Podcasts about scale commercial real estate podcast

Today's guest is Robert Withers.   Robert is an Entrepreneur and Real Estate Finance professional with experience in Conventional , SBA & Private Equity CRE financing.   Show summary:   The conversation unfolds with an introduction to unconventional loans, followed by an exploration of the scale of real estate podcasts.The discussion touches upon selling brokerages, navigating agreements, and imparts valuable lessons on scaling a real estate business. Throughout the episode, the speakers candidly address challenges in scaling, regional business variations, the significance of relationships, and provide a comprehensive overview of the current state of commercial finance.   -------------------------------------------------------------- 00:00 - Intro 03:54 - Speaker, guest journey. 06:48 - Guest's background, transition. 09:31 - Selling brokerages, agreements. 12:45 - Scaling business lessons. 15:54 - Challenges in scaling. 18:32 - Regional business differences. 21:45 - Importance of relationships. 24:50 - State of commercial finance. -------------------------------------------------------------- Connect with Robert:  Facebook: https://www.facebook.com/M1CapitalCorp   Linkedin: https://www.linkedin.com/in/robert-withers-602b16/   Twitter: https://twitter.com/M1CapitalCorp   Phone: (914) 490-8623   Web: https://mortgageone.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 → sam@brickeninvestmentgroup.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: 00:00:00:01 - 00:00:36:12 Robert Withers Why lock into a seven and a half percent, 3 to 5 year conventional loan with prepayment penalties when you can take interest only debt at a point they have a point and a half to two points over that. Okay. No prepayment penalty. And if it pencils, meaning if the numbers work, you'll have an opportunity in two years to hopefully lock into long term as cheap as possible interest rates going out for that, you know, for that either five or ten year term that you're looking for.   00:00:36:23 - 00:00:58:16 Sam Wilson 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. Robert Withers is an investor, entrepreneur and real estate finance professional with experience in conventional SBA and private equity. Robert, welcome to the show.   00:00:59:01 - 00:01:00:21 Robert Withers Thank you, Sam. Great to be.   00:01:01:03 - 00:01:09:21 Sam Wilson Absolutely, Robert. The pleasure's mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?   00:01:10:21 - 00:01:42:18 Robert Withers Well, okay. Where do I start? I started in the men's clothing business back in 1982. And basically what happened was I had was given an opportunity to be able to jump into the mortgage business because of the expensive men's clothing that I wore. Somebody took notice. So that was a sharp dresser. It gave me an opportunity to be able to get into sales in the mortgage industry in the early eighties and taught me the business.   00:01:42:24 - 00:02:14:15 Robert Withers Four years later, I went into my own business, started my own company after three mortgage companies on the residential side, which I all sold the last one right prior to the to the financial crisis. We took a little time off, reset things, decided that residential mortgages wasn't something that I wanted to do any longer, and jumped into the commercial real estate finance field.   00:02:14:23 - 00:02:18:03 Robert Withers And I've been there ever since. That was in about 2014.   00:02:18:22 - 00:02:32:16 Sam Wilson Got it. Okay, now that's cool. How did you when you sold all three of those businesses this this is getting in the weeds a little bit, but it sounds like you figured out how to do it once. And you said, look, we built one company. Want to go out and just do it again. But how did you get around non-compete or did you just.   00:02:33:03 - 00:02:33:24 Robert Withers I waited them out.   00:02:34:09 - 00:02:34:17 Sam Wilson Okay.   00:02:35:04 - 00:02:55:04 Robert Withers I waited them out. You know. But you know, Sam, it's interesting you bring that up because I. I sold a mortgage brokerage. Now, I don't know if you know anything about our business, but not a lot to sell there, right? There's not a lot of, you know, really good will and maybe some of a pipeline that you may have in it.   00:02:55:20 - 00:03:18:10 Robert Withers The companies weren't huge companies, but they did you know, they did a few million dollars worth of business a year. So they were nice sized companies. My first one was a sale and I was young when I did it, so it was awesome. I sold it for seven figures. I actually sold it to somebody who decided to reinvest the money back into the company so we could go national.   00:03:18:17 - 00:03:45:24 Robert Withers That did not work out. It didn't work out for me. It didn't work out for him. And I wound up buying the company back, which and then developed my second company. So the non-compete wasn't really an issue because of the fact that I kind of waited it out and then was able to buy the company back and take it into my second mortgage company, which I sold and turned that actually into a mortgage bank that we were in several states.   00:03:46:08 - 00:04:07:00 Robert Withers So it was kind of cool. We had a great time. But my, my partner and I had a disagreement in the in the direction I wanted to take it more of a New York luxury market based. And he wanted to do government based business. And we had a we agreed to disagree. It was very you know, it was it was very cordial.   00:04:07:10 - 00:04:23:01 Robert Withers And then my third one, which launched me into my third company, which I shut down really, but sold off some pieces of it, but shut down prior to the financial crisis, non-compete were really never an issue. Timing because of the timing that we took. So.   00:04:23:01 - 00:04:42:02 Sam Wilson Right. Yeah. And if you're listening to this and you haven't sold a business, a lot of times there's going to be restrictions around you getting back into the same business, especially in the same geographic area. If it's a geographically bound company where it's absolute what you can't for three or five years compete in this, you know, whatever the radius is from your business or, you know, and they're all structured differently.   00:04:42:02 - 00:04:56:10 Sam Wilson But that's a that's really cool. I appreciate you giving us the insight there. I think you may have answered this question, but you said in the company that you guys look to scale because the name of the show is how to scale commercial real estate. You guys said, hey, we're going to scale. And I think the principles are the same.   00:04:56:21 - 00:05:08:10 Sam Wilson We're going to scale this business, you know, across the United States. And you said that didn't work out. What were some of the lessons you learned in that didn't work out, process it?   00:05:08:10 - 00:05:46:18 Robert Withers I think for the most part it was two things. We were really more of an East Coast. The leadership team on our company was really East Coast focused. So I found as we talked to people throughout the country, that mindset and how things are done both in, you know, on a local basis and on a regional basis differ greatly from New York to California here and from New York to Tennessee and from New York to the you know, to the northern parts of our country.   00:05:46:18 - 00:06:11:02 Robert Withers So, you know, I think cultural and that not culturally. I think it was just a matter of mindset. And I think the way that we wanted to run our company isn't what we saw. We could replicate well in other parts of the country. So we decided to really stay more on the East Coast. We were licensed in Connecticut, New Jersey, New York, Florida.   00:06:12:09 - 00:06:36:09 Robert Withers And from that part, we were we were successful. And we, you know, we were able to scale, but we were able to scale in what we knew rather than, you know. And you would think, you know, listen, you know, a product like a mortgage is universal, right? It's the same it's a national thing. You know, it's it's it's rates are driven by national for national reasons.   00:06:36:09 - 00:07:02:02 Robert Withers You know, there are state regulations. But for the most part, the markets that buy mortgage loans are national at Fannie and Freddie Mac. But doing a good job in markets that you don't understand is it can be very difficult. And when management doesn't agree with what boots on the ground, well, the flops, the philosophies of each when there's no agreement, it's difficult.   00:07:02:02 - 00:07:22:13 Sam Wilson So I could see that. And that's something that I think until you've lived in various parts of our country, you may not understand. You know, here in here in Memphis, Tennessee, if you get on the phone, even with somebody if I saw you yesterday, Robert, we're going to talk for about six or 7 minutes about nothing. We're going to talk about the weather.   00:07:22:21 - 00:07:39:24 Sam Wilson We're going to talk about, you know, family, all sorts of things. I lose you there, Robert? No. Okay, cool. And I was that you were you were you were still a stone. I was like, oh, shoot. Maybe the Internet froze. But no, we'll talk about a lot of different things long before we ever get to the reason for the call.   00:07:40:05 - 00:07:56:15 Sam Wilson It's just the way it's done. And I'm from Indianapolis. I was born there and we don't really like we pretty much get on the phone and, hey, you know what you need, Robert? What's going on, man? And we get down to business, but here in Tennessee, man, I had to slow down. I'm like, wait, like, if I don't ask and it's just kind of rude if you're just like, Hey, what's up?   00:07:56:20 - 00:07:58:20 Sam Wilson Click like it just doesn't work.   00:07:59:06 - 00:08:04:02 Robert Withers If you're from Indianapolis, right? You were like, right down to business. Now I'm from New York.   00:08:04:05 - 00:08:07:20 Sam Wilson Oh, you guys are even more I mean, you guys are like, what?   00:08:07:20 - 00:08:33:01 Robert Withers We jump a couple of spaces in front of you and it comes down to, okay, we won't even introduce ourselves. And we're pitch and we're pitching a product. You know, we don't get me wrong, I'm not I'm not a big I'm a relationship builder. I've been in this industry for almost 40 years in one way or another. So I didn't survive this way by being transaction, you know, triad transaction related.   00:08:33:08 - 00:08:43:13 Sam Wilson And I'm not suggesting that it's just, it's just a different way of communicate. And if you're not prepared to spend the 7 minutes talking on the phone about nothing, then people are going to think you're rude and be like I don't wanna do.   00:08:43:19 - 00:09:06:15 Robert Withers Business with developing relationships are is you know is something that you know I mean you can start it in 7 minutes, but some of my best clients are ones that came back to me, you know, the second, you know, two or three times we had spoken two or three times transactions didn't work. And then all of a sudden it kicked in and things actually wound up jelling between the two of us.   00:09:06:15 - 00:09:08:10 Robert Withers So relationship building is huge.   00:09:08:14 - 00:09:25:23 Sam Wilson Absolutely. No, I appreciate you giving the insight on that because it's one of those things, even for people out raising capital, it's an important skill set to master. Am I talking to somebody from New York, New York investors? Man, we is down to brass tacks on the beginning. The phone call, I call somebody from Memphis, Tennessee. We're going to spend our time on the phone.   00:09:25:23 - 00:09:40:17 Sam Wilson And so it's knowing and being able to shift even gears immediately when you jump on the phone with those people. And knowing how that works is I think it's an important skill that as you scale your business, that you and your team have to master. So that's a rabbit hole. But I appreciate you taking the time to kind of go down some of that.   00:09:40:23 - 00:10:02:13 Sam Wilson Tell me about your business today. I know you said in 2014 you decided to get into commercial real estate finance and Gilliam saying this is ten years ago now. You know, 2014 was when I think things really started to recover in the real estate markets. Commercial real estate, residential real estate started to, you know, go on that upward curve that we've seen for the last nine or ten years.   00:10:02:13 - 00:10:16:23 Sam Wilson What tell me about the business you guys are in today and maybe give us, you know, if you can, just a quick rundown on what the last decade looked like and kind of how you guys are positioning yourselves now, changing it.   00:10:17:00 - 00:10:41:03 Robert Withers Things have changed a lot from going from an investment market where, you know, we're cap rates were compressed and, you know, they were low and everybody, you know, we had cheap debt. Let's face it, you know, at one point we were looking at 3%, you know, commercial real estate rates that that were trading. So it wasn't hard to get a deal to pencil.   00:10:41:10 - 00:11:29:23 Robert Withers So people were were were trading investment real estate left and right. We work in basically four major food groups or product sets is a better way of describing it. And that is we do a lot of SBA financing for owner occupied clients are looking to finance property they want to buy for their business. We do conventional financing for somebody who's buying a some sort of a mixed use or multifamily product or an industrial product for purposes of investment, we or or owner occupied, we do bridge loan financing which is short term up to three years type financing, which, you know, is in short, short term a great, great tool for actually what's going on right   00:11:29:23 - 00:12:15:08 Robert Withers now because nobody's actually buying into conventional rates because they're high. So putting in a short term solution like a bridge loan makes a lot of sense in many cases. And and spec spec construction, construction financing for the purposes of building a, an investment property, whether or not it's a single family home of a bunch of different homes, you know, you know of it in the case of a of a of a development project or, you know, something that's more like an apartment building, not and we're not seeing a lot of mixed use or multifamily construction going on right now for the purposes of of of in the investment markets.   00:12:16:17 - 00:12:40:23 Robert Withers So we concentrate on those four types of programs here or products here. And from 14 to 23, for the most part, it's been up and down. You know, Sam, it's you know, we started off really, like I said, in a very low interest rate market. So the products were really all, you know, either CMBS loans or they were regional banks that I we don't do a lot of business with national banks.   00:12:40:23 - 00:13:06:24 Robert Withers It's mostly local or regional banks offering great product. And as rates changed over time and an opportunity changed over time, we shifted gears. Last year was our biggest year ever with SBA financing. We did a lot of SBA financing and bridge loan financing. So and quite frankly, I think we're going to we're going to see a repeat of that for 24, as they've been saying in our industry.   00:13:06:24 - 00:13:26:01 Robert Withers Andrew About your industry. Sam But in our industry they've been saying it's survive until 25. So you know what? I think for the most part, you know, we're looking ahead and maybe, you know, going to see some of that investment type real estate come back in 2025. Right, equity investment properties.   00:13:26:07 - 00:13:44:13 Sam Wilson So that makes a lot of sense. We're going to cover, I think, get into some of the more nuanced pieces of this. I'm looking here, bridge debt. You mentioned that bridge debt is a good tool for now a lot of people. And I'm going to I'm going to I'm going to ask you to tell me why I'm wrong.   00:13:45:09 - 00:14:00:23 Sam Wilson So a lot of people have taken on short term debt in the last 2 to 3 years. And from this side of things, I look at it and say, man, bridge, that's a bad deal. It's a bad deal because right now there's I don't know how much what is it? What then? You could probably give me the accurate number on this.   00:14:00:23 - 00:14:08:03 Sam Wilson I'm going to pull this one up and say it's north of $1,000,000,000,000 in debt coming due in 2024 on commercial.   00:14:08:05 - 00:14:08:15 Robert Withers Scale to.   00:14:09:03 - 00:14:09:13 Sam Wilson I'm sorry.   00:14:09:24 - 00:14:10:17 Robert Withers Close to it.   00:14:10:23 - 00:14:25:05 Sam Wilson Right. So in in some of that, I would venture to say I don't have any empirical evidence to substantiate this claim. But I would say that a large part of that is probably bridge debt where it's like, hey, man, we got to get out of this. We don't know how to get out of it. We got to refi somewhere.   00:14:25:12 - 00:14:42:04 Sam Wilson And so we're going to see cash in, revise happening and or assets selling at a massive discount because of the way they structured the debt. Tell me why you say in light of that frame, tell me why you say that bridge debt is still a good tool for now and how do you use it without playing with fire?   00:14:43:02 - 00:15:09:18 Robert Withers Interest rate cycle sent interest rate cycle was lower three years ago when this debt was was originated. So unfortunately, that debt that's coming due is is being refinanced in a higher interest rate market. We've for the most part, if you were to believe the Fed in I have a hard time believing the Fed. But, you know, if you're over the next couple of years, we're going to see that cycle turn around.   00:15:09:18 - 00:15:31:15 Robert Withers I think for the most part, we can agree that interest rates have topped out. You know, there is certain concerns on the employment jobs data side, but for the most part, inflation looks like it's under control. And although take my word for it, I never seen the price of eggs and bread be where it is at this moment.   00:15:31:15 - 00:15:51:09 Robert Withers But for the most part, inflation, if you're going to go on a on a pure core product or service or, you know, in this case a product gasoline, you know, gasoline prices are coming down. Now, you could say that that's, you know, technical in nature. But quite frankly, I think it's a good indicator where we're headed in regards to prices.   00:15:51:20 - 00:16:38:24 Robert Withers So having said that, I think that people who are originating bridge that now like we have a bridge program that's one overpriced three quarters to one over prime you're single digits right why lock into a seven and a half percent 3 to 5 year conventional loan would prepayment penalties when you can take interest only debt at a point they have a point and a half to two points over that okay no prepayment penalty and if it pencils meaning if the numbers work you'll have an opportunity in two years to hopefully lock into long term as cheap as possible interest rates going out for that, you know, for that either five or ten year term that   00:16:38:24 - 00:16:49:02 Robert Withers you're looking for. So it depends on the transaction, but quite frankly, I think is a short term for the right trend, for the right transaction. I think it's a good solution.   00:16:49:20 - 00:16:55:19 Sam Wilson So the so the gamble here is that interest rates do not continue to climb.   00:16:55:19 - 00:16:56:07 Robert Withers Yes.   00:16:56:17 - 00:17:01:05 Sam Wilson Okay. No. And that's I mean, that's as long as you go in eyes wide open. You know.   00:17:01:09 - 00:17:49:07 Robert Withers I think any substantial climb in interest rates, Sam, would hurt this economy, never mind our industry more than than it already has. And I don't think the Fed's willing to take that chance. So, listen, it's as real estate. It's you know, there are there is some risk, right? So this is a risk weighted decision. We're advising certain clients who who have that space in their performer to maybe consider bridge debt now versus convention debt because they're not facing a 2% prepayment penalty on a $10 million loan in 2025, when interest rates could be the I mean, hypothetically lower and much lower.   00:17:49:21 - 00:17:50:04 Robert Withers You know.   00:17:51:13 - 00:18:11:07 Sam Wilson You guys said and that makes sense. I mean, again, you know, for for the right product or the right project at the right time, you know, that's something you just got to weigh your options there. I think that's the conclusion there that that there is this is a tool that for the right fit makes perfect sense that let's talk about SBA 2023.   00:18:11:07 - 00:18:22:01 Sam Wilson You guys said you wrote a ton of SBA loans at 2023. Walk us through that program. I mean, SBA, I'm assuming, is long term fixed. Yes, we.   00:18:22:01 - 00:18:23:24 Robert Withers Buy 25 year. Yeah, 20.   00:18:23:24 - 00:18:25:19 Sam Wilson Five. Talk to us about that if you can.   00:18:26:07 - 00:18:56:19 Robert Withers Sure. So what we found is there was a host, a lot of owners of businesses out there who had done well, post-pandemic. Their businesses were doing fabulous. Listen, let's face it. We what you can question is there's always going to be a debate on it, but our economy is strong. So a lot of small businesses were doing very well and they decided that, you know what, they want to buy something now this is the time to buy it.   00:18:56:19 - 00:19:30:15 Robert Withers Our financials look great. We've got cash. You know, perhaps we're going to wind up being able to negotiate a great deal on the property that they're already in, approached the owner say, listen, we you know, we're interested in buying the property. Interested, or they were looking at property that was on the market for sale. Now, you know, as a seller of a as you know, a retail spot or industrial space or maybe a commercial condo, seller's got to say to himself, you know what, the market's pretty ripe right now.   00:19:30:21 - 00:19:56:05 Robert Withers This is a good time to sell. I mean, you know, where are we going to be in at the end of 2024 in regards to values? Because everybody's kind of targeting that we're going to see a reset and that reset is going to be pretty much because of a total environment type. Look at look at commercial real estate, fair or not, things on a macro basis, you know, they impact the smaller markets.   00:19:56:16 - 00:20:23:22 Robert Withers And what we saw, what people really take advantage of that, you know, they were able to lock in a rate that was. Yes. Higher than they wanted to pay. But they're an owner. SBA gives them up to 90% leverage, which is, let's face it, that's very attractive fixed rate for 25 years. And on the seven eight program, they give you they can give you working capital and they pay your closing costs.   00:20:25:00 - 00:20:46:10 Sam Wilson That's wild. I mean, to win it. Yeah. In fixed rate fixed rate debt over a 25 year period. I mean, it's incredibly tempting because it's the the real estate investors in this in this case, small business owners, greatest hedge against inflation like you can borrow in dollars and repay and dimes.   00:20:47:01 - 00:20:47:13 Robert Withers Thank you.   00:20:48:03 - 00:21:07:08 Sam Wilson It's yeah that I mean that's that's astounding I mean it's getting through I think one of the things like you mentioned, though, one of the one of the, you know, reasons that people don't do it is because they look at that interest rate that they're paying because it's above market. They're looking at that. They look at the length of time they're locked into it.   00:21:07:08 - 00:21:11:04 Sam Wilson They look at a lot of those factors and then look at are closing costs, which can be onerous.   00:21:11:23 - 00:21:40:24 Robert Withers Daunting. But since 5000, they're not paying 5000 in rent and you know, all for their mortgage payment. They may be paying closer to seven because of the interest rate bump, but they're paying 7500 right now, a month in rent to somebody else and not owning the property. And the money's gone. And all they get out of it is a line item on their on their pro forma, on the on their if they have financials and a line item expense on their financials makes no sense.   00:21:40:24 - 00:21:56:13 Robert Withers If somebody is in the position where they can, they have the capital to buy the property that they're in or something that works better for them. This is the time to use SBA financing. It was without a doubt the leading charge product of 2023 for us.   00:21:56:18 - 00:22:01:17 Sam Wilson Right. Because it's one of the last ones that had long term fixed rate debt, the last last minute.   00:22:01:17 - 00:22:04:20 Robert Withers Single digit rate and single digit rate.   00:22:04:20 - 00:22:06:12 Sam Wilson So that's that's amazing.   00:22:06:12 - 00:22:20:03 Robert Withers And really the analysis, Sam, is rent versus own. It's nothing more than that. It's not interest rate, it's not copper. It's nothing else other than rent versus own. Where are the benefits of owning this property versus renting?   00:22:20:03 - 00:22:26:19 Sam Wilson It makes perfect sense. What is the total dollar amount? The SBA will loan any one person or entity?   00:22:27:03 - 00:22:27:18 Robert Withers 5 million.   00:22:27:24 - 00:22:39:12 Sam Wilson 5 million. Okay. And that's 5 million in cash. Not and that would include that would include the debt against against real estate. Or is that just 5 million does doesn't.   00:22:39:12 - 00:22:58:08 Robert Withers Include any of the other sponsored SBA loans like the I forgot what the till loans that they came out with or the PIP loans that has nothing to do with. In fact we've taken the opportunity, Sam, to refinance those loans out that have to be paid back through acquisition, through SBA financing.   00:22:58:13 - 00:22:59:16 Sam Wilson Right. Right.   00:22:59:18 - 00:23:26:24 Robert Withers That's we're doing that right now on a transaction. We're actually taking out their PE loans that have to be paid off because they were done on a seven year basis, which made no sense. I know this. The borrower may she just made a really bad decision in regards to the the terms of that peep loan. And we're now taking that debt, refinancing it into an acquisition, never mind a refinance, and lowering her monthly payments or cash flow.   00:23:27:04 - 00:23:44:04 Sam Wilson Yeah, we we, of course, you know, had the opportunity to take advantage of those types of loans as well. But I think those are locked in for 30 years at like three or three and a half percent. And I'm like, Yeah, I guess what, we're never paying those down. I'm going to pay that for 30 years. I'll be 70 when it pays off and I will be happy to do it because it a payment.   00:23:44:04 - 00:23:59:13 Robert Withers Is a payment. I don't care what rate it is, I don't care what rate it is. It's a debt. You know what? Why is if you don't need it? I know people who are sitting still sitting with that money in their bank account, but yet they're paying a payment on it. They never needed it. They took it because it was cheap.   00:23:59:17 - 00:24:00:05 Sam Wilson Right.   00:24:00:20 - 00:24:05:13 Robert Withers But they're making it, you know, they they have to they had to start paying it back, you know.   00:24:05:14 - 00:24:28:05 Sam Wilson So very good. Thank you for taking the time to walk us through the opportunity that lies there with the SBA. We've talked about Bridge. We talk about SBA. You've talked about a reset that you think is going to happen across the macro kind of commercial real estate. I'm going to know how to finish out that sentence, but either way, the macro real estate picture is going to experience a reset.   00:24:28:13 - 00:24:47:10 Sam Wilson This is a conversation I had with some bond brokers last night who deal with a lot of CMBS loans and things like that. And they said, you know, what isn't isn't the kind of price of interest rates and or bridge debt coming due? Isn't that already baked in like when people are taking stuff to market and I'm like, I don't know that it is.   00:24:47:10 - 00:24:51:17 Sam Wilson What do you think about that and what do you mean when you say reset? What do you what do you think of.   00:24:52:00 - 00:25:18:24 Robert Withers Values are going to get impacted? Sam That's what interest rates they have to. They always do. So we're going to see valuations and those valuations a lot of for a lot of especially the larger private rate. So I'm going to be underwater. You know, they were going to have $800 million worth of debt on a building that was valued at 1000000 to 1000000002 and now all of a sudden, that's about $800 million or $750 million property.   00:25:19:03 - 00:25:45:17 Robert Withers Right? So values are going to be resetting. And when values reset, there is going to be two ways of looking at it. It's a cash refinance. Right. As you as you spoke about, there's going to be capital calls and some of the even larger players, the national players are not willing to come up with those capital calls. They handing the keys over to landlords, those loans excuse me, to the lenders.   00:25:45:22 - 00:26:07:13 Robert Withers Those banks are going to put that property on the market to savvy investors who are going to do what they're going to lowball the purchases. They're going to wind up settling in regards to the debt, using the the bank to finance it, but yet the purchase price is going to be lower. Sam That's the reset I'm talking about valuation patterns are going to get reset, which is going to trickle down to even in our local markets.   00:26:07:20 - 00:26:14:04 Robert Withers And I think we're going to wind up seeing both opportunity and unfortunately, we're going to see some pain across the board.   00:26:14:21 - 00:26:30:09 Sam Wilson Yep, I couldn't agree more. Robert, thank you for taking the time to come on the show. Today was certainly a pleasure to have you. You are a wealth of knowledge and insight. Give us a lot of things to think about here today as we consider what it means and how we are going to finance our properties here in 2024.   00:26:30:09 - 00:26:33:18 Sam Wilson If our listeners got to get in touch with you and learn more about you, what is the best way to do that?   00:26:34:18 - 00:26:55:21 Robert Withers I'm going to give you a old fashioned cell phone number, which is 9144908623 mortgage one com. You can always go to the website and there's a form you can fill out. And the inquiry comes straight to our, our sales team and, and I'm aware of it. So I'll make sure that it gets taken care of, especially if it's referred by you said.   00:26:56:01 - 00:26:59:23 Sam Wilson Fantastic. Robert, I appreciate it. Thank you so much for coming on the show. Have a great rest of your day.   00:27:00:05 - 00:27:01:03 Robert Withers You two enjoy your day.   00:27:01:11 - 00:27:22:21 Sam Wilson 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 or 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.   00:27:22:21 - 00:27:26:01 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.  

