (00:04:51) - And then we just wrote our book financing the Bankable deal, you know, And so I was at the commercial, the National Commercial Mortgage Brokers Conference in Vegas last year, and I was talking to a bunch of commercial lenders and saying, Hey, I'm writing this book. Where do you guys think the market is going and what's it doing? And, you know, did I cover everything? You know, Is there anything I missed? And one of the guys was somewhat skeptical. And we had a breakout session the next day. And during the breakout session, he found out everyone on the panel had done business with me. But him. He was like, Wait a minute, you did business with him. You did along with him. And both of the guys going, Yeah, he sure did. Yes, he does. They're like, Well, okay, well, you got to get us in there, right? You know? And I was like, Yeah, okay. You know, that's awesome. Sam Wilson (00:05:38) - That's awesome. Well, tell me this. What what is the type of lending that you specialize in now? Malcolm Turner (00:05:46) - Right now, most of our business is multifamily. Most of our businesses are multifamily and we kind of slid into the bridge loan, the bridge lending space because you know, the market for deals. That are picked over and everyone's fighting for. If the market is this big, those deals are this big. Sam Wilson (00:06:09) - Right. Malcolm Turner (00:06:10) - And so there's another you know, this is a stat a lot of people don't know, but like 85% of commercial loan applications are denied. Yeah. Believe that are denied. Right. That doesn't mean that the other that the the 15% are great and the other 85% are terrible. You know, there's probably another 25%. Of those deals that are doable. They just don't know how to do them when their bank says no. Right. Right. And so I was at a a commercial multifamily meetup and a banker was doing the presentation on financing. And at the end of it, they said someone asked the question, well, outside of there were a small community bank outside of you guys doing loans, who else can do them? Another way to do multifamily as well, the small banks and big banks. Malcolm Turner (00:07:02) - And I was like, That's it. And they were like, Yeah, just just those two. And that was from their perspective, Right, Right. And I was like, okay. So I posted in the group on their Facebook page. There's seven alternative ways of financing deals between Fannie Mae, Freddie Mac, USDA, FHA, HUD, Right. Private lending, bridge lending. There's a whole smorgasbord of options, you know, and everyone's getting in the business. You have insurance companies, pension funds, hedge funds that are setting up mortgage funds. So there's plenty of capital in the marketplace. Now, deals, on the other hand, is another story, but there's plenty of capital to get to get deals done right. Just no matter what, it's going to cost you. And then if you're buying, can I price my deal where the cost of capital makes sense, you know? Sam Wilson (00:07:54) - Right. Right. That that's the the kicker right there. Can I price my deal where the cost of capital makes sense? And, you know, there's a lot of fear, I think, in the marketplace right now. Sam Wilson (00:08:09) - What are we on? And you would know this stat better than me, but I read it maybe. A month ago. That year to date, transaction volume in the multifamily space was down 75% nationally. The rising interest rates are a concern, as you said. You know, you guys have weathered through that. But having, you know, specializing in the bridge lending space, there's a lot of people that look at bridge lending now, especially with a, you know, suspiciously. They look at it and go, oh, absolutely. Bridge lending. Don't I got to go? Like, that's not for me. Tell me why it still is a good option for the deals you guys are getting done. Malcolm Turner (00:08:51) - Well, I think you start with when is it inappropriate? Mm. Right. If you have a cherry deal, it's cash on like crazy. You got tremendous occupancy or expense ratio is is fantastic. The property condition is great, the location is great. You know, you don't need a bridge loan. Malcolm Turner (00:09:16) - And what I've seen is for convenience and speed and just, you know, again, convenience because it's not as many hoops to jump through. A lot of people that were doing bridge loan deals that shouldn't have. Mm. And so now with the price increases, okay, they're not competitive and it's like, oh, bridge loans are bad. No, that deal should have never been in a bridge loan in the first place. Sam Wilson (00:09:39) - Right. Malcolm Turner (00:09:40) - You know, so for me I look at if the deal has something wrong, if it's got what we call heron on the deal, poor occupancy, poor cash flow, you know, there's all time. There's a situation where there's a time sensitive thing going on. Like, for example, I had to deal with closed where there was two partners, two guys partnering on a deal. They own the property probably about 5 or 6 years when I was getting a divorce. And and, you know, sometimes you see it coming. Sam Right. You sort of know the handwriting's on the wall, right? And the one partner says, Look, if you're getting divorced, we got to get out of this partnership because I don't want your wife winning, winning your half of the deal, and I can't be partners with her. Malcolm Turner (00:10:28) - Right. You couldn't make it work. I sure as hell can't. Right. So. So they were looking to get out fast. Their property manager was my client. So I have been he's been I do commercial real estate meetup here locally in Southfield, Michigan. And this guy's been coming to my meetups a couple of years and he had about ten rental properties. And so we did a portfolio loan, cashed out of his cash, a bunch of equity out of his residential. And then literally 45 days later, these guys said, Hey, hey, Rob, do you know anybody that might want to buy this property? Because we got to get out fast. And he was like, Hey, me, me, me, me, me. Right. He's already been the property manager and he had the cash and he knows what the issues were with, with the property, right. And there were certain things they were they should have done, but they weren't doing. They could have made it more profitable. Malcolm Turner (00:11:25) - And so he knew where it could go. So we financed that deal, got those guys out, and we closed in like 30 days. Sam Wilson (00:11:33) - Wow. Malcolm Turner (00:11:34) - You know, and for the speed for closing that quickly and beating the attorney right to the courthouse, you know, he got that property at like a 15 know 18% discount to value. Right? Right. So for some sellers. Speed and time. Let's just say time is more important than money. Right, Right, right. And so, you know, you have to say and play a blue ocean strategy. And say, okay, where am I looking at deals that no one else is looking at and then how do I make that work? And then that's where a bridge loan could come in. And even if the deal is is fine and there's no pressing issues like these two partners had, you might still offer that lower price. But I will close quickly. I will close in three weeks. I will close in 30 days or less, you know, and see if they bite now, if they don't bite. Malcolm Turner (00:12:32) - And he says, okay, fine, you didn't you know, you didn't bite. I guess I won't have to go the traditional route, you know, because there's going to be a higher cost with the bridge loan. Sure. Right. But if I'm getting an 18% discount off a value. I don't care. Sam Wilson (00:12:47) - Right. Malcolm Turner (00:12:48) - The math works, right? Sam Wilson (00:12:50) - Well, hopefully the math works, because even if it's a discount, if the current cash flows don't cover the, you know, the current expenses, then it becomes an interesting, interesting equation. Malcolm Turner (00:13:02) - Well, right. That's where the math has the math. Right. Right. And I say that in my in my book. The math has to work. Right. Right. And you can't fall in. And one of the mistakes sometimes investors will make is they'll they'll find a deal or maybe it's a deal that been paying on for a long time. It finally comes available. They get a shot at it and it's a bad deal. And I'm telling them it's a bad deal. Malcolm Turner (00:13:28) - They got other advisers telling them it's a bad deal and somehow they still trying to make it work. I remember I had a guy shop a deal to me three times in two years. In the first time, I was like, Yeah, I don't think this is going to work. He didn't listen. He went to someone else, you know, didn't work, pay some guys money up front to quote unquote pre-approval or some nonsense. Okay. And came back to me. And then the third time, a real estate commercial real estate brokerage here in town say, hey, Mac, I got a client coming in tomorrow. He's got this big deal downtown Detroit. We're trying to make it work, you know, I know it's short notice, but can you meet me in my office at 10:00? Because he doesn't have his financing set. And I was like, sure, sure. I walked up to the meeting and the guy's name the broker's name was Levi, right. And I was like, Hey, Levi, how are you doing? Is that good? He's like, Malcolm. Malcolm Turner (00:14:20) - I was like, Mike. And Mike was like, Hey, Malcolm, how are you doing? I'm like, Good. He was like, Oh, you know, each other. I was like, Oh, yeah, right. And we went to talk about the deal and he was like, Yeah, I got the spreadsheets. Like, It's okay, Mike. I got everything on your deal. I don't throw that stuff away. So everything you submitted to me is all those financials still the same? Yeah. Okay. Well, your options. The options I gave you six months ago. The options I gave you a year or two years ago. I'm probably the ones you still should take. And he wasn't willing to listen. He was so in love with this deal. He just couldn't let it go. Sam Wilson (00:14:57) - Mm hm. And it was a deal that should have just been let go, is what it sounds like. It was just a bad deal. Malcolm Turner (00:15:04) - It was. Well, it wasn't. Malcolm Turner (00:15:05) - I won't say it was a bad deal, per se. It wasn't a great deal for him. Right. And he ended up losing it. Someone else got it. And, you know, long story short, it was a deal that was probably like a million and a half. And I just saw it. It sold for like 5.20. Sam Wilson (00:15:22) - Wow. Malcolm Turner (00:15:23) - So, you know. But but if I you know, they always say, you know, there's there's more than one way to skin a cat. Sometimes there's only one. There really is only one. And if I say this is how you make it work and that's how you get it done and the guy doesn't want to do it was nothing I can do. I can only advise. Sam Wilson (00:15:40) - You can only advise. Let's talk a little bit about your financing, the UN bankable deal book. And again, you know, this kind of goes obviously hand in hand with bridge loans, things like that, that help get some of these deals across the across the finish line. Sam Wilson (00:15:56) - But what are un bankable deals and why? What's compelling about those that makes people even want to buy them? I mean, if banks are looking at it going way, way, way too much risk, kind of like you looking at it going, Hey. That's a that's a challenging deal. Like what? What's the motivation behind someone trying to get deals like that done And what's the what's the I mean, just give me some color behind that if you can. Malcolm Turner (00:16:21) - Sure, sure, sure. I mean, from my perspective, a good bankable deal has got some hair on it that scares the willies out of everybody else. So one, you're not going to have a lot of competition when it comes to negotiating the deal, because most people, I think, don't think it's possible. Right. To you know, like I said, it may have cash flow issues or occupancy issues. And the question becomes, does your team because I believe teamwork makes the dream work. Right? Does your commercial real estate team have a plan? To turn that property around. Malcolm Turner (00:16:59) - You know, sometimes that that property, that own banker will deal is a hotel that's failing miserably as it is a lot of hotels right now, Sam, that are in trouble. A lot of the biggest category of deals in foreclosure and forbearance. Our hotel deals. Okay. Sam Wilson (00:17:18) - It's not it's not office space. Malcolm Turner (00:17:21) - No, it's hotels. It's hotels. Sam Wilson (00:17:25) - Tough. Why? Malcolm Turner (00:17:26) - Because if I'm, um. Ford. Okay. And I'm leasing 50,000ft², and I've got a five year lease, right? I'm paying my bills. Right? Right. For may try to negotiate with the landlord, but I'm paying my bills. Yeah, okay. In a hotel, though, right? It's consumer based. So Right. So the consumers are like, Yeah, that area's not that hot anymore or we don't like that property anymore or it's not managed well. It can drop like a hat. You know? And so as an investor, though, sometimes we know in commercial it's about highest and best use. Right. Malcolm Turner (00:18:14) - So one of my examples in my book is about strategic repositioning. I had a client, she bought one of these, um, drive in like motel type places. You know, we're talking about, you know, the movies. You pull up to it, that's where everybody hides out and trying to hide from the FBI. You're on the lam. One of those type hotels. And she closed off the place. She put wrought iron fencing all around it. She made it senior only because seniors only need about that much square footage. Right. She took the wall out and the and the back of the unit in between. So she made two units. One one unit is like their living area and the other unit is a bedroom. Sure. Bedroom, private bath. Right. The other one was like a little living area with a kitchenette. Okay. She provided housekeeping for them. She provided meals for them three squares a day, all for all inclusive price of, like 2500 a month. Sam Wilson (00:19:15) - Wow. Sam Wilson (00:19:15) - Okay. Malcolm Turner (00:19:16) - The square footage was only 432ft². We? You know, that thing was cash flow and like crazy, right? Sam Wilson (00:19:30) - I'm sure it was. Malcolm Turner (00:19:32) - You know, And so she's like, let me do it again. And so that's where now if she goes to get a loan for multifamily. That's not going to work there. Look, this is a hotel, right? You're going to have to do some renovations to it. We don't know about your experience doing that, you know? How successful is it you're going to change the use? What about. But if somebody has a plan and they've got it worked out and she had a chef that would come in in the in the clubhouse of the of the place, he would cook meals for all the residents on a daily basis. It worked out. It cost her like $5 a meal. Wow. Right. The maid service, same thing. And the great thing about the maid service. They're all seniors, right? They're on fixed income. They loved the fact that meals, housekeeping, everything was included for her. Malcolm Turner (00:20:26) - She knew her property was going to get kept up because the maids going in there cleaning everybody stuff. And if somebody was having a rough time, if they were sick or they weren't doing well, the maid would know first. Sure. And say, Hey, Mrs. Johnson, And you know, Unit three B is struggling. You may want to call her adult children, have them come check on her. You know, So it was a way to better manage the property as a property manager because the maid was giving her all the gossip on what was going on with the place, you know, and every unit was maintained well, and she made a really good profit. Oh, and she gave them cable, right? Because she gave them like basic cable. And the only thing those tenants had to pay for was their own cell phone. Sam Wilson (00:21:08) - Wow. Malcolm Turner (00:21:09) - Wow. And that was not a bankable deal. But that was where, you know, and I believe she bought that property all in between the renovations and the purchase was like a mill one. Malcolm Turner (00:21:23) - And I think the value of our cash flow was something like 2.4. Wow. And then when I met her, she wanted to cash out, refi and then go buy her another one. Sure. And I was like, Absolutely. Sam Wilson (00:21:37) - Absolutely. Yeah. Because you got the model. I mean, that's it. And I think that's what I'm hearing you say here is anything that is outside of the ordinary, it's not maybe cash flow positive and or if it is cash flow positive, the value add plan has not yet been implemented. A heavy value add plan has not yet been implemented. So what you need are a couple of things. Tell me if I'm wrong, but you need someone with a skill set to implement the heavy value add plan. Yes. And then, you know, obviously, you know, that's really it. In the second part is to have that plan. So if you have those two things inside of a deal, maybe that non-traditional or the lender's traditional lenders won't look at, you need to go to the non-traditional route, which is through maybe somebody like yourself that helps specialize in that. Malcolm Turner (00:22:27) - Okay. And there's money for you know, there's money for all of that. And as lenders who aren't scared. Of a value add project. Right. They're not scared of even if it's like a straight, like obviously repositioned, but also just, you know, this is a property that maybe market rents are 1200 a month and the current rents are like 700, 800 bucks. The owner is like, you know, 82 years old. And he just didn't feel like putting everyone on a new lease. So the whole rent roll is month to month. You know, it's on the market and the bank is like, Yeah, yeah, we didn't want to do that. But if you've got a guy that's got, let's say, 4 or 5 properties already in the area, he's bringing in applications, right? Rental applications from those other properties. Okay. He knows I can fill up those 20 units easy, no time. You know, I know guys, they do self storage like that. They'll have a great location and they'll they'll have one property. Malcolm Turner (00:23:34) - That's the real big marketing property. It's on such a great corner that property is always filled and they use those extra locations to fill other self storage. They got like 5 or 6 other self-storage units that are not on great locations, so therefore they were cheaper. Sam Wilson (00:23:50) - Right. Malcolm Turner (00:23:51) - Right. And they use the one premier property, right? The trophy property to feed the applications and keep the occupancy high and the other self-storage properties that they have. Sam Wilson (00:24:02) - That's awesome. I love it. I love it. Malcolm, I've learned a lot from you here today. Learned about bridge lending. You learned about the times when it's a good application and a good opportunity to use that. Talking about your book Financing the Unbreakable Deal, we've talked a lot about the advantages of using bridge lending, convenient speed. The yeah, just went kind of through a lot of those details on that. I've learned a lot from you. Certainly appreciate you taking your time to come on the show today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that? Malcolm Turner (00:24:33) - They can find us on YouTube. Malcolm Turner (00:24:36) - We have a YouTube channel, Castle Commercial capital. You can find us on YouTube. Our website is Castle Commercial Capital. I also have my book website, which is financing them. Bankable deal. They can learn more about the value that's in our book and if they want to book consultation, I offer this to all of your listeners there. They can have a free consultation for half an hour with me to discuss the deals that they're working on and future deals, because one of the best ways to be really effective with your financing and I put this in my book is to meet with your finance guy ahead of the deal and say, Hey, here's where financing is at, here's where it's going, here's the best deals to get done, and then go out in the marketplace and see which. And it's amazing. Sometimes I'll have a conversation with someone. And literally three days later, I found just the deal you were talking about. Really? Yeah. But it's like and I'll end with this, it's like getting a car, you know? I got a black Toyota Venza, XLE. Malcolm Turner (00:25:36) - Not a whole lot. I'm on the road. Most. We don't even know what that car is. I didn't know what it was. I fell in love with it when I saw it. Right now, I see them all the time. Every day. Right? Right. It's like once you get an eye. For certain types of deals. You see them. You know, I've got an eye for commercial real estate. You know, I personally like to buy single tenant leased properties that are vacant. So every time I'm driving down the street and I see an empty McDonald's or a former Baskin-Robbins or a close Starbucks, I'm like, ha ha ha. And then I'm reading What's the other tenants around that? And most people just drive by those places, right? Sam Wilson (00:26:15) - I love it. I love it. Malcolm, thank you for taking the time to come on the show today. We'll make sure we include the links to your book and to your website there as well. There in the show notes. Sam Wilson (00:26:25) - I certainly appreciate your insight and your time. Malcolm Turner (00:26:27) - Hey, thanks for having me on, Sam. I appreciate. It was fun. Sam Wilson (00:26:30) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