Today's guest is Michael T. Fay   Michael is Chairman of the U.S. Capital Markets Group Executive Committee, Managing Director of Avison Young's Miami office, and Global Director for the Asset Resolution Team Affinity Group. He has brokered over $16B in transactions over 40 years.   Show summary: In this podcast episode, Michael Fay discusses the challenges faced by the office sector in the commercial real estate market. He highlights the major reset happening in the office market, with different companies implementing varying approaches to returning to the office. This has resulted in high vacancy rates and uncertainty about the future of office space in major metropolitan markets. Fay also discusses the challenges faced by lenders and borrowers, the potential repurposing of office buildings, and the shift towards industrial real estate.  -------------------------------------------------------------- Intro [00:00:00] Michael Fay's Career in Commercial Real Estate [00:01:03] The Major Reset in the Office Market [00:04:01] The resetting of loans and creative solutions [00:09:17] Distressed office properties and new investment funds [00:11:30] Redevelopment of malls and creation of urban centers [00:16:25] Opportunities in the Real Estate Market [00:18:20] Alternative Investments and Interest Rates [00:19:46] Inflation and Commercial Real Estate [00:21:00] -------------------------------------------------------------- Connect with Michael: Email: michael.fay@avisonyoung.com Phone: 305-495-0003 Linkedin: https://www.linkedin.com/in/themichaeltfay/ Web: https://www.avisonyoung.com/professionals/-/ayp/view/michael-t-fay/in/miami   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 → sam@brickeninvestmentgroup.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: 00:00:00:01 - 00:00:23:10 Michael T. Fay Only about 50% of office buildings can really only be repurposed for multifamily or some other use outside of office. So what's interesting in what I'm hearing and what I'm starting to see is, yes, the foreclosures are coming in, but there's going to be, what I would say, a proverbial kicking the can down the road. What does that look like?   00:00:23:18 - 00:00:24:17 Michael T. Fay Welcome to the How.   00:00:24:17 - 00:00:47:14 Sam Wilson 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. Michael Fay is chairman of the US Capital Markets Group Executive Committee. He's the managing director of Allison Young's Miami office, and he's also the global director for Asset Resolution and Team Affinity Group.   00:00:47:22 - 00:00:54:18 Sam Wilson He has brokered over $16 billion in transactions over the last 40 years. Michael, welcome to the show.   00:00:55:14 - 00:00:57:09 Michael T. Fay Thank you so much. It's great to be here today.   00:00:57:12 - 00:01:06:18 Sam Wilson Absolutely. The pleasure is mine. Michael, there are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00:01:08:12 - 00:01:30:14 Michael T. Fay Started commercial real estate when I was 13 years old. Honestly, I was 13 was the time when I wanted to really think about real estate. It was a great way to watch. Watch. It happened with some friends of ours. I started in commercial real estate 20 when I was 20 years old, actually this month, July 20, 23. It's been 40 years, so 40 years in the business right now.   00:01:31:10 - 00:01:49:03 Michael T. Fay I reside in Miami, Florida and a couple other places. It's really it's been a great business. It was involved with a bank and some other really great entrepreneurial ventures in commercial real estate. Just allows such a purview into so many businesses and things going on. So that's why I feel blessed to be here.   00:01:49:07 - 00:02:07:00 Sam Wilson Yeah. My gosh, that's that's a heck of a career and a heck of a job. I mean, I'm thinking just the amount of change that you went through from 83 to 0 three. Right. Like that was that was incredible. And then to see that, then turn and then do it again for the next 20 years, that's a lot.   00:02:07:01 - 00:02:21:01 Sam Wilson That's a lot to compress here into a 15 minute podcast, and I'm sure we won't even begin to scratch the surface. Tell me, what are some things you know that you're working on right now that you said, hey, this is this is something I'm really excited about in the commercial real estate space.   00:02:22:24 - 00:02:46:20 Michael T. Fay So right now, just to go back to what you just said and these 20 year segments, I think I nine different downturns. So that was from the RTC days of the nineties to the Russian ruble crisis to the war and the Great Recession of oh eight and of course, the pandemic and today our great inflationary the so, you know, we see these and there's a couple more in between I think today.   00:02:47:04 - 00:03:20:13 Michael T. Fay What's exciting is that they're really a tale of many cities and it depends a lot for the country. There's all sorts of opportunity that goes on in different product types, whether it's office for a retail, multifamily development deals. You know, we do some of the largest, largest sales of development sites, especially down here in South Florida, out working on the $1.2 billion sale for Dante, the Malaysian gaming company, which we exclusive represent where the middle of several offers, all that which we're locking in on right now.   00:03:21:03 - 00:03:55:13 Michael T. Fay We have other larger development sites that we do work with the courts. We do work with the special servicers, which I'll get into in a moment on the curbside. But, you know, I would tell you, each area of the United States is got its own opportunities and weaknesses. But I think the biggest weakness that we're seeing across the whole country, South Florida being the exception or as the office for the office, the return to office, the amount of office buildings that are experiencing the distress, the higher vacancies of digital.   00:03:55:14 - 00:04:09:10 Michael T. Fay Right now, we're going to see one of the largest resets, I think all the office product that we've ever seen across the country. This goes for all the major metropolitan markets to CBDs as well as even tertiary markets.   00:04:11:00 - 00:04:16:20 Sam Wilson Major resets. What are some things that you're seeing when when you say major reset, what comes to mind?   00:04:18:00 - 00:04:37:23 Michael T. Fay So a major reset really is what's the office what is the office going to look like? What does office space look like for the next two years, five years, ten years, 20 years? How our employees work, how are people coming back to the office? So a lot of the work around the office, there's different, you know, different companies of work to work differently.   00:04:38:17 - 00:05:07:13 Michael T. Fay You know, a lot of groups have got a three day work week, a lot of groups are doing a full time. You got to come back to work. So some groups and companies are having a specified amount of days and weeks and vice versa. So I think each company is going through that. What's bad and what has been very tried is the owners of these office buildings are experiencing these companies say we don't know what we want.   00:05:07:16 - 00:05:31:10 Michael T. Fay So therefore there's a large amount of uncertainty. How much space am I going to be? What does the amenities look like? What what do what do employees want to come back to? Do they feel safe? Do they feel secure? Why? Why should people come back? I already said, you know, our biggest thing is camaraderie, communication, collaboration and partnership.   00:05:31:10 - 00:05:53:23 Michael T. Fay And so we kind of drive off of those four pieces of why we're back in the office and what we're doing in the office. But a lot of companies feel differently. So what, in my opinion, is as we go through these this thought process, you're now hitting on large vacancies. But look at New York, you're probably sitting at a 32% vacancy rate.   00:05:54:21 - 00:06:20:09 Michael T. Fay But this that's not uncommon. There's a lot of other areas you could go to Chicago, you go to Houston, you could go to L.A., you can go to all these other major markets or having resets, if you will. So that's that's the big reset. The second part of the reset is really what are the lenders doing all these large office portfolios and or individual assets across the country?   00:06:20:09 - 00:06:43:14 Michael T. Fay So when you sit there and have all these groups that are trying to figure out their load, so we've got rising inflation and rising interest rates, interest rates right now or at the top, as we've seen, that is put a major downward pressure on a lot of these groups that have got what we call maturing loans. These are loans that are maturing during this period of time, which is really creating, again, more downward pressure.   00:06:43:14 - 00:06:48:03 Michael T. Fay So we've got these two confluences coming in and really created this downward pressure.   00:06:49:08 - 00:07:10:07 Sam Wilson What so what are lenders let's talk about that for a minute. What are lenders doing and what are borrowers doing their own office space? I mean, we haven't and forgive me if I'm wrong, tell you. Tell me if I'm wrong, rather. But I don't know that we've seen mass foreclosure in the office space yet. Is that is that the case?   00:07:10:12 - 00:07:44:00 Michael T. Fay And so you're asking. Great question. So I'm going to break it down to basically two or three areas. So what what's happened is I wrote the asset resolution revisiting. We've got 140 different people across the US and the major market and tertiary markets and we are all hyper focused on helping lenders. That's is the special servicers, the banks, life insurance companies and even Bassetti lenders work through any issues that they have during this time.   00:07:44:00 - 00:08:07:00 Michael T. Fay And by the way, separating office for 1/2, it could be an issue of a shopping center, could be an issue on a mall. Right. These things. And by the way, it's also depends on what part of the market you're to see the market, the country. So we're seeing that under the scenario of the office buildings, I will tell you there's been some really large major national banks.   00:08:07:17 - 00:08:35:17 Michael T. Fay Those banks peeled back many, many borrowers after the 2008, 2009 crash. And they would have call it 90,000 borrowers. They scaled it down to 10,000 borrowers. The other 80,000 borrowers went up to community banks. They went off to regional banks. So they the large banks spread the risk. But what's happened is the call it the 10,000 customers they kept were the large ones.   00:08:35:17 - 00:09:03:03 Michael T. Fay Those were the 150, 253 or $400 million credit facilities. And there's an old saying, little kids, little probes, big kids, big problems. So we've got that big kid, big problem. That's affecting a lot of the servicers and the banks. So when we think about the office buildings themselves, that's where the resets come at it. So you've got maturity and you've got vacancy issues and you've got return to work and what does it look like?   00:09:03:20 - 00:09:31:15 Michael T. Fay So I read a statistic probably six months ago. All the office buildings, only about 15% of office buildings can really only be repurposed for multifamily or some other use outside of office. So what's interesting in what I'm hearing and what I'm starting to see is, yes, the foreclosures are coming in, but there's going to be, what I would say, a, the proverbial kicking the can down the road.   00:09:31:15 - 00:09:56:13 Michael T. Fay What does that look like? The kicking the can is really to say, okay, we're going to extend your load, we're going to reset the load. We're going to do a lot of different things. But it depends on your servicer that looks a little different than if you're a bank and so you've got these different ways. So I think the resetting is they're going to get creative and state listen, the property was worth $100 million.   00:09:56:13 - 00:10:17:00 Michael T. Fay The loan was 60 million. So now all of a sudden the property is worth 60 million. So does the bank want it back? The bank may say, listen, borrower put in 10 billion or let us work out a short sale. Effectively bring in a new buyer that's going to put in ten or 15 million. That will keep the of the 60 billion.   00:10:18:06 - 00:10:39:24 Michael T. Fay There's going to be a lot of creative ways. Now, the problem is banks handle it differently than servicers because you've got bondholders on the service side, you've got credit default swaps, you've got a lot of other what I would say pressure points in that as opposed to a bank which the banks making decisions based on their capital and their earnings for the actual quarter.   00:10:41:08 - 00:11:08:19 Sam Wilson I know that's a that's a really, really interesting scenario that you're painting there. So 85% of office space will forever be office space is what I'm hearing. You're saying we can only convert 15% of it if they're kicking the can down the road, trying to get creative, trying to work out strategies, or even doing cash in refinancing is I mean, how how are borrowers doing that?   00:11:08:19 - 00:11:17:09 Sam Wilson Hey, come up with ten or 15 million bucks for an office space maybe that's vacant or is already underperforming like get that. Well, million bucks from where?   00:11:18:02 - 00:11:43:04 Michael T. Fay So I will not name names, but you can figure out the names, the names of all the big investment houses and investment groups that have got all this product in their portfolios. They're either selling it the major discounts and getting out or to handing it back. Right. But they're giving it back. Now, what's interesting, those same groups are also creating new funds.   00:11:43:20 - 00:12:07:20 Michael T. Fay Okay. Investments, funds to go back and buy distressed office at a reset number. And that's what's going to end up happening because it's the only way to look when you when you think about offices and I'm talking about class A trophy assets were you and I don't care if you use New York City just because everybody's picking on New York City today.   00:12:07:20 - 00:12:35:07 Michael T. Fay You know, somebody said it was called New Glut City, you know, glut of office space. I read that an article somewhere, right. 88 with the imagination of having corporate tenants on long term leases forever. And it's very hard to move. And all of a sudden today it's changed, COVID changed that whole thing. So now these corporations, as I said, are working differently and their employees are working differently.   00:12:35:07 - 00:13:06:16 Michael T. Fay People are working differently. So therefore, that whole that whole system and that whole business plan has really changed. So it's forcing a reset, which I keep saying at it's forcing a different look. And the way to do that is, is to really get real with what the situation is and handle it. So, you know, all these groups are having properties back, but they're also figured out new funds, distressed funds or opportunistic funds to go back and say, how do we work on the reset and make this better?   00:13:06:24 - 00:13:15:19 Sam Wilson Absolutely. I mean, it's it's the it's the right time to buy. It just kind of seems like I mean, obviously, these large companies can pull this off.   00:13:16:06 - 00:13:45:14 Michael T. Fay But let me say one thing, which is really think you will find believe it or not, and I'm not suggesting that, but you will find some major metropolitan cities in the CBD, areas where you may say this office building will no longer be there. They're going to figure out either if they can't repurpose it, which is about 50%, you may see these buildings getting pulled down and then having a brand new build where we are seeing this in Miami or land values of Miami are continuing to increase all the time.   00:13:45:21 - 00:14:00:11 Michael T. Fay And, you know, we're bordered by Biscayne Bay and the Everglades. So the the amount of land I mean, you can look it doesn't matter if you're Chicago. It doesn't matter if you're a New York, L.A. It's it's really, you know, land constraints that drive everything.   00:14:00:16 - 00:14:17:23 Sam Wilson Yeah, absolutely. Absolutely. But on the buy side of things, I mean, I was talking to somebody else here on the show recently and they were saying, you know, hey, we're buying office space in New York City as fast as we can possibly get our hands on it simply because they're paying three or 400 bucks a square foot. When he goes two, three years ago, we're paying nine.   00:14:18:21 - 00:14:20:07 Michael T. Fay Or 1100. Right.   00:14:20:16 - 00:14:26:22 Sam Wilson Right, right. And he goes, even if we're just even if our plan is to buy it and sit on it, like, okay.   00:14:27:09 - 00:14:44:15 Michael T. Fay That's where you get to. But, you know, look, you get figure out today. So office buildings are very interesting. You have cost of capital, so you've got the interest rate, then you've got debt improvements and certainly a tenant rep, at least high commissions, those are all very, very big. The old adage was make it disappear, turn it off.   00:14:44:15 - 00:15:04:15 Michael T. Fay Owning an office building as you own it, but you make all your money off the sale, sign it. And that's what it was for years, you know. Right, because it's a cap asset class. It was also considered one of the safest asset classes for years. And and now, you know, multifamily, you know, it's paid carpet. Thank you very much.   00:15:04:22 - 00:15:29:14 Michael T. Fay You know, I can raise rents all year long as leases rule. So that's why multifamily continues to still be an asset class. No other asset class is just the back end of that industrial. You know, when you think about the pandemic pressing forward, the use of Internet retail sales, it went from that call it seven to 8% to 15% in a period of two years.   00:15:29:18 - 00:15:58:03 Michael T. Fay That was almost like 10 to 12 years of growth compounded into only two years. And when you think of the logistics that's going on and the distribution centers and everything else that happens, that's what you know, you look at great companies like Prologis and these other larger groups of these larger industrial groups that continue to build and service the retailers from that standpoint, but also the last mile logistics, which is really becoming interesting.   00:15:58:11 - 00:16:01:05 Michael T. Fay So Industrial Can has really got it.   00:16:01:05 - 00:16:22:23 Sam Wilson Absolutely does. Yeah. It's very, very, very interesting to watch kind of how all of these interplay and see which ones are really doing well and which ones are struggling or plateauing. And again, you know, I've heard it said since I got in real estate a decade ago, you know, that real estate is local. I mean, I think I think I'm hearing that from you in the South Florida market.   00:16:22:23 - 00:16:24:15 Sam Wilson You guys are having a.   00:16:25:15 - 00:16:50:13 Michael T. Fay It's it's it's local in a lot of ways. But when you start to look at industrial industrials more regionalized, if you will, only because of what your handling of retail is local. But it depends also what you're doing. But, you know, when you look at the Internet sales for certain retailers and that experience becomes a whole different game and how that's played.   00:16:50:13 - 00:17:14:08 Michael T. Fay So look, you know, I think, you know, good neighborhood retail you know anchored retail's good the malls we are having several malls right now we're in a couple of foreclosure malls. You know, we're image the malls like the Broward Mall here in Fort Lauderdale for Rialto. It's an incredible mall. And it's got such an unbelievable upside of development and a replay there.   00:17:14:08 - 00:17:37:20 Michael T. Fay So, you know, we're in the middle of doing that. We're going to have a call for offers here in the next call. It probably right after Labor Day weekend. But my point being is this is the transformation of malls and creating what I would say, urban urban centers, if you will, that will have residential redone, retail, destination, entertainment, things of that nature.   00:17:37:20 - 00:17:56:19 Sam Wilson Yeah, those are cool projects to to see come around. I mean, in malls, my gosh, the amount of land those take up and the redevelopment front there it's saying that sounds like that's an awesome opportunity. And I looked at a project here recently, I think it was in Cincinnati, similar idea. I mean, just an enormous undertaking. And it was.   00:17:56:19 - 00:17:57:08 Michael T. Fay Absolutely.   00:17:57:12 - 00:18:19:00 Sam Wilson All all the the the the redevelopment of an existing mall. What are some other opportunities do you really see right now? I mean, you get to see things from a lot of different angles. But when looking at the real estate, commercial real estate landscape kind of across the country, what's something you see is you say, hey, there's excellent opportunity in what.   00:18:20:15 - 00:18:45:06 Michael T. Fay I, I still think, you know, if you're looking at real estate, you can look a lot of these, right? Some of the reach of this public sector of the stocks. I think you could follow some of those groups and probably get some interesting buys from that standpoint as this reset is taking place, whether it's an office read or industrial read or a retail, whatever they may be or even a multifamily, I think you'll start to see some of those play.   00:18:45:06 - 00:19:09:09 Michael T. Fay So if you're not buying real estate, you could participate from that standpoint. I think also, you know, the crowd source funny continues to be some people are doing that. But you know, again, you've got to be careful with the sponsors. You've got to work with the right sponsors. You know, you've got to watch what's going on to see how they handle their assets or what they do.   00:19:09:23 - 00:19:32:17 Michael T. Fay You know, commercial real estate really for years and years and years, you know, those capital intensive, you will have a large slug of equity. You need to be able to apply your loans. So right now, the opportunity, I think, is going to be watching the interest rates. As for the next two years and the fallout, remember, stock market goes down the fast as it comes back, as fast as real estate goes down.   00:19:32:17 - 00:19:56:10 Michael T. Fay Really slow and it takes a while for it to come back. So right now we're on the downward slope in a lot of these areas that I think we might add some decent foreclosures or short sales or motivated sellers. What are the key components here that I think we are seeing for the first time in a long time was interest rates for the last call it since the Great Depression.   00:19:57:18 - 00:20:31:17 Michael T. Fay The Great Recession of 2000 ignited. Interest rates were low. So you had you couldn't really go to alternative investment, to the stock, to real estate. Right now, you're seeing banks pay 5%, 6%. Look at the treasuries. There's alternative investments that you can go into and get that call at four and a half to 6% without much benefit. So the interesting part is people maybe say, I've done I want to move into something else so you'll see some other sales happen from that standpoint as well.   00:20:31:17 - 00:20:42:03 Michael T. Fay So I think the alternative, because interest rates have gone up, it creates a different sliding economic opportunity on both sides for sale or buy.   00:20:42:10 - 00:20:59:10 Sam Wilson It really does. It really does. Let's talk about inflation for just a minute. I mean, it's one of those things, you know, what your thoughts around a a diverse portfolio that is inflation protected inside of commercial real estate. What's the what's a play you'd recommend?   00:21:00:16 - 00:21:20:00 Michael T. Fay Well, I think it's anything I mean, a lot of a lot of people were kind of going back, you know, for us, what we look for work with clients, you know, if it's a if it's a retail center, right, and and there's fixed there's fixed, Bob. So that without CPI increases, you know, you pretty much you're getting you're pretty much locked.   00:21:20:00 - 00:21:37:22 Michael T. Fay It it is what it is. So as inflation goes up and you're other things go up, you know, the value of the asset is either going to stay the same or go down. So I think, you know, looking for opportunities where there CPI increases or tenants rolling over, you can have these resets the by the way, that's got on industrial right now.   00:21:38:12 - 00:22:02:19 Michael T. Fay But a lot of these areas where they had all these leases or that industrial because it's become such a hot commodity, you can end up raising the rates that you're getting on your decimal space. And we've seen some increase, you know, increased unbelievable rates. Same thing with multifamily, multifamily, because it rolls every year. You can kind of catch up your rents to what your expense or inflation.   00:22:02:19 - 00:22:17:00 Michael T. Fay So, you know, I think, you know, there are several markets within the country that I've seen that 10 to 25, 27% multifamily rental rate increases over the last couple of years.   00:22:17:14 - 00:22:26:00 Sam Wilson Right. Yeah. It sounds like to summarize, you'd say anything that you can reprice in a shorter time frame than other things have. Maybe be the the.   00:22:26:00 - 00:22:36:20 Michael T. Fay Absolutely, absolutely. No, no. That was a problem with office buildings. Office buildings. They were locked in with certain fixed rates and weren't going anywhere while it was safe. Remember, high risk, high return, low risk, low return.   00:22:37:01 - 00:22:48:09 Sam Wilson Right, right. And it's funny because in in that even those office spaces were locked in. It was almost you thought it was lower risk, but now it looks like it was a higher risk in the end deal there.   00:22:48:09 - 00:23:09:18 Michael T. Fay Well, you know, but but but when you have two black swan events of the pandemic and then the global inflation that we had, which was pressed on by other global logistics and things of that nature, you know, you would have never thought that. I mean, you can look at the different the different graphs of each country and where it stands, where it is.   00:23:10:00 - 00:23:23:13 Michael T. Fay It's just interesting to see. I mean, it was totally a global pandemic, but it's been a global inflationary issue. So those are the two Black Swan events within a two year period, which is really what's at downward pressure.   00:23:23:19 - 00:23:43:06 Sam Wilson Absolutely. Absolutely. This has been great. Michael, thank you for taking the time to come on the show today. Certainly learned a lot from you. I love to get your current kind of state of the market insight. Loved hearing about office space, kind of where you see opportunity on that front. You guys are working on some absolutely very cool projects and again, thank you so much for your time.   00:23:43:14 - 00:23:48:11 Sam Wilson If our listeners want to get in touch with you and or learn more about you and what you do, what is the best way to do that?   00:23:49:07 - 00:24:03:24 Michael T. Fay So please you email me at Michael Dot say at Abyss and or I'm always available by cell phones. 3054950003. That is service.   00:24:04:01 - 00:24:19:16 Sam Wilson You are a bold man, sir. I don't know that I would put my phone out there if I were you, but thank you very much. For those of you listening, that's an incredibly generous offer from Michael to put both his email and his phone number out there to get in touch with him. Michael, thank you again for coming on the show today.   00:24:19:16 - 00:24:21:00 Sam Wilson This was an absolute blast.   00:24:21:15 - 00:24:25:22 Michael T. Fay My pleasure. It was great. Thank you. Great question. To the great top three. Did have a great one.   00:24:26:03 - 00:24:47:13 Sam Wilson 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.   00:24:47:13 - 00:24:50:19 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.  

Today's guest is Tyler Sellhorn.   Tyler is a teaching-oriented technologist. He creates and cultivates digital workplaces that produce results.   Show Summary:  In this podcast episode, Tyler Sellhorn, a teaching-oriented technologist and customer success manager, discusses the challenges and strategies for optimizing outputs in a distributed workplace. He emphasizes the importance of explicit communication, accountability, and clear processes for goal achievement in geographically diverse teams. Tyler also highlights the benefits of flexibility and personalized approaches to work. Additionally, he addresses common problems faced by companies, such as integrating systems, change management, and establishing team-level agreements. The episode also focuses on effective communication in a distributed workforce, including considering different communication channels and preferences, checking for understanding, and utilizing tools for efficient communication.    -------------------------------------------------------------- Intro [00:00:00]   Transitioning to a Distributed Workplace [00:02:08]   Measuring Outputs in a Distributed Workplace [00:07:58]   the impact of technology on education. [00:09:59].   establishing team-level agreements [00:14:55]   Different kinds of communication for different purposes [00:19:55]   Common pitfalls when transitioning to a distributed workforce [00:20:39]   Closing [00:25:00] -------------------------------------------------------------- Connect with Tyler:  Linkedin: http://linkedin.com/in/tyler-sellhorn  Twitter: https://twitter.com/tsellhorn Web: https://tsell.link   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 → sam@brickeninvestmentgroup.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: 00:00:00:00 - 00:00:21:20 Tyler Sellhorn Ari Optimizing for the outputs are the inputs. If we're optimizing for the inputs, we're going to require butts in seats where we can look at them. Right. Right. If we're optimizing for outputs, we are paying very close attention to the things that we are expecting. You are you have to inspect what you expect. You have to be able to say, did we do the thing?   00:00:21:24 - 00:00:43:05 Tyler Sellhorn And to be able to say back to the person, well done, you did the thing. Here is that bonus. Here is that that incentive pay. Here is like the next opportunity for you because of the work that you've done so far. 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.   00:00:43:05 - 00:00:55:18 Sam Wilson Investing business into something big. Tyler Sell Hawthorne is a teaching oriented technologist. He creates and cultivates digital workplaces that produce results. Tyler, welcome to the show.   00:00:56:07 - 00:01:01:06 Tyler Sellhorn Thank you so much, Sam. It is a pleasure to be here learning out loud with you and your audience.   00:01:01:07 - 00:01:10:09 Sam Wilson Absolutely. The pleasure is mine. Tyler, there are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00:01:11:07 - 00:01:40:04 Tyler Sellhorn I started out as a teaching or a technology oriented teacher teaching secondary mathematics. So then I made a pivot, you know, as a middle aged person, to becoming a teaching oriented technologist, as a customer success manager for B2B SAS companies, helping companies be successful, working remotely, using software and where am I now? I am busy doing that on a much more general way.   00:01:40:17 - 00:01:52:22 Tyler Sellhorn So if you're listening today and you're looking at home, you know what? It would be nice to have not just a workplace, but workplaces, right. Including the digital space. I'm someone who can help you do that, man.   00:01:52:22 - 00:02:12:04 Sam Wilson That's really, really cool. I know this will be relevant to our listeners in the commercial real estate space. Just because our teams are so geographically diverse. That's right. I mean, gosh, we have a foremost $50 million portfolio and I work from home. All right. The members work from home. And it's like, okay, like.   00:02:12:04 - 00:02:26:23 Tyler Sellhorn How we're all from your own individual facilities, right? I mean, and you're not there on site, you know, managing that person. They're they're being trusted with responsibility and authority to act on your behalf, on the company's behalf, in those places that they happen to be correct.   00:02:26:24 - 00:02:49:08 Sam Wilson Right. And you know, it's funny, there's part of me that likes it and part of me that hates it. Like I was kind of looking at it right now and I'm like, you know, because we're scaling, especially here on, on, on our local operations, the in the laundry facility side of things. And I'm like, man, it's almost like it's almost time where we've got to have an office because we're missing some components that face to face.   00:02:49:08 - 00:03:00:22 Sam Wilson I mean, look how many Zoom meetings we have. I don't have many KPI calls I have with various team members throughout the week. Going through the reviews. There's nothing like just that cam camaraderie of face to face and it cuts both ways.   00:03:00:22 - 00:03:22:16 Tyler Sellhorn But the way, the way I express it is that the async time is about the work and the synchronous time is about the connection and then the in-person time. That's about those bonding moments where we're slapping backs, we're high fiving, we're hearing the echo of our laughter against the walls, right? We're doing those things that can only be done face to face in person.   00:03:22:16 - 00:03:37:15 Tyler Sellhorn Right? These monkey brains got a primate sometimes and it's really important that we do all of those things. It's a both and situation. It's spectrum's not squabbling over returning to the office. It's it's flexibility, not fights over when work should get done.   00:03:38:04 - 00:03:56:13 Sam Wilson Right? No, I love it. I love it. And you threw out a bunch of things there in your 92nd intro, which thanks for keeping that. That was probably 50 seconds. So that was that was well under time. Thanks. I appreciate that. Ding, ding, ding, ding, ding. You made it, man. You cross the finish line before anybody else. But no, seriously, there were some things that you threw in there.   00:03:56:14 - 00:04:15:15 Sam Wilson You know, we're commercial real estate people on this show. So you threw in like B2B sass and this and that and the other. And I'm like, I have no idea what you just said, so maybe I can break some of that down for going back to Monkey Brains. Yeah, me too. Tell a little bit more color on what it is you do and then then we'll get into more weeds.   00:04:15:15 - 00:04:17:04 Sam Wilson So anyway, I'd love to hear that.   00:04:17:12 - 00:04:37:05 Tyler Sellhorn It's really important to make all of those implicit things that used to come along with being in the same office every day at the same times, right? That kind of came along for the ride that were like assumed by everyone that showed up there that this is when we do work, this is how we do it, this is how I communicate.   00:04:37:14 - 00:05:00:15 Tyler Sellhorn And now that we're in a much more distributed and flexible environment, you know, sometimes that scary remote word, right? Right. It's you have to become much more explicit about the the wheres and whens and how we communicate and get things done. That's where the tension and frustration come in, where you're saying said, I really liked this this office thing that I used to have.   00:05:00:15 - 00:05:18:09 Tyler Sellhorn Right. Well, what is it that you liked about it? Well, the only way that those things are going to exist in a distributed environment is if you make a plan and execute on that plan and then reflect on whether or not you actually accomplished the outcome that you were seeking. And sometimes it's going to require being in person.   00:05:18:17 - 00:05:53:05 Tyler Sellhorn You know, very often you see, you know, I've worked in globally distributed customer experience teams. I led a team of 25 people from Seattle to Melbourne. Right. And we saw each other once a year together, optionally. Okay. All right. So so one of the things that's really important to recognize is that when you are operating in that way, that says, okay, we may or may not be present with one another, how you gather those KPIs that you're talking about and how you talk about them and where they're posted and how we can access them.   00:05:53:13 - 00:06:11:05 Tyler Sellhorn There needs to be a process that is really, really explicit. That's the bullet points, sub bullets, right? How do we do these things? And once you have that rock solid, you can start with a shared reality of how things are and then you can iterate from there to continue to improve.   00:06:12:08 - 00:06:15:06 Sam Wilson You say when you say shared reality, what do you mean by that?   00:06:15:20 - 00:06:37:15 Tyler Sellhorn I mean, this is our number. This is your number that impacts that number. And everyone gets to see, right, how are we doing? How do we have the shared accountability? We're not hitting our number because so-and-so is not hitting their number. Right. How do we communicate those things to say on a regular cadence? When do we look at these numbers?   00:06:37:21 - 00:06:58:10 Tyler Sellhorn And even just having the, you know, very often you have a leaderboard, right, in a sales team, right. In saying, you know, who's who's up top. Now, you know, you can think of the always be closing, right? If you're in third, you're getting a new job type of thing, maybe it doesn't need to be that hard nosed in like cutthroat.   00:06:58:20 - 00:07:35:04 Tyler Sellhorn But I do think that having a shared accountable party of what we are doing and how that contributes to that one number or set of numbers that you have, where is that shared workplace that has that number where everyone can see it? Maybe, maybe it's in your physical workplace, like you're in your home office, maybe you have a spot that has the number displayed or maybe it's a dashboard inside of your Google workspace that says, okay, I can always go to this link and find the information that I'm trying to, you know, contribute towards, Oh, I move the number today and there we go.   00:07:35:10 - 00:07:49:01 Tyler Sellhorn And for your boss to say, well done, you contributed to the number today. Way to go. If you're not doing that on a regular cadence and or even having it something that can be accessed whenever, wherever you start doing that. Right.   00:07:49:11 - 00:08:11:09 Sam Wilson Right. Yeah. I think that's one of the cool things about the distributed workplace is the ability for people to kind of work at their own pace and at their own time like members that I mean one even she works and again, I don't need this position filled full time. So, you know, she works maybe 20 hours a week and it's usually Monday was a Friday and today she's like, hey, you know what?   00:08:11:09 - 00:08:14:19 Sam Wilson By the way, I'm working today and not tomorrow, okay? I don't care as long as you get your stuff done.   00:08:15:02 - 00:08:15:17 Tyler Sellhorn That's right.   00:08:15:18 - 00:08:16:13 Sam Wilson It's fantastic.   00:08:16:13 - 00:08:37:05 Tyler Sellhorn She's like, What are we optimizing for, Sam? Are we optimizing for the outputs or the inputs? If we're optimizing for the inputs, we're going to require butts in seats where we can look at them, right? Right. If if we're optimizing for outputs, we are paying very close attention to the things that we are expecting. When you are, you have to inspect what you expect.   00:08:37:12 - 00:08:52:08 Tyler Sellhorn You have to be able to say, did we do the thing? And to be able to say back to the person, well done, you did. The thing here is that bonus here is that that incentive pay here is like the next opportunity for you because of the work that you've done so far.   00:08:52:22 - 00:09:08:05 Sam Wilson Do you switching from I mean, input to output measurements? I mean, tests, secondary mathematics was a very input measurement. Yes, you measured test scores, but it was butts in seats for X number of days a year to count.   00:09:08:07 - 00:09:18:12 Tyler Sellhorn It was this co-located. Does it get Sam there were bells telling us to go from one mandatory meeting to another. Mandatory mean with none of the people that we would have chosen to be with if it was up to us.   00:09:18:13 - 00:09:20:01 Sam Wilson Oh, gosh.   00:09:20:01 - 00:09:41:24 Tyler Sellhorn Right. And I think, you know, here in my second career, right. I'm starting to like your take off some of those layers of trauma. Right. Right. And and and like I'm starting to identify with those students that really did not want to be there, right? Yeah. Sam, you maybe identify as that kind of approach, right? School wasn't for you, right?   00:09:42:05 - 00:10:12:01 Tyler Sellhorn And so I think that's one of the things that we need to transition from is this one size fits all. Like, you know, 1965, you know, industrial age kind of kind of version of things to a one size fits one version of things where, hey, Sam is building the business. That's his and according to his lights and setting the course and setting the sales by his own decision making and, you know, getting to the destination he chose to or not based upon his own efforts.   00:10:12:09 - 00:10:15:00 Tyler Sellhorn I think we're moving more and more towards that future.   00:10:15:00 - 00:10:48:22 Sam Wilson Oh, absolutely. I mean, again, we're kind of moving off of center topic. But I think it's important because one thing it's not that I hate to learn. I love learning. I just it's sitting at a desk to do it. That's right. This is awful. So, no, I think we've seen that in the education space. As as I mean, obviously, you can you can learn anything you want on the Internet now for it's right would cost to sit your butt in a seat for an entire semester and learn that same exact thing so pretty pretty cool what are what do you what do you see are the top maybe two or three problems that companies come   00:10:48:22 - 00:10:51:24 Sam Wilson to you to solve and how do you solve them?   00:10:52:14 - 00:11:21:13 Tyler Sellhorn Number one is getting disparate systems to talk to each other. What do you write? I mean, you have a Gmail address. How do I get the the information that I need to come in to my inbox? Right. I have this system. You've got, you know, inventory for the laundry business. Right. How do I know when I need to know it that we need to purchase more detergent?   00:11:21:20 - 00:11:44:22 Tyler Sellhorn Right. Right. I mean, I mean, that may be or I know that these systems are about to break. Right. I don't want to have to pay attention to that. I want to be notified of that automatically. Those are the kinds of systems that I help set up. So that and also related to people are also related to, you know, hiring, also related to, you know, customer inquiries.   00:11:44:22 - 00:12:13:22 Tyler Sellhorn You know, these are the kinds of things that can be automated or at least automated to the point where all it requires is a click or a set of clicks. Those are the kinds of operational know. How is that? I'm being very, very cool agnostic here. But you can think of specific systems like in the B2B space, like a huge one would be like slack, how do I get my Slack inbox to have all the information that I need without having to go to all the different apps, get all the apps, talk to it.   00:12:14:02 - 00:12:39:17 Tyler Sellhorn Right. I used email earlier. Right? How do I get all the apps to talk to to my email inbox so I don't have to be all over the place? I can click from the inbox and come back there. How do I get my one app to be the trunk of the knowledge tree? Or How do I get a system to be like, okay, well, I'm going to update this process on a regular cadence or based upon the the information that came in and the robots are watching instead of me.   00:12:39:23 - 00:12:49:11 Tyler Sellhorn Right. Because, you know, having a robot teammate, letting the computers, it turns out that computers can do stuff. Sam And very few people understand this at a deep level and I do.   00:12:49:17 - 00:12:52:23 Sam Wilson Right. Is that is that the technologist background in you coming out?   00:12:53:07 - 00:13:13:22 Tyler Sellhorn Oh, for sure. I built x86 computers in the basement with my dad, like we were one of the first thousands CompuServe customers or eventually AOL. Right, right. These are things that like, you know, the I know what a 14.4 board modem sounds like, not just a 96 K, right? Yeah. Yeah. So all of that stuff is, you know, things that are in my wheelhouse, right?   00:13:13:22 - 00:13:23:06 Tyler Sellhorn I know what a terminal is. App scripts, right? These are things that, like, are pretty nerdy and and I'm happy to be your computer nerd.   00:13:24:00 - 00:13:42:22 Sam Wilson That's awesome. So you saw the technology or what did you say, getting disparate systems to talk to each other? That's the first thing. Yes, you do. In what? Just just make me feel good here, because part of me thinks it's just us at the small little, you know, product scale. We are that some of these things I would imagine it's not true.   00:13:43:12 - 00:14:10:19 Tyler Sellhorn It's across the entire spectrum of work. It's crazy. And and enterprises are purchasing software that is very expensive. And then not using a fraction, maybe not using it at all. Right. It's really quite scary how few people actually engage with the robot teammates that have been purchased for them. And I mean this on a very, very small level.   00:14:10:23 - 00:14:44:10 Tyler Sellhorn You have the cheapest laptop that exists. There are things that it can do for you that you didn't even know was possible. And it's really, really great stuff and could make your life easier and you don't have to think about that anymore. Well, because. Because robots should do the robotic things and people can show up then as creative, empathetic humans that are engaging with other humans to get them to buy or to get them the help that they need to be able to succeed and feel good about what they're trying to accomplish.   00:14:44:10 - 00:14:46:14 Tyler Sellhorn That's what we want to be able to do in our businesses.   00:14:46:17 - 00:14:52:00 Sam Wilson Awesome. So you solve that problem first and foremost. What's the second thing that you like to solve?   00:14:52:13 - 00:15:09:21 Tyler Sellhorn Second thing is the change management surrounding that. So first of all, we want to get things you know, I was hinting at this in the previous answer. Right. But the first part is getting things to talk to each other now, how do I make use of that in a way that is going to be able to actually accomplish the outcome I'm seeking?   