In today's show, Sam shares opportunities for new team members at Brick and Investment Group. Open positions: Director of Communications (remote, part-time role): Timestamp: 00:05:35 Investor Relations (remote, full-time role): Timestamp: 00:06:35 COO at Ellie's Laundry (not remote, full-time role): 9. Timestamp: 00:07:30 Apply: Email: firstname.lastname@example.org Show summary: In this podcast episode, Sam discusses the importance of building a team and the hiring process. He shares his personal experience and emphasizes the idea of working together as a team. Sam announces three positions available within his company and encourages interested individuals to reach out to him for more information on these opportunities. -------------------------------------------------------------- Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Sam Wilson (00:00:00) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. How to scale commercial real estate listeners want to say thank you, as always, for tuning in and listening to this show today. You get just me. I've not done many solo episodes, but this is one of those things that, well, once you hear what the topic of today's episode is about, you'd like that makes sense to have a a solo episode. So again, you know, thank you as always for listening. One of the questions I commonly ask people who come on the show guess that. Come on the show you I know if you've been listening to the show for a while, you know this is something I always ask about, which is how did you build your team? What does that look like to build a team? What have you done right? What have you done wrong in the hiring process? What's it looked like early on especially and that's the name of the show is how to scale. Sam Wilson (00:00:58) - What does it look like early on to bring on team members that have really helped carry you to the next level? And I think it's it's a it's a question that I asked because it's a question that I have commonly wrestled with. I think here for the last decade or so. When I sold our flooring company when I was 30, I sold that flooring company up in Indianapolis, Indiana. And one of the things that I had had enough of was employees. I'll be honest, I was tired. I was tired of working with other people. I was tired of telling employees what to do. I was tired of the problems that came with having team members that I was then responsible for. And I just said, Man, I don't want to do that anymore. Well, here we are 11 years later. I do have, again, a lot of employees, but it's taken me a while really to get to that point where it's like and I don't even like the term if you get to know me, you don't. Sam Wilson (00:01:57) - I don't like the term employees told me of the day. I said, Look, I'm no one's boss. Like if you come if you come to work with us, you come to work with us. You don't work for me, you work with me. And that's that's really the kind of the spirit of what we want to do when we're bringing on team members is to let everybody know that we are a team and that we're yes, we are building something bigger than hopefully anything, us, anything that any of us can achieve on our own. And so that's been a it's been an interesting process for me. But even bringing on a lot of those team members, they've been team members that I'm not directly responsible for. We've had some great general managers here in the Memphis area that have helped kind of manage some of our laundry side of things that I don't even directly interface with a lot of those employees. So a lot of that again, that burden has been taken off of my shoulders. All that to say, though, is that on the brick and investment group side of things, so we have our laundry facility business, which has, I don't know, probably 15, 20 employees at the store levels that work with us. Sam Wilson (00:02:59) - But then on the brick and investment group side of things, so kind of more on the leadership side of things. I've kept the team pretty light and that's been intentional because again, I've tried to avoid being responsible for other people and that's it's hindered growth, to be honest with you. And that question I asked the podcast guests that come on and say, hey, you know, where or what have you done right? What have you done wrong? I know I said that earlier in the show earlier on. What have you done right and what have you done wrong and how did you build your build your team And every single person, at least in my memory now, you could probably go back and find a guest that came on and say, Well, Sam, you're wrong, but in my memory as I recall it. Every single person that has come on the show has said, if you want to scale, you must have team. The way I've heard it said is if you want to go far. Sam Wilson (00:03:47) - Uh, or if you want to go fast. Excuse me. Let me get the get the phrase right or the. Yeah. Get get this right. So if you want to go fast, go alone. If you want to go far, go together. And again, you can probably look it up and be like, Hey, that's you butchered that one, two. Sam Which is probably true, but you get the idea is that if we want to go the distance, we've got to have team to do it. So the preamble, my five minute intro here to actually the thing that I wanted to talk about today was that on the brick and investment group side of things, we have opportunities for team members, not I have told you all the reasons. Probably you never want to work with me, which is because I don't really want to be responsible for people. But it's one of those things that. In 2023. Somebody asked me this for 2023. They asked me at the end of 2022. Sam Wilson (00:04:40) - They said, hey, in 2023, what are two things you are going to do to make a meaningful difference in the way that your business operates? I said. Focus and team. Two things. Two things alone that we are going to do inside of our business is hyper focus and bring on excellent team members. And I will say that we've had we're doing more. Better. Faster now than we ever could have possibly done as a lightweight. And we're still a lightweight team. But even even just on my own, even for that matter. So all that being said, there are opportunities here inside of the Brick and Investment group and want to let our listeners know what those are. There's two remote positions and there's one that is not a remote position and we'll get right into those. So the three positions that we are hiring for first and foremost is a director of communications. This person handles all of the investor updates, monthly newsletters, weekly newsletters, website edits, project management. They manage our social media managers. Sam Wilson (00:05:56) - They manage a lot of the things that are the kind of forward facing communication outlets. For the firm. That role is a definitely a remote position. It's something where. It could be what I call an all you all you can work buffet. But it is it's probably more a part time role suited for somebody that's looking for 20 to 25 hours a week and they super hyper flexible schedule. Not not a very in There are definitely times that availability has to be, you know, nailed down but a very flexible position that can be anywhere in the country. Director of communications The second thing or second job, rather, that we are actively hiring for is an investor relations position. Again, could be a completely remote position and that role is definitely a full time role. We are at a point now where, again, I've handled investor relations now for four years and it's something that we're excited to grow the number of investor conversations, the investor request, the things to keep up with it is a full time job, everything from investor outreach to investor updates to just doing everything that pertains to staying in front of and making sure that investors are happy and taken care of is a second role here at the company that I am actively hiring for. Sam Wilson (00:07:21) - And again, that can be a remote position, but it's something that would really if that's something you are considering or you know, this is your skill set, certainly please reach out to me on that job. The third position we're hiring for is a COO inside of Ellie's laundry. And you're going to say, what is Lee's laundry? Well, for those of you that don't know, we are going long. We have been going along for a while in the laundromat space, actually prefer to call them laundry facilities because of how our stores operate. But the laundry facility space is a business that we know very well. We've been investing in for years personally and have recently opened that business up to our retail investors and we are growing that business exponentially. And so it's been a lot of fun to really see that business just explode. The opportunities there are unlimited and we are actively seeking a CEO for that company, Ellies Laundry. We have the Clean Laundry Fund, one for those of you that haven't been tracking what we've been doing, the Clean Laundry Fund, one is going to acquire another 20 to 25 stores in the next 2 to 2 and a half years. Sam Wilson (00:08:28) - And we just, again, have unlimited opportunity there inside of the Clean Laundry Fund and inside of Lee's laundry for expansion and growth and need a experience there need an experienced CEO to come on board and really help us take that business to the next level. If this person or persons, any of these roles, describe who you are as an individual and you want to learn more about these, please reach out. The best way to do that is Sam plus the plus sign Sam Plus Careers at Brick, an investment group that's Brick, an investment group again that Sam plus careers, that brick and investment group. But now you get a good idea of where we are in our growth journey. And there's actually more roles that we have openings for as well inside of the business. But those are probably the three most prominent roles that we're actively hiring for and would really love. If this is something that you say, Hey, I'm great at this and I am ready to scale with a team and make a meaningful difference in both our communities and the team that we are building here. Sam Wilson (00:09:30) - I would love to hear from you on that. So that's it. Thanks again for taking the time to tune in to the How to scale commercial real estate show. You know how to get a hold of me and have a great rest of your day. Thanks so much. Bye bye now. Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Nick Prefontaine. Nick Prefontaine was named a top motivational speaker of 2022 in Yahoo Finance. He's a Speaker, Founder and CEO of Common Goal. Using the S.T.E.P. system he is able to lead clients through their trauma. Once they make it through, that is where their limitless potential lies. Nick's been featured in Brainz Media, Swaay and Authority Magazine. Show summary: In this podcast episode, Sam interviews Nick Prefontaine, a real estate investor and motivational speaker. Nick shares his personal journey of overcoming a traumatic brain injury and his success in the real estate industry. They discuss Nick's step system, which he applies to both his recovery and his coaching program. Nick talks about his high success rate in helping buyers qualify for loans and move forward with their homes, attributing it to their unique process. They also touch on Nick's experiences as a motivational speaker and his strategies in the commercial real estate space. -------------------------------------------------------------- Intro [00:00:00] The Step System [00:04:28] Nick's Journey [00:01:17] Realization and Doubt [00:06:46] The Step System [00:10:32] Motivational Speaking and the Step System [00:11:19] Real Estate Journey [00:15:12] The commercial real estate strategy [00:21:09] Buying commercial properties creatively [00:21:48] Closing [00:23:30] -------------------------------------------------------------- Connect with Nick: LinkedIn: https://www.linkedin.com/in/nickprefontaine Facebook: https://www.facebook.com/nick.prefontaine.7 Website: http://www.smartrealestatecoach.com https://nickprefontaine.com/step/ Podcast: https://www.smartrealestatecoach.com/podcast Facebook Page: https://www.facebook.com/smartrealestatecoach Google +: https://plus.google.com/+Smartrealestatecoachchannel YouTube: https://www.youtube.com/smartrealestatecoach Instagram: https://www.instagram.com/smartrealestatecoach Twitter: https://twitter.com/smartrecoach Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Nick Prefontaine (00:00:00) - Our success rate of our buyers. We're we're seeing it. GS Up to 90% of them that are once they're in the home, they're able to qualify and get their own loan and move on with the home, um, move on with their lives where as the other investors out there, the, the, the so-called competition um is seeing the inverse right. 90% of the people fail and only 10% of the people and that's because there's a very particular process that we'd like to put all of our buyers through so they're successful when they get to the end of their agreement. Sam Wilson (00:00:38) - Welcome to the How to Scale Commercial Real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Nick Prefontaine was named a top motivational speaker in 2022. He is also a real estate investor. Nick, welcome to the show. Nick Prefontaine (00:01:01) - Sam I'm excited to be here and with your audience today. Sam Wilson (00:01:05) - Absolutely. The pleasure is mine. Nick In 90s or less. Can you answer these three questions for me? The same three questions I ask every guest who comes on the show. Sam Wilson (00:01:13) - Where to? Just start? Where are you now and how did you get there? Nick Prefontaine (00:01:17) - Uh, where where did I start? Gosh, I would say back to that fateful day in February of 2003, I was just club with my friends. Uh, got to the mountain, headed right for the top and charged towards one of the biggest jumps in the terrain park and going off it, I caught the edge of my snowboard, threw me off balance and landed on my head. Uh, the doctors told my parents that I probably wouldn't walk, talk or eat again. And, um, let me see. Less than 90 days later, I ran out of the rehab hospital in Boston. Sam Wilson (00:01:55) - Wow. Won't walk, talk or eat again. 90 days later, you're running out of the hospital. What has happened between I guess that would have been middle of April 2003 and now. Nick Prefontaine (00:02:09) - That's right. Middle of April. Yeah, you got it right. Um, a lot has happened. I was. I was. Nick Prefontaine (00:02:14) - I was trying to give you the CliffsNotes version, but a lot has happened. I, um. I actually, when I was in high school, and it was really reflecting on it. Sam back, it's. It was reflected back to me from a mentor of mine. She said, Wait a minute. So only 18 months after finishing rehab, outpatient rehab, I was knocking on the doors of, um, notice the default doors of homeowners that had missed a few payments all the way up to several payments on their home, and the bank still foreclosed on them. So that was how I got my start in real estate. That was when I was 16, right when I got my license. And then, um, after I after I got out of high school, started starting to get my real estate license. Uh, got it. And when I was 19 years old and that led me to doing what I'm doing today, which is helping buyers and sellers. Um, we buy and sell property on terms creatively, so not conventionally. Nick Prefontaine (00:03:18) - And you can do that with that. We can, you can do that with anything, as I'm sure you're aware. Sam Wilson (00:03:23) - I am. I am. That's a really fascinating, fascinating story. So 18 months after rehab, walk, talk, eat again, 90 days later, you defied really all expectations. What would you attribute that to? Nick Prefontaine (00:03:40) - Uh, well, all right. So this is something that we recently developed within the last year, which is the step system. And it's something, it's step is an acronym. It's something that I unknowingly use to recover from my snowboarding action and what we've created, um, and the acronym stands for Support, You get to make sure you have the support of the family and friends around you. Um, this has you pulling back on relationships that you built prior to your setback, and then t is trust. You have to trust that the next step is always going to be available to you, so long as you take your first step is energy without maintaining your energy. Nick Prefontaine (00:04:28) - Um, you're not you're not a good use to anyone. You've got to maintain your energy, um, to get to get to that next level. And finally, persistence. And this is just a Cliff Notes version, but, uh, p this is a 10,000 foot view, but P is persistence. Once you've taken your first step, keep getting up every day and taking your next step, no matter how small. So that's something, that's something that, um, that I did unknowingly when I was in the hospital and what we've recently uncovered. Um, so yeah, pretty exciting, man. Sam Wilson (00:05:04) - That's cool. I love that. What? Let's go back to the I know the you probably have more lessons to share with us maybe than the time in the hospital, but I think that's probably a fairly, um, memorable time for you. Like at what point in time? Or did you ever go through that period where it's like, Oh wait, there's a realization that things may never be the same and then how did you deal with it? Nick Prefontaine (00:05:33) - Yeah, that's a great question, Sam. Nick Prefontaine (00:05:35) - So I would say when I was going through it and anyone that knows from going through a traumatic experience, time slows down. So although it was I was in a coma for three weeks, I really don't remember a month because it was partially induced because they had to induce me because they worried if they didn't, I wake up and freak out and the swelling in my brain would increase and I would die. So it was really less than 60 days. But those less than 60 days felt like six years. Just time time slows down when you're going through an experience like that. I don't know. I see you nodding your head. Um, so I don't know if you can relate to that or not. Sam Wilson (00:06:22) - Well, I've never had a traumatic brain injury per se, but certainly I think everyone's encountered something at some period of time where you wish there was a fast forward button and you're like, Oh my gosh, can we not? This is painfully slow. Yeah, And you just went out. That's it. Sam Wilson (00:06:43) - I think there's that period where you just want out. So yeah. Nick Prefontaine (00:06:46) - And to answer your question head on though, it's just bubbling up to me. Uh, there was so from the moment that I, that I remember the first moment that I remember, um, was the third floor when I was transferred to the rehab hospital in Boston. I was initially put on the third floor, which was reserved for the most critical of cases, and I hardly have any memory of being on the third floor because they were in the process of taking me off the drugs and medication. Um, when I first like kind of got my bearings and my surroundings, I just got up and kept doing the best I can and kept getting better every day. And a big thing, the reason I was able to do that is because when I was in the coma, my parents, the doctors would come in to share like news, worse and worse and worse in the beginning. And they came into my room to share it in front of me. Nick Prefontaine (00:07:45) - Even though I was in a coma, my parents knew that I was still taking information. So they said, No, no, not in front of him. And they made the doctor's walk outside to share the information. So I didn't know any better. I just as soon as I was aware of my surroundings, I got up, um, took my next step and I kept getting better every day. Um, there was one moment, though, which was in between my therapy, so I would get up in the morning. I would need help from a physical therapist helping me to shower and learn because I lost everything. So I didn't know how to do anything. Sure. So I would do that and then I would have physical, occupational and speech therapy. And after which you broke for lunch. And there was a there was a time on one of those days early on in my recovery, I was in my hospital room. I was in a wheelchair. I still couldn't really talk, wasn't really audible. Nick Prefontaine (00:08:41) - It was, if anything, a whisper was coming out and I was looking over my situation. Sam and I just. I turned my mom who was who me every day. That was part of my support system. And I said, Am I? I just couldn't figure it out. For whatever reason, I was having a moment of doubt, I guess you could say. I was like, Am I ever going to be able to walk again? And she looked. She looked at me and right away didn't even hesitate. Of course you are. That's what we're doing here. So you can get everything back and we can go home. And that was the only moment of doubt that I can say that that happened when I was in the hospital. Everything was just I got every day was, all right, what do I do next? What do I do next? What do I do next? And um, when I got home, it was really no different. I, I had to be tutored even though it was at school, because I got, I got out of the hospital at the end of April. Nick Prefontaine (00:09:38) - I had to be tutored because I had lost so much time and wasn't able to be in regular classes with my classmates. So I got tutored for the rest of the school year and then all summer long. Um, in order to move on to high school with the rest of my classmates. Wow. So let me take a breath there. No, that's throwing a lot of information at you. Sam Wilson (00:09:59) - No, it's a great story. I mean, that's. It's. It's inspiring. And it certainly one of those the one of those stories of perseverance, I think. I love the idea of the step that you put in there first is having that support. And I think you and you sound like you guys have rolled this out through your coaching program as well, if I'm not mistaken, using this same kind of process for. Can you hear me? Nick Prefontaine (00:10:26) - Yeah, No, I got you. Sam Wilson (00:10:28) - Okay, cool. I'm sorry. Nick Prefontaine (00:10:29) - The glasses. Yeah. Sam Wilson (00:10:30) - Gotcha. I thought you were giving me, like, the. Sam Wilson (00:10:32) - Hey, I can't hear you. Fine. You're good. Which is fine. Here, we'll hit time out there. Matthew, if you want to delete that. He is. Matthew's the the editor. We can just wind that back a few seconds. Let me jump right back in here. In a couple of seconds, we'll give him a pause so we can find the find the break. It seems like you guys have rolled out this step program or the acronym you use for step, not just for you and what you do on the coaching side of things or on the motivational speakers side of things. But you've also rolled it out inside of your business because I think these things kind of all they parallel, do they not, between the support, trust, energy, persistence, like those are those are four things that everybody needs to be successful really in anything they're doing. Nick Prefontaine (00:11:19) - Yeah. You know what? When I had a mentor year and a half ago reflecting this back to me, the step system, what I actually did and everything, she was it was the whole reason was saying because she said to me, Well, okay, you ran out of the hospital, but how'd you do it? I said, I don't know. Nick Prefontaine (00:11:36) - I just I got up and did it, like, did it. And there's just that's the mentality that the step system is how I've tackled, um, and been able to overcome and succeed with anything in my life. And it's really so it's really something that has been instilled in me. Um, and it's the way I was raised and like that, my upbringing. So that's how I've always dealt with things. Um, and now, now I'm, I actually started a company a year over year and a half ago now calm and goal, which we lead people that are going through a trauma or life challenge through the other side and then they can thrive with the rest of their lives. But this step system is something that we all naturally do. When I when I go like this and say we all mean like at smart real estate coach, it's just like the way the way the only way I know. Um, so it's just like continue to take your next step, but specifically the step system. Nick Prefontaine (00:12:45) - Yeah, that's a common goal. Um, but it's, it's something that I've done my whole life. Sam Wilson (00:12:50) - You're called on to speak as a motivational speaker. You, we were talking about this off air is that there are brain injury, traumatic brain injury associations that will say, hey Nick, can you come talk to us or come, you know, share? What are some of the things that you find are consistent themes that you talk about that resonate the most with the people that you are sharing with? Nick Prefontaine (00:13:18) - So depending, depending on the amount of time I have because, um, like tonight I'm going to be doing for speaking for the Brain Injury Association of Ohio, and that would be a 45 minute version of my keynote. Um, and then when I spoke at the Brain Injury Association of Maryland in March at their annual conference, that was a 60 minute version. And the, the only difference is in what's so exciting to me about the keynote is I get to share that step system and go into detail, um, like really drill down and go into detail about how they can apply it to their lives. Nick Prefontaine (00:13:59) - So, um, the common theme that I'm seeing is people come up to me after I've, I probably have, um, on average, like 10 to 15 people come up to me after and say how much, um, my story and the subsystem, um, help them see through what they're going through and they're going to go back and um, really try to drill down and download because it's free. It's a free e-book step is a free e-book that I give away on my website, which I can give it to you after to throw on the show notes. But um, yeah. So just excited as you can say. Sam Wilson (00:14:43) - Absolutely. No, that's really, really cool. I love that. I love that. Yeah, that's. That's absolutely awesome. When did you so you've been in real estate? You know, I think you said 18 months after rehab, you're out knocking on delinquent homes with delinquent mortgages, whatever, delinquent payments of some sort, seeing if you can acquire those houses. What's your real estate journey been like inside of this? Because it sounds like, you know, real estate has kind of been part of what you've done really from the outset. Sam Wilson (00:15:12) - I mean, gosh, 18 I don't know if you were still in high school when you started doing that or just out of. Yeah, but yeah, that's that's pretty compelling. Tell us a little bit a little bit about your real estate journey. Nick Prefontaine (00:15:23) - Sure. So that was it was actually the. So not the first summer after I ran out of the hospital, but the second summer I was my family was involved in real estate. So I, I had always been around in my whole life. However, I started to get the itch and I started going to my dad's library that second summer after I came home. And that would have been summer of 2005. And I started looking through his books and everything. And and I asked him, What is a book that you recommend If I wanted to like get started. And he said, Cashflow quadrant. So as I was reading through that, I came back to him and said, I