00:15:10:03 - 00:15:26:05 Tyler Sellhorn Right. So it's so it's the change management part where it's like, okay, we've got the system set up now. How do I use it? Well, right, because there is that human element, right. And it's to say, okay. And then I would say the third piece that that I really bring to bear. Right, is that team level agreement. Right.   00:15:26:05 - 00:15:43:04 Tyler Sellhorn And maybe that's just with yourself. If you're an individual or it's with your team or it's across your entire company is to say, okay, when am I working? And you've already communicated this already with someone that's assisting you. They work Monday, Wednesday, Friday, and they communicate with you when they're going to work on a Tuesday instead of a Wednesday.   00:15:43:06 - 00:16:03:15 Tyler Sellhorn Right. Right. That's a very, very basic thing that would be not obvious to everyone to say, like, oh, I should like, first of all, have a working schedule that is that is communicated right. And that if it changes, I need to say something about that, like those kinds of explicit statements about how we're going to work together. I help build that stuff as well.   00:16:03:21 - 00:16:16:00 Sam Wilson Right. No, that's so important. So, so, so very important. I love it. So you solve some three, three and they're interconnected systems, but yet very different, I would think across across the board the bits.   00:16:16:00 - 00:16:23:07 Tyler Sellhorn I've got to talk to the other bits. Right. And then you've got to be able to use that system that you've set up and then you've got to be able to communicate with others about it.   00:16:23:13 - 00:16:45:21 Sam Wilson Right? When, when a company is looking, no matter what the size, when they're looking at bringing on new team members in maybe, maybe they don't have a distributed workforce, what are some proper groundwork things? You know, and again, maybe, you know, there are some simple solutions like, you know, getting I hate email, by the way, Tyler, can I just say.   00:16:46:08 - 00:17:06:02 Tyler Sellhorn Hey, you know, I think that's the thing that when I was saying one size fits all to one size fits, one, when we work in an increasingly screen based, you know, like business. Right. It's really, really important to recognize that 100% of what you look at in that screen has been chosen by you.   00:17:07:03 - 00:17:07:13 Sam Wilson Yep.   00:17:08:01 - 00:17:19:15 Tyler Sellhorn It's really, really easy to blame other people about what's on your screen. And if you don't like email, stop using email.   00:17:19:19 - 00:17:30:10 Sam Wilson I'm doing my best buddy. I promise you train at training, but training our team members to not email me. I'm like, don't just don't use slack. We have channels for this. We have.   00:17:31:05 - 00:17:54:21 Tyler Sellhorn That. That's exactly right. And I think you should be let me just give you some direct instruction right away. You should have an auto responder for every one of your teammates set up in your email to say, I will not respond to you in this. This is in the wrong place. There should be an automated message that has the correct URL to be sent back to them based upon like a best guess.   00:17:54:21 - 00:18:05:03 Tyler Sellhorn Like you can even, you can teach the AI to like read the message and suggest the URL that you would assume is the correct channel that they should be posting it.   00:18:05:07 - 00:18:12:20 Sam Wilson Right. Yeah, because if it's an operations question, if it's a question, if it's a this like if it's a content question, like, yeah, me.   00:18:12:20 - 00:18:20:19 Tyler Sellhorn And that's first of all, don't email me. Second of all, here's a suggested place to put this. Instead, I will not be replying to this email.   00:18:20:20 - 00:18:42:24 Sam Wilson No. Amen to that. May I need I need more you in my life. Tyler, this is impressive. So as you said, though, every team is different. Every setup is different. A company, let's say they're looking to grow and they're looking to bring on some key team members. Are there people that you just simply have to have at the Home Office or is there a way to do it completely distributed?   00:18:42:24 - 00:18:43:15 Sam Wilson What's your thoughts?   00:18:44:10 - 00:18:57:09 Tyler Sellhorn I think it needs to work for that company. So you need to do the deep reflection and consideration for yourself. Will I need to be able to lay eyes on this person ever?   00:18:57:15 - 00:18:58:01 Sam Wilson Right.   00:18:58:17 - 00:19:22:15 Tyler Sellhorn Once a quarter, once a month, once a week, every day. Right. Like you as the business leader need to decide what is going to work for you and and that is going to inform how you show up. Right? Because Sam Wilson and Tyler Selman are completely different business leaders. I would much rather hire somebody that's awake when I'm asleep and we commute.   00:19:22:18 - 00:19:42:02 Tyler Sellhorn We touch base once in the morning, once in the evening, if needed. Right. Whereas, you know, maybe for you, you want somebody local, you want somebody that you can take out for a coffee, right? Right. And just just, you know, like, say, what's up? And that is going to inform how you show up in the talent marketplace.   00:19:42:11 - 00:20:06:18 Sam Wilson Yeah, absolutely. And also, you know, obviously, this goes without being sad, but it's also role dependent because there are roles that I don't ever I mean, I've had somebody work for me for eight years and we've never even talked on the phone. I mean, like you said, they're awake when I'm asleep and vice versa. The only and in this case, we did email, which is been my new push to get rid of email, but we did email so I do but.   00:20:06:18 - 00:20:22:18 Tyler Sellhorn You but but I think but I think even saying that like, okay, there's going to be certain kinds of communication that I do here, right. Versus another place. Right. Email might be for external partners. And if your internal we're going to have a trigger based on the domain that this came from. That's it. Okay, now, now, now we got it sorted, right?   00:20:22:18 - 00:20:33:15 Sam Wilson Yeah. I certainly under no circumstances can tell my equity investors that are writing six figure checks. Hey, buddy, you can't email me. Not a chance. I'm like, yes, right. Glad to be responding to your email. Thank you.   00:20:33:15 - 00:20:34:17 Tyler Sellhorn Sir. May I have another?   00:20:34:24 - 00:21:01:14 Sam Wilson I have another. I am at your disposal. Yeah. I mean, those are different different conversation for different time. So I like I like the way that you think through that. But but again, going back to kind of the question, obviously building it to where it makes sense for that different organization, we talked a little bit about the things that you try to solve upfront, but are there are there things that people should be looking at or thinking about kind of from a more holistic perspective as they look to grow from a distributed workforce perspective?   00:21:01:14 - 00:21:08:07 Sam Wilson I mean, these are things you go, man, these are some just common pitfalls that I really think if you got it right before you launched into this, would really solve some problems.   00:21:08:24 - 00:21:44:13 Tyler Sellhorn Number one, do not assume that the message you sent and intended was the one that was received and understood. Start with centering the others understanding and how they will receive that message. So business leaders start. They might be email poor people or they might be slack people, or they might never record themselves. But I invite out all of you listening to number one, record yourself on video and provide a summary of what you said.   00:21:45:20 - 00:22:08:04 Tyler Sellhorn A concise transcript and a full transcript, and record your tone of voice, record your facial expression like give the B omni channel. Likely we'd talk about being that kind of a business, you know, whether it's e-commerce or whether it's, you know, like the different kinds of properties we own, right? We want to be able to diversify the kinds of offerings we have.   00:22:08:10 - 00:22:32:09 Tyler Sellhorn Well, you need to do that in your communication. So if it's really, really important that this one message gets communicated, go for bandwidth, right? Don't back up from providing every single person their preferred mode of understanding what you have to say, because some people are only ever going to read the bullets. Right? Right. And some people are going to repeat like read the full transcript and then read it again.   00:22:32:17 - 00:22:53:20 Tyler Sellhorn And then maybe one more pass. They'll get it. Understood. And they won't ever watch your video. Other people will only watch your video and they'll be, they'll be, there'll be. But like if you don't do those things, if you don't provide those things, the message you're intending to send may or may not be understood. And then the second piece to tack on to that is to check for that understanding.   00:22:53:24 - 00:22:54:10 Tyler Sellhorn Hmm.   00:22:54:23 - 00:22:55:19 Sam Wilson How do you do that?   00:22:56:21 - 00:22:57:14 Tyler Sellhorn You ask.   00:22:58:01 - 00:22:58:11 Sam Wilson Okay.   00:22:58:21 - 00:23:25:22 Tyler Sellhorn What did you hear me saying? What do you want? What? When you read that the other day, like like what did you take away? Right. Hey. And also be willing to repeat yourself without annoyance, without judgment, right? Right. If it's that important, it's worth saying again in a different way, in a way that they will understand center, the understanding center, the receivers, understanding of your message.   00:23:26:01 - 00:23:45:15 Sam Wilson I love that. I love that. Yeah. And that's that's actually something again, going back to my hate of email, I sent a ton of video email me cast animatic. I think it's called screen pals with a little link right inside of your email. I mean I sent, I send verbal replies all the time because I can do it one in a fraction of the time.   00:23:45:15 - 00:24:09:23 Sam Wilson I just recorded say, hey Tyler man. Hey thanks send the email. Does want to get back to you on this here's a minute long video I have not started sending the it does auto transcript. I'm that thought about attachment. I'm a big if I listen to a podcast it's by reading the transcript like I can get on your website and if you got transcripts for your podcast which we do for all of our shows, but it's like, I can read that transcript in about 4 minutes.   00:24:10:08 - 00:24:29:06 Sam Wilson Yeah, I get the whole thing. I'm like, Okay, cool. The 28 minute podcast, I just got it in 4 minutes. And that was I learned everything that I would listen if I got it. And of course you missed the intonation in reading that. But either way, it's like you're saying when you're communicating with team members, distributed workforces, doing the all of those things, they can pick it up in the channels in which error, in the methods in which it makes sense to them.   00:24:29:06 - 00:24:45:00 Sam Wilson So I love it. Tyler, this has been a blast having you on the show today. I love the energy that you bring behind the mic. That's that's hard to come by, honestly. Oh, right. As a as a host of I've done 800 and some of these episodes and you probably ranking the top ten of energy behind the mic.   00:24:45:00 - 00:24:47:14 Sam Wilson So thanks. Thanks for doing that. This is a blast.   00:24:47:14 - 00:24:50:23 Tyler Sellhorn I've got enthusiasm to burn and happy to share it with you and your audience.   00:24:51:03 - 00:24:56:00 Sam Wilson Absolutely. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   00:24:56:13 - 00:25:05:19 Tyler Sellhorn I'm most active on LinkedIn and the place to get connected to me. There is t cell dot link, tsc, alcatel i n k.   00:25:06:02 - 00:25:12:20 Sam Wilson T cell dot link. We'll make sure to include that there in the show notes. Tyler, thank again for your time today. I do appreciate it.   00:25:12:20 - 00:25:13:20 Tyler Sellhorn Great to talk with you, Sam.   00:25:14:07 - 00:25:35:18 Sam Wilson 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 or 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.   00:25:35:18 - 00:25:38:24 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.  

Today's guest is Vernon Beckford    Vernon is the CEO of Diversified Lending Solutions, a capital advisory firm that offers loans to small to medium-sized real estate companies. He has 15 years of experience in investment management and a background in tech and commercial real estate. -------------------------------------------------------------- Introduction [00:00:00] Guest's background [00:00:37] Similarities and differences between distressed mortgages and today's market [00:07:45] Poor Underwriting and Quiet Pain in the Market [00:08:48] Types of Deals and Alternative Sources of Capital [00:11:01] Lending on Earnest Money Deposits and Risk Mitigation [00:13:54] Reducing Risk [00:18:27] Unnecessary Information [00:19:18] Contact Information [00:22:03] -------------------------------------------------------------- Connect with Vernon:  Linkedin: https://www.linkedin.com/in/vernon-beckford-77ba17/ Web: https://www.dlsloans.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 → sam@brickeninvestmentgroup.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: Vernon Beckford (00:00:00) - I, I think there's a lot of quiet pain in the market. There are a lot of folks, I think, especially within the syndicator community, that didn't overcapitalize their deals. So if you're now in a position where you're going back to a lender and they're saying, Hey, we need to b you to buy new interest rate cap, but we need you to replenish an interest reserve, and you don't have millions of dollars just sitting on, on the sidelines, that becomes a very, very difficult conversation.   Intro (00:00:24) - 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 (00:00:37) - Vernon Beckford is the c e o of Diversified Lending Solutions, a capital advisory firm that offers loans to small and medium sized real estate companies. Vernon, welcome to the show.   Vernon Beckford (00:00:48) - Great to be here, Sam. Thanks for having me.   Sam Wilson (00:00:49) - Absolutely. Vernon, there are three questions I ask every guest who comes in the show in 90 seconds or less. Can you tell me where did you start? Where are you now, and how did you get there?   Vernon Beckford (00:00:57) - Sure. Where did I start? Uh, I started, uh, in investment banking. Um, in, you know, in, in, in how I got there. Uh, I was studying entrepreneurship in high school. That motivated me to apply to Columbia University where, uh, I graduated. And during that process, uh, I fell in love with the idea of learning about business and banking seemed like a great place for me to, uh, cut my teeth.   Sam Wilson (00:01:27) - That's awesome. And have you been in the banking sector from I guess that point all the way until now?   Vernon Beckford (00:01:33) - No. So I was fortunate or, or unfortunate enough to, to go through the great financial crisis. So when I came out, the market was as hot as you could a minute, and walking around as a banker was the coolest thing you could be doing in New York City. Um, and then, uh, you know, by 2008, uh, when the market exploded, I'm still relatively young in my career. Uh, and, and, and that kind of set everything on a different trajectory. So had I been a little bit earlier, a little bit later, I may have stayed, but that was really one of the, uh, the pivot points. And from that point, um, I did a whole host of things in commercial real estate, but that was, that was the first chapter.   Sam Wilson (00:02:12) - Got it. What'd you move into in commercial real estate and how did you discover opportunity in the midst of the 2008, 2009 crisis?   Vernon Beckford (00:02:20) - Su it's such a good question. So  at the time, uh, and it, it, it's, you know, it, you look back and it was a crazy time. There were so many loans that had exploded, right? Yeah. That there was an instant overnight opportunity, which was how do you work out these loans? How do you potentially buy them? How do you re use that as a way to get into real estate? So I started a company that basically helped large investors evaluate these large pools of defaulted mortgages. And as you'd imagine, there was, uh, a lot of distress. And so I learned a ton. And that was a really, actually, actually fun time because you have to be creative to think about how you can actually spot the opportunity in those investments. I then got hired off by a company called CW Capital, which is one of the largest, uh, special servicers in the country. And special servicers do what? They take these defaulted loans and they figure out a way to work them through the system. So even though I left working at a bank, uh, my role was still very much in the financial service industry and in the capital markets. And then it just developed from there.   Sam Wilson (00:03:27) - Man, that's really, really cool. So you figured out a way to evaluate the stressed mortgages. I'd love maybe, you know, as we get into more of this show, hear kind of how you've taken that experience and you're comparing some of those markers that you saw in those defaulted mortgages to the things you're looking at today   Vernon Beckford (00:03:46) - And see if there's   Sam Wilson (00:03:46) - Sure. Any correlation on that front. But what was the next step? I mean, now you're, now you're lending to medium, small to medium sized real estate, um, companies. Yep. So what, what is that business today and what, and why, I guess, you know, did you see, did you see the opportunity in this?   Vernon Beckford (00:04:03) - Yeah, so, so in the midst of me doing all of the very big corporate stuff, I, I, I noticed what I felt to be a really troubling trend, which was every time I wanted to go off and do a small deal by myself or with my buddies and get financing or funding, it felt like it was like moving mountains. It, it was always, uh, an issue. And as I went through my corporate background and was working on these big financings, I mean, after the distress, I worked at a big investment shop and we were doing all this really cool stuff, but it was always involved in really big transac transactions that helped big firms get bigger. Right? And it felt like once you went back to the small balance space, those opportunities and that transparency wasn't there. The pricing was, was all over the place. There were a bunch of sketchy actors you never knew really who you should be transacting with. So I launched the company Diversified Lending Solutions along my business partner. Cause we wanted to bring that institutional quality to what is just a much more fragmented space and help small operators get the financing they need to grow so that they can be institutional 10, 15 years from now.   Sam Wilson (00:05:12) - Right, right. I mean, I've heard it said a hundred times over that, you know, the, the, uh, the bigger, the bigger deals are just as, just as much and or easier. Um, I guess on the work side of things, uh, you know, as it is the, the really small ones, like you can do a 50 million deal and instead it's the same end or less work than a $500,000 deal.   Vernon Beckford (00:05:30) - Yes. And what I, what I would say is what drives me nuts is where you see, uh, a hardworking, smart, industrious entrepreneur who is just bootstrapping their way one deal at a time to get a little bit bigger. And you said if that person had the right support financially to help them grow faster, there's no reason they couldn't own exponentially more. Right. Whether that be from going from two to four units to buying their 2050 a 200 unit multifamily.   Sam Wilson (00:05:59) - I, I would, I would imagine from just a size of the pie, um, perspective that the reason that big institutions do big deals is cuz there's a lot of money to be made on 'em. And the reasons they don't do small deals is cuz there's not a lot of money to be made on 'em. How do you overcome that challenge?   Vernon Beckford (00:06:17) - Absolutely. So that's spot on. So the way you overcome that obstacle is you have to get as big as you can, as quickly as you can. Mm-hmm. . So for folks, I think the mentality is typically I'm not, I'm not experienced enough yet to do a bigger deal or I don't have enough capital to do a bigger deal, as opposed to are there ways that we can reframe or reposition you to make you attractive to a capital source that will provide you with capital to do a bigger deal. And so from our vantage point, our goal is not to help small guys stay small. Our goal is to help someone who's small, but has all the right endowments to do bigger deals faster.   Sam Wilson (00:06:56) - Got it. I like that. I like that, uh, that, that niche you found. Cuz it is, I mean as you know, I'm, I'm preaching to the, to the man that already knows, but you know that there's a need there. Uh, I've experienced it certainly, uh, starting out where it's like, oh my gosh, like this seems impossible. Some of these smaller balanced, smaller balanced loans and, and they are, they're just as much work, uh, as some of the bigger stuff that we have. Let's go back to your experience then with that in mind. Looking at the distressed mortgages that, sorry, I'm a hands talker. Um, looking at, at the distress for those you're watching on YouTube, they can't, you know, you, you know what I'm talking about, but if you're listening, you have no idea. Um, but evaluating those distressed mortgages in the, in kind of the markers in the, in the, the hallmarks of why those went into distress compared to what you're seeing today. Any, any, any correlation there?   Vernon Beckford (00:07:45) - Well, the core there, there are a couple very strong similarity and a couple big, you know, um, um, complete binary opposites. What makes them similar? Well, um, if there's stress to the cash flows, right, that's a early indicator that there may be some distress. In today's market, what's driving the stress has been the rapid increase of in interest rates. And so interest rates have gone up so fast, right? That they haven't been able to, they being an operator increase their NOI enough to offset the fact that their borrowing costs are so high and now that their borrowing costs are so high, if they need to go and refinance that property, they're not gonna get nearly as much debt on the property as they would've in the past, which means now they need potentially fresh equity to bring the table. That's a lot of what's driving the distress here in in, in the great financial, uh, crisis.   