want to I want to get involved. What do I do? And or how can I get started? And right around that time I was getting my license, my real not real estate license excuse me, my driver's license. Nick Prefontaine (00:16:17) - So he thought it'd be a perfect fit because right on, right along that time around that time, they were starting to play with the idea of having bird dogs, lots of properties and knock on doors and set meetings for the investor to meet with these folks about potentially buying their homes. So I was like, Oh, awesome, that's what I'll do. So I had to go to school during the week, but on weekends and holidays I would usually pick 1 or 2 days out of a weekend and I would do like 50 to 70 doors. I go to cities where they were high concentration and I do these doors. Um, if you fast forward a little bit, I got out of high school, started starting to get my real estate license, and I got my real estate license and, uh, drumroll, please. Um, march of. 2008. Great timing. Great timing. Great time to get your real estate license. So, um, I got my real estate license and started selling real estate, helping buyers and sellers. Nick Prefontaine (00:17:25) - As a realtor, I had all the people around me. Lamenting and complaining. Oh my God. The market used to be so good. Used to be so easy. You could do this and do that. I didn't know what they meant, so I. I just. That was the market that I. That I was dealt with, that I that I had to deal with. So I learned how to, how to help buyers and sellers in that environment and around we're not around. In 2014, my dad started buying properties 2013, 2014 started buying properties as an investor, and he asked me if I could help him with the marketing of all these properties that he was getting. I was reluctant, Sam. I was like, No, no, no. I got my own thing going on. I'm not looking for any any extras or anything. And luckily he asked me more than once. And so I started helping them with the marketing. Then the calls started coming in. He couldn't keep up with them, so he asked me if I could help out with the buyers. Nick Prefontaine (00:18:26) - So that morphed in New and then over the years, I developed a process, a buyer process that we have to bring our rental buyers through so that they're able to qualify for their own loan once they get to the end of their agreement. And I think you can probably relate to this, but um, our success rate of our buyers, we're, we're seeing it, jeez, up to 90% of them that are once they're in the home, they're able to qualify and get their own loan and move on with the home, um, move on with their lives where as the other investors out there, the, the, the so-called competition um is seeing the inverse right 90% of the people fail and only 10% of the people and that's because there's a very particular process that we'd like to put all of our buyers through so they're successful when they get to the end of their agreement. Sam Wilson (00:19:29) - Got it. No, that's really cool. And I love and it sounds like that's all you've done basically is some form of real estate really since high school. Sam Wilson (00:19:38) - Is that a fair analysis? Nick Prefontaine (00:19:41) - Fair statement? Sam Wilson (00:19:42) - Wow, that's cool, man. Good for you. I'm not. People are not. Maybe they disagree or agree. I really don't care. But the I think college is overrated, to be honest with you. Like, you know, if you can figure out a path to go out and make a meaningful difference, improve people's lives, there's ample opportunity to get paid for doing so. And you definitely don't need to go to school for for that to happen. In fact, it probably gets in the way more often than not. So I'm always, always happy to meet another bootstrap for that. Maybe I think that way because that that was my story. Um, yeah. Anyway, love it. That's very, very cool. So you've been in real estate ever since then. You guys have worked out the buyer process, a 90% conversion rate. So for those of you who are listening, it sounds like you guys are doing lease options basically as one of your strategies on the homes that you're buying. Sam Wilson (00:20:37) - So you're selling them on a lease with an option to buy and you're getting 90% of those to then convert to exercising that option to buy, is that right? Nick Prefontaine (00:20:46) - Yeah. So we're we're buying we're buying properties creatively, so we're not going and signing personally and qualifying for loans or putting big down payments down or anything like that. Um, however we acquire them, uh, we're always selling them on a rent own agreement to our buyer. Right. Um. Very simple. Yeah. Sam Wilson (00:21:09) - Right. No, that's cool. I love that strategy. Do you guys employ that strategy at all in the commercial real estate space? Nick Prefontaine (00:21:18) - We have? Yeah, we have. We've done several deals over the years with with commercial. The building that we're in is, was bought, um, with owner financing. I think my dad may have mentioned that. Yeah. Um, also there have been several buildings over the years in the state that we are right now, which is Rhode Island. And you can do this anywhere where we did mailers to, I forget the exact niche list. Nick Prefontaine (00:21:48) - I think it might have been out of state landlords or something, but 4 to 6 unit buildings. We ended up buying two of those out of the mailings to to on two different occasions, buying them, um, improving the property, getting the rents up and improving the whole property and then selling them, buying them creatively and then selling them for a profit. So yeah, we've done a few commercial deals as well. Sam Wilson (00:22:16) - Got it. I love it. Nick, I love your story. Thank you for taking the time to come on the day on the show today and share with us you've overcome incredible adversity. I have a very close friend of mine who something similar on a hiking accident fell in, kind of was told the same thing, but his journey was much, much, much, much, much, much longer maybe than yours was in getting out of the hospital and even surviving what's kind of a miracle, let alone being able to walk and talk again. So I think it's really cool that you have overcome that. Sam Wilson (00:22:51) - You have found a process really that can be applied both to life, to real estate, to really anything you undertake. And I think it's really cool the way that you give back to the brain injury. Others that have, you know, endured brain injuries and giving back to brain injury associations, being a keynote speaker, you got a great story. And I also love what you're doing in real estate. And it's really cool the way that you guys are helping other homeowners, not just find and keep their homes when they are rent to buy buyers, but also just the way you guys are coaching and helping other people in the real estate space. So very, very cool. I love this. If our listeners want to get in touch with you and learn more about you, what is the best way to do that? Nick Prefontaine (00:23:30) - So if anything, if anything rang true with any of your listeners as far as on the business, on the business end, how we buy, how we buy and sell homes, um, creatively and our trademark prepaid system. Nick Prefontaine (00:23:45) - Um, they can go to smart real estate coach.com and if they scroll down they can get registered for the free masterclass. And as I said, that's going to teach them about how we buy and sell on terms and our trademark three day system. Um, and then if they're interested in the step system and like following me with anything I'm doing with my motivational speaking or anything and that and that regard, they can go to Nick prefontaine.com/step. Um, and they can download the step system for free today and that will help them take their first step. Sam Wilson (00:24:25) - Awesome. We'll make sure we include that there in the show notes. Nick prefontaine.com/stapp Nick thank you again for coming on today. It was an absolute pleasure. Nick Prefontaine (00:24:35) - Always a blast. Thanks for having me. Sam Wilson (00:24:37) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. Sam Wilson (00:24:54) - It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Adam Zach. Adam retired from the Civil Engineering profession at age 32 through real estate investing. He is a family man with a business, not a businessman with a family. Show summary: In this podcast episode, host Sam interviews retired civil engineer Adam Zack, who achieved financial independence through real estate investing. Adam shares his strategy of buying rental properties in up-and-coming markets and emphasizes the benefits of being a tenant buyer. He discusses his approach to underwriting potential buyers based on their credit score and background, and explains how he pairs investors with properties that meet their desired return criteria. They also discuss the challenges of securing loans and verifying down payments, as well as the potential market size for this investment strategy. Adam reveals their recent launch of a fund to streamline their real estate purchases. -------------------------------------------------------------- Intro [00:00:00] The Marshmallow Test [00:01:49] Formulating the Plan and Executing [00:03:12] Finding the Person First, Property Second [00:06:53] The option to buy structure [00:08:25] Complications and sourcing funds [00:09:17] Market potential and disqualifying criteria [00:10:51] The challenges of real estate transactions [00:18:05] Launching a real estate fund [00:20:26] Current challenges in the real estate market [00:21:15] -------------------------------------------------------------- Connect with Adam: Linkedin: https://www.linkedin.com/in/adam-zach-pe-0000303b/ Facebook: https://www.facebook.com/ChessChief Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Adam Zach (00:00:00) - As a tenant buyer, it's actually great to buy an up and coming markets that could drop because you just have the option but not the obligation to buy. And so at the same time, that's why we're setting this up, not so much as like, hey, test drive it, it's, hey, this is your house. And if something were to go wrong, we give them three years, they get an option to extend for a year. Plus we give them the option of like, Hey, if something really goes wrong, we'll just sell the home. And if there's whatever equity is generally left, you can take part of your deposit back. Just like if you bought a house now and sold it six months later, you're going to lose money just 6% to agent fees, whatever it is. And so we're trying to set it up as much for success across the board. Welcome to the How to Scale commercial real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Sam Wilson (00:00:50) - Adam. Zack is retired from the civil engineering profession at the age of 32. He did that through real estate investing, as he claims. He is a family man with a business, not a business man with a family. Adam, welcome to the show. Adam Zach (00:01:03) - Thank you, Sam. Good to be here. Sam Wilson (00:01:05) - Absolutely. The pleasure is mine. Adam There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Adam Zach (00:01:14) - Little town of Dickinson, North Dakota, population 17,000, went to civil engineering school. One of six found my sweetheart in college. We got married. We now have three kids. Five, three and one. Got into real estate just as I graduated engineering and realized that the marshmallow test was the key to success, that if I can just wait and not eat that one marshmallow today, I can have two later. Sam Wilson (00:01:40) - Fantastic. I would venture to say that many of our listeners have no idea what you're talking about. Sam Wilson (00:01:46) - I do know what you're talking about. Tell us about the marshmallow test. Adam Zach (00:01:49) - So they did this experiment. It was kind of cruel with kids, but like it was a great indicator of success in life or being able to get what you want because success has a funny success in my mind, is just getting from point A to point B if you want to get there, point A to point B could be I could lose £1, £10, I could get whatever I want. So in general, they set these kids in a room and they said, Hey, you can have this one marshmallow now and you can just eat it or you can go play with those toys. And if you wait, I think it was like 30 minutes, I'll give you two marshmallows later. And the kids that were able to be like, You know what, I'm going for the two marshmallows. Like, I'm going to do it. Like these kids that were, you know, less than ten years old that they were able to have some sort of self-control. Adam Zach (00:02:27) - They tracked them over a period of like 30 or 40 years and found out that they were much happier and successful in their careers. Sam Wilson (00:02:33) - Right? Right. Yeah, absolutely. So you graduate engineering school and then you get into real estate. One thing I know because I am not an engineer, I need engineers in my life because you exhibit this trait, which is that you will research, research or research plan and then execute. And having had and currently have friends who are engineers getting to the point where they're like, okay, now we're ready to do it takes a considerably long amount of time. It sounds like you were able to formulate the plan and execute, which a lot of people struggle with in a in a relatively short period of time. How did you do that, especially coming directly out of college? Adam Zach (00:03:12) - The tipping point was asymmetric reward to risk at a 2 to 1 ratio. So Daniel Kahneman does this great test, like you flip a coin. It's heads. I'll give you 50 bucks. If it's tails, you give me 50 bucks. Adam Zach (00:03:25) - Most people won't do it. Like I don't want 5050 because they fear losing two times as much as they gain winning. So the tipping point is, I'm going to flip a coin. You win $100 or you lose 50, then that's like when the tipping point is like, Oh yeah, I'll do that. Right? Like, sure, if I do it enough time, if I'm going to do that enough time, I'm going to win. Right? But if it's like it's just one time, some people like you have to get to that comfort zone. So for me, it was, okay, what's the upside and is it more than a 1 to 1 ratio? Because otherwise my brain cannot compute, right? It's like, here's the reward. I'm betting a dollar. I could lose a dollar. Like I'm just playing blackjack and it's like there's too many and there's so many variables that I can't control. So in my mind it was, how do I make it a 2 to 1? Because I have to get beyond that first for my own reptile brain. Adam Zach (00:04:12) - And once I do that, I'm like, Let's just do this enough and eventually I'm gonna win, right? Sam Wilson (00:04:18) - Oh, that's really cool. Let's dig into that. And I love My mind immediately actually went to Blackjack. You said that. I'm like, Yeah, I think, you know, I'm not mistaken that the casino's edge in the game of blackjack, it's only like 3/10 of a percent. It's not 1%. Maybe it's a half a percent. Whatever it is, it's. It's really small. So, I mean, the casino does have the edge, whatever that is. 50 point call it, 50.5% to your 49.5. And the game still gets played. But you found a way to have that return of 2 to 1 on the okay, I win, I make 100, I lose, I lose 50. What was it? Adam Zach (00:04:57) - So for that it was specifically, how can I. Heads. I win, tails I break even. Right? And it was okay, if I win, it's going to be this. Adam Zach (00:05:07) - And if I don't, it's like, okay, over the long term, I'm going to generally not lose money. It's not I have to get 8%. It's not that I have to beat the S&P. It's just like, okay, over a period of five years, if I do this, the worst thing that's going to happen is I got a $10,000 education that I should have put. I could have put my money in at 8% and maybe would have grown to $12,000, which is like, you know, do. But if I win, you know, that now turns into a rental that I get a block that then fuels everything else. And so it was looking at that ratio of like, okay, if I do this right in general, and of course you can always go, you know, it could be worse, right? I could have not had insurance and the whole house could have fall down. But it's like, okay, give give some sort of like 95 degree level of confidence, right? So like that's where it gets a little bit tricky. Adam Zach (00:05:54) - But like that's how my engineer brain was like, okay, well, the worst of the worst of the worst is like, as long as I have insurance and as long as something else, like in general, if you hold real estate long enough, like it generally works. So like for my first deal, it was like, just try not to lose money and if I happen to be right, I'm going to probably learn something and win. Sam Wilson (00:06:11) - Got it. I love that. So you began in Single Family, is that right? Adam Zach (00:06:16) - That's right. And that's what I grew most of the portfolio. It's crazy. It just a single base hit at a time, right? That was it. Just one one after another through 50 homes. Sam Wilson (00:06:25) - 50 homes. You have 50 rental properties currently, correct? Adam Zach (00:06:29) - In 13 different states. Sam Wilson (00:06:31) - Wow. Okay. 50 rental. That's that. That's a twist. I did not expect 50 rental properties, 13 different states. What was the strategy in getting outside of You're in North Dakota, right? You got it right. Sam Wilson (00:06:49) - What was the strategy or the intention behind, hey, we're going to we're going to go outside of North Dakota. Adam Zach (00:06:53) - So besides just taking the action, getting in the game, we went through like pivot one, pivot two, pivot three of like, oh, this business model is better. Okay, now this one's better. Okay? It's fixing flips. No, it's the burn. No, it's wholesaling. No, it's commercial. No. And it was like, okay, in general, we just like, okay, what do you not like about what you're currently doing? Solve that problem? And so what we currently ended up with with, okay, let's find the person first and the property second, which means we find someone who 1 to 3 years away from a mortgage, they apply to us. We preapproved them like a bank. We go buy the home and sell it to them on a rent with an option to buy. So we don't find any properties. We don't look at properties, We still get the inspection and still get the appraisal. Adam Zach (00:07:30) - But now we find the people, the people go shopping with an agent and then we buy the home for them. Sam Wilson (00:07:36) - So I'm sorry, I'm a slow learner. Rewind that strategy again. Adam Zach (00:07:42) - So. So this scenario, Adam cannot get into a house because I recently left my civil engineering job and on paper I make negative money. So the bank says, Hey, turns out your debt to income ratio is out of whack. Like, I can't buy you an owner occupied home, but you can go get a loan all day, right? So I can buy a non owner occupied. But if I want a primary residence, the bank does not like Adam in my current position. Wealthy, but debt to income doesn't work. So I go, Hey Sam, if I put 20% down on a new build here in Fargo, so a $400,000 house, would you go get a loan for 320,000? You don't put any money up. Whatever your whatever your pity is, I'll pay you that plus $500 a month. Adam Zach (00:08:25) - Just give me the option to buy it back at $430,000 any time in the next 18 months. And you'd say, well, what's your credit score? What's your background? What's like? And so then we we basically underwrite people like I'm a registered loan originator. I'm also an investor. And so we underwrite people to that criteria. I'm like, okay, you're risky, you're 20% down, you're not risky, you're 5% down. And then we're basically pairing of what we want from a return, just almost like we're privatizing the mortgage industry. But instead of doing a first position loan, Sam, as the investor taking title, you get to depreciate it. It's a rent with an option to buy. So it's more favorable to you as the investor when you're buying the home, selling it on an option to buy because the option fee doesn't get taxed right away. It's not like deferred capital gains. You can still 1031 into something. And so that's the structure that really hit the turbo button for us. Sam Wilson (00:09:16) - Wow. Sam Wilson (00:09:17) - I mean, forgive me, but that sounds that sounds complicated because you got to write borrower, you got to find the right property. You've got to find the right bank. Let's assume I'm the lender. I'm the I'm the one in this case putting up the $320,000 loan. Does it get complicated? If you are the lease option tenant, I'll call it that. Does it get complicated with you bringing the down payment and me securing the loan in the bank comes to me and says, Hey, Sam, where'd that 80 grand come from? Adam Zach (00:09:51) - If you're putting it in your own personal name, 100%, because they got to source all the funds, right? If you're getting a commercial loan or typically a DSR, they they I guess sometimes it's, hey, I need a show proof of funds, but I'm putting my 80 grand towards the title company you're bringing. If you have let's say we're doing ten and ten, then you would send it to the title company. So in theory you just have to show the proof of funds. Adam Zach (00:10:18) - But the title company is the one receiving all the funds, so they're receiving my non-refundable 80 grand of option fee. And then the day and the day you close the take title, sign the mortgage, do the personal guarantee, whatever it is, we're executing the lease with the option to buy. So you you actually don't typically we don't touch the keys. They just hand the keys over. Sam Wilson (00:10:35) - Sure. Right. Yeah. Ideally. Ideally, that's the that's the strategy. That's really, really intriguing. How many potential, um, people are there that fit this criteria such that you can make a scalable business out of it? Adam Zach (00:10:51) - So roughly 1 in 10 Americans get denied a mortgage, which is, which is excess of 2 million people every year. There is 140,000 people searching rent to own into Google every month. Wow. And so all we did was tapped into that market disqualify the individuals that can only put 1% down because like there's different like there's larger companies divvy homes, Home Partners of America, this is their entire business model, but they don't offer it up to other investors. Adam Zach (00:11:23) - They say they say test drive the home, put 1% down, rent it with the option to buy. And that's that's also a great scalable market. But they only pick great properties and great locations. And for us, since we're tenant led, we just said, Oh, you're picking a property and nowhere in North Dakota you're probably going to need 20 to 30% down because I don't want to come to that property. I don't want this property back, right? And so all it is, is just like a balanced, almost like risk to reward of like, okay, if they default, if Adam defaults, I'm keeping his 80 grand and then I'm selling the property, I have to evict him. It's not a foreclosure because it's a lease with an option to buy. So instead of being a six month foreclosure, it's a 30 to 45 day eviction. And it's just kind of helps protect that. And then the icing on the cake is if you do a rent with an option to buy, there's rent guarantee insurance that you can apply that I didn't even know existed. Adam Zach (00:12:15) - The guarantors leap easy and then Single key, which is in Canada coming to the United States, you can literally apply coverage like the banks do with private mortgage insurance on renters. And so if they default, you keep their option money. You have this insurance policy which is basically like you're, Oh shit, something went wrong because they're potentially higher risk because they don't fit the bank. And so we've just been layering that on to now try to find this balance of what does it look like, What is it, what is an investor want from a return? How much skin do they want in the game from the tenant buyer? And it's like almost going into underwriting like 101. It's just like, okay, well, what does Sam want? Does he want cash flow? Does he want appreciation? Does he want a nice home? Does he want a nice location? Okay. Does one all those. Okay then based on that, what's the demand for people in Indianapolis that would want Sam to buy him a home? And