Vernon Beckford (00:08:48) - A lot of what drove the distress was, I would say poor underwriting. So fundamentally, folks were looking at deals that were being extremely aggressive in their underwriting as, as to what the financial projections of the business plan were. Those plans were not sustainable. And so once it got to a point where that realization was met, of course there, there had to be some, some correction. So I think what makes this cycle a little bit different than that is that the underwriting is far better than it was in the past, right? From the point of view of the lender making the loan. But that doesn't make it life any easier for the operator when now they took out a floating rate loan and now they're borrowing costs of tripled. I mean, so I, I think there's a lot of quiet pain in the market. There are a lot of folks, I think, especially within the syndicator community that didn't overcapitalize their deals. So if you're now in a position where you're going back to a lender and they're saying, Hey, we need to b you to buy new interest rate cap, but we need you to replenish an interest reserve and you don't have millions of dollars just sitting on, on the sidelines, that becomes a very, very difficult conversation.   Sam Wilson (00:09:55) - Yes. Yes, it certainly does. And and do you feel like those, those, um, conversations are being had with a certain, like within a certain loan size or is it just across the board from small to large operators? Like,   Vernon Beckford (00:10:12) - You know, I I tell you, uh, it, it runs the gamut. It really does. I, I was talking to one sponsor, uh, that, uh, owns a, you know, 35 million asset. I was talking to another one that owns a 15 million asset. I was talking another one that owns a $5 million asset mm-hmm. , it, it really runs the spectrum because the, the mechanics of what led to the, to the disconnect are all, are all the same, right? So, so it's just that the magnitude of the problem gets bigger, the bigger the deal you have because you're talking with, you know, bigger numbers. Right,   Sam Wilson (00:10:46) - Right. Yeah. 30 versus 15, bigger, bigger numbers more, uh, more just, yeah. Bigger magnitude on that. Let's talk then about the types of deals that you're getting across the finish line then in today's environment and how you guys are getting it done.   Vernon Beckford (00:11:01) - Sure. Yeah, that's a great question. So it falls within a, I think three or four different types of deals. The one is, uh, traditional debt. How do we get someone a larger loan than they've traditionally gotten in the past? And for us that, that could be a bridge loan, that can be a new construction loan, but that's really in helping frame the operator and the strength of their deal to a new set of lenders that they probably don't have access to. And if they do have access to, they don't know how to speak their language. And so there's a disconnect that prevents them from being able to access that funding. Unfortunately, what we've seen in, in, in the, in the capital markets is with, you know, it feels like another bank is failing every week, but with banks going down, um, they've gotten more defensive.   Vernon Beckford (00:11:48) - And so what that's led to is a preservation of capital, meaning I wanna get repaid on my loans. I don't necessarily wanna put more money out. And so what was, you know, a year ago a great source of debt being the bank sector is now really, really, really difficult to get loans. I mean, those guys are not lending. And so for us, where we've been successful is pivoting and saying, listen, we don't necessarily need to go banking route. We can go to other sources of capital, whether that be a life insurance company, whether that be a debt fund, finding alternative ways and alternative sources of capital when you really can't just take anyone for granted right now. So that's one where, where we're, we're, we're getting deals done, other place we're getting deals done is increasingly in, in restructurings in working with borrowers who are having troubles with their lenders and saying, Hey, let's come in as an intermediary, as a third party.   Vernon Beckford (00:12:42) - We're not emotionally connected to the property, we're not looking at the lenders, the bad guy, and let's come in and try to find a solution that doesn't involve you either having to sell the property when you don't want to or really getting hammered in a way that's gonna prevent you from, from finishing your business plan. So we've been doing, uh, uh, more and more of that in terms of the deal, what I would say, deal formation side. Even though we started our business being a source of debt, what we realized is that folks need a lot of help before they even get to the point they need a loan. So what we started to do is make loans on earnest money deposits. So for instance, if you've got a property and you need to put up an earnest money to get it under control and you don't want to ex fully exhaust your liquidity, we started making loans to, to operators to help them take down those properties. And then the, the other piece of the puzzle is to the extent, because we want you to do bigger deals than you before you needed, uh, to hit certain net worth liquidity thresholds, right? To get a loan, we've started to connect our clients with key principles that step into the deals to help them meet that network liquidity requirement so they can qualify for large loans.   Sam Wilson (00:13:54) - That's really cool. I I like both of those. Let's dig into, I, I've not talked to anyone, at least not recently that I can recall, uh, lending on the earnest money deposit side. How do you guys offset risk on that front without holding the bag for an operator that doesn't get a deal closed or, I mean, that seems like, uh, you know, risky in my opinion. So how do you do that? Well,   Vernon Beckford (00:14:17) - Great question. So it depends, right? Depends. Cuz there're two types of deposits. It could be either a soft earnest money or hard to the extent that it's soft. We feel like that's very, very easy, uh, to underwrite because as long as we have visibility to when the contract, you know, goes hard and we have, uh, you know, uh, assigned the, the money in escrow to a title company we feel comfortable with, then we feel very confident that that that's, that's very easy to underwrite.   Vernon Beckford (00:14:47) - If you're talking about earnest money, you're right, that's a completely different bag because you're now taking the first dollar risk in the deal. And so typical, right? That is very linked to the sponsor. What's their experience? What's their financial strength? Do they have assets at their disposal that represent some multiple to what we're putting up in the EMD so that we have confidence that if for whatever reason they feel so confident that they want to go hard, but they actually don't get it across the finish line, are there other assets at their disposal to help to pay back that loan? So, um, in this market, frankly, we encourage people to the extent possible to, to sign soft, you know, uh, deposits. There was a time, whatever last year where it was like everyone was like, impossible. If I, if I'm gonna get a site, I need to go hard. Now we're in a point where the tide has shifted a little bit. Buyers should be able to recognize they have more leverage, uh, in the negotiations and really po push for soft deposits. Yeah,   Sam Wilson (00:15:46) - Absolutely. Absolutely. Yeah, that, that was gonna be my question is because I think I got a report the other day on the multi-family side of things, transaction volumes down like 70 or 75% year over year. Yep. Just substantial. I mean, yeah, that's not, that's not a 10% decrease. It's a 70% decrease. And so that would seem that it would give people still who are confident enough to make offers a little bit more leverage. Cuz now I mean, that would indicate that for the 10 offers they were getting before, now they're only getting two and a half on those properties at most. Exactly. Exactly. So that's, uh, that's really, really cool. I love hear what you're doing in the space, how you are taking your, your kind of mission it sounds like, is to take that smaller operator and give them, uh, the ladder, if you will, to kind of climb up and do bigger deals over time. What, what are, what, what are some things, I guess as you think about that, that you would say, Hey, here's some things that borrowers need to be doing now, some proactive things they can be doing now. So when they start to have a conversation with yourself that would help kind of expedite this process.   Vernon Beckford (00:16:52) - Yeah, so, so the first thing I would do right, is if you think about the process of going where you are today to where you want to go tomorrow, there are really four, I would say, critical things you need to be doing throughout the process. Um, and, and I say I smile when I say this because I know we all fall in love with our, our deals and, and we've decided that the best things in Slice Brett, but , first thing you, you really gotta do, and this is what we help you with, is do some real litmus testing. So take, take the blinders off that you've fallen in love with it, and let's look at from the point of view of a lender or from an seed investor or a private equity firm, what are the sa the the strengths, weaknesses of this transaction?   Vernon Beckford (00:17:36) - And what is going to prevent somebody else from wanting to invest or support it, right? Mm-hmm.  and, and answer that objectively and, and clearly so you can understand what challenges that you have. The second piece of that puzzle is what I like to call objection smoothing, address objections upfront. Everybody I find leads with why the thing is so great, and then anyone who has a brain starts digging beneath the surface. And that's when deals fall apart, tell me what I should be afraid of and how you're going to resolve it. Mm-hmm. , right? Because that's giving me the sense that you know what you're talking about and you're not just out here buying to buy, but you have a, a philosophy, you have a strategy, and those two things come together on the deal that you're talking about with me right now. After that, I want to focus on what I would call de-risking the deal.   Vernon Beckford (00:18:27) - How do we find a way that regardless of what the deal is, to find ways to reduce my risk, whether it be as a lender or as an investor in the project so that we're not out here, um, exposed when we don't have to be. Right? And then finally, I would say it's thinking through the lens of fact filtering, meaning some people don't share enough information, some people share too much information Hmm. And we wanna find a middle ground where you're sharing enough information that is useful for your investors and your lender to complete the diligence they need to get, feel comfortable in the deal, but you're not inundating them with too much that's either irrelevant or confuses the story or by the point now that you've shared something, they say, oh, well really, I don't like this deal as much as I thought I did because you're giving me new information.   Vernon Beckford (00:19:18) - And we found , I've worked with so many folks that have gotten a deal almost to like the one yard line, and then they shared some information that was completely unnecessary and an investor was like, Nope, I'm out. And, and it was like, if we'd gotten in front of that earlier, there probably was a path to address it. So I say everything when you're thinking about growth is through the lens of am I doing those four things? And really what our job is to take you to a lender where if you were doing a 5 million deal, we can make a justification that you can get a 20 million deal done because you, you've addressed all those four pieces,   Sam Wilson (00:19:53) - Right? I really like that. The, the last one actually came a bit as a surprise, uh, the fact filtering one, but you're so right. Like, I, I can think of several examples in my head that we don't have the time to share on the show, but it, it, it, there's, it's unnecessary. It's like, hey, this is, this is even on call. I was on yesterday with a, uh, it was actually a monthly, it was our monthly investor update. It goes to our all entire brick and investor club. And she's like, Hey, you know, she's, it's our communications director's writing. She goes, Hey, I wanna throw this in there and that, and there I'm like, you know, that's not necessary one because it could, it could instill a lack of confidence and really it's irrelevant. Like in the grand scheme, it was like, it was, it was, we, we figured out what the total loss was and it was like one 10th of 1% in the last five years. And I'm like, yeah, but it sounds really terrible what you're about to say . Like, let's just not put that in there  because it's irrelevant. And it then makes our investors skittish for something that really has almost a non-monetary and or business relevant. So it, uh, I hear it and it, there's those small things that you're like, oh, we doesn't, doesn't, you know, we don't need to talk about that. So it's   Vernon Beckford (00:21:00) - The small things that can muddy the waters. Yeah. And, and I'm, I'm in no way saying ever, um, um, be, uh, always be transparent for sure, right? Be transparent with your lender, be transparent with your investor. But there's a difference between being transparent and and sharing the salient information, right? And just providing, uh, data that muddies the water and confuses folks and now creates concerns unduly. Right.   Sam Wilson (00:21:26) - Right. And that's it. That was it. Yeah, that was, that was that information yesterday. I'm like, that's completely un un you're creating, like you said, un undo concern. Is that the right way to say that? I don't know. Either way.  Vernon, this has been great, man. I love, I love those four things to think about. You've given us a ton to think about here on the show. I like your mission, I like the way you're doing it. I like your background, uh, starting out in commercial real estate and banking, in, in evaluating distress mortgages, how you compare that to what you're seeing today and kind of just what you guys are doing in the marketplace as a whole. I think it's, it's a much needed niche as you're, uh, obviously very well aware. If our listeners wanna get in touch with you and learn more about you, what is the best way to do that?   Vernon Beckford (00:22:03) - Sure, absolutely. Visit us@dlsloans.com. You can also find me on LinkedIn. I respond to dms Vernon Beckford and reach me directly on email vernon dot beckford dls loans.com. And   Sam Wilson (00:22:15) - That's DLS for Diversified Lending Solutions for those of you who are listening. So that's, uh, you said DLS loans.com?   Vernon Beckford (00:22:21) - Correct.   Sam Wilson (00:22:22) - Fantastic. We'll make sure we put that there in the show notes. Vernon, thank you again for coming on the show today. I certainly appreciate it.   Vernon Beckford (00:22:28) - Thank you, Sam.   Sam Wilson (00:22:30) - 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 Podcast, Spotify, Google Podcast, 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 Carlos Vaz   Carlos is an esteemed real estate investment expert with a remarkable track record of over $2.5 billion in real estate transactions. He is the Founder and Chief Executive Officer of CONTI Capital, a leading real estate investment company that has successfully managed more than 12,500 units and facilitated transactions totaling $1.3 billion. With over 15 years of experience in multifamily housing and real estate investment, Carlos is recognized as an award-winning entrepreneur and thought leader in the industry. -------------------------------------------------------------- Building an External Team [00:00:00] Starting in Real Estate Investment [00:01:13] Elevating Oneself Out of the Day-to-Day Grind [00:06:26] Creating Scale [00:07:42] Empowering Leaders [00:09:20] Building an External Team [00:11:28] Building an External Team [00:14:00] Protecting Your Time [00:14:31] Importance of Company Culture [00:16:27] Building a Company Culture [00:20:57] Multifamily Space and Fundraising [00:23:52] Contacting Conti Capital [00:25:25] -------------------------------------------------------------- Connect with Carlos:  Web: https://conticapital.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 → sam@brickeninvestmentgroup.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: Carlos Vaz (00:00:00) - , who is your external team? You need to find a good real estate attorney. Hey, go talk to some people. Hey, who is gonna be my good real estate attorney? Uh, title companies get to know who is good title. Companies get to know who are the top three five brokers in that supermarket. Go have cough of them. Go talk to these guys. They say, listen, what do you guys are seeing? So externally, you need to be able to build your external first, right? A good insurance company, Hey, who is a good local insurance company I can talk to? So number one, you need to create your external team. Welcome   Intro (00:00:30) - 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 (00:00:42) - Carlos VA is a real estate investment expert with a remarkable track record of over two and a half billion dollars in real estate transactions. He's the founder and c e o of Conti Capital, which is a leading real estate investment company that has successfully managed more than 12,500 units. Carlos, welcome to the show.   Carlos Vaz (00:01:00) - Hey, thank you Sam. Great to be here.   Sam Wilson (00:01:02) - Absolutely. It's club. Glad to have you here. Carlos. There are three questions I ask every guest who comes to the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   Carlos Vaz (00:01:13) - Oh, nine seconds or less, right? I start in Dallas, Texas. That's, uh, it's home in, uh, 2008. I bought my first property in March of 2008. So when everybody was running, running away, I was running towards the business. So that's, uh, when I started.   Sam Wilson (00:01:30) - Where'd you start? Where are you now?   Carlos Vaz (00:01:33) - Uh, right now we're in Dallas, Texas. We have done over 2.5 billion in, uh, in transactions. We sold a lot of property, sold almost 7,000 units in the last two years. Wow. Uh, now, I mean, we're really building a bigger portfolio, right? We're just closing our fourth fund. Um, and, uh, and we have another closing in the next set. I would say four weeks. Okay. Property or buying.   Sam Wilson (00:01:57) - Okay. So you guys are you, you guys are, are, uh, you're busy. You've sold a bunch here, there. So very, very busy. You've grown a company from in March of 2008. I guess what, let's, let's, let's go back to that. What gave you the confidence in March of 2008 to say, man, now is the time to start buying real estate?   Carlos Vaz (00:02:16) - It's not. I mean, confidence is a, I think that's a, it's a function of a lot of knowledge that we're always applying that people are surround yourself with, right? Because I don't, I, I, I believe that no man is an island. Right? That's a, that's important. You should be always be learning, make yourself better. So the confidence in 2008 was come back to some fundamentals, right? You're looking for in 2008, you're buying, you're buying per pound, you're buying cheap. So the, the confidence came that, hey, some of the properties, I'm looking 2008, I cannot even build for this price. So it's the, the gap is, it's too big, right? If I'm able to buy some propers, like that one we know can make money. So that was a little bit of confidence, right? You had the knowledge, you start to apply and that the numbers now start to make sense. Granted, it was a horrible time to trying to raise money to talk to a lender and, um, and all the above, right. ,   Sam Wilson (00:03:11) - Uh, absolutely. And you went, you went directly into multi-family in March of 2008.   Carlos Vaz (00:03:16) - That's exactly, I, I, I mean myself, I was born in Brazil originally. Have been in the US now for almost 23 years. Mm-hmm. . So I came here $300 in my pocket. Wow.   Sam Wilson (00:03:26) - So I didn't   Carlos Vaz (00:03:27) -  I didn't have much, my, my rent was three 50, so my p n l was negative day one. Um, so my first job actually was work at a, at the law office, uh, a non-paid internship from 8:00 AM to three. Uh, I was working at the newspaper warehouse from 2:00 AM to six. Uh, then work at, uh, T G I Fridays over the weekend and going to school during that night. So that's my, that was my, my beginning. And um, uh, there in Boston, I got myself involved in construction, working as an assistor carpenter, started learning, doing the odd jobs. That's how the first county was created. County construction county's name after my mom, it was a county va. So that's where county comes from. Uh, our first company was to do small jobs that start growing. I believe that everything that you do, if we do, of integrity of values start to grow, right?   Carlos Vaz (00:04:18) - It might take a little bit longer. And that small company starts growing. Then a friend of mine was in the mortgage, Hey, let's work together. You know, a lot of people, if someone wanna buy a house, you let me know. I'll do the finance and you do the renovation. Sure. Teach me. I start learn about mortgages. Then from oh five to oh seven, did over 32, uh, 32 houses in the greater Boston area. Got early 2007 is should good to be true. And that's another conversation by itself. I sold all the houses in May of, uh, in May of 2007, and I start learning about multi-family taking courses. Um, C C I M, I'm, I, I'm strong believer in C C I M, some of the organizations reading books and everything else. And, and the data showed that Dallas was the place to be. So that's what brought me to Dallas. And then up finding the first property in closing March of 2008.   Sam Wilson (00:05:09) - Wow. Wow. I love, I I always love the, um, they're not the rags to Rich's story, but it's, it is that in its own right. It's, it's the hustle, it's the grit, it's the grind. It is the, yeah. Starting with no handouts. I don't believe in handouts. The no handouts mentality of, of go get it done. People ask me that, like, how, how did you get where you are? I was like, well, I was hungry. That's how we got   Carlos Vaz (00:05:34) - 100%. Yeah.   Sam Wilson (00:05:34) - Yeah. I was hungry. And, and I can imagine that's, that sounds like the same story for you being negative, uh, what you call negative 50 bucks on your p and l outta the gate. Yeah.   Carlos Vaz (00:05:43) - . Yeah. It's, I I think never underestimate the, the power of grit, right? You're going and, uh, and if you look at nowadays the access information, like someone listen to this podcast, it's priceless because you start really getting nuggets. Right? Right. I think that's the most important thing. We should never stop learning. Never stop learning, right. And these nuggets are priceless. So, good to you.   Sam Wilson (00:06:08) - How Well, thank you. And I'm glad it's good. It's cuz a great guest like you that come on and share those nuggets that we even have a show. So thank you for that. What, what is it, how did you elevate yourself out of the weeds? So many people are, I forget what book it is. I'm sure you can quote it, but we're emit what's that?   Carlos Vaz (00:06:26) - Emmit? Yeah.   Sam Wilson (00:06:27) - They were they saying   Carlos Vaz (00:06:28) - On their business, right? Yeah.   Sam Wilson (00:06:30) - The entrepreneurial seizure, is that what he calls it? They're working in their business.   Carlos Vaz (00:06:33) - The entrepreneurial myth.   Sam Wilson (00:06:35) - Yeah. How, how did you elevate yourself out of that? Because I can only imagine running a full-time construction company, renovating homes, things like that. It would be hard to then think about what it looks like to grow beyond the day-to-day grind of, of being in the whirlwind.   