then we just play matchmaker? Sam Wilson (00:13:02) - Interesting. Sam Wilson (00:13:03) - Okay, so let's just run the numbers here. You've got a house. This is hypothetical, but you got a house for 400 grand. They put you know, again, it's you and me doing this deal. Adam puts 80 grand down as the down payment. Is there an option? Fee in addition to that? Adam Zach (00:13:20) - No. So I'm interchanging it. It's technically an option fee, but generally no. Like security deposit. Right? It's the option fee, which you can call it a down payment, but it's technically an option fee in an option agreement. Sam Wilson (00:13:33) - Right. So, okay, that's your you're calling the 80 grand the option fee. Totally. Fine. Understood. And I'm sure there's some reasons legally for that which we won't get into the nuances of. I'm sure our listeners can just make their own conclusions from that. And then you say, all right, you know, congratulations, your $400,000 home is going to cost you whatever it is. I don't know. What would that be, $2,200 a month, maybe 2400 bucks a month in today's rates. Sam Wilson (00:14:00) - Plus you'll be 500 bucks a month on top. So the investor collects the six grand a year. And then if you add them exercise in the next 18 months, you'll owe me an extra 30 grand on top of that. But the only way they're going to exercise is if they are able to then in 18 months go out and get a refinance. Adam Zach (00:14:20) - You got it. Sam Wilson (00:14:23) - What are the statistics around the people that are able to substantially turn around their lives in such a way that they actually get that refi done? Adam Zach (00:14:29) - Terrible. Which is why. Three things. Number one, we created a podcast dedicated to those 1 in 10 people denied a bank loan because in general, people do this all the time. Hey, give me ten grand, move in. You can get financing in a year, right? Yeah, sure. I can take the money, rinse and repeat, and it's like the greatest ROI you'll ever get, right? Ten grand plus rent and do that every year. It's like just juicing the ROI. Adam Zach (00:14:54) - So it's like number one, stop it. Okay, then number two, becoming a registered mortgage loan originator. I'm still not a great loan originator, but understanding. Okay, what does it actually take to become qualified with a bank? And then number three, setting them up for success so that they can do it. So whether it's a credit repair, whether it's reporting the rent credits, whether they're being a co-borrower on something, it's seeing them through. And so at the time of this, we have like we have an 80% buyback rate, which is staggeringly higher than like the national average of what don't know if there is like an authority, but I've heard like 5 or 10%. But it's usually because you're only putting 1 or 2% down because all buy a home right now in Florida with 1% down. If I can lock in a price because I'm playing the appreciation game, I would love to do that as what I call a tenant buyer. As an investor, I don't want to do that because I want the upside without the downside protection. Adam Zach (00:15:44) - So like as a tenant buyer, it's actually great to buy an up and coming markets that could drop because you just have the option but not the obligation to buy. And so at the same time, that's why we're setting this up. Not so much is like, hey, test drive it, it's Hey, this is your house. And if something were to go wrong, we give them three years. They get an option to extend for a year. Plus we give them the option of like, Hey, if something really goes wrong, we'll just sell the home. And if there's whatever equity is generally left, you can take part of your deposit back. Just like if you bought a house now and sold it six months later, you're going to lose money just 6% to agent fees, whatever it is. And so we're trying to set it up as much for success across the board, right? Sam Wilson (00:16:23) - I mean, and again, 80 grand is no small amount of money. And so for the person that has 80 grand in savings to plunk down on a $400,000 house, um, you know, you'd hope they could figure it out. Sam Wilson (00:16:36) - But it sounds like you're doing you're taking a different approach to this business because, yes, there are the people in the in the capacity to wash, rinse, repeat and really juicy returns. But it doesn't really do anything for the people that live there. It doesn't do anything other than really just pad your pocketbook. I'm not going to say it's wrong, but I'm going to say that, you know, maybe there's better ways of doing stuff. It sounds like you're really making sure. And you said 80% of your buyers end up exercising. That's really, really strong, right? Adam Zach (00:17:05) - Right now it's really strong. I, I see some ways that that might get generally lower, but as of the recording of this, it's 80%. Sam Wilson (00:17:12) - That's awesome. And that's cool. I mean, and that's good. That's good for two people. It's good for the tenant buyer and it's also good for the investor. I mean, because then they collect their their upside and then the tenant buyer, of course, ends up with the with the house. Sam Wilson (00:17:27) - But you're going through the steps that probably a lot of landlords, business owners aren't going to go through in order to make sure that people then exercise. I think I've only done. Oh, no, I've done three. Three deals like this. But I too, like you like I went to a lot of effort to see to it that they got these across the finish line. How do you handle that side of things? I mean, you said you're a family man with a business, not a business man with the family. 50 of these houses, you've got investors, you've got properties, you've got builders, you've got all of these. There's a lot of moving parts there. How do you manage all that? Adam Zach (00:18:05) - So luckily, I have an awesome business partner and a team. And so we've found kind of our own skill sets where we have someone in call it tenant relations, and I'm more in sales and marketing playing with Google ads and Facebook ads and trying to make sure that our website explains things to the tenant buyer is putting out content, trying to help them. Adam Zach (00:18:21) - And so once once you get through the closing, it's it's relatively more easy because they have a monthly payment and they're just trying to get mortgage ready like that, but like getting to the finish line, like just in general, buying a house is complicated. Okay. Add in the fact that our agents are showing someone that we're not even there and we're, you know, potentially assigning this to an investor and they're understanding like, okay, what does this actually mean? And if one person, whether it's the insurance, the title company, the buyer, the seller, the agent, us, the tenant buyer, like if someone falls through, it's like, okay, then the whole thing comes down just like in any other normal transaction. So it's like, okay, being the transaction coordinator and holding everyone's hands and making sure that we have the contracts to hold everyone to it, getting earnest money from either investors or the tenant buyers to make sure that they have skin in the game just to make sure things don't fall through the crack. Adam Zach (00:19:11) - And then if worst case comes. To it. We just buy it all cash and just save the deal if something were to fall out. So we have a little bit of options because we don't want to have a bad reputation out there of like, Hey, we can't close on homes. But in general, you know, that's the piece. And then it's like, okay, normally what people need to work on is their credit or it's paying down debt. Rare is the time where they're just waiting for two years to get like their tax returns. But, you know, that does happen. And so it's okay. How do we increase the likelihood of them buying it back, which, you know, wasn't our primary focus. Our number one was like, okay, how do we use this to quit our day job? I'll be honest, Like it wasn't very altruistic to start off. I was like, How do I make more money? And it was like, Oh, it turns out Chris Krohn on YouTube is like, Oh, I'm preaching about least options. Adam Zach (00:19:52) - And then when he patented Joe McCullen, it took these courses and I was trying to sandwich lease options, but it was really hard to find motivated sellers. But why don't I just find a motivated. You know, home shopper. And so I found that. So we're not buying it great, but we're selling it well. You know, if you can buy it at a discount plus sell it on a lease option, well then you got both. We just found a model where we're purchasing properties right now off the MLS and cash flowing them all day, every day. Sam Wilson (00:20:18) - Wow, that's wild. I love it. I love it. Now, you've launched a fund here recently. What? Tell us about that. Adam Zach (00:20:26) - So we kept trying to do these one off deals, right? Like, we'll find the person, we'll do all this. And we said, All right, let's just get two of us together. We'll put a bunch of money in there, We'll look at the bank and the bank's like, Oh yeah, cool. Adam Zach (00:20:35) - You guys are good for like $5 million. Okay, let's just go buy. So any now we know that the next 30 homes we're just gonna buy like, no questions asked. The banks on board. We got the investors, we already got all the capital. So we just did a, you know, a pretty standard fund, put that together, got some limited partners in there. And then we're going to see how that works by 20 to 30 homes, see what the returns are, see what the splits are, and then just either do that every year or keep it as an ongoing, ongoing thing where we just keep buying more properties with the fund and keep distributing it. But right now it has a sunset of, hey, we're just going to buy 20 homes and then we're going to go do it again, Right? Sam Wilson (00:21:08) - That's that's really, really cool. What are some bottlenecks or complications in your business right now that you presently have not solved. Adam Zach (00:21:15) - Interest rates doubling over a year? And so in general, last year it was hotter than a pistol where everybody wanted to go through. Adam Zach (00:21:24) - And it turns out the demand is still here. But just like everyone in 2023, when interest rates are at 7% every. So we have this list of I'm going to call it pre-approved home shoppers that are like 50 to 100 people that are just like, well, I'm not sure if I want to do it right. And there's but that's America in general, right? Low inventory. Nobody wants to give up their 3% rate like, but everyone's pre-approved. They could get a home and everyone's like, well, I don't want to overpay. It's still generally like a seller's market from what we're seeing in different places, even though the highs, you know, have come down. But like it's still like homes are still going like 1 to 3 days. So in general, it's like everything got more expensive. Well, when that happens, things generally slow down in general. But what we've seen is we've got this huge demand built up, but not as many contractual offers. So the top of the funnel from us is still rocking where we get 1000 to 2000 people every week to our website. Adam Zach (00:22:13) - We get, you know, ten people applying with us and, you know, every week. So we got like 2 or 3 new home shoppers every week. And it's just a matter of, okay, do they want to move forward with this or not? And then we'll get people that came came to us from last year like, Hey, can I still get that? Uh, nope. That's not it's not it's not the same, you know, 4.5% interest rate. Sam Wilson (00:22:32) - No, no, it's not. And that's. Yeah, man. Very interesting. Adam, I've really enjoyed having you on the show today. I love what you guys are doing. The strategy, I understand lease options and lease to own very, very well, but I've never seen it employed quite the way that you're doing it. So this is very, very fascinating love. I love what you're doing and I also love the way you are getting people into homes and helping them get across that finish line and actually make it to homeownership in the end. Sam Wilson (00:23:02) - I think that's that's a really cool, unique strategy that you're employing there. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? Adam Zach (00:23:11) - If they want to learn more about me, you could just follow me on Facebook. If you just search Adam Zach Or if they want to learn more about this strategy, it's home equity partner slash investors home. Sam Wilson (00:23:21) - Equity partner.com/investors and Adam, I butchered your last name there in the beginning. Adam Zach (00:23:26) - It's just very German. It's like Baquba with a Z. Sam Wilson (00:23:30) - With a Z. Yeah. And I'd definitely made it. Adam. Zach. So, Adam. Zach Got it. Adam Forgive me for that. I've enjoyed having you on the show today. Thank you so much for coming on and have a great rest of your day. Adam Zach (00:23:41) - This is a pleasure. Thank you very much. Thanks for the great questions. Sam Wilson (00:23:44) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. Sam Wilson (00:23:57) - If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Franco Perez. Franco is on a mission to create affordable housing in Silicon Valley. He discovered that the Bay Area's mobile home parks offer an abundance of underused land with great growth potential. Show summary: In this podcast episode, Franco Perez discusses his mission to create affordable housing in Silicon Valley by renovating and expanding mobile homes in mobile home parks. He explains how his company revolutionizes the construction industry by building homes on an assembly line in a controlled factory, reducing costs and increasing efficiency. Franco addresses the misconception that mobile home parks are low-quality and emphasizes the benefits of owning a mobile home as a way to build net worth. He also discusses the challenges and opportunities in navigating building restrictions and codes, as well as the need for more young people in the construction industry. -------------------------------------------------------------- Intro [00:00:00] Franco Perez's mission to create affordable housing in Silicon Valley [00:01:01] Converting old mobile homes into larger, luxury homes [00:02:08] The benefits of factory-built homes [00:11:19] Changing perception of mobile home parks [00:12:25] Challenges in building codes and regulations [00:13:34] The benefits of mobile home ownership [00:21:59] Challenges in protecting mobile home parks [00:23:11] Government protections for mobile home residents [00:24:47] -------------------------------------------------------------- Connect with Franco: Linkedin: https://www.linkedin.com/in/francotv/ Web: https://beacons.ai/franco.tv Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Franco Perez (00:00:00) - Cars originally were only affordable to the rich and wealthy, and it was only until they started building it on assembly lines that they were able to make it available for everybody. Right. And how did that happen? It's building processes. It's making making the build of these cars more effective. And that's exactly what we're doing now, is we're building these homes on an assembly line in a controlled factory and maximizing the output of the current labor that we have today. And and with that, we're able to buy material at economies of scale. We're able to really make labor way more effective. And in the in the end, we're we're making the cost, the total cost of the construction way lower than you would if it was a single site unit build home or traditionally built home. Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Sam Wilson (00:01:01) - Franco Perez is on a mission to create affordable housing in Silicon Valley. Sam Wilson (00:01:05) - He discovered that the Bay Area's mobile home parks offer an abundance of underused land with great growth potential. Franco, welcome to the show. Franco Perez (00:01:14) - Thanks for having me. I'm excited. Sam Wilson (00:01:16) - Absolutely. The pleasure is mine. I also am excited, frankly. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Franco Perez (00:01:28) - Well, first moved here from the Philippines, got into real estate because of necessity, as the only job I could have taken at the time. Didn't go through school from there. Did real estate agents work? And I hated it and really wanted to help people in the middle class and got into finding out that mobile homes do that very well. So I took it upon myself to to start a business and helping people get into mobile homes. And that's where we are now. Sam Wilson (00:01:58) - Start a business helping people get into mobile homes. So you're placing tenants essentially in mobile homes. Franco Perez (00:02:05) - We are doing that. Sam Wilson (00:02:06) - Are helping people buy mobile homes. Franco Perez (00:02:08) - Yeah. So, I mean, in the beginning it just first started with really helping people transact, so buying and selling mobile homes. And then from there, once they once we started to build up our business, we realized that a lot of these low quality mobile homes are like single wide trailers could have been optimized. So we start now. We're currently turning a lot of 700 square foot mobile homes and turning them into beautiful 1600 square foot, three bedroom, two bath, 12 foot high ceiling like beautiful luxury homes. Sam Wilson (00:02:41) - Now what? That's wild. So you found and what year really did you start doing this? Franco Perez (00:02:49) - You know, we only started our business about almost three years now. Okay. So, yeah, Yeah. So it's pretty exciting. Sam Wilson (00:02:57) - Absolutely. So and again, I'm forgive me if I'm asking you this, the questions that you've already answered, but I'm a slow learner. You started buying and selling just mobile homes. You started placing people in the mobile homes. Sam Wilson (00:03:11) - Then you figured out there's a way to renovate. And this is what you said blows my mind. Renovate a 700 square foot mobile home and turn it into a 1600 square foot really nice house. What's the strategy? How do you profit in that? What are the I mean, there's so many questions as it pertains to that. And is that and I'm throwing like 80 questions at you initially ask one. But is that the main strategy now or what is what is the overarching strategy? Franco Perez (00:03:38) - Yeah. So you kind of said it everything pretty much correctly, except we're not actually buying the mobile homes themselves. We kind of as a construction company, helping, you know, people reach us like, Hey, you own this home. It's in a beautiful location. If we convert this to a much bigger home, you can actually spend X amount. And when you sell later down the line, you're going to make X amount plus more, right? So we create a win win solution for them to convert their old home to a new one. Franco Perez (00:04:08) - And in return, they have a much more they have much more value in that in that mobile home itself. And then they can sell it for more later down the line. So we really act more as a development style company, if that makes sense. Sam Wilson (00:04:22) - Yeah. Are these mobile homes placed in mobile home or manufactured housing communities? Franco Perez (00:04:30) - Yes. Yes, they definitely are. Sam Wilson (00:04:33) - How do you I mean, I don't own any mobile home parks. So how do you handle the kind of sizing restrictions? I mean, every mobile home park I've seen is they're packed in pretty tight. How do you how do you find that extra 800ft² to expand? And even how in the world do you expand a mobile home? I mean, I would I would have thought those are pretty fixed. Franco Perez (00:04:55) - Well. Well, a lot of these homes are built in the 70s and they really weren't optimized for high density housing. So keep in mind, like in my area in San Jose, you know, these are mobile home parks that are located right across the street from Google, Samsung headquarters, Apple headquarters, you know, prime location. Franco Perez (00:05:13) - And people are paying high dollar amounts just to rent a rental apartment. One bedroom, one bath is typically about 3300 bucks. If they were if someone wanted to purchase a single family home that never owned one. The median price point for a single family, homes $1.6 million. Right. So big contrast in between and came to realize that, hey, these are already in prime locations. They're just built in the 70s. They're old style homes. And, you know, they weren't built to last this long. So what we do is we can we're realizing like you're on they're on a lot themselves. Some parks, they are pretty packed. But there's, you know, in our parks, you'll typically see a single wide with a porch on the side and then we'll end up maximizing and retrofitting their lot so that they can get the maximum amount of value. Of course, we have to analyze each space case by case and see how they can maximize their value. But in most cases, you can turn a single white into a double wide and we're doubling the square footage and raising the value by a lot. Sam Wilson (00:06:18) - Wow. And you're you're doing this construction work for existing owners. Franco Perez (00:06:26) - Correct. Sam Wilson (00:06:27) - Okay. Yes. And are those owners, the people that actually live in the home, or is it and I'm just asking more specifically, like you're there in the in the Bay Area, Are they are they tenants that are living there? Like who is what's the profile of the person. I guess that actually yeah. House. Franco Perez (00:06:46) - Yeah. So I guess first off, like the big stigma around mobile home parks is that, hey, the, you know, we only get our perception of mobile home parks from the media really like TV or the news or, or Eminem music videos. Right? And our perception of mobile home parks is that they have low quality people, that they have low quality builds. And this is really only for the poorest of the poor. Right. And but the truth of it is, is just like in apartment buildings, like, hey, there's apartment buildings where I don't want my kids ever visiting or that sort of thing. Franco Perez (00:07:16) - And then there's luxury style apartments that are actually beautiful places to live, great communities, great amenities. And that's the same spectrum that we have with mobile home parks. You have, you know, they aren't just bad quality parks. There's very high quality parks that look like resorts that have spas, that have swimming pools, billiard rooms and that sort of thing and have tons of space as well. Right? So that's the first thing. The next is actually I forgot the main part of your question. But, you know, the the main thing is, first, understanding that mobile home parks might not be what you perceive. And also on the financial side, we have a lot of bad knowledge about or bad information about these two. Hey, mobile homes only depreciate in value. They're built of low quality and that sort of thing. But this is all old news that is still being passed on to current day. Right. And that's what we're doing is like I was at Washington, DC, we built a home on Capitol Hill and we showed how beautiful these homes were being built. Franco Perez (00:08:18) - And on our YouTube channel, we show the quality of how it's being built. We use two by fours, fiber, cement, exteriors, you know, quartz countertops all the way throughout. And it's really such a beautiful thing. What how we're advancing and revolutionizing mobile homes itself. Right? Sam Wilson (00:08:34) - Oh, that's cool. I love that. So lots of questions on that front. So we've talked a little bit who who the owners of these are. I mean, California's not known for having a few rules. There's a lot of rules, especially as it pertains to building restrictions and things like that. How how is navigating the building restrictions, building codes, things like that, when you're doing kind of an unchartered waters model, which is, hey, we're going to renovate, expand, build on to a 1970s. Mobile home and turned into something brand. Yeah. How's that process? Franco Perez (00:09:12) - You brought up? A really good point, and I'm very passionate about, like lobbying and stuff with DC. We were. Franco Perez (00:09:18) - That's why I was in DC. We were pitching to multiple different states, not just California, but California is of course, kind of the most