Carlos Vaz (00:06:52) - Well, it, it is, you said something good. Well, Michael Gerber, that's the , that's the entrepreneurial myth. I work in our business, work on our business, right? So, uh, we are our best friends, yet we're the best, the worst enemies. So, and we wake up in the morning and both are your on our shoulders, right? So, you know, in each which one are you gonna look? I think Sam, my perspective is that when, uh, or so, oh, I need to make money. I need to make money. And of course money is really important, but then you see, I need to do it myself because if I don't do it, nobody knows how to do, right? So it comes that idea of trust and what does it look like in the beginning, right? I have to trust someone else that we can find a way to do any type of partnership or something that even at the, I would rather make less money, but create scale.   Carlos Vaz (00:07:42) - There's something can be said about creating scale. Because if you become a one man show, you are a hundred percent liable yourself. God forbid you get sick or something, your business shuts down completely. So you need to be able to, hold on a second. I am the worst liability myself. I need to stop. I I cannot be working seven days a week, man. When I was doing renovation, I used to bring my mattress work until 2:00 AM taking a nap and waking up at six and doing again and again and again. Right? How long can it do that? I mean, and if you're gonna build a family or something else, right? So what's the point? Right? Do you wanna have a heart attack in your forties, ? It's, uh, so I think the first idea is say, hold on a second. I, I need to find some people that, uh, that I can, I can work together and I'm okay if I'm okay.   Carlos Vaz (00:08:36) - If I, I don't make as much money, but I can trust they're gonna be able to finish something there, then I'll be able to create scale. The first thing, the first thing scale in my mind came this project manager. I had the project manager who had been working together. He was doing a good job and said, listen, and, uh, why don't you do the following? If, if you start taking care of the whole project, of the renovation yourself, and you deliver this on time, this is how much more I'm willing to pay you. I'm gonna give you a 20% increase. And the guy was blown away. No, but I, but this, you and I are gonna meet now instead of me be on the site five days a week. I'm gonna be on the site every Friday. We're gonna meet at this time, but you run all the projects, let's test the first one.   Carlos Vaz (00:09:20) - We test the first one, uh, was working and say, all right, so can I give the second one? What that allows me to do allows me to stop being in the business, looking on the business now, hey, now I can get another house, another house, another house. Not a house, not a house. You're just trying to look at that scale. When you go to where we are today, of course, much bigger than everything else. My main thing is that how we can find the best leaders in the company and empower them so they can make the decisions themselves. Right? I believe the best decisions are the ones that the trunk that, that the branch can make without getting, get it to the trunk. Right.   Sam Wilson (00:09:58) - That's brilliant. I love that. And that's right in keeping, you know, with the name of the show, it's how to scale. Like how, how do we scale and how, you know, commercial real estate. But it, you know, how do you scale anything? And I think, I think it is, it is exactly what you have just described there where it's then moving to that managerial role. Every Friday we're gonna have a meeting in review, and then, you know, you're gonna make more money and I'm gonna be less involved. And that's, I think that's a brilliant way to do it. What, how did you, in the, uh, multi-family space, how did you, what were some of the first team members you brought on that, that, or, or maybe even some of the tasks, if you can remem remember back that far that you said, I've gotta get these things and this off of my desk in order to move this company along in a meaningful way?   Carlos Vaz (00:10:44) - Okay, so I, I look at that one from true perspective, right? First it becomes you at that one man show, right? Right. So picture myself, I I, I got your math right. Hey, Carlos, hey, it's different, right? So they'll be different. But let's say I got your math as in your backyard, Sam, I wanna start my, I wanna start, look at, I, i, first I order, you need to create your external team. Who is your external team? You need to find a good real estate attorney. Hey, go talk to some people. Hey, who is gonna be my good real estate attorney? Uh, title companies get to know who is good title companies get to know who are the top three five brokers in that supermarket. Go have coffee of them. Go talk to these guys and say, listen, what do you guys are seeing? So externally, you need to be able to build your external first, right?   Carlos Vaz (00:11:28) - A good insurance company, hey, who is a good local insurance company can talk to? So number one, you need to create your external team. So that's when new business arch, and then you close your first deal, right? You look now your business, you close the first one. When you are gonna close the, your, your first one you need, what's the next, what am you doing today? And what I want to, what are the things I want to do? And I don't wanna do more important things that you wanna do. Is that what I don't wanna do? Yeah. Right. So, uh, so for example, if you don't like the property management side, so your job is, all right, I need to step out. I don't need to get involved in the property management. How can you interview some good property management and make sure that you hold them accountant?   Carlos Vaz (00:12:12) - That that would be one. You can say that, you know what, one thing that I always tell people, right? You are as good as your book. If you're your books, right, you are as good as your books. If you don't, if you're not an accountant per se, you better go find a very good accounting firm or a bookkeeper that you can hire internally, right? That's gonna save you a lot, a lot of headache. So your books has to be really, really sharp. So perhaps the first person need to hire, it might be the bookkeeper, someone that can, or maybe a small accounting firm that you can outsource that one. Do not try to do the books by yourself. I mean, I rule number one, right? And then as, uh, the first person that we hired in our firm back then, I, I need to have a, a real estate analyst because you start to look at deals, right?   Carlos Vaz (00:13:02) - And I don't have time to find the deals, do the underwriting, do all this stuff, right? The first person I had to hire was a real estate analyst that was able to start look at the deals with me, and, and let's go meet some brokers. Let's see what's happening, start putting some notes. So that was, that was a big, uh, a little bit of relief, right? Um, that was, and the second person that we hired back then was a junior, uh, asset manager mm-hmm. , someone that said, and now we have the properties, but how are we able to hold the, the property managers accountable who can have this asset manager that can, can help us? So that was the initial, so the first phase, you, you, you, you are taking people that they start to do is some things that you are doing the next phase. You want to hire people with more knowledge, they're gonna take over the department, so they're gonna start doing things that you not even know how to do. That's the next level. Right?   Sam Wilson (00:14:00) - That makes, that makes a lot of sense. And I've not heard that quite, it's clearly articulated, uh, probably here before on the show, but I, but I like that thought process where it's, where it's, at first it is getting things off. It's bringing peop people on. If I can recap what you said and make sure I understand this right, getting people to, to, to take the task off of your desk that are not necessarily value adds to the business. Like, here, you do this, and once you've done that, then move to bringing on department heads that can then grow the company that are, you know, like you said, doing things that you don't even know how to do.   Carlos Vaz (00:14:31) - Yeah. And, and, and the other thing, what's your greatness, right? And, and when I say greatness, put the ego at the door, right? I always say that ego stays at the door. Right? What's your greatness wanna look at Sam, for example, Hey, maybe Sam has great value. He's able to talk to brokers better than anyone else, and he is able to find deals. I'm like, it's priceless. Hey, we need to protect Sam's time because that's where he's gonna give us the 10 x, right? Anything else not related to that? Let's make sure that we're, Hey, he's not doing   Sam Wilson (00:14:59) - Right, right, right. Oh, absolutely. Absolutely. I like the idea. That's a good, that's a good nugget there. Protecting your time. Cuz that's, that's something that's so hard to, uh, to do, especially in the whirlwind. I mean, you know, it's just tough.   Carlos Vaz (00:15:16) - I mean, it's tough and at the end of the day, right, good is the enemy of great  . So it's, it cannot be good. What's the point of being good in 10 things if you cannot be excellent and great in one thing? Right? So find the one thing that you're great off. Cuz if you're good, you're gonna become average, right? Right. I mean, yeah. Tell me the an average, I mean, football team, ,   Sam Wilson (00:15:41) - Right? No, no, they don't make it to the Super Bowl, I'll tell you that. Exactly. They don't make it to the Super Bowl at all. That's, that's, I like that idea. An average football team. Oh, congratulations. You're an average. Yeah.   Carlos Vaz (00:15:52) - , yes. Look at that.   Sam Wilson (00:15:54) - You don't win anything. Good job. Um, yeah, , I like that. Let's talk a little bit. So you've given us some, some wonderful insight there on talent, but once you've built that talent, at what point in time in the trajectory of your business did you really, um, focus on culture? Where did you, where did you come in and say, look, we've gotta really infuse more of what Carlos believes in and the kind of the philosophy that you wanna do instill inside of your business. Where did that come into play?   Carlos Vaz (00:16:27) - I would say, um, as soon as I realize if you don't have culture is everything right? As soon as I realize I have been doing this wrong in a very wrong way. Hmm. Uh, so it's a because okay, so now here you have, you are the, you're gonna hire a couple of people and you're gonna go to work. What for, what are you guys doing and how do you know how to hire people? What if you, if you have horrible hiring decision, you know, I mean the, the, the worst thing you can do is hire the wrong person because you spend a lot of time training the wrong person and the wasting your time and the other person's time, right? So it was a lot of kind of, I mean, really his lap on my face. I said, Carlos, that's not the, and, and being this lifelong learner, right?   Carlos Vaz (00:17:17) - Like I said, being a lifelong learner is, is important. And you always need to be your biggest fan. Yet your biggest critic say like, huh, how can I, it was this idea of culture I think starts over 10 years ago. Uh, we have been in business for 15. So the first four years you're trying, you're seeing, you start to hiring people, but these people are not staying. And why did you hire that person again? Hey, raise your hand if you have not made the hiring mistake, right? Hey, we all have those hiring mistakes. And I said, how the heck will hire this guy? Then the first idea came to mind is that, hold on a second, we need to fire, fire that find a better harm process. Hey, hey, I need to have better questions to ask during the interview. And then when you ask those questions that, okay, I'm asking these questions, but what's my company value?   Carlos Vaz (00:18:06) - I mean, what's my core values as a, as, as a company, right? And makes no sense. So now it was important for me to, uh, let's stop. And there are many books out there that you can read about company val values, core values, right? Uh, what do you stand for? Hey, these are the values like behind me on the other side here, that's our core values there, right? So if you can see this, integrity, excellence, right? Lifelong learner, right? That's, so all this defines who we are at the end of the day. So 10 years ago said, listen, we need to put the core values in place that help us to see a little bit how to hire better people. And the other thing too, Sam, what was interesting is that you start to hold yourself accountable even more. So the beauty about, like, the beauty about having core values is like, it's like you, you are wearing that 25 pound jacket, right? It gets heavy, but it, it gives you accountability, right? People know that you hold themself accountable and that one start to generate. So it was a lot of, uh, mistakes that I personally have made in the past that force me if, unless I have a company culture that I can relate. Because whichever you think is what it's who you're gonna become. And that's what we're gonna be saying. So that's, that's where the, the, the culture became so important to us today. I can say culture is the number one priority on my book,   Sam Wilson (00:19:36) - Right? In that, in that culture, I would argue, and maybe you can tell me if I'm wrong, but having that culture is probably what now begets the talent that you need   Carlos Vaz (00:19:46) - 100% and I for good and for bad, right? So you've gotta be interviewing a bunch of people and then no, no, no, no. Why does it take three months to find one person? Yeah. Or four months. But we're not the best people that, that you, that you, I mean, when, um, when you, when you, you won a very, in a very emotional way, hire someone. Do you know when you, when you interview someone and say, wow, this person's amazing, right? You live in the room and walk a little bit more and you're like, oh, that's Sam guy. Wow. The guy was, he's one of us. So that, that's how, and I wanna wanna have that one of us. I'm like, okay, let's bring this guy on board   Sam Wilson (00:20:27) - Right now. That makes, that makes, that makes a lot of sense. What are some things you do to really just make sure that that culture stays front and center? Because a lot of times I think organizations will make all these fancy, you know, these are our core values and they go on a sign somewhere and then that sign just collects dust and that's the end of it. And you might think about it again at next year's, you know, the whatever retreat, call officer's retreat, whatever you wanna call it, but you're like, oh, hey, we gotta pull these outta the drawer and look at 'em again. How do you keep it front and center?   Carlos Vaz (00:20:57) - Well, a couple of things that we do, right? So, uh, when we join our company, there's, there's a book list and, uh, that's not telling you what you do. It's more like those are mandatory books that you have to read, right? Uh, it's, uh, hey, if you join our company, you need to be a lifelong learner. One of the books there is gonna be this e o s entrepreneur operating system. We have been used this, this process for over eight years now. So on our core values, every quarter, every single person side of the company, you're, I mean, you're pretty much, you're being evaluated based on a core values. They get it, they want and they have the capacity. So every quarter, that's part of it, right? Uh, every, every, um, what do we have, uh, in terms of how you doing the things to live up to those, those values once a week, right?   Carlos Vaz (00:21:49) - Every manager, they have the one-on-one of their manager, their their people, the one-on-one, which is very important to us. Every Monday we have that quick, quick sync on every Monday. Just make sure that everybody's on the same page. Because if you wanna build a company culture, you need to build trust. And trust sometimes is hard because if you're building trust, you might hear some things that you don't wanna hear that's gonna hurt you. Hey, welcome to life. Life is gonna  is gonna, is gonna punch you. Sometimes there's things that you don't wanna hear. Hey, Carlos, when you show up to a meeting like this, this is how I felt. Really? You are like a jerk. Ouch. Uh, hey, how can I become a better person next time? Uh, what do you mean by that? Right? Uh, give that feedback. So it's our weekly conversations, our monthly meetings that we're gonna have as well.   Carlos Vaz (00:22:42) - Once a quarter want to have our, we're gonna have a meeting with all the company, we disclose our financials, everything to everyone to see, hmm. And this is what we achieve in terms of our goals, and this is what it didn't achieve of our goals, right? I think the more you are transparent and it helps a lot, right, Russia, sure. We're not perfect. We make a lot of mistakes. If there's one perfect person in the world, please let me know. I'd like to meet that person. , uh, we'll make a lot of mistakes ourselves, but, uh, that's what makes us great, right?   Sam Wilson (00:23:13) - Man, I love that. I love the idea, uh, of building trust in, in, in building that trust. I think goes back to what you said earlier, which was you gotta check your ego at the door. And that's, uh, that's very, very powerful. Carlos, you've given us so many things here to think about. We've talked almost this entire podcast, really just around business, business, organization, hiring great talent, how to grow a company. We haven't even talked about at all what you do in the real estate space, which is tons of fun. I want to just spend maybe, I don't know, we got maybe 60 to 90 seconds here left, but you guys have sold 7,000 units over the last two years.   Carlos Vaz (00:23:51) - Uhhuh. . Yeah.   Sam Wilson (00:23:52) - You're in the multifamily space. You're in, uh, you're mainly in the Sunbelt states.   Carlos Vaz (00:23:57) - Yes. What   Sam Wilson (00:23:58) - Are you doing in the multifamily space today? I mean, I know many, many organizations are pencils down. What are you guys doing right now that you feel like sets you apart?   Carlos Vaz (00:24:07) - Uh, again, our people and our culture, right? And the relationships that we have in place. We, we, I mean, very happy to where we are. We'll close our first or fourth fund. Now we're on a process of launch fund five that's coming. Uh, our fourth fund was 200 million, right? So, uh, happy to, uh, happen to that one. Uh, look at the fund five. We have one close in the next four weeks. We're always looking for deals, right? We're always looking. Uh, the last year and a half, we created our own index in-house. So there is a, there's a lot of data that we look right currently. We look at over 406 points before buy any property. It became a very strong, uh, screening tool for us. Um, so, uh, now, uh, we're looking at deals. We, we, we now have the right relationships. It's harder, right? Uh, this year alone, we, we look at a, a little bit over 6 billion in properties to buy one. But that's the name of the game. It's uh, it's the name of the game. It's called Discipline, uh, I mean perseverance and, um, and doing the best we can on a daily basis.   Sam Wilson (00:25:14) - Got it. I absolutely love it. Carlos, thank you for taking the time to come on the show today. If our listeners want to get in touch with Conti Capital and learn more about you, what you guys are doing, what is the best way to do that?   Carlos Vaz (00:25:25) - Just go your website. Uh, conti capital.com. That's it. Simple was that.   Sam Wilson (00:25:29) - Perfect. Perfect. C o n t i capital.com. That's conti capital.com. We'll make sure we include that there. Also in the show notes. Carlos, thank you for taking the time to come on the show today. I learned so much from you. This was an absolute pleasure.   Carlos Vaz (00:25:41) - Oh, my pleasure, Sam. All the best.   Sam Wilson (00:25:44) - 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 Podcast, Spotify, Google Podcast, 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 Jonharold Cicero.  Jonharold is a Real Estate Attorney & Partner at DL Partners law firm in NYC and real estate operator and investor in four States. Join Sam and Jonharold in today's show. -------------------------------------------------------------- John Harold's Background [00:01:03] John Harold's Work as a Real Estate Attorney [00:04:00] Risks in Real Estate Investing [00:08:01] Air Rights and Complex Transactions [00:09:21] Joint Venture Deals and Subdividing Buildings [00:11:59] Compromises in Transactions [00:15:28] Collaboration with other attorneys [00:17:39] Personal real estate investments [00:19:58] Experience and expertise in real estate law [00:21:44] -------------------------------------------------------------- Connect with Jonharold: Linkedin: https://www.linkedin.com/in/jonharoldcicero/ Web: https://dlpartnerslaw.com/#attorneys-section/jonharold-a-cicero   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 → sam@brickeninvestmentgroup.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: Jonharold Cicero(00:00:00) - Picture, there's a building and then the first four or five stories of the building we built is right up against it. And then after the fifth floor, it extends over the roof of the other building and then goes up another 15 floors. Wow. They end up looking like, uh, Tetris pieces that, you know, didn't quite land. Right. Wow. It's somewhat common in the city. Uh, there's even a building downtown in, I believe, uh, around Tribeca that they call. I think they refer to it as the Jenga building cause it had some candel and the architect went with it and staggered the floors. So it's, you know, when you see it, you know, it's that building. Welcome   Intro (00:00:38) - 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) - John Harold Cicero is a real estate attorney and partner at DL Partners Law firm in New York City. He's also a real estate operator and an investor in four states. John Harold, welcome to the show.   Jonharold Cicero(00:01:01) - Thank you. Happy to be here.   Sam Wilson (00:01:03) - Absolutely. The pleasure is mine. John Harold, there are three questions I ask every guest who comes in the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   Jonharold Cicero(00:01:13) - Uh, I started as a person, a child who grew up in New York City and saw the effects of gentrification firsthand. Uh, I had a single mother and she bought a small apartment in an area that wasn't so great. And over 20 years it became a phenomenal area because everything around us got built up and she was able to cash out and it helped her get into retirement. And that's where I got the real estate bug, wanted to become that person that had the capability of gentrifying neighborhoods and being involved in that process. Uh, I was originally gonna go get a, uh, MBA and learn about real estate that way and somebody gave me very, very sound advice and said, unless you're getting an MBA from a top 20 school, you're not gonna be working on Wall Street in private equity for real estate. Become a lawyer so you have a fallback. And that's what I did. I went to law school, uh, focused on real estate, which was brutal because I was in law school during the great recession, so there wasn't too many real estate jobs around. Um, but I stuck with it and a lot of my colleagues went into bankruptcy work and restructuring, but I stuck with real estate cause they knew that's where my passion was and 15 years later, here I am. So it worked out.   