difficult. Now, one thing to keep in mind is that these mobile homes were building are in mobile home parks. Right. And you don't actually own the land itself. So the that small separation actually allows for us to build a much more efficient and rapid rate because it's not technically real estate. Right? So with that, we have less governance of how we build this. We you know what normally would take me to build a 1500 square foot home on a piece of land would take me 8 to 13 months. Whereas on this, in this mobile home park, I can convert someone's old mobile home to a new one. We just beat our record recently where we completed start to finish in less than two and a half months and it's insane what we're doing. So now we're doing that repeatedly and they love beating our record too. Sam Wilson (00:10:16) - Well, 75 days start to finish is impressive. Sam Wilson (00:10:20) - What about what a and I would imagine, you know, the cost component is something you kind of started talking about early on. What's the cost? I mean, are the are the costs lowered in your construction style? I mean, you're doing some pretty cool finishes as well, but there's economies to be found there. Franco Perez (00:10:41) - Absolutely. You know, one of the big things that's really underrated, we're our country is facing a huge problem when it comes to construction in the future. Right. We're not building enough affordable housing out there. And we have to innovate and change how we're doing, how we're building housing. And it's so important and it's fascinating. If you see on our channel how we build these on assembly lines. And I kind of bring this analogy is that, hey, cars originally were only affordable to the rich and wealthy, and it was only until they started building it on assembly lines that they were able to make it available for everybody. Right. And how did that happen? It's building processes. Franco Perez (00:11:19) - It's making making the build of these cars more effective. And that's exactly what we're doing now, is we're building these homes on an assembly line in a controlled factory and maximizing the output of the current labor that we have today. And and with that, we're able to buy material at economies of scale. We're able to really make labor way more effective. And in the in the end, we're we're making the cost, the total cost of the construction way lower than you would if it was a single site unit build home or traditionally built home. Right. And that's a huge thing that that we're also working on as well. Sam Wilson (00:11:58) - That's wild. So you're you're having these manufactured in a facility. Even even even these. Remodels, new construction or reconstructions, if you will. All this is built in a factory and shipped to you. Franco Perez (00:12:14) - Exactly. Yep. So if you can imagine, just like I know I keep using our area as an example, but this works in many other areas. Like we were just consulting in Austin as well. Franco Perez (00:12:25) - The labor in these high density areas are very expensive. Now if we can transport the cost of that labor to another outside area where it's less expensive, hey, we're able to create great jobs for an area that doesn't have a lot of jobs, and then we're able to transport these units to to a site that really needs affordable housing. And this is a model that's really been growing and probably the most. Talked about thing in the construction industry and we speak a lot about it. It's very similar to like modular construction. They're starting to do these in apartment and multifamily as well. But we really have to change the way we see building homes. And this is this is a movement that's going to be happening. Sam Wilson (00:13:09) - Oh, I absolutely couldn't agree more. I mean, it's it's we're seeing it not just on the mobile home park side of things, but the eye getting getting. Buildings like this. Through codes, through building permit phases and allowing municipalities and to accept these types of buildings. I mean, once once this becomes mainstream, it's going to be like, okay, wait, we can reduce the cost. Sam Wilson (00:13:34) - Like you were saying, I like the analogy of the car assembly line. You know, the Model T came out, I think it was the one that really changed. It was like everybody can now have a car like this is wild, but you know, get it. Getting this stuff pushed through is obviously it's a it's a labor of love, if you will. What are some things that you or some headwinds you're running into on the legal and or building codes, construction side of things that are preventing some of this to go really more mainstream. Franco Perez (00:14:04) - Well, you know, I really work on this at a at a big level to try to ease as much as we can a few of our issues is. Originally there wasn't a lot of loan options for financing for people that want to own something like this. And through the years it's gotten better and better. Now we have 10% down programs, 25 years, and now we're trying to just get more government backing to help us create this financing as a solution. Franco Perez (00:14:33) - The second is for it's really advocacy or really letting people know that the. The second restriction is really the perception of mobile home parks and mobile homes itself, right? That's why we push how quality built these are on our YouTube channel. That's why we push how this is helping the teacher that wasn't able to stay in the Bay Area, be able to stay there and have a comfortable financial situation. You know, we loved sharing these stories because the general public misunderstands this. And sometimes in outside areas they try to close this down or feel that it's creating a bad a bad thing in their area. And that's really something that we try to push for and try to protect the preservation of these mobile home parks, right? Sam Wilson (00:15:22) - No, absolutely. Absolutely. Yeah, They're not they're not generally building more of them in most, uh, most governments and local governments are opposed to them. So it's yeah, you're fighting an uphill battle, but I really like that. Do you see what you're doing is expanding ever beyond the mobile home park industry, or is there just so much opportunity there that that's not even on the on the radar yet? Franco Perez (00:15:47) - There's there's a ton of opportunity all throughout affordable housing, if you ask me. Franco Perez (00:15:51) - I think the problem around affordable housing is is so underrated. We don't realize how bad of an issue where it's going to be later down the line. One thing I'll put out there is like all most of our construction labor are 45 and older and they're retiring. And they, they, they they don't want to work anymore. But we don't have enough young generation people that want to get into the labor industry and how are we going to build homes, You know, if we don't innovate now, there's we're going to hit this huge problem and it's something we should see now in and adjust and innovate and build better, Right? And a lot of these regulations and restrictions are causing builders to have difficulty to building homes. And we need to lower the restriction so we can make it easier to build these homes as well. Sam Wilson (00:16:40) - No, there's. Franco Perez (00:16:41) - There's a ton of yeah, I'm all for anybody that's helping create housing in an innovative way. And there's so many opportunities out there. Sam Wilson (00:16:51) - There really are, man. And I'm not going to be on the forefront of that, you know, got my hands in other things. Sam Wilson (00:16:56) - But I think it's a fascinating thing to watch, certainly, because it's like I mean, I think about this all the time. I live here, even in Memphis, Tennessee. And I'll be honest, like even in the existing housing stock, it's like, my gosh, like stuff is it I mean, especially here in the South. I mean, you know, it's just the the natural environment alone will just wear something out in short order. So not to mention being lived in by humans and it's like, my gosh, our housing stock is aging, it's getting old, like stuff's falling apart, Like and there's it's getting to the point where the replacement housing stock and even even the replacement housing stock that's coming online isn't that great quality. You know, it's going to last nearly as long as this is. So how how are we going to, like you said, continue to provide housing stuff that's well built stuff that will at least stand the test of time. I mean, my I used to think a hundred year old house was old and now I'm like looking around. Sam Wilson (00:17:50) - I'm like, dang. Like, we're really close to living in 100 year old house. That's this is. This is wild. So yeah, it's just kind of fun to see that how Let's go back to your kind of origin story here a little bit. How did you find the first person and implement the first kind of mobile home park remodel? Like what was what was that process where it suddenly turned you on and said, hey, wait, we're on to something here. Franco Perez (00:18:16) - Well, I think the first thing I want to mention is that I grew up personally with a single mom and remember the pain points of rent. And I think that's a really big part of why I'm so passionate about this is because I felt that pain. And for me, working as a real estate agent, it just wasn't rewarding. Telling people, you know, helping the richest people I can help find the most expensive homes that I could and turning away the people that were in my shoes like, Hey, I'm sorry, you can't afford it yet. Franco Perez (00:18:44) - You don't have a down payment yet. Save up some more, make some more, and then we can work together later. Right. And I hated that so much. And and I really wanted to explore out there to find, like, how can we help create a stepping stone for people that can't yet afford real estate and but want to get out of that rat race of renting and looked into government entities, tried that for a little bit. Realize a lot of these rent lowered rent situations aren't really helping families as much as we think they are. It's really the ownership. The wealthy are able to benefit from homeownership like tax benefits, appreciation, building equity, leveraging a loan. And these are things that should also be accessible to everybody. And I came to realize I actually I accidentally stumbled upon on Google Maps, mobile home parks. I was like, Whoa, there's a ton of mobile home parks I never even knew about. And they're everywhere. And and I met the people. I realized that, wow, you know, these people are able to live here and be able to feel financially secure. Franco Perez (00:19:50) - And and and the financial model of it really is is a beautiful thing. And it's something that more people should realize. But that's kind of how I found out about it. Then it came into how do we help improve it? How do we help build better quality homes in these parks that are already existing in high density, high cost areas? That's how it started. Sam Wilson (00:20:13) - Do you have a background in the trades? Franco Perez (00:20:17) - You know, I have no formal education, didn't really go through college or anything like that. But, you know, I think one thing I always look back on is being coming from the Philippines is really being resourceful with what you have. I think people have to realize education and anything we want to learn is out there on the Internet. You know, all the information is there. It's just a matter of how we use it. And if we are passionate about wanting to use it right. And because of my passion of wanting to help for me, helping one single family get out of a rental rat race is so rewarding. Franco Perez (00:20:51) - And if I can if I know I could do that at scale, man, you know, I'll study this all day and and learn it myself, right? So I seeked upon online I seek developers and learn from them for, you know, worked for them for free and that sort of thing. And that's kind of how I got my education. Right. Sam Wilson (00:21:10) - Got it. No, I love it. That's great. Wasn't suggesting that necessarily had to have a background in the trades. I just think, you know, I'm even more inspired by what you've done because, you know, I would think that, hey, we're going to walk in. I see that. We're going to turn that into something cool. We're going to build a new a new, completely remodeled, brand new mobile home with twice the square footage and awesome finishes that you would have had a background in the trades and or and building construction. But even that you didn't even have that really necessarily going into it. And self-educated I think is even more inspiring. Sam Wilson (00:21:41) - So that's really, really cool. One of the things I think about is that it's lots. There are lots rent or lot rent. So if you have a mobile home on it now, you've expanded it from 700 to 1600 square feet. Is it still movable? Franco Perez (00:21:59) - We we build it to a point to where it's really is permanence could be right and it's not, you know so so it's not like on wheels or anything like that, but it's just enough to be classified as a mobile home. And and the ownership. You talk about rent and I think a lot of people are steered away from mobile homes and owning it itself because you're always going to be paying that rent. But I share to people that this is something that is better than renting and it's a way to upgrade yourself out of renting. Hey, that person that's spending 3300 a month on full rent and after five years have nothing to show for it, they can instead go to a payment like this, which is about 3500 a month to one third of that, let's say, is going towards the low rent, which is like we could we could be negative about it, but realize that two thirds of that is going towards an asset that you own that's helping you build your net worth and helping you progress your family stability. Franco Perez (00:22:57) - Right. And that's the key thing here is it's a stepping stone to graduate yourself out of that rat race and into your journey of home ownership. And. Sam Wilson (00:23:07) - I'm sorry. Go ahead. Franco Perez (00:23:09) - Oh, I was finished. Sam Wilson (00:23:11) - I'm so sorry. My apologies, Franco. I just. I hear that. I love it. I love the mission. I love the goal there. But how? One of the things that that I follow is mobile home park closures. I follow municipalities that are saying, oh, I mean, it's happening all over the country where it's like, oh, hey, cool, really glad. And people claim that it's the largest privately held mobile home park owners in the country that are kicking everybody out and closing the parks, which is just categorically untrue because if you look at it, there's a lot of municipal I think there was even National Park Service here and it was like, Oh, hey, cool, thanks for you've been here for 100 years, but now we're taking the land back and everybody get out. Sam Wilson (00:23:53) - You got 30 days. And it was like, Wait, Like residents are furious. How do you as a it's somebody in this position, protect yourselves against that. Like if you're gonna put all this money into this program, all this money into renovating a home and renovating a mobile home park or mobile home rather, how do you make sure that, hey, in two years I'm not going to say, Hey, thanks so much, by the way, get out. Franco Perez (00:24:16) - Hmm. No. Good. Good question. And I think the there's a lot of bad stories and bad myths. And keep in mind that the news really pushes it's an easy target to talk about mobile homes all the time. Right? So whenever there's a hurricane or that sort of thing, everyone's like always targeting that. But the reality of it, I say take in your own information and your own areas and really realize how these are. And the second part to that is I am very passionate about protecting and preserving these in the government level as well. Franco Perez (00:24:47) - And we've done that to help protect residents. So there are now and this is different in every area, but in our area, for example, in San Jose or in California, there's it's going to take too long to go into the details. But this park closure happened. Their homes were valued at about $200,000. They had to do a closure to redevelop. And because of the government protections around this, they were the developers were forced to either pay them their value of their home plus 50%. So they were actually getting about 300 K for the value of their home because and then that or they gave them the option to to keep one of the homes that they're building. Right. So they can't just it's kind of like an eminent domain situation. These residents are protected as well. They're not just they have to give them the value of what their home is worth in order to kick them out. Right. So it's not what you think where it's like, hey, they're closed. They lost all of the home value, that sort of thing. Franco Perez (00:25:46) - It's not that way. There are government entities that protect them. Yeah, And if you think of two, these banks are smart, right? These banks that are funding these residents, they're not going to fund a loan in a park that where they could close and lose all their value, too. Right. So if you think these banks are funding these, of course, they know their risk. They know their legal protections as well, too. So there are a lot of people that are safe in that manner. Sam Wilson (00:26:14) - Franco This has been enlightening. Thank you for taking the time to share with us what you're doing here for the affordable housing situation we have. You're solving it in a in an incredibly unique way. I don't think I've had anybody come on the show out of 800 and some odd episodes at this point that has even remotely come close to doing what it is that you're doing. So think this is super cool. I appreciate you taking the time to come on today and talk to me and our listeners about it. Sam Wilson (00:26:42) - If we do want to get in touch with you or learn more about you, what is the best way to do that? Franco Perez (00:26:47) - All of our links are at Franko TV. Or you could Google us at Franko Mobile Homes and really appreciate what you said. We're so passionate, our team worked so hard on just helping as many people as we can and and appreciate being on your show. Absolutely. Sam Wilson (00:27:05) - Thank you. Franco. Make sure to include that all there in the show notes. Have a great rest of your day. Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
That Touted DoD Budget Plus-Up Cuts Into Space Force and Seeding Future Military Space Innovation The U.S. Senate returns on September 5, followed by the House of Representatives on September 12, to negotiate the FY'24 federal budget. While both houses want to cut down the president's request for the Space Force and military space programs by more than a billion, it's not yet set in stone. To understand what's at stake, Laura Winter speaks with Chris Stone, Senior Fellow for Space Deterrence, National Institute for Deterrence Studies and author of the book “Reversing the Tao: A Framework for Credible Space Deterrence”; Peter Garretson, a senior fellow at the American Foreign Policy Council and co-author of the book “The Next Space Race: A Blueprint for American Primacy”; and Sam Wilson, senior policy analyst for the Center for Space Policy and Strategy at The Aerospace Corporation.
Today's guest is Travis Smith. Travis is the Founder and CEO of Tribevest, a platform that makes it easy and safe to invest as a group and do deals together in as little as 48 hours. He started his career with Morgan Stanley but realized financial freedom was easier as a group. Show summary: In this episode of the How to Scale Commercial Real Estate Show, Travis Smith, Founder and CEO of TribeVest, discusses his platform that allows investors to invest as a group and do deals together. Travis explains how TribeVest differs from traditional syndication and fund-to-funds models, focusing on empowering individual investors by leveraging their tribe. He shares that TribeVest is now working with lead sponsors and their investor networks to create accessibility and raise more capital for deals. Travis also addresses the challenges of consistency and compliance in the industry and highlights TribeVest's partnership with sponsors to ensure aligned and compliant documents. -------------------------------------------------------------- Intro [00:00:00] The Origins of Travis [00:01:14] Building a Massive Business [00:02:08] Creating a Fund Manager Program [00:05:14] The challenges of working with the SEC and sponsor consistency [00:12:57] The benefits of using TribeVest for fund managers [00:14:19] TribeVest's partnership with lead sponsors and economies of scale [00:18:10] -------------------------------------------------------------- Connect with Travis: Facebook - https://www.facebook.com/tribevest Twitter - https://twitter.com/tribevest IG - https://www.instagram.com/tribevest/ LinkedIn - https://www.linkedin.com/company/tribevest LinkedIn - https://www.linkedin.com/in/travissmithmovethechannel Web - https://www.tribevest.com/pro Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Travis Smith (00:00:00) - We've been mastering group investing for the last four and a half years. We've built out all the the the platform, the infrastructure, all those services. And now kind of the next thing is and again, we're doing this by partnering with the sponsors and saying, hey, you know, to safely, you know, go out there and work with, you know, with other entities, it's important those other entities are set up in a legal, safe, compliant way. And Tribez is the company that makes that so easy. Sam Wilson (00:00:36) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Travis Smith is the founder and CEO of Tribe Vest, a platform that makes it easy and safe to invest as a group and do deals together in as little as 48 hours. Travis, welcome to the show. Travis Smith (00:01:00) - Sam Thanks for having me and really looking forward to this. Thank you. Sam Wilson (00:01:04) - The pleasure is absolutely mine. Sam Wilson (00:01:05) - I, too, am looking forward to this. Travis There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Travis Smith (00:01:14) - Oh boy, Where did I start? So the origins of Travis go back 15 years. And my brothers and I were trying to figure out how to break into real estate and true wealth building, finding financial freedom. We kept running into, well, how and where and how do you learn how to invest in real estate? And then the big problem is capital. So my brothers and I came together, formed an LLC, started pulling capital together and did our first deal, did our next deal, did our next deal. And we look back and we realized that by forming and funding our investor tribe, we unlocked a future none of us could achieved achieved on our own. So that's where I come from. Where am I now? Is that the next one? Sam Wilson (00:02:08) - Yep. Sam Wilson (00:02:08) - Where did you start? Where are you now and how did you get there? Travis Smith (00:02:10) - All right. And where am I now? I'm building a we're in the early stages of a massive, exciting business where we're helping others and we're empowering others to come together, pull their capital so they can participate in private deals, real estate, things they wouldn't or couldn't on their way on their own. And I think, you know, where I'm at right now is super excited to talk about specifically how we're working with lead sponsors and their investor networks to be more effective at creating accessibility and raising more capital, to do more deals to to do more good. And how I got there, how I got there. Here is just an incredibly blessed family, unconditional love and support and can do and insane amount of persistence is how I got here. Sam Wilson (00:03:17) - That's great. I love it. Yep. Persistence. I think that's the that is the the ingredient that that many either lack or it's probably one of the tougher ones to generate is persistence for a lot of people. Sam Wilson (00:03:32) - So tell me this just so we can understand. You know, our listeners are a sophisticated listener group. This is about a scale commercial real estate. We spend no time defining terms, anything like that here on the show. So this is as high level as we can possibly go. Tell our listeners why what you do is different maybe than just a regular syndication and or fun to funds model. Travis Smith (00:03:59) - Yeah. So I'm really excited to have this conversation. First, we aren't the law firm or super expensive solution out there that most. Uh, lead sponsors, Lead syndicators use. Right. Very complex. And we aren't that we aren't that. You got to remember we started with the investor, right? How do we help one investor become more powerful by leveraging their tribe so they can pull capital, their expertise, their network to do more. So you got to remember where we started. We start with the investor. And in this case and in this world, the limited partner and and now where we've come is we help that lead sponsor, right? And we help them by creating a capital raiser program, a fund manager program where they can be efficient with their existing investor network. Travis Smith (00:05:14) - Right. And how do we do that? We help the lead sponsor roll out a program that makes it easy for their aspiring capital raisers. Fund managers to easily form a fund to fund tribe. And this is new. This is new system. So we now have an attorney on staff. We're building those that, you know, we're creating the the operating agreement, the PM, the subscription and now on try best we can easily help fund manager form a fund manager tribe and and go out to their network and legally safely affordably help the lead sponsor and participate in the lead sponsors deal. Sam Wilson (00:06:12) - Got it. So if I if I understand the. Kind of flow, if you will. You've got a lead sponsor. That lead sponsor. Of course, has the deal or opportunity. And then you may have a another, which is not uncommon in this business. I can't talk about it on the. Oh, wait, we are talking about on the show, which is that people know there's capital allocation companies out there. Sam Wilson (00:06:35) - And so you're kind of going with that, you know, maybe capital allocator and saying, hey, look, let's create and tell me if I'm wrong. Stop me any time. Let's create a fund of funds and we'll help you set it all up such that your tribe can then invest in the lead sponsor deal. Is that right? Travis Smith (00:06:51) - Yes. And let's get more specific. So you know, you're part of some of the same groups were a part of. Of course, we love left field investors and the good work that they're doing. And what we've seen is this movement of of of people coming into passive investing into syndications. Right? Coming in as a limited partner. And they're they don't have a financial advisor. Right. But they're they're going to these communities. They're investing in masterminds. They're listening to your shows. They are very informed. They're very educated. And they're becoming very good investors. Right. They're they're building the relationships with the sponsors. They're doing the due diligence. And before they participate in these these syndications as a as an investor, as a limited partner, they're they've done all these things right. Travis Smith (00:07:51) - And so now they're having success. They continue to to enjoy and learn how to become a better investor. They're meeting more sponsor building relationships. They're learning how to do more due diligence. And they have a network, right? They have a network that is saying, hey, next deal, you get in, will you like, you let me know because like what you're doing is really exciting. And can you can you teach me? Can you help me? And and as you know, this industry makes it really hard for us to help each other. Right? It's, you know, and and so what you do is, you know, you you tell them about a deal or whatever it is. But we're tribe is of course, we've built a tribe, a pro tribe where you can go out and say, hey, come on in. Maybe there's a $500,000 investment and all of us can come together. We can each put in 25, K or 50 K to get in together. And that's just a simple business partnership, single entity governed by an operating agreement. Travis Smith (00:09:14) - And we're all on the same terms, all for one, one for all. And that's a really cool product we offer, right? And now what we've done with the fund manager tribe, which is a new, new thing we're bringing to the market, is now how can I even, you know, help more people, right? And then how can I potentially, you know, be in a position where I can create my own fund of funds and and invite more people in, giving them access to bigger, more deals, better deals, while while being appreciated for my time and effort and energy and all the work that goes into that. So that's a little bit of the of the evolution, if you will, is you know, we've we've been mastering group investing for the last four and a half years. We've built out all the the, the platform, the infrastructure, all those services and now kind of the next thing is and again, we're doing this by partnering with the sponsors and saying, hey, you know, to safely, you know, go out there and work with, you know, with other entities, it's important those other entities are set up in a legal, safe, compliant way. Travis Smith (00:10:39) - And Tribez is the company that makes that so easy. We've turnkey that to make sure anybody you're working with is set up, you know the right way compliantly, you know, crossed all the T's, dotted all the i's. And again just offering that as a as a way to make it more accessible, right? Making that more accessible. Sam Wilson (00:11:01) - When you partner with the sponsors. I mean, because a lot of times, you know, the structure will be if you're doing a fun to funds deal, maybe you're using the same attorney that the sponsor does, maybe you're not. But the deals I've been a part of on a fund to funds both as a. Faster in an active investor. You know, they remember my question here. Oh, partnering with the sponsor is. Travis Smith (00:11:26) - What you were going to say is the sponsor. You know, typically when you've participated in a fund to fund that, the sponsor, you know, that fund to fund is working with the same attorney that the lead sponsor is working with. Travis Smith (00:11:40) - Yeah. Sam Wilson (00:11:41) - Yeah, it was something along those lines. But but essentially we're kind of left as a fund to fund to go out and find our own. If we're not using their attorney, find our own attorneys, draft our own docs, and then come in as an investor. And in this case, you're kind of turning it. This is where I was going with that. You're kind of turning this on its head or it's, Hey, the lead sponsor then comes to you and says, Hey, let's create. Help us create then the correct fund of funds model for our then potential capital allocators that want to do so into our opportunity. Travis Smith (00:12:17) - That's right. That's right. And and you're right. So, you know, the lead sponsor is, you know, working with SEC attorneys, making sure they're setting up their operating agreement and PPM, the subscription docs, making sure that they're doing all the proper filings. And then and then, you know, again, how do you help your network be more successful out there? And you you hit on all the challenges that come with it, right? Like, man, I have to work with an SEC attorney. Travis Smith (00:12:57) - Do I need to work with the SEC, the lead sponsors, SEC Attorney What are the costs? You know, and then the challenge is for the sponsor is it's so antiquated that there's no consistency. So it's just hard to know, you know, you know how you know how to work with making sure you're working with the right entities that are set up and aligned and have done all the right things. And that's where Tribez comes in. And how we partner with the sponsor is they know when we're working with their fund to fund managers that their their documents line up with their documents, right? That all the proper filings, the checklist, all those things are consistent in taking care of and compliant. You know, also in terms of operating. Right. I think another challenge the sponsors have is great. I'm working with a great guy. They're awesome. And but are they delivering on at the Standard? We're used to? Like we do a great job at doing communications out. We're very consistent with our distributions, you know. Travis Smith (00:14:19) - How are you keeping track of all this? ET cetera. ET cetera. And I think without tribe best, that answer varies, right? And where Tribez comes in is there's this single platform with all that infrastructure built in making sure that the, you know, the fund manager tribe is making their their quarterly or monthly distributions in a very professional and consistent way, you know, helping them take the communications from the lead sponsors and distributing those to the, you know, the fund to fund members. ET cetera. So just the consistency that we bring to the market makes makes this accessible and a great way for sponsors to build out and empower their investor network. Sam Wilson (00:15:13) - Does your. Yeah, I guess so. So this is a sponsor centric platform is what I'm hearing that or begins with a sponsor and maybe it's not like you said it starts with the investor. Obviously that's, that's the most important component of all of it. But the sponsor kind of initiates this conversation with Tribe best. Is that generally the way that. Travis Smith (00:15:33) - Right? Yeah. You know, so we're working with a very select number of, you know, really the most respected, most well run operated lead sponsors out there. And we can be very selective in who we work with. Um, you know, because it doesn't, we don't, we don't need to be working with everybody, right? Our, our business model allows for us to really focus and partner so we can make sure that we're covering all the bases and again, crossing all the T's, dot and all the I's. But yes, to answer your question, the partnership starts at the sponsor level. And again, certain qualifiers to work with us are, you know, do you have a proven track record? Are you known for your operations and and, you know, all those things? And then the next question is, hey, are you you know, are you looking to be more efficient and effective with your investor network at raising capital and and providing resources for them to be, you know, better participants? And the answer is always yes, but how? And so again, try best comes in and says, look, our program you can kind of roll out to your to your network. Travis Smith (00:17:03) - And again we provide all all these services and value to make sure you're doing it right in an inconsistent way, which is the hard part. Right. Otherwise it's, you know, to do that. That there's training, there's infrastructure, there's all these other things that you kind of got to do if you're going to do it right and safely. And again, Tribez kind of brings this platform and all those checks, checks, you know, in a and again, a consistent platform way. Sam Wilson (00:17:38) - One of the things as a fund of fund. Manager I've seen is just the expenses involved in getting set up those fund of funds. If this is a program that you guys are consistently and I'll be honest, I'm going to throw in my little bit of jab at our at our attorney friends. I feel like so many of the documents that we get are just the same set of documents, changing the names with a few tweaks through them and it's like, Wow, I just paid 20 grand for that. That was fun. Sam Wilson (00:18:10) - Especially when you get a you know, and these are well respected attorneys. It's like, Oh, I can get that to you tomorrow. You're like, Wait, we just drafted this today. Like. Okay. So we really are just changing names. And you're charging me 20 grand with a few tweaks in there for like, okay, you spent an hour on that. Like, are there economies of scale? And again, you know, forgive me if I just put my own internal monologue here on the podcast in perpetuity, but. Travis Smith (00:18:33) - You're saying what we're all thinking, right? Sam Wilson (00:18:36) - Are there economies? I know, I know that's bad, but it's just the reality of it. Are there economies of scale that you guys are achieving with kind of finding a model that can be not white labeled? But, you know, it sounds like this you've got the model figured out where it's not reinventing the wheel every single time. And are there economies of scale that you guys are able to achieve with that? Travis Smith (00:18:58) - Absolutely. Travis Smith (00:19:00) - And and I think, you know, look, the attorneys are critical part of this. Sam Wilson (00:19:10) - 100%. Travis Smith (00:19:11) - And 100%. And making sure you're setting it up the right way and working with the best attorneys is a good idea, is a good idea. And the best attorneys they deserve and make a lot of money. And again, they deserve it because, you know, there's a lot of things you need to make sure you're doing and doing it the right way. But the the question, which is a good one. Are there economies of scale to leverage? Yeah. And we all know. Yes. Yes, there is. And and look, we've been doing that for the last four and a half years. Even if you kind of go back to that traditional, you know, group investing group, you know, investor group model that's governed by an operating agreement, you still need an LLC and and even, you know, without tri best, you still have to like find the right attorney. You know, they're going to draft an operating agreement. Travis Smith (00:20:18) - You're talking thousands and thousands of dollars for a super partnership, something that's been done hundreds of thousands of times. Right. And so, you know, four years ago, we said, look, let's just work with really bright attorneys, the best attorneys, and form a couple of templates that can be easily configured based not by tribe best, but by the members of that investor group. And now fast forward four years here. You know, we're taking that same mindset and true to being a software as a service platform and a fintech platform. And yes, there are economies of scale and and we do have an SEC attorney on staff. We don't offer legal advice. We're not in a law firm, but we are seeing all those, you know, those consistencies in the market. And so how do we do that in a way where it saves saves the the the ecosystem money so that they can they can they can focus on, you know, doing the best deals, building those best relationships, all those things. Travis Smith (00:21:32) - And that's that's one of the reasons and how we've been able to keep this at such a no brainer cost. Sam Wilson (00:21:38) - Right? No, I love that. And it's one of those things that that in the end serves the investor best as well, because obviously those those expenses get baked into those deals that we do. And it's like, okay, if we can keep some of that down and still do it. And again, don't get me wrong, I'm not going to bash all of our attorneys. They've been very helpful. I mean, some of the stuff that we're paying for, of course, is their their insurance policies that then back the work that they do. So, you know, it's and those. Travis Smith (00:22:04) - Little bit of the nature of the beast. Sam Wilson (00:22:06) - It is it most certainly is. Yeah you need it it's nature of the beast. But if there's a way to, like you said, create templates that then can be modified on a case by case basis without reinventing the whole platform, that that makes a heck of a lot of sense. Sam Wilson (00:22:19) - Travis really enjoyed our conversation today here, talking about try best learning kind of your guys's history where you are now and how you guys are really making investments easier and more accessible for both your investor base and kind of simplifying the process. On the sponsor side of things, I think this is really, really cool. I love what you guys are doing and look forward to having a further conversation with you guys about the opportunities you have. But if our listeners want to get in touch with you or learn more about you, what is the best way to do that? Travis Smith (00:22:48) - Yeah you can follow me at. On LinkedIn is probably the best way. Just, you know, do a search of Travis Smith and Travis let me know you. You heard me on this show and I'd love to connect with you and then you can go to try best.com and we're in the process of really updating our our website but it's always a good place to go and define just more specifics on this fund manager tribe program and our pro tribes again which are very narrow focused to help in the end really smart, good people get more access to the best deals. Travis Smith (00:23:34) - You know, you can just chat with us on our website and again say, you heard me on this show and we would love to to to talk more about it and help out any way we can. Sam Wilson (00:23:47) - Fantastic. Travis, thank you again for your time today. I do appreciate it. Travis Smith (00:23:51) - Thank you, Sam. Good to be here. Thanks for having me. Sam Wilson (00:23:53) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Chris Prefontaine. Chris is the four-time best-selling author of Real Estate on Your Terms, The New Rules of Real Estate Investing, and Sell With Authority for Real Estate Investors. He's also founder of the Wicked Smart companies and host of the Smart Real Estate Coach Podcast. Chris has been in real estate for over 31 years. His experience ranges from constructing new homes in the 1990s and owning a Realty Executive Franchise to running his own investments (commercial & residential) and coaching clients throughout North America. Show summary: In this podcast episode, Chris Prefontaine shares his experience and insights in the real estate industry. He discusses the importance of being able to pivot creatively to find deals, reflects on his early days building homes on spot lots, and how he shifted his strategy after the 2008 crisis. Chris emphasizes the significance of surrounding oneself with experienced individuals and shares his approach to deal structuring, owner financing, and master lease purchase. He also talks about the potential of owner financing across various asset classes and introduces his book, "Real Estate on Your Terms." -------------------------------------------------------------- Intro [00:00:00] 2008 crash [00:01:01] Deal flow [00:08:56] Structuring deals [00:10:39] Seller motivation [00:12:10] The history of owner financing [00:16:58] The versatility of owner financing [00:17:27] The appeal of owner financing for higher-end assets [00:19:04] -------------------------------------------------------------- Connect with Chris: Book request: https://wickedsmartbooks.com/sam1/ Email: firstname.lastname@example.org Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → email@example.com SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Chris Prefontaine (00:00:00) - So there are always going to be people out there. There's a third of the properties in the United States, roughly, that are free and clear. That is a great pond to fish in. Always don't care what the market is. And I know this, the market can go up, down, sideways. Doesn't matter. You will always, always have enough deal to come across during any market as long as you know how to pivot creatively. And that's what we do. Sam Wilson (00:00:20) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Chris Prefontaine is a four time best selling author. He's also founder of the Wicked Smart Companies and host of the Smart Real Estate Coach Podcast. He's been in real estate for over 31 years. Chris, welcome to the show. Chris Prefontaine (00:00:47) - Thanks, Sam. Glad to be here. Hope we can impart some some nuggets here while we chat. Sam Wilson (00:00:51) - Absolutely. I'm looking forward to it. Sam Wilson (00:00:52) - Chris There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Chris Prefontaine (00:01:01) - Um, started in 1991 by building homes on spot lots where the owner would wait for the money, the vendors would wait for the money. So we were doing creative way back then in my 20s. Um, we, um, we pivoted big time after the 2008 crash and started saying, okay, no more signing on bank loans, no more pledging cash. We buy everything today. Owner financing subject to existing financing. All these projects, you can do any asset class with any one of those. And we teach that not only we do it ourselves, we teach that all around North America. Sam Wilson (00:01:33) - That is wild. So I've never heard the term spot lot, forgive me, 800 and some odd episodes and ten years in the business. I don't even know what that is. Can you define that? Chris Prefontaine (00:01:41) - Spot lots. Chris Prefontaine (00:01:42) - Yeah. Meaning sort of infill lots. Where you come in a situation, there might be one lot left or, you know, someone has a lot next to their house they can subdivide. We did that and I was naive enough in my early 20s to go to the owners and say, Look, we're going to build a house and go to the vendors and say we're going to build a house. But you guys all get paid when it closes in like four months. And they all said, yes, the market was tough then, but I look back and say, Wow, I don't know if I'd ask that now, but we did it. We did like 100 homes. Sam Wilson (00:02:05) - That's crazy. Yeah, I'm not even sure I would have the courage to to look at a contractor in the eye and say, Hey, buddy, listen, four months from now, you'll get paid. Chris Prefontaine (00:02:14) - But I guess it's so different. I think back. I remember. I remember I had a eyeball with the lumber supplier and he chuckled. Chris Prefontaine (00:02:20) - But then he did it. So, you know, it's funny. Sam Wilson (00:02:22) - That's wild. Okay, so you work that strategy. I'm sure there's a lot of other things from 1991 through 2008. And it sounds like in your story there, there was potentially some pain throughout the zero eight crisis such that it made you really pivot into your strategy that you're employing now. Chris Prefontaine (00:02:40) - Yeah, pain would be an understatement. Mentally, physically, you know, financially, big time. I had about 20 some odd properties at that time. I, I bought conventionally or with a loan and or with investor money. So I was on every single property personally guaranteed and so realized the hard way what that means. Yes, I had good credit so I did that but learned the hard way what that means when the market takes a dip one third to two thirds and some of my projects. And so that was a miserable four years from zero eight Feb till 12 Feb It was a miserable four years and we worked it out. We pivoted in 12 and said, okay, got my legs again, get out of my head and said, I can do this still after 18 years I can do this. Chris Prefontaine (00:03:21) - And we pivoted and created the smart real estate coach and our own deals and we just do not do not sign personal loans anymore. And it's a little bit different going to sleep at night knowing that. Sam Wilson (00:03:32) - I can only imagine four years is a long workout. I mean, that's a long time to be under that amount of stress. What were some of the things? You know, looking back on it, you'd say, hey, you know, this is how how would your approach change? Were you to be in that position again? Chris Prefontaine (00:03:52) - I'd say exactly, because it was all mental. It was me beating on myself saying, what the heck? And despite it being a national crisis, I blamed it on me. Right? My stuff. So I will tell you, in hindsight, I would have done what I did about at the three and a half year point, which was go find 2 or 3 people that have been through it and then some over the years and have more experience in the market than I do. Chris Prefontaine (00:04:14) - So people 15, 20 years older than me, that was super successful. I did that. But it took me too long to do that and got in my own head. And when I did that, one of them literally chuckled at me. Sam. He chuckled at me and said, Okay, here's all things I've been through, and he's listed a litany of things. And then it made me seem like, okay, it's no big deal, but wish I did it earlier. Like I'm talking like six months in. Go. Okay, help me tell me how to get through this. But but so it's really key because success leaves clues, right? You and I know that. So there is someone out there that went through what you went through. I don't care what it is. Personal business, financial, this summit. So you got to seek them out earlier. Sam Wilson (00:04:48) - I like that a lot. That's that's really, really smart. It sounds like, um, you know, finding those people that were ahead of you are the ones that kind of, like you said, help you get out of your own own head on that. Sam Wilson (00:04:59) - Like, that's, that's fantastic. I mean, that's so true. I think for any of us, though, I mean, it's the same reason we're in mastermind, the same surround ourselves hopefully with people smarter than us. Chris Prefontaine (00:05:09) - Right on. Sam Wilson (00:05:09) - Yeah, but I like that. So you think you could have shortened that four year period to 6 to 12 months maybe? Chris Prefontaine (00:05:16) - Yeah. In hindsight, the mental game is so crazy, right? I just. I just was in the cycle and then you. And then you start attracting more of it. And that sounds kind of fufu, I know, for some people, but I'm telling you it's real. And so, yeah, I could have done a lot more quickly. Sam Wilson (00:05:29) - Yeah, man. No, it absolutely is. Yeah. I always say that being inside my head by myself is like a bad neighborhood. It's not somewhere you want to be alone. It. Chris Prefontaine (00:05:38) - That's a good one. I like that. Sam Wilson (00:05:39) - Absolutely. So, no, I like that. Sam Wilson (00:05:41) - That's fantastic. So you pivot in 2012, you say, all right, look, you know, we've got to do things differently. You've no longer guaranteeing loans. You're no longer signing on stuff. How have you been able to employ this strategy over the last now, I guess, 11 years? Yeah, that's that's basic math. The last 11 years, I mean, we've had a bull run in the market. We've had incredible growth across all sectors. My. Argument, which you're going to prove me wrong. But would it be that man? You know. As things get better, people aren't looking to exit properties commercially, residentially, whatever it is on terms. Tell me why I'm wrong. Chris Prefontaine (00:06:18) - Yeah, I always like using specific examples, so it's not theory. I am standing in my building, my commercial building right now. It's a mixed use building and I bought this in 18 and I bought it on owner financing. It was free and clear. That's who we that's who we target. Chris Prefontaine (00:06:32) - That's our avatar free and clear properties. So that on 99% of the deals, I can structure principle only payments as long as I get them to their number and as long as I get the right term. Now, why did he do it? To answer your question, he did it for personal tax planning and personal estate planning reasons only. He had a four by eight sign saying My firm is building me and realtors coming in saying I got an offer for I got a buyer for. And he kept saying, No, no, no, I want in need owner financing. So there are always going to be people out there. There's a third of the properties in the United States roughly, that are free and clear. That is a great pond to fish in. Always don't care what the market is. And I know this, the market can go up, down, sideways. Doesn't matter. You will always, always have enough deal to come across during any market as long as you know how to pivot creatively. Chris Prefontaine (00:07:17) - And that's what we do. And I just give you one example, but that's a great example. Sam Wilson (00:07:20) - It's a great example. I mean, but in this particular case, you had a seller that was already looking for what it is that you do. How does this conversation shift when you have a seller that is on the, you know, the other side of the equation where they're like, hey, look, I only want. A sale. Cash out. I'm going. I'm done. How do you. How do you warm up that conversation with the seller such that it becomes an option they'll consider? Chris Prefontaine (00:07:48) - Yeah. So my conversation sounds like this. If you said that to me as a seller, I just have one question that'll tell me if need to go further or not, and I'm just open with them and I might not be there by the question is great. 99% of the sellers I buy from want what you just described. Full price, close now conventional. Everything's simple. However, fracture closings are at like 20% right now. Chris Prefontaine (00:08:08) - Things have fallen apart. So if it doesn't sell and if you don't get your price at the time you want, what's your backup? And that usually provokes a further conversation down the road. So I give them their space, let them go try it if they need their cash up front. And they absolutely know that and they need the equity out to go buy a house for the family or a building for whatever, they absolutely can't pivot. I'm not the buyer. They need the cash now. People need to be able to wait. That's why I like free and clear, because the financially typically well off. Sam Wilson (00:08:35) - Right, right. Right. Chris Prefontaine (00:08:36) - Yeah, that's. Sam Wilson (00:08:37) - True. Yeah. If you're if you're if you're owning commercial properties, residential properties, whatever it is and it's free and clear, then you've made some good decisions along the way and you're not you're, they're not actively looking to cash out and harvest that equity. Maybe, you know, like somebody that's levered to the hilt. So that's, that's really, really cool. Sam Wilson (00:08:56) - Have you seen have you seen any deal flow increase, decrease? Has it been steady? What's what's that been like and what's kind of the sentiment towards. Yeah. Chris Prefontaine (00:09:07) - Super applicable question. So here's what happened. I'll go back to like pre Covid and give you the gist. Yeah. So because all this means is what pond do you fish in? I don't care if you look whatever asset you're looking for. Are you fishing in the for sale by owner fishing expired. You're fishing in a niche list like free and clear. Just you just have to pivot where you're fishing. Here's why I say that. Beginning of 20 people panicked. I scream to my community, the wicked smart community. No, no, no. This is when you doubled down. They need a guide. Sure enough, our properties tripled what we were taking in, but that only lasted three months. Then the market got hot, right? A four months. Whatever it was. So then everything was selling like hotcakes. So was it a good pond to fish in for sale by owner in any asset class? No. Chris Prefontaine (00:09:44) - That was you had to do a lot of calls to get the same lead. And so you just have to bop. And we've with where you're fishing our properties steadied out then meaning instead of getting 25 a month in the community, you probably got 10 or 12. And then it's now the market slowly but surely has been going right back up with some strong demand from the expired market. Right. Because things aren't selling like they used to. The media is screaming. I think they're incorrect, but they're screaming, panicked, everybody. And that's causing sellers to come looking for us. So it's going to do the ebb and flow. To your point, it's just a matter of you knowing where to fish, knowing your metrics, because that's what we teach, but also knowing like the skills to structure deals and creative real estate will put you through any market. That's it. You can pivot and pivot and deal after a deal. After a deal. Sam Wilson (00:10:24) - What what, what are what are some things that you're really with? People that work with you? What are some ways you're structuring deals and or, you know, insisting, hey, this is the right way to structure a deal? And then maybe what are some pitfalls as well? Chris Prefontaine (00:10:39) - Yeah. Chris Prefontaine (00:10:39) - So the free and clear on the financing I love I also love the sub two meaning if you knew listening to this just subject to the existing loan balance. I just one of my students just told me about a large commercial building where the gentleman actually couldn't wait to sell it, subject to his existing loan, meaning that loan stays in their name right until such time it's cashed out. And then there was a owner financing component for his equity. So that's kind of a quasi owner financing sub two combo. I love those because let's think about it. What were the interest rates for the last year or so? Super low, right? And now we're grabbing buildings in residential that have these low interest rates. You can't get better than that. Even if you went and did it for yourself, right? You have one property or you have one house or whatever, and you're getting it for two and a 3:45 and three quarter rate. Not bad. That's what we're seeing. It's crazy. Sam Wilson (00:11:29) - That's free money. I mean, it's it's free money. Sam Wilson (00:11:32) - And that's a that's a I know there's gonna be a left turn here, but that's something I've been trying to convince my own mother of, who is now in her late 70s. And it's like, don't pay off your home. You have a fixed mortgage at like 2.5%. Chris Prefontaine (00:11:45) - It's crazy, isn't it? Sam Wilson (00:11:46) - 30 years? Chris Prefontaine (00:11:47) - I don't think we'll see it. I really don't. Sam Wilson (00:11:48) - Know. Absolutely not. Absolutely not. And yeah, those are those are those are amazing deals to find. Okay. So we've talked a little bit about the way you like to structure them and that was a unique structure, a sub two plus owner financing on the on the equity side of it. Like how what's a seller's motivation even in a situation like that? Why? Yeah. Chris Prefontaine (00:12:10) - This is also a great timing question that you hit. You're hitting some high points. Here's why because I wasn't seeing those before. I was seeing people that want to sell. They're free and clear pretty much while often have time. People that are selling us sub to and willing to keep their name on the loan are usually hurting financially now in the community. Chris Prefontaine (00:12:26) - Rick in New Hampshire comes to mind. His last two deals, six figure deals for him. They were both sub two with a component of owner financing. And what I'm seeing is to answer your question. People. They either have two properties they're getting up in age or they have two properties or more, and they are a little afraid with the media screaming. The media is helping us because again, think they're incorrect. But that's what's going on now. And you know what he prospects he specifically is prospecting now this particular student owners of two or more properties. And so it's not surprising me now in hindsight that he's finding that because they just want to unload some they want top dollar, but they can give us a term. And if on the equity piece we're making no payments or interest till the end or we're making principal only payments, that's a Great recession. Hedge It's a great play. It's a great leverage play. I love it. Sam Wilson (00:13:13) - Absolutely. Any I mean, a savvy seller, again, I'm giving a counterargument, but a good savvy seller would say, hey, look, Chris, you know, I love the deal. Sam Wilson (00:13:23) - Maybe I do owner financing on the equity portion. Let's even structure, you know, you can take it sub two, but I'm going to need personal guarantees. I'm going to need something that says you got skin in this game and you're going to perform. How do you handle that conversation? Chris Prefontaine (00:13:38) - I've gotten it literally more so when I first got back in, but literally maybe 3 or 4 times where the attorney hits me or hits my attorney. Right. And I just tell him it's not for me, quite frankly. And and I think it's usually a confidence issue. I don't think I know as I listen to some of my students calls, if they're getting it, they're usually coming across pretty weak on the phone. It's not a negative. It's just not his experience. So I don't get any more just from a conference standpoint. And if I do those first few times I bought it was a multi coincidentally, and I ended up buying that property because my attorney said they don't do it. You have the security. Chris Prefontaine (00:14:09) - You're telling me it's low loan to value. They don't do it. And so they came back. Now that one took a year and there was a big residential properties like 14 acres, almost a million bucks. And that one took a year. He kept wanting to do it with me, and he went through two attorneys who said, No, no, no, you can't do that. They got a sign. Okay, let me know. So if they end up selling, good for them. But if they don't, they're going to come back. So we just don't sign personally. Sam Wilson (00:14:29) - What what would you say is the average cycle or average? You mentioned a year there. So what is the average time it takes to get deals like this the way you're structuring them closed? Chris Prefontaine (00:14:41) - Good question. I would go anywhere from 60 days to a year, Sam, because like this building when I talked to him. Now, granted, to your point, he was looking for it right and in cold calm. Chris Prefontaine (00:14:52) - But this took probably we we actually we live on an island so we happen to use the same law firm. So this was like a ten minute conversation. He loved my book. He read it. He's like a math guy. He's like, this is great. And they structure a deal. Like this whole thing took maybe a week. So usually it's a couple months to a year. Now, what dictates that? In my opinion, if they're an expired property, they're on with a commercial or residential agent, they're usually more quickly converting. If they're a for sale by owner, they it takes follow up. Why are they a for sale by owner they think they can sell, right? So when they realize they can't like 98% of them don't, then then they come to reality. They either go to an agent or call us. Right? So that does take longer. Those are follow up calls always. Yeah. Sam Wilson (00:15:33) - So let's talk about that on on the finding deals side of things. What's what's kind of the strategy behind this? Is there a particular program you use Is there I know you mentioned expired, you mentioned free and clear. Sam Wilson (00:15:46) - I mean, obviously you can there's data sets where you can pull down that data. But what's the what's the process we have? Chris Prefontaine (00:15:53) - We do have a lead source that that feeds us. Those categories I'm mentioning to you. And then a database. You know, you and I know you could pull a list of literally anything, but I love like the multiple properties or Love Free and clear out of state, you know, combos like that, That's where we get them. Then what happens though, we have a virtual assistant call first. So our students, unless they want to do more on their own to increase their lead flow, if that's if that's their business plan, most of them are starting with a virtual assistant calling so that the cream rises. Hey. Yeah. Have him give me a call. Yeah, I'm open to that. Then we'll call those leads. They're a lot stronger. I keep those in my desk at any one time. Like the virtual assistant emails them to me, and I call those only unless I'm in a mode where I want to open up a new list and experiment myself. Sam Wilson (00:16:36) - Right, Right. No, that that makes a heck of a lot of sense. We've covered subject two, We've covered owner finance. We've covered the ways that you guys are finding leads. I want to know, and you mentioned commercial, which obviously this show is 100% about commercial real estate. Are there asset classes? Is there are there any asset classes where you're not seeing transactions like this occur? Chris Prefontaine (00:16:58) - Uh, not me personally. No. I think here's something interesting. I do have some people say either on a show or even sellers say, Oh, I've never heard of that. Okay, really? Okay. So if you read the new book by Anderson Cooper, I read it because his family had a mansion on Bellevue Ave here in Newport, Rhode Island. So I said that would be interesting. In the book, he talks about his family buying owner financing and he called it master lease purchase on these large buildings in New York City in the 1600s before banking like so it's been around forever. Sure. Chris Prefontaine (00:17:27) - All we did is wrap a bow around it and assistant around it and support around it so that students don't go. They go in the real world. We help them get deals done. We revenue share and we're in the trenches. But other than that, it's been around forever. You can do any asset class, planes, boats, cars, any asset class can be done the way we just talked about, right? Sam Wilson (00:17:43) - Yeah, I've actually thought about that quite a bit. Is is that there. And I've done a not a ton but a fair share of owner finance and subject to deals probably obviously nowhere near the scale that you have but I've often thought about that. I'm like, my gosh, like the potential to do this across anything like you said, planes, boats, cars, homes, any of those things exist because there's always a motivated seller somewhere that needs to get out. I think the trick the trick is finding and tell me if I'm wrong here, but the trick is finding the right data set or the right pond in which to fish. Chris Prefontaine (00:18:19) - Is that sound about Once you're in any pond, what do we really doing? Because people say to me, Oh, how do you convince them? Never What? Never convince? What I do is listen for the motivation. What would you do if it didn't sell right? Bingo. You get you get the answer. Then if you can solve for that, good. You're gonna have a deal. If you can't tell them I'm not your buyer. So it's that simple. And just to get people's mindset, the asset class in the price doesn't matter. Sam Right. Sure was a house. I bought a house here in Newport a little while ago. This was back before the crash, and the guy in front of me didn't know it right away, bought that house owner financing. He needed to do that because he's going through a divorce. You're talking about several million dollar property. He needed to do it because going through divorce and then eventually he put financing on it. But my point is, there's no class or price range that's off limits. Chris Prefontaine (00:19:04) - In fact, I would argue that the higher end buildings in residential are more apt to do it. They understand it, the more savvy. It's a very easy conversation. Sam Wilson (00:19:13) - That's interesting. That's that's that's a I think that's that's a brilliant point. The higher end assets, the more expensive they are. Probably more likely, which is probably true. I mean, we see that in multifamily, you know, loan assumptions. Yeah, same kind of basic idea. Obviously, a loan assumption in a multifamily property is maybe very or is structured very differently than a subject to would be. But you know, in the end, same basic idea somebody else has. Chris Prefontaine (00:19:38) - And I'd be shocked, to your point, if you could run across an investor, say like you or I, that has bought and sold and gone through challenges that loves a bank, that prefers to use a bank before. So that's why they're open. A lot of people aren't bankable or don't want to deal with banks, right? Sam Wilson (00:19:54) - Right. Oh, absolutely. Sam Wilson (00:19:56) - Absolutely. No, I'm in the I'm in the it's it's funny, you mentioned that. Thanks for bringing up the pain here this week. It's I'm waiting like like nail biting on in a pre a delayed appraisal for a closing that's supposed to happen Friday on a commercial building and it's like. Oh, this process sucks. Okay. So, yeah, I love I love what you're doing. Let's talk a little bit about your book here. I know you have an offer here for our listeners. I think it's very, very generous of you. Tell us about the title of your book, what it's About, and how they might get a copy of that. Chris Prefontaine (00:20:28) - Sure. It's real estate on your terms. It was written in 17 best seller. Then we were revising it right at the end of 19, beginning of 20, and Covid hit us. So we said, okay, let's take advantage of this, this opportunity here and update it appropriately. So we did. So it's very, very up to date right through like 2021, I think it came out. Chris Prefontaine (00:20:47) - And that's going to show a through kind of what you and I talked about, but a little bit more granular on how you can buy any asset class without using a cash credit or gobs of cash or or your credit or investors if you don't choose to do that. Because I do have people that read a book go, You know what resonated, Chris don't want to go raise money like some people just don't want to do that, right? So it's going to teach you how to do that. We do have a free copy and it's not one of those offers, as I told you off air that says, you know, free copy and then you got to put it into credit card free shipping. Right. We are going to ship it from this building and you'll get that and you might get another book in there as well. Just go to wicked smart books with wicked smart books, dot com, forward slash Sam and then the number one numeric number one. Sam Wilson (00:21:26) - Awesome wicked smart books.com/sam number one and you can get a copy of real estate on your terms. Sam Wilson (00:21:33) - That's really generous of you guys to share that with us and I think it's extra cool. And I mentioned this off air, but extra cool that you guys ship a hard copy book still out to people. It's not just the oh, what's the what was the term used. Yeah it's not just a PDF download they called that there was a name, somebody who's a term for their day that's like, oh they call it a snooze fest. They're like, Oh, thanks for the PDF download. There's a total snooze fest. So actually getting a real book in the mail I think is is really, really cool. Chris I've enjoyed having you here on the show today. We've covered all sorts of really fun things. I loved hearing your story of just how you've transitioned from 1991 all the way here to 2023 and the wealth of experience that you have. I love what you're doing in the marketplace. Yeah, it's talked about a lot, but I think you guys bring a new and exciting kind of angle to the way that these assets are taken down and just, you know, learning how to do open finance subject to even on larger commercial projects is a very exciting and enticing discussion. Sam Wilson (00:22:31) - So thank you for that. If our listeners want to get in touch with you outside of getting a copy of the book and or your company, what is the best way to do that? Chris Prefontaine (00:22:37) - You can just email me Chris Chris at smart real estate coach. Com. Just make sure they mention your show because I don't always give that out. Sam Wilson (00:22:44) - Got it. Chris at smart real estate coach.com mentioned the Hello skill commercial real estate podcast. Chris thank you again for coming today I do appreciate it. Hey thanks for listening to the How to scale Commercial real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
Today's guest is Tom Dunkel. Having spent his early career as an accomplished corporate finance leader with over $1.2B of middle-market M&A and financing transaction experience, and possessing a proven track record as a trusted decision-making partner to C-level executives, Tom turned his entrepreneurial energy and enthusiasm toward building a self-storage investment business. Show Summary: Tom shares his journey from corporate America to entrepreneurship, discussing his experiences in self-storage, short-term rentals, and distressed mortgage debt. He emphasizes the importance of utilizing technology and marketing strategies in the self-storage industry, and shares insights on market dynamics and competition. -------------------------------------------------------------- Intro [00:00:00] Tom Dunkel's background and journey [00:01:27] Reasons for pivoting businesses [00:04:24] The importance of KPIs for mom and pop operators [00:11:13] The advantages of raising rates in self-storage [00:12:08] Factors influencing being a price leader or follower [00:13:11] Closing [00:22:36] -------------------------------------------------------------- Connect with Tom: Facebook: https://www.facebook.com/tom.dunkel.1 https://www.facebook.com/belrosestoragegroup Linkedin: https://www.linkedin.com/in/tomdunkel/ https://www.linkedin.com/company/belrose-storage-group/ Web: https://belrosestoragegroup.com/ Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → firstname.lastname@example.org SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Tom Dunkel (00:00:00) - Over the past 40 years, the US economy has been bouncing around like a really wicked roller coaster. Right? Good times, bad times, everything in between. But storage, it's like. It's like that lazy river. Sam, when you got your little cocktail, you're floating around at your resort on your little inner tube there. I mean, it's just gently meandered between about 80 and 90% for that same time period, 40 years. So we really like that, that steady predictability and the increasing demand, and that's high cash flowing business. So we're really enjoying it. Welcome to the How to scale. Sam Wilson (00:00:33) - Commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Tom Dunkel is a former aerospace M&A guy. He's got 17 years as a full time real estate investor. If you don't know, Tom actually came back on the show September 18th of 2022, which if I'm not mistaken, that was episode number 658. If you want to go back and hear a little bit more of Tom's story, you can go back there again. Sam Wilson (00:01:04) - Check that eight. Check that out on September 18th of 2022, Episode 658. Otherwise, Tom, welcome to the show. There are three questions that I always ask every guest who comes on. I know you got this question last time, but maybe you'll answer it differently this time. And if our listeners haven't heard that, they want to hear it again anyway. So where did you start? Where are you now and how did you get there? In 90s or less? Tom Dunkel (00:01:27) - Got it. Thanks, Sam. It's great to be with you and the listeners once again. Great show. Yeah. So as you mentioned, I started out in corporate America after business school was I was kind of the number crunching, you know, Excel spreadsheet nerd. I was putting together the projections and the pro formas for our aerospace acquisitions, doing the valuations, doing the the, the market work to see like, who are the competitors out there, What were they doing, You know, how could we position ourselves and all those kinds of things. Tom Dunkel (00:01:59) - So I got to work with some amazing people Harvard MBAs, Wharton MBAs, Naval Academy graduates, Chicago MBAs, retired Air Force colonels, and even some astronauts. And if you catch up with me after the show, if you visit with me on my website, I'll be happy to share with you the two astronauts that I've actually had lunch with. But yeah, so from there, Sam went into a couple other jobs corporate wise, and I just knew all along that, you know, scraping and clawing up that corporate ladder just, just just wasn't for me. I knew there would be a better way. So 2006, I got my opportunity when I was fired for my corporate job. Finally gave me the kick in the pants that I needed to go out and do my own thing. So of course, 2006 was a rough time to get started in real estate. But, you know, I went in full bore and got my butt whooped pretty good those next few years. But, you know, learned a lot, got some battle scars and but persisted. Tom Dunkel (00:03:01) - And now here, 17 years later, I've built multiple seven and one eight figure business and now we're in the self storage space, which is a ton of fun. And I'm sure we'll get more into the details there later. But in the 90s, that's the story. Sam Wilson (00:03:19) - That's the summary. I love it. I love it. Have you always done just self storage or do you have other real estate holdings as well? Tom Dunkel (00:03:28) - Yeah. So right now self storage is our primary business, but we do through the years, of course, being entrepreneurs, we try out different things. So we also do have a short term rental portfolio in the there's a, there's a mountain in Lake Region here north of Philadelphia called the Poconos. And so we picked up some Airbnb rentals up there, which were really hot during Covid. And then we also have a distressed mortgage debt business. And that was the business that I started after getting my butt whooped in the residential world in 2009, I started buying notes and then 2010 and etcetera. Tom Dunkel (00:04:05) - And that business has done real well for us over the years. Sam Wilson (00:04:08) - Considering the various businesses that you're involved in. What were some of the hallmark or hallmarks, rather, of why you pivoted from one to the next? And was there any expense in not staying with just one? Tom Dunkel (00:04:24) - Yeah, that's a great question, Sam. So distressed mortgage debt has been great. I mean, we've generated over $53 million of revenue in that business and we're not a big company. So that's that's done real well for us. Problem is, it's extremely unpredictable and it's not like we can go up to Big Bank USA, knock on the door and say, hey, sell us some loans. So we were strictly at their behest, you know, their whim as to what loans they were going to sell, how many and when. And so for like an MBA guy like me, you know, taught how to put business plans together and KPIs and whatnot, I mean, it just became impossible to really predict the future in any way, shape or form for distressed debt. Tom Dunkel (00:05:04) - So even though that business is still rolling today, it's strictly, you know, when when a deal comes up, we kind of shift and we jump at it. We have a team that's able to do that and then we got to shift back. But so along the way, we had been looking for an asset class where there was some predictability. You know, there was some staleness there was, you know, a way to put a plan together and put a team together and really, you know, build a business. So we actually started out looking at private lending, hard money lending, and we really liked that business. And we still do a little bit of it sort of on the side. But but we were just not able to get the traction to get that business up and running. And one of the big reasons is its super duper competitive. So that's a big takeaway I would give the folks out there is, you know, be careful about what asset class you choose because if it's super competitive, you know, you're going to have a hard time making hay. Tom Dunkel (00:06:02) - So when that business didn't work out the first time, we thought, Hey, let's try this again. We did this so good the first time. So we failed at that business twice. And we start we got involved with the title company and because again, we thought that was going to be a lot of a lot of small transactions and predictable, but again, couldn't find really the right relationships and team to put to bear there. And then about 2017, 2018, we started hearing more and more about self storage. We were like, Hmm, okay, this is checking a lot of boxes, very fragmented industry. So it's, you know, there's a lot of moms and pops. The big names that you've heard of out there, they only control about 30% of the market, the public storage, extra space, cube, smart, etcetera, those big guys. So the vast majority of the market is just small ones, two mom and pop owners, which was very attractive. The second thing we found super attractive was just the adopt, the adaptability, the market penetration of self storage. Tom Dunkel (00:07:03) - A few years back, only about 8% of households in the US, we're using storage. Fast forward to today, it's going on 11% and increasing and I know maybe 3% doesn't sound like a lot, Sam, but when you consider there's 120 million households in the country, every 1% move is 1.2 million new self storage customers. And they're just not building them fast enough. So we've got increasing demand, you know, supply increasing not as much, which means there's going to be upward pressure on rates, which is awesome. And then I guess the last thing I would throw out there is just that over over time, over the past 40 years, you know, the US economy has been bouncing around like a really wicked roller coaster, right? Good times, bad times, everything in between. But storage, it's like it's like that lazy river. Sam, when you got your little cocktail, you're floating around at your resort on your little inner tube there. I mean, it's just gently meandered between about 80 and 90% for that same time period, 40 years. Tom Dunkel (00:08:06) - So we really like that, that steady predictability and the increasing demand, and that's high cash flowing business. So we're really enjoying it. Sam Wilson (00:08:15) - No, I think that's all of those are excellent, excellent reasons to get involved. I'm I'm shocked that 30% only 30% of the self storage market is controlled by big names. That's a shocking statistic to me. The big one, I would not have guessed that today that that's still. But that's still the case. Which obviously I guess it is. I would think that that though having those big industry names behind it, like those those consolidating entities, is probably a good thing, just in the sense that it brings market awareness. It brings. I mean, it has to improve resale value of your guys facilities if you decide to resell it all, if that's even part of your strategy. Is that not a fair, fair analysis? Tom Dunkel (00:09:07) - Yeah. So so the rights are it's kind of a double edged sword with them. So if they are in a market where we are, they I mean, they have a lot of sway, right? They've got big marketing budgets. Tom Dunkel (00:09:19) - You know, it's usually a big shiny building right on the corner in the middle of town, you know, that kind of thing. So when they come into town, especially if they're building a new facility, what they will do is they'll really drive down the rates in the entire market just to get their facility filled up. And then they'll kind of boil the frog slowly and up, up, up the rates. And so, you know, in that situation, we have to follow them, unfortunately. So that's part of our analysis. When we are looking at acquiring a facility, we're looking to see who are the competitors. Is it, you know, is it Joe's self-storage or is it, you know, public storage? And do we So we need to be cognizant of the fact that there are there is a REIT or our REIT's in the market. And so that's just going to just make us think a little bit more about how we're going to address that. But yeah, the the thing though is if they are already established in the market, they're going to be pushing rates. Tom Dunkel (00:10:16) - So that's the other edge of the sword is, you know, we can then ride that wave as well by. Either, you know, doing maybe a small discount off of what they're doing or if all the facilities in the in the market are full, which does happen, then we know we can really kind of push that demand curve and push those rates and just kind of see where that equilibrium is and and really be more aggressive about bumping up our rates. Yeah. Sam Wilson (00:10:45) - That's interesting. I would have I mean, it makes sense, obviously what you said, but I would have guessed the other way around would be that your mom and pop owners would be the ones that are keeping prices artificially low because, well, you know, we've all we just had our prices here and we don't want to upset our customers. So we're going to keep it here. It's like. Tom Dunkel (00:11:05) - No, you're spot on. That's 100% correct. Sorry if I got off on a off the rails there, but no, no, you're 100% correct. Tom Dunkel (00:11:13) - And that's one of the things we look for when we're acquiring a facility is a mom and pop, you know, their big KPI. And we're talking about KPIs, key performance indicators before we hit record. And that's their like only KPIs seems like is are all my units full, right? That's what the mom and pop operator does. The last thing they want to do is have to have to have a fancy website or implement technology or a marketing program or, you know, God forbid, throw out some Google ads, you know, something like that. It's just not how they run their business. Right. They're just looking for that mailbox money and they know their rates are low. They know that their delinquencies are high, but they just don't want to upset the apple cart because they know they know all their customers a lot of the time. Right. Sam Wilson (00:12:02) - That makes that makes a lot of sense. But, I mean, that's where the that's where the meat on the bone lies, right? It's like, okay. Tom Dunkel (00:12:07) - 100%. Sam Wilson (00:12:08) - 100%. I'm thinking about a which we're we're long in the laundry business. And I was thinking about a store we just bought and we literally raised rates 53%. Tom Dunkel (00:12:19) - Oh, yeah, right. Sam Wilson (00:12:21) - Because it's who knows how long it's been since they've raised rates. I mean, of course that's right. It's all the little sophisticated. I'm not going to call it sophisticated little things that you can do that drive a business in a meaningful way that you just mentioned. Like. Yeah. Oh, hello. Google ads. Okay. Pay per click campaigns. Okay, we're marketing. Okay. We have a phone line. Tom Dunkel (00:12:40) - Right? Sam Wilson (00:12:42) - I mean, how many of these facilities you're buying where you're like, you guys don't have a site and a phone number that there's a. Tom Dunkel (00:12:47) - Person and we're actively surveying the market to see like who's charging what and how busy are they, Right? Sam Wilson (00:12:54) - Yeah. And those are those are where your competitive edges lie. What's your thought? Maybe you answered this, but I'm going to ask it again anyway just to see if there's more more to this than not. Sam Wilson (00:13:05) - What's your thought on being a price leader or a price follower? Tom Dunkel (00:13:11) - Yeah, good question. You know, and I hate to I hate to say this, but it's going to depend on the market. So, for example, we acquired a facility in Mount Airy, North Carolina, a couple of years ago. And the entire market in our analysis, we discovered that the entire market was full. And so we knew when we acquired our facility there, Granite City Storage, we knew that if there's a customer in that market that wants a storage unit, they're going to have to pay more because if we bump up the rates even on our existing customers, where are they going to go? So we we were able to successfully play that game in that market and we increased our rates about 21% in the in the first few months. And then we were just able to bump it up kind of incrementally from there. But yeah, I mean, that's that's a big factor is what's going on at the other stores. Tom Dunkel (00:14:06) - But like we talked about a minute ago, you know, if there's a big new development going in and there's a REIT coming in, you know, we're going to be more of a price follower in that situation. Oh, and what I meant to add on to for my first example in North Carolina, all the other competitors in that market, they followed us after they saw that we were bumping up our rates. They all, you know, bump, bump, bump, bump, bump up their rates. Right. And then, you know, we I don't remember getting like a holiday card or like a commission check that year from those guys, but we should have for sure. But yeah, on the other side with the with the big rates coming in or big developments coming in you know you're going to end up most times being a price follower in that situation. Sam Wilson (00:14:55) - Right Yeah it's it's a it's a temporary race to the bottom. Tom Dunkel (00:15:00) - That's right. But but honestly, which is why I'm sorry to interrupt, but which is why like, you know, people look at these really hot markets, you know, like down in Florida and, you know, millions and millions of people moving there, or at least hundreds and hundreds of thousands. Tom Dunkel (00:15:16) - But we don't like to see that the market being too hot because we know that's going to attract the REIT's. You know, so we're looking for that Goldilocks situation where it's growing but enough to increase demand but not enough to increase, to increase or attract a lot of competition. Sam Wilson (00:15:35) - What's one of the things that you have done from a management perspective and you're based in Wayne, Pennsylvania, so. That's right. And you're buying things in Mount Airy, North Carolina. That's more that's more than a five minute drive from your house. Tom Dunkel (00:15:50) - That's right. Sam Wilson (00:15:51) - So how how have you established systems and got the in and established the right people to manage these at scale from a distance? Tom Dunkel (00:16:02) - Yeah, I mean, that's really, you know, the magic, you know, the secret sauce, although it's not very secret. I mean, you hit the nail on the head. It's. It's getting the right team together, right with the right systems. And of course, we're leveraging technology to the max. So those moms and pops that we buy from, a lot of times they don't even have a website. Tom Dunkel (00:16:24) - And if they do, it's stale information. You know, it's rates from a few years ago and the phone numbers wrong, you know, all those kinds of things. So we implement what we call a hybrid management strategy. So each of our facilities has a human that is assigned to it. But because we leverage technology, the phone number that is at the facility, you know, if they call our facility in Douglasville, Georgia, it's going to ring on the cell phone of the human manager. But they might be out in Missouri. And so but because of technology, they're able to answer the phone. Hi, it's Douglasville Self Storage. And then, you know, nine times out of ten, they can handle whatever the customer inquiry is just right there on their smartphone. Right. And in the event that the manager is busy or maybe they are not able to pick up the phone, if the customer is at the facility, they're going to they're going to see one of these they're going to see a QR code. Tom Dunkel (00:17:28) - And if anyone out there wants to have a little fun, you can scan this on your phone and you can run a unit from us at our Baltimore facility. But the the customer can just go up, scan that QR code, it'll take them to the website, They can fill out all their personal information load in their credit card for autopay, which is awesome. And then just sign the contract with their finger. And then once they submit all that, they get a gate code texted to them while they're right there standing outside the gate punching the gate. Code gate opens up. They go inside, they find their unit, empty out their stuff, lock it up, and they're on their way without having to interact with the human at all. So so we love doing that and it allows us to really drive down our operating expenses at our facilities, which is everyone out there, I'm sure knows because you've got a smart audience that drives up net operating income, which drives up the value of the facility, which is the whole purpose of our value add strategies that we implement. Sam Wilson (00:18:32) - And it improves the customer experience. I mean, that's the last thing is, yes, it drives up in why. But Tom, if you gave me the option to rent from you where I can do it from my phone, plug in my information and be done in five minutes versus walking inside hand it being handed, you know, 42 pieces of paper and filling out all information. Tom Dunkel (00:18:51) - That's right. That's right. And and you got that generational difference, too, right? I mean, you know, millennials are our biggest generation right now in the US. And that's you know, they were all born with a smartphone in their hands. Pretty much. Right. Right. Sam Wilson (00:19:05) - For better and probably for worse. That's right. Yes. That's that's very, very true. Tom, we've got a few minutes here left, and I wanted to highlight a couple of things and just get your thoughts on them. This is, again, you know, the fact that we talked about this in the beginning. You came on September 18th or the show published September 18th of last year. Sam Wilson (00:19:25) - Some things have changed. It's some things have changed in the financing side of things. On the sales side of things. Yeah. Tell me, how are you guys navigating the current lending environment? How has that affected deal flow? How has it affected pricing fast? Three questions and money as opposed to ask one at a time. So it's up to you now. Tom Dunkel (00:19:45) - Sure. Yeah. I mean, things have certainly been dynamic the past nine months since we spoke last. And, you know, rates are interest rates are up, you know, 4 or 5%. I mean, which is huge, right? I mean, we were doing deals that, you know, three and three quarters or 4% debt back then. But, you know, now it's a different ballgame. And, you know, we've been able to adapt. Of course, none of this was really a surprise. I mean, we all saw, you know, all the money that had been printed and, you know, that inflation was coming and that was going to push up rates. Tom Dunkel (00:20:17) - And so we, you know, having been around, you know, the deals and projections and all that for for many, many years, jeez, you know, Wow. Going on 30. Wow. Anyway, I'm not that old. So we knew this was coming, right, Sam So we were we were already adjusting our models, adjusting our exit Capri assumptions and our future rate assumptions and all those kinds of things. And and so we've, we've been very disciplined and about the facilities that we purchased. And for that reason, we've, we haven't purchased a whole heck of a lot. I mean, we're we just closed on our 13th facility. We've got our 14th coming up here soon. But our acquisition pace definitely slowed down because. A lot of sellers were looking back a year saying, Oh, I want that value, you know, from back then. And we're saying, Well, sorry, that's off the table now because our cost of capital is up and we have return targets that we need to hit for our investors. Tom Dunkel (00:21:15) - So that's definitely slowed us down. But I guess the good news about that is because of the run up in pricing the last few years, there's a lot of owners out there sitting on a lot of equity and that has allowed us to to take advantage of seller financing. So we have we did a seller financing deal in the fall and we have two seller financing deals lined up here that are that will be closing here in the next month or two. And the beautiful thing about that is, well, it's really a win win, right? Because the seller, they're not getting a big tax hit right up front because if they took the whole purchase price, net purchase price and in cash, they'd have to pay a big chunk of taxes on that. So seller financing allows them to kind of push push out their tax liability there. And then for us, there's no big onerous underwriting process that you have to go through with an institutional lender. There's typically no personal guarantees, which again, on smaller deals from a credit union or a small local bank, there's going to be looking for personal guarantees, and the terms are typically pretty great. Tom Dunkel (00:22:25) - So we're seeing interest only payments, which of course means lower lower payments, higher cash flow left over for our investors. So. So we love to see that. Sam Wilson (00:22:36) - Absolutely. Tom, this has been enlightening. Thank you for taking the time to come on the show today and share your thoughts. You're kind of updated thoughts here with us on the market, how you guys are handling it, what you guys are doing there in the self storage space. It's a pleasure, of course, to have you come on a second time. You're an absolute wealth of knowledge. I do appreciate it. If our listeners want to get in touch with you and learn more about you, what is the best way to do that? Tom Dunkel (00:22:59) - Sure, Sam. It's been great. Love the questions. Great energy. Love it. So, yeah. I'm Tom Dunkel. I'm the chief investment officer here at Belrose Storage Group. You can find us at Belrose Storage Group. We also have a Facebook page. If you want to search Belrose storage group on there, you can find my past podcast interviews and other articles and value add that we put out there for our investor community. Tom Dunkel (00:23:25) - So yeah, I'd love to love to hear from you and I'd love to schedule a call. You can do that from our website as well. But yeah, we, we're active, we're out there doing self storage deals and we're, we're doing syndications with accredited investors. So I'd love to have you come join us. Sam Wilson (00:23:38) - Fantastic. Belrose Storage group. We'll make sure we include that there in the show notes. Tom, thank you again for your time today. Do appreciate it. Tom Dunkel (00:23:46) - Thank you, Sam. Sam Wilson (00:23:47) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is, you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.