Sam Wilson (00:02:23) - It worked out. No, this is cool. It's gonna make for a fun conversation because I think rarely do we get the combination of both investor. I mean, you own your own real estate, you're an investor in other people's deals, but also you are an active attorney that practices, uh, some, some, you know, really nuanced parts, I think probably of real estate law. One thing I do wanna comment back on, and this is, this is a, a beef I have had, I think with people that are opposed to gentrification, that gets a, it's a, it's kind of a dirty word for a lot of people where they're like, oh man, you know, these terrible humans that come in and buy neighborhoods and take 'em from dirty, dumpy little neighborhoods and actually make the place decent. You were the recipient or your mother was rather the recipient of the benefit of that. Right, right,   Jonharold Cicero(00:03:07) - Right. Uh, I think from the perspective of most people, especially if their renters, uh, gentrification is a horrible term because it means renters gonna go up. You know, if you, if you own, you're gonna, you're gonna reap the benefits of the price increases,   Sam Wilson (00:03:25) - Right? Yeah. The b the the price increases. And, and, and, yeah, again, I've never, I've never quite understood the mentality of improving an area, being a bad thing. Like, oh, we're gonna make this a decent place for people to live Again. Imagine, imagine how horrible her person you must be. So I love, I love the ti that's how you caught the bug, was just watching it firsthand and said, man, this is, this is something I want to do. Tell me on, I guess, you know, what are you working on, on the law side of things right now? What are, what are some really some, some cool projects or some stuff you're seeing happening in the marketplace?   Jonharold Cicero(00:04:00) - Uh, I represent a lot of, uh, wealthy family offices and private equity funds. Um, anyone from you investors traded development companies. Um, so I do a lot of new construction condominiums. If you ever see the show, A million dollar listing on Bravo with all those brokers and they do a new construction condo. I would say for every three that you see on the show, new construction condos, I'm the attorney for one of every three of them. Uh, it, it's constantly my clients on the show. I know all those brokers on a first name basis. Um, so I do a lot of that work, but I also do a lot of buying and selling commercial real estate, whether it be apartment complexes, uh, office buildings, apartment buildings, shopping centers, sometimes hotels, uh, and then also in buying and selling, representing the borrowers and negotiating their loan documents, um, and doing corporate structuring for the terms of their investors and how they're entering into the deal.   Jonharold Cicero(00:05:01) - 10 31 exchanges, sometimes reverse 10 31 exchanges into more complex deals That just did a deal, uh, last, at the end of last year where we bought a property. My client was selling a property, they were buying an apartment complex in the 40 million range, and they had a joint venture between a family office and a private equity fund that was run by the children of the family office. The private equity fund sold something and did a 10 31 into it as a tenant in common. And the family office was still trying to sell something and wasn't gonna close in time. So we had to do a reverse 10 31 for that tenant in common so that they could come together and then they could subsequently sell their property and get the cash, uh, you know, the tax deferred exchange value out of the reverse 10 31. So complex stuff that keeps it interesting. Um, but, you know, and then a lot of straightforward stuff too.   Sam Wilson (00:05:51) - Wow. Yeah, that I bet, I bet that is, like you said, that's the stuff that keeps it, keeps it interesting is probably also the stuff where you probably, you, you, you get to, uh, really put your creative, uh, problem solving hat on. Is that part of, part of what keeps it interesting for you?   Jonharold Cicero(00:06:05) - Absolutely. Uh, you know, and, and it, it really, you run into so, so many varieties of deals and over time with more experience, you know, I've been doing this for like 15 years now. Um, hundreds and hundreds and hundreds of deals of all different asset classes in different areas, different sizes, different structures, and being able to tap into those experiences as resources, the structure, new deals, and especially with some of my less experienced clients, being able to come in, you know, clients who are not private equity funds and don't have in-house council and separate financing got, being able to, to share with them some of the opportunities and options that are available for them to better structure their deals. I mean, that's where they get the most bang for their buck with me. You know, you, you get what you pay for when it comes to attorney.   Jonharold Cicero(00:06:53) - Um, and, and having a firm that's real estate centric, that's primarily all we do is real estate here. Having so many colleagues that I can refer, you know, and, and bounce ideas off of. Um, it, it's beneficial, especially in New York City where you're doing a lot of, you know, development and you need your na you're up against your neighbors, you need access to their property in order to build your property. Like it, it gets sometimes outta control. So, uh, it keeps it interesting and I enjoy being able to help my clients grow because I see it over the course of years where they go from 2 million projects and now 10 years later we're doing 20 million project.   Sam Wilson (00:07:32) - Right, right. No, that's really, really cool. When you look at all, I mean, cuz you're an investor as well and so you get to see probably, and like you've mentioned the gamut of transaction types. Are there risks you see people taking right now that you personally aren't comfortable with? Obviously, you know, your clients can do what your clients can do, but what do you see in the, I guess the question is what do you see in the marketplace? What are people doing right now that you're like, wow man, that that that, that doesn't fit my investing criteria?   Jonharold Cicero(00:08:01) - Uh, I think it as an attorney, um, naturally risk averse, I don't think I was as risk averse before it became an attorney and then it became more risk averse. Right. Um, and, and it's a constant internal struggle for me as an investor to battle some of that risk aversion. Um, but I, I do have, uh, clients who do some crazy structures, um, with regard to buy, you know, buying up lots and trying to secure air rights. We have that in New York City where you can buy, if you have an, a building next to you, say you bought a corner lot and you have a building next to you that's only four stories, but as of right has the ability to be six stories. You can buy their air rights and transfer 'em over into your zoning lot so that you can build an even taller building on your lot then you would legally be allowed to.   Jonharold Cicero(00:08:46) - Um, so some of those deals that get very complex, I do the zoning lot development, development agreements for those transactions. But for me personally, I mean that, that's way too big for what I would invest in, um, or, or would take on as the main investor. Uh, I like more of, uh, I'm not so much into the class a high end luxury properties. I like more recession resistant investments, class B properties and Class B neighborhoods instructions that get complex with air rights and, and other things. Uh, my clients, I'll help them do it, but that, that's too much for me at this point.   Sam Wilson (00:09:21) - Yeah, no, I, I completely understand that. And we've never actually covered on this show. We're pushing 800 episodes at this point. I'm thinking we've ever actually gone in depth on air rights and kind of how those are structured. I mean, that just seems like the wild West. I mean, maybe it's not cuz you're in New York City and you guys see it all the time. But I guess briefly, can you just tell us, is that, is it just like, I mean, how do you even establish what those air rights are worth?   Jonharold Cicero(00:09:47) - I, I just did. Yeah. Yeah. I know that's a, that's a constant debate based on where the neighborhood is and what the air rights that are available are. Um, and, and without diving down the rabbit hole, you know, you, you have to buy air rights of a neighboring building before you can approach the building on the opposite side of that building so that you can buy their rights. Um, you know, you have to have the, the continuity of one building into the next building. You can't just go from, uh, you know, leak your neighbor into a a subsequent building. So it, it gets crazy. Um, it determining what the value is based on comparables no different than comps, uh, that you would have when you're buying a property. What are the comps for people who are buying rights? Um, so it, it's a, it's a tricky transaction, but I, I mean it gets very interesting. I mean, I, I just did a building where they can't deliver over a neighboring building. So the first four, if you could picture it, there's a, a building and then the first four or five stories of the building we built is right up against it. And then after the fifth floor it extends over the roof of the other building and then goes up another 15 floors. Wow. They end up looking like, uh, Tetris pieces that, you know, didn't quite land. Right.   Sam Wilson (00:10:59) - Wow.   Jonharold Cicero(00:11:00) - It's somewhat common in the city. Uh, there's even a building downtown in, I believe, uh, around Tribeca that they call, I think they refer to it as the Jenga building. Cause it had some candel levering and the architect went with it and staggered the floors. So it's, you know, when you see it, you know, it's that building. Um, but fancy,   Sam Wilson (00:11:21) - I'm gonna have to look that up. The Jenga building, I'm sure that, I'm sure that that's well documented. Uh, I think it's   Jonharold Cicero(00:11:26) - 56 Leonard Street, I think is the address.   Sam Wilson (00:11:29) - Ok, there you go. I'm gonna look that up. I'm gonna look that up. That's it. That's really fascinating. And again, I think, I think I hear the, the, the, the, um, you really enjoy kind of that more complex nuance part of, of what it is that you're working on. What are some opportunities you're seeing right now, I guess in, in the broader, either in your market or just, you know, across the, across all the deals that, that you see coming across your desk and opportunities you're working on. What are some stuff you see right now that you're like, man, this is, this is a really, really cool space and I see people doing really well with it.   Jonharold Cicero(00:11:59) - Uh, I think, you know, multifamily is always strong. I love multifamily from an investing perspective, use as well. Um, but really space, you gotta have service, uh, tenants. You can't have, you know, retail tenants who are just selling products, right? They gotta be a service like a, you know, a salon or something like that. Um, or selling food or something. But, uh, interesting things that I see, um, you know, in here in New York City and this market, you know, prices keep going up and up and up and, uh, outer markets in parts of northern New Jersey and other parts of the five boroughs of New York City that when I was a kid you would never wanna go to are now starting to trend and, and, uh, become more valuable. Um, I look at this in particular, diaper Heights section of Brooklyn was a very much, um, um, my family's from Italy and a lot of Italian Americans had settled there when, when I was a kid, my great aunts and uncles had houses they bought for 40,000 over there.   Jonharold Cicero(00:13:00) - The same house with no improvements is now 1.5 million. Um, so, you know, the, the, the values have gone up. What I do think is interesting that I see a lot of in New York City is people, cause it's a higher point of entry, a higher price to enter the market. I see people doing a lot of joint venture deals and then coming to me to subdivide a building into separate condominium units. So you can have, I just did one, um, maybe about two years ago here in Midtown where we had two bigger players enter into a transaction where they bought a existing office building. They went through the, uh, variance to get the building re-designated for zoning purposes. And then we split the building into two condominium units. One was the first floor through the 10th floor or 12th floor, and the other was 12th floor or 13th floor all the way up to, I think it was the 30th floor.   Jonharold Cicero(00:13:54) - And the lower portion became a hotel. And then the upper portion became individual resident condominium that was above a hotel in the same building with a hotel entry and all the amenities of five star hotel, four star hotel. Um, so, you know, they can add value to that. Um, but it was two different partners that entered into the deal for the joint venture to acquire the building. And one is a hotel operator and owns the hotel condo and the other is a condo developer and owns the residential portion that they then further subdivided. So I see a lot of those kinds of opportunities where people, and even subdividing a a larger lot that people buy, uh, at a client who just did that in, uh, the Bronx and on the edge of Yonkers where we bought a huge lot and one was an older school building and they subdivided that into a separate tax lot of its own so that they could rent it back to the city to use as a school and they're gonna add the improvements. And then this huge vacant part of the lot was further subdivided and, uh, now a film studio is being built there.   Sam Wilson (00:15:00) - So that's really cool. Yeah, and I guess that's the way that when you get into those creative structures and especially do dealing with the dollar amounts that you're dealing with there in New York City, it makes sense, you know, to have the condo, uh, the residential condo, uh, developer and operator partner up with the hotel operator. I can only imagine the amount of, you know, we always say good fences make good neighbors. And so the amount of just working through on the front end, the nuances of how to structure those deals,   Jonharold Cicero(00:15:28) - The, the easement that I had to write with regard to mechanicals and shaft waves and whatnot was quite lengthy, but   Sam Wilson (00:15:36) - Yeah. Yeah. And, and, and when you got done with that, did you ever hear back from those, uh, from those, from those owners and those operators? Did you ever hear back from them saying, Hey, if we had done this, or I would've added this provision in there or structure it differently next time?   Jonharold Cicero(00:15:52) - Yeah, I mean, there's always things you want in those agreements, but you know, the other side, you know, is also represented by council and that transaction, I represented the hotel portion. So the council who represented the residential portion had their own comments because they wanted things to be a little bit easier for their client. So it's a give and take. You gotta reach a compromise and, you know, down the road people start to stop. They, they forget what was written or they don't refer back to it and they try to get away with things and then there's a, a dispute. But if it's written well enough, um, you know, then you can go back and point to certain provisions and say mm-hmm can't do that. We already accounted for that in the provisions here. But on a, to, to your point on a smaller scale, um, I think, uh, a lot of investors maybe overlook it and finding value, even in buying a smaller building that's an excuse or a lot that has a building on it that's in good condition that they maybe wanna do, you know, alterations to.   Jonharold Cicero(00:16:49) - But there's uh, you know, additional room in the back, maybe they can get variance. I did something in northern jersey where we had a building that had a huge backyard and it was on a corner of an intersection and we were able to keep that building and, you know, put, uh, commercial tenant in and there were some apartments above it, but that huge backyard on the building, uh, was along the side street, not the main avenue. And we were able to get a variance and do a curb cut and take that yard and separate it from the building. Cause the building didn't really need it. The retail tenant on the first floor wasn't using it. Uh, and then make that into additional parking, uh, with a curb cut and now the upstairs tenants can rent out parking spaces and, you know, in an area where there was a a a hard time finding parking, we had a tremendous value by doing this.   Sam Wilson (00:17:39) - Right. No, that's, that's really, really cool. And you know, there's so many different parts of this. How, I mean, I would assume that you oftentimes correct me if I'm wrong, have to collaborate with other members at your firm there. Cause it's like, hey, this is your specialty in getting whatever the variances are for curb cuts and all those things. I mean, is that, is it part of uh, just kind of a more of a collaborative law firm you're working inside of?   Jonharold Cicero(00:18:04) - Yeah, definitely. And, and obviously as the years go on, you meet a lot of attorneys at other firms and we, you know, reach out to each other and say, have you ever seen this? You have this kinda agreement that I can use as a base form for what I'm trying to do. And we help each other out. Um, you know, some attorneys are at adversarial, but many are are decent people contrary to popular belief. Um, and, you know, we work with each other, but certainly here, uh, our firm is a real estate firm. The only thing we don't do is land use and zoning. But we have a, I'm in the commercial department, I'm in the condo development department. Um, we have a residential department, a leasing department, a construction department. Uh, so, you know, there's a variety of people here that I can bounce ideas off of and, and that's a great aspect to it.   Jonharold Cicero(00:18:49) - Um, you know, for me personally, I I'm, I, I think there are some brilliant solo practitioners and small firms out there twice as it's happened to my clients where they have a health issue and everything comes to a standstill on your project because the attorney had a health issue and there's nobody else to rely upon. Or they're doing things based on their experience, but maybe they're not so experienced in construction aspects. Uh, you know, access agreements and construction issues. And they might be great at representing you in the acquisition of the property, but the construction side, it costs you some money that if you're going somewhere else, you know, like I say, I say to my clients, you get fat, good and cheap, you get to pick two of the three. Right. One, fast and cheap, not gonna be good. I   Sam Wilson (00:19:33) - Gonna be good. I love that. I love that, that, that, I've heard that before and I think, I think that's a brilliant, brilliant statement there. How are you scaling your own personal real estate investments? I know you've kind of told us a lot about the law landscape that you're working inside of how you guys handle and scale the, you know, the, the, the opportunities for your clients. What are you doing on a personal front for scaling your real estate holdings?   Jonharold Cicero(00:19:58) - So right now, uh, I had some smaller properties that eventually I will do 10 31 exchanges on. I've, I've had some value add opportunities in those smaller properties. I got into them at good prices with great interest rates. Um, so I'm looking at long term just raising rent and continuing to add value or like, I have another one I'm looking to do, uh, variance for parking to add more parking to it. Um, and eventually I'll 10 31 those into something bigger along with, uh, additional accrued equity that I've put aside for those investments. Um, but I've also started investing with clients and friends who invest and develop much larger projects that I could personally take on, on my own. Um, and I, I put equity into those deals, timing it so that three years out, five years out, I have different money coming back to me that can then be reinvested because, you know, I wanna get to the point where I've got, uh, you know, 50 unit buildings instead of five and 10 year building.   Sam Wilson (00:21:07) - That's really, really cool. I love that. I love what you do here. Uh, John Herald, this has been a blast having you come on this show today. I mean, uh, I feel like I've just scratched the surface of what it is that you know and understand about your local market there on how to work inside of it, the nuance to what it is that you do. I mean, you, you guys have to compete with, I mean, I look at, I look at, you know, some of the zoning. I got some report back from, from, uh, somebody today on some zoning issue. And it was, you know, I thought it was complicated. I'm like, this is a mess. But then here in Utah, I'm like, we got nothing. This is, this is really easy compared to what John Harold's working on.   Jonharold Cicero(00:21:44) - But it's like anything else, the more you do it and the more complex it gets, the easier, you know, things that seem like monumentally difficult five years ago now I'm like, I've seen that five times. I got it,   Sam Wilson (00:21:55) - I got that.   Jonharold Cicero(00:21:56) - Like anything else in life. Right, right. The more you do it, the better you get.   Sam Wilson (00:21:58) - Absolutely. I love it. John Harold, if our listeners want to get in touch with you, learn more about you, uh, and or work with your firm, what is the best way to do that?   Jonharold Cicero(00:22:07) - Uh, you can reach me by email. Uh, I don't know if you'll be able to put that at the bottom of the screen or something. Uh,   Sam Wilson (00:22:15) - Show notes.   Jonharold Cicero(00:22:16) - Sure, sure. And then, uh, always the by phone. Um, two easiest ways to reach me and LinkedIn. Uh, I am frequently on LinkedIn.   Sam Wilson (00:22:26) - Fantastic. And can you say it just for the people who are only listening to this show and maybe don't have access to their, uh, computers or otherwise to find those, what is your email address?   Jonharold Cicero(00:22:35) - Sure. It's j Ciro, j c i c e r o, DL partners dog larry partners law com. So j ciro dl partners law com.   Sam Wilson (00:22:49) - Fantastic. John Harold, thank you for coming on the show today. I do appreciate it. This was awesome.   Jonharold Cicero(00:22:53) - I appreciate it. This was a lot of fun. Thank you for having me.   Sam Wilson (00:22:56) - Hey, thanks for listening   Sam Wilson (00:22:57) - 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 Podcast, Spotify, Google Podcast, 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.

This podcast features Jamie Raskulinecz   Jamie is the founder and CEO of Next Generation Trust Company, and discusses the self-directed retirement plan industry and the founding of her company. She also explains how Next Generation Trust Company helps investors invest in non-publicly traded alternatives using their retirement plans. -------------------------------------------------------------- Starting a Self-Directed Retirement Plan [00:00:00] The Difference Between Servicing and Trust Companies [00:02:29] Importance of Customer Experience [00:06:45] The Importance of Self-Directed Retirement Plans [00:08:00] Marketing to Self-Directed Account Holders [00:09:33] Prohibited Transactions in Self-Directed IRAs [00:12:42] Prohibited transactions [00:16:28] Types of accounts: Solo 401k vs IRA [00:17:37] Deploying small balance IRAs [00:23:03] Investing in Personal Loans [00:23:59] Investing in Startups [00:25:19] Contacting Next Generation Trust Company [00:25:48] --------------------------------------------------------------   Connect with Jamie:    Facebook: https://www.facebook.com/NextGenerationTrust/ LinkedIn:https://www.linkedin.com/company/next-generation-trust-company/mycompany/?viewAsMember=true Web: https://nextgenerationtrust.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 → sam@brickeninvestmentgroup.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: Jaime Raskulinecz (00:00:00) - . So when you're looking for investors, one of the objections you might get is, you know, all of my money is tied up in the stock market and things are really bad right now, and I can't really liquidate anything because, you know, everything has lost a lot of money, so I gotta stay there and make up for it. So the answer to that objection that I like to tell sponsors to give is, that's really great, and I, I absolutely understand that, but did you know that you're able to use your retirement plan, which, whatever kind you have to make these same investments into non-publicly traded alternatives?      Intro (00:00:37) - 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) - Jamie Rascal Linens is the founder and CEO o of Next Generation Trust Company. They are custodians for sale directed retirement plans, specializing in the custody and administration of non-publicly traded alternative assets. Jamie, I got all that out in one sentence without messing it up. Thank you so much for coming on the show today.   Jaime Raskulinecz (00:01:07) - Thank you so much for having me. That was a mouthful, wasn't it? Betwe, between my name, pronunciation, and the, and the intro. Wow. ,   Sam Wilson (00:01:15) - It's a lot of big words all crammed into one. Thank you very much. I appreciate that. I've got three questions that I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now, and how did you get there?   Jaime Raskulinecz (00:01:28) - Interesting. Um, yes, I can tell you. So, uh, my, my prior business to this was a property management company and I was looking for an additional revenue stream, and I happened to meet someone in this business who, uh, introduced me to it. I thought it was one of the greatest things I had ever heard, because I was also interested in putting real estate in my retirement plan. And so, kind of the rest is history. We started, uh, the servicing company in 2004, the Trust company, um, about seven years ago. And here we are today with, uh, almost 700 million in assets under custody, and, um, you know, still going strong working with real estate investors, fund managers.   Sam Wilson (00:02:16) - That's awesome. That's awesome. You, it, it's keeping you busy. You mentioned a couple of things there. Uh, you, you said, you mentioned you that you had started a servicing company in 2004 and then seven years ago started the trust company. I don't even know what the difference is   Jaime Raskulinecz (00:02:29) - . So, um, back in 2004, next Generation Services was formed. We have two companies, next Generation Services and Next Generation Trust company. And so the services company all by itself, always needed to have a licensed, uh, or chartered financial institution to act as custodian for all the assets. Okay. And without me having that partnership, next Generation Services would be unable to do business. Hmm. So you can only imagine that that was the nightmare that kept me up every night. And I was looking for ways to have both sides of that equation so that we had control of both sides. And so about seven years ago, we formed, the Trust company was chartered in South Dakota, and so the trust company is the custodian for all the assets, and the servicing company is in North Jersey and still does all of the sales, uh, transaction report and other types of reporting. And, uh, the trust company is really the chartered custodian for all of the assets.   Sam Wilson (00:03:38) - So yeah, I mean, that, that's is are all self-directed custodian set up in a similar, uh, kind of arrangement there?   Jaime Raskulinecz (00:03:45) - A lot of them are okay, but, uh, a lot of them are, but some of them use the trust company completely for both sides of that business. And so for me, because the servicing company came first, and because we're located in two different states and the regulations vary, it made more sense to keep them both separate for, um, you know, uh, trust company regulation purposes and other business considerations.   Sam Wilson (00:04:17) - It sounds, I mean, it sounds like this is, uh, is just not obstacles, but just kind of overcoming the legal hurdles required to do business the way you guys wanna do business.   Jaime Raskulinecz (00:04:28) - Yeah, there's, there's a lot of, as you can imagine, there's a lot of regulation, uh, governing these types of businesses and plans, right? So we have to worry about the division of banking in South Dakota because we have an office in New Jersey. We also have to register with the banking commission in New Jersey. We've got i r s and Department of Labor Regulation. So it's really, uh, it's really a lot of fun.   Sam Wilson (00:04:55) - Yeah, I guess so. I guess, so how did, what, what gave you the confidence to enter this space? Knowing all of the regulatory hurdles? And I know some of those may be, maybe they have, maybe they haven't lessened here in the last 10 years, but, um, how did, how did you have the confidence to move forward in that? I mean, that's, that's a lot to swallow all at once, even just thinking about it.   Jaime Raskulinecz (00:05:16) - Well, um, one of the biggest reasons is I think that, um, ignorance is bliss in the beginning. So you really, uh, you know, I didn't have any idea about a lot of what was gonna happen with this, especially the trust company didn't come until many years later. Yeah. So, and, and that's sort of been the story of my life, right? One of my other businesses is property management and we specialize in affordable housing and talk about regulations, right? Right. And so there's that, and my, uh, my prior life, my career was healthcare. So I've been in a heavily regulated environment, uh, pretty much since birth.   Sam Wilson (00:06:01) - Wow. Yeah, I guess, I guess, uh, if you're used to it, you know, and in its own right, you know, those regulations, uh, prevent competition, which I'm not gonna say is a good thing, but, um, they certainly, once you understand it, it's like, well, it's confusing and it's hard and lots of paperwork. So, you know, in its own right. Once you, once you kind of have the inside know-how it's probably, uh, it's probably okay, just getting through that initial hurdle I think would be, would be a little bit challenging. What do you feel like when you formed this company, and you guys have been, I guess now around it's 2023, so that's 19 years, like, what do you feel like you do differently or that was missing in the space? Because I think you saw opportunity there. What was that opportunity?   Jaime Raskulinecz (00:06:45) - Well, for me, regardless of whatever business I was in, what was always top of mind for me was the customer or the client experience. Hmm. And whether that was way back when in healthcare or in property management with tenants, or I've owned rental real estate myself. Yeah. You, you want to provide the best experience to people that you can. And in my industry, as you know, there are small boutique firms like mine, and then there are those giant companies that have been around since the seventies. And really our goal was not to become a giant company, like the ones that have been around since the seventies. I liked being a boutique firm because we can pivot easily and we can make accommodations for our referral sources and for our clients easily. And it was also easy for me to instill that, um, you know, that feeling with all of our staff members. We've done Ritz Carlton training. So, um, you know, that's kind of the level of service that I want us to be known for, and we are actually known for our customer experience in the industry.   Sam Wilson (00:08:00) - No, I think that's great. That's absolutely great. And yeah, I mean, as a, as a deal sponsor, I have, uh, interacted with all of the different, you know, uh, I guess variations of the types of firms out there. And certainly the smaller the firms and the more personalized that experience is, the easier it is for us as sponsors to bring our investors on that have self-directed accounts. And the larger the companies get, the, uh, the more cumbersome and less responsive it tends to be. So I certainly, sure.   Jaime Raskulinecz (00:08:30) - And, and what's our job? It's to make life easier for our client when they wanna make investments. Right. And on the other side, you know, of course, you know, we're not allowed to partner or directly refer, but we wanna make it a seamless process for all the parties concerned in the transaction, otherwise why would they come to me? Right,   Sam Wilson (00:08:49) - Right. Absolutely. Absolutely. I understand there's statistics that are out there and, and I'm not gonna butcher whichever ones they are. Uh, but in short, and I'm guilty of this too, so tell me what the opportunity is and maybe, maybe we could even talk about how deal sponsors can be effectively marketing to the self-directed account holder crowd. Because what I understand is that there's a lot, a lot, a lot of money in self-directed accounts, and again, myself included, especially small balance accounts that is doing absolutely nothing other than sitting in a trust account. How, how, how do we get in front of self-directed account holders and let them know what opportunities we have?   Jaime Raskulinecz (00:09:33) - That is such a great question. So let me, let me start at the beginning. There's almost 12 trillion in IRAs in the United States right now. Uh, it's really boomed because of much more contributions and a lot more gain in the investment. Yeah. Uh, in the last year that may not be so the canon investment, but about 12 trillion. And so we get this question a lot from fund managers and other people who are looking to raise those funds. And you know, my answer to them is because I know some of the objections that you get. So when you're looking for investors, one of the objections you might get is, you know, all of my money is tied up in the stock market and things are really bad right now, and I can't really liquidate anything because, you know, everything has lost a lot of money, so I gotta stay there and make up for it.   Jaime Raskulinecz (00:10:29) - So the answer to that objection that I like to tell sponsors to give is, that's really great, and I, I absolutely understand that, but did you know that you're able to use your retirement plan, which whatever kind you have to make these same investments into non-publicly traded alternatives? And one of the best things to ask, especially now with, um, the layoffs that there have been in the last couple years, is they're an old employer 401K somewhere that you can roll over. Uh, I am not allowed to give people advice, but personally I like to tell people that I can think of only one real specific reason to ever keep your old employer 401K active. And that's if you have stock in that company, you may wanna keep it in that old 401k, but anything other than that, you wanna really roll it over so that you have more control over the investments that you can make and the fees that are involved because 401ks have higher fees, uh, with employers. So that's one strategy to even start talking about, do you have old employer 401ks? What, what are your IRAs doing? Uh, you can also self-direct education savings accounts and HSAs, and a lot of people take advantage of those contributions and use those to self-direct as well.   Sam Wilson (00:11:57) - I think that's, that, that's really cool. Um, and, and most people don't, most people don't know even about self-directed IRAs. Even inside of my own family, I've had to educate a lot of my own siblings like, Hey, you know, you can move this into an accountant and tell, tell 'em what to do with it. Like that, that's, that's, and, and, and so if they don't know about that in the self-directed IRA space, then you start getting, you know, further down the rabbit hole into self-directed HSAs and things like that. And that's, that's mind blowing I think for a lot of people. Let's talk a little bit about maybe the transaction types, prohibited transactions, things like that, that go into self-directed IRAs. I know there's all kinds of confusion on this, and so I'm hoping maybe you can kind of just boil this down so a simpleton like me can understand   Jaime Raskulinecz (00:12:42) -  Well, it took a simpleton like me to figure it out and figure it out quickly too when I first started the business. Right. Okay. So the easiest thing to remember is not what type of investments am I allowed to do within a self-directed ira because they're, you know, it's a huge number. What is best to remember is what am I not allowed to do? And the only things that are not allowed investment in self-directed IRAs are life insurance policies and collectibles. And so, uh, that means that if somebody says to you, gee, I wanna invest in a racehorse, can I do that? You absolutely can. So, and we've had people do that. Um, you know, I wanna invest in oil and gas interest or lease rights for mineral rights. Can I do that? Absolutely, you can. Uh, another interesting one was several years ago they purchased licenses to, uh, purchase feet at national sports stadium games. I never even knew that was a thing.   Sam Wilson (00:13:50) - Oh. So,   Jaime Raskulinecz (00:13:52) - Um, so the possibilities really are endless. You may invest in, you know, anything except for those two things. Um, I have people, you know, real estate investors are mostly creative thinkers, right? So real estate investors are, uh, a real fun and interesting group for me to work with because I'm always getting calls with creative ideas to try to do something that's not allowed. So, , how about if I structure it this way? Yeah, no, it's still not good. You can't, you know, you can't get around the rules, right? But, you know, we, we have great discussions with people, but the structure, as you say is important. If you have family members or if you have business partners that you are associated with, you're unable to really do transactions between you and them. So a great example, you and your wife own property personally, and you wanna get it into your ira.   Jaime Raskulinecz (00:14:54) - You can't sell it into either one of your IRAs because it's self-dealing. You can't purchase or sell anything that you already owned personally. If you and your wife had separate IRAs and you wanted to invest in a property together, uh, this requires some thought about this. You may invest in a property together and you may partner together, but the percentages that you start out investing must remain the same throughout the entire investment. So if you purchase a property, 50, 50, 50% of the investment money must come from each ira and all of the income must come back to the IRAs in those same percentages. So 50% of the rent, 50% of expenses from either ira, and those percentages can never change because then that's actually doing transactions with disqualified people. That's why the percentages must stay the same, but there is a lot of flexibility to partner with others, even though they may ordinarily be disqualified from doing a transaction between you.   Sam Wilson (00:16:05) - Right. The way I've, I, the way I've understood disqualified, uh, uh, people, it would be more of a, a linearal, no linearal, gosh, can't even speak today, but just direct descendants. Like, my mom can invest with me in a deal that I am a general partner on, but my siblings can. Is that right? Correct.   Jaime Raskulinecz (00:16:28) - Yeah. But you have to be careful. If your siblings invest, then you have to be sure that it's a market rate transaction and that your siblings IRAs are not getting special treatment because of the relation, right. Or your fund, or your deal isn't getting special consideration. Like if they're giving you a loan, maybe they're giving you half of the normal interest rate that's market that's wouldn't be allowable. So you also have to keep some good records to prove that everything was market rate.   Sam Wilson (00:17:02) - Right. Right. Yeah. Which, I mean, market rate four years ago might, might have been three to 5% market rate today might be 10 or 15. So , right,   Jaime Raskulinecz (00:17:12) - You're   Sam Wilson (00:17:13) - Gonna, you're gonna need the, uh, need that good record keeping there. Okay. Awesome. So we've talked a little bit about prohibited transactions. We've talked about how to market to, uh, self-directed account holders. What, and we've talked a little bit about the types of accounts. I think we mentioned self-directed IRAs, we mentioned, uh, self-directed HSAs and self-directed. What was the other one you threw in there that was a   Jaime Raskulinecz (00:17:36) - Little bit? Education savings, account   Sam Wilson (00:17:37) - Education savings account. One that I don't hear a lot of press coverage on, because I think everybody, I think IRAs for whatever reason tend to be more, just more people know about 'em. But solo 401ks, what is to walk us through that benefits, maybe if you're considering opening accounts, why one versus the other? I don't even, not even sure. I understand why one is better than the other. So maybe you can kind of talk to us about those.   Jaime Raskulinecz (00:18:04) - Well, on a solo k there, there can be no common law employees of the company if you have a solo K but you can have partners or spouses that can, uh, be included in the plan. And so why some people see benefits to using a solo K first thing is the contribution limits to a solo K are much higher than you could put into an ira. So for 2023, and I have some cheat notes for myself cause uh, my memory is bad, but for 2023 and a solo, okay, you can, um, you can contribute up to 25% of your compensation to a maximum of about, uh, 22,500. And if you're 50 and above this year, there's a $7,500 catch up contribution. So the contribution limits are a lot higher. If you mortgage a property in a solo k, it's a little bit, it's, it's a little bit easier to mortgage a property in a solo k um, there are some benefits to that, but the disadvantages to a solo K or that most people don't really understand them, uh, there are companies that specialize in self-directed solo Ks, and that might be all they do is qualified plans for non-publicly traded alternatives.   Jaime Raskulinecz (00:19:38) - We offer solo Ks as well, but we require folk to have a third party administrator to advise them on the setup of the plan, the ongoing reporting and maintenance of the plan, because that's, that's a whole separate field, uh, qualified plan administration, and that's really not our thing. So en to, to enable somebody to do it, they really have to have someone to advise them.   Sam Wilson (00:20:03) - Right. Yeah. It sound, it sounds like there's, there's, uh, maybe some flexibility benefits that come with it, but then also some reporting and, um, just some rules to that game maybe that are sounds really nuanced.   Jaime Raskulinecz (00:20:19) - Yeah, and a little more of an expense too, right? Because you actually need to have somebody advise you on that. So, uh, it it's a little more expensive to do if you think you're gonna make all of those. Uh, if you're gonna maximize the contributions and perhaps you have an old employer 401K that you wanna roll into this plan, so you have a lot of funds, then it kind of makes sense, right? You've got a lot of money in there and you wanna be able to put it to maximum use for your investments, and then it pays to pay all of those professionals to advise you, right? If, if you, if you have $10,000 in that plan, um, you know, why would you wanna spend money on the advisors, you know, makes more sense to use an IRA simpler,   Sam Wilson (00:21:01) - Right? Yeah, absolutely. Are there things that we should be doing on the IRA side of things to, I mean, are there, are there advantages or, or, uh, is there any capability of putting in more than maybe what the contribution limits that are published? Are there, are there kind of some catch up provisions or anything like that that we should be thinking about?   Jaime Raskulinecz (00:21:21) - Yeah, there are, uh, catch up contributions for, uh, traditional and Ross, although not as generous as, uh, the 401k. So it's only a thousand dollars catch up contribution for both of those, and the contribution limits are 6,500 for this year. But you know, what people don't realize is with those old employer 401ks, um, you know, as I keep saying, there's not too many reasons to keep all your money over there. You can roll those into an IRA and have a nice balance to enable you to do some creative investing.   Sam Wilson (00:21:58) - Yeah, no, that's cool that I didn't realize that, that you could roll old 401K funds into an ira. What, what do you advise? This is a personal question because I see, I see both in my investor pool and me personally inside of my self-directed ira, you get distributions. Maybe they're monthly, maybe they're quarterly, but you know, so let's say we put 50 grand in a deal and you know, it's throwing off 8% a year, whatever that comes out to be, what is that? 4,000 bucks a year? Yeah, it's really hard, especially when that 4,000 bucks dribble dribbles in $1,000 at a time throughout the year to do anything meaningful with that. What do, what do you see some people doing to kind of overcome that hurdle of small accounts, especially investments that produce cash flow, but then, I mean, it's gonna take 12 years to have another $48,000 to invest into anything at 4,000 bucks a year. If that's all that account had was 50 grand, then I'm not saying that's what it is, but if that were the case, so what are people doing right now to kind of deploy small balance IRAs in a meaningful way?   Jaime Raskulinecz (00:23:03) - Uh, good question. And so don't forget, even though you have a small balance, um, IRA, you probably can make contributions every year to boost up that balance, right? So you have to watch your income limits and, and what other contributions you're making. Yeah. But you can add to it that way. But a favorite method, uh, or a favorite investment in our office of small balance accounts, especially with some young people who might just be starting out, they may look at their balance and say, especially in this interest rate environment, I have a friend who has credit card bills or whatever, and they're paying, what is it now, 30%? I'm afraid to look at my statement. So I don't even know what credit card interest is these days, but it's, it's, you know, really high. Sure. So, um, they're paying this off and maybe it's 30% interest.   Jaime Raskulinecz (00:23:59) - I can get maybe four and a half percent in a treasury fund right now because interest rates are going up so much. But if I offer that person a personal loan, and it could be collateralized by something, it doesn't have to be an unsecured note, but I'm gonna lend this person $5,000 to pay off some credit card debt, and instead of them paying 30% and me getting four and a half, maybe I'll get 10, right? Or 12 if it's not collateralized by anything, maybe even 15, because there's no collateral, right? You have to look at what your user, uh, laws are in each state, but I'm going to get a much higher interest rate, you're gonna get a much lower interest rate, and I still have recourse against you if you don't pay me, uh, or if you don't pay my ira. So that's a good way to do it. There are some other companies that take smaller investments into some startups, so I don't, there's so many out there crowdfunding sites and startups, but you can use your IRA or other money to do smaller investments in some of these platforms that do investments in startup companies, and they're small minimums, right? So those are two of the most popular ones that I see.   Sam Wilson (00:25:19) - Yeah, I would, I would, I would think a reggae fund of some sort where you could, especially if you can, you know, continuously invest those distributions that are coming to your account, would be a good way to, a good way to deploy that as well. I hadn't, hadn't, uh, considered that, uh, on that front. So, no, those are, those are great. Two very great suggestions there. Jamie. I know we're over time. I certainly appreciate you coming on the show today. This was a blast. Learned a ton from you. If our listeners want to get in touch with you or your company, what is the best way to do that?   Jaime Raskulinecz (00:25:48) - Well, we, our website is next generation trust.com. That's probably the best way. There are several ways to reach us there. We have, uh, a chat spot on that website. We have a form on the website to contact us. There's a ton of educational resources there. We have, uh, pre-recorded webinars and other videos. We have white papers that they can download to see the different investment types. And there's also, uh, a listing of our staff and ways to contact them if you want to talk to a live person. Fantastic. We have a live, live person answering the phone during business hours, so you, you will always get a person at my office.   Sam Wilson (00:26:30) - Awesome. Awesome. Thank you Jamie, so much for that. I do appreciate it. Thanks so much for coming on the show. Have a great rest   Jaime Raskulinecz (00:26:35) - Of your day. Thanks so much for having me.   Sam Wilson (00:26:37) - 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.      

Today's episode features Andrew Keel, CEO of Keel Team LLC, who shares his experience in mobile home park investing.  He discusses his approach to finding off-market deals through cold calling and the efficiencies he brings to properties through sub-metering and other improvements. Sam asks Andrew about the market sentiment in mobile home park investing and his journey from flipping houses to owning over 2,000 lots across 33 mobile home parks and 11 self-storage facilities. Andrew also explains his company's approach to adding affordable housing units to markets in need while providing great returns and tax benefits for investors. Join Sam and Andrew in today's episode. -------------------------------------------------------------- Cold Calling and Timing [00:00:00] Andrew Keel's Journey [00:01:07] Efficiencies in Mobile Home Park Investing [00:04:20] Building a Cold Calling Team [00:07:48] Forced Sellers in Mobile Home Park Investing [00:10:10] Creating Affordable Housing in Mobile Home Parks [00:11:44] The need for affordable housing [00:12:33] Community engagement in mobile home parks [00:13:36] Connecting buyers with manufactured housing [00:17:09] Building a Team [00:18:45] Creating Win-Wins [00:23:09] Contact Information [00:24:15] -------------------------------------------------------------- Connect with Andrew: Instagram: https://www.instagram.com/keelteamrealestate/ Facebook: https://www.facebook.com/keelteam6/ Linkedin: https://www.linkedin.com/company/keel-team-real-estate/   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 → sam@brickeninvestmentgroup.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: Andrew Keel (00:00:00) - they're not gonna wanna sell right when you call 'em, right? They're, you're kind of caught 'em off guard. But it's getting the details on the property, seeing how it's performing, and then following up with them because life happens. I, I, if, if this cold calling has taught me anything, it's that, hey, you know, people are one heart attack away from fire sailing their property. It's all timing and being there when you know something happens to help give them a solution, right? A, a fast exit, uh, because that's, that matters in today's world.   Intro (00:00:27) - 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 (00:00:40) - Andrew Keel is the c e o of Keel team llc and m h u Top 100 owner of manufactured housing communities with over 2000 lots under management. His team currently manages over 30 manufactured housing communities in 11 self storage facilities. Andrew, welcome to the show. Thanks   Andrew Keel (00:00:56) - For having me. Excited to be here, Sam.   Sam Wilson (00:00:58) - Absolutely. The pleasure is mine. Andrew, there are three questions I ask every guest who comes in the show in 90 seconds or last, can you tell me where did you start? Where are you now, and how did you get there?   Andrew Keel (00:01:07) - Started flipping houses around central Florida, uh, through a yellow letter I mailed out. I found two mobile homes, uh, uh, that, that I ended up buying and selling on contract. Ended up meeting a, a park owner and he took me under his wing and, and said, Hey, this is how you syndicate deals and raise money from investors. So now I've been doing that for seven years, and we own, uh, over 2000 lots, across 33 mobile home parks and 11 self storage facilities.   Sam Wilson (00:01:37) - Wow, that's amazing. That's absolutely amazing. Tell me, I guess, what, uh, what's the market sentiment and what it is you're doing right now?   Andrew Keel (00:01:46) - The market sentiment? You know, I think it's, uh, I think there's some, some ups and downs. You know, there's some, there's some landlords out there that have kind of given mobile home park investing a black eye, I would say from, you know, raising rents too fast and, and, and kind of, you know, predatory landlording is, is kind of, you know, going around. So there's some of that out there. Uh, but then there's good operators that are doing it the right way, right? Like, you know, rent's gotta go up, but you gotta fix that deferred maintenance, you gotta improve the properties and make 'em better. And I think there's a win-win there for the tenants and for the investors. So, uh, it's just finding the right operators. Yeah,   Sam Wilson (00:02:23) - No, that, that's absolutely right. Uh, I want to hear, you know, what, what it is that you guys are doing right now. Uh, like who is your target seller? What, what's that, what's that look like for you?   Andrew Keel (00:02:36) - Target seller is, uh, we have a, an acronym, it's called goat and it stands for Gray, old and Tired . And in our c r m we don't pursue any deals unless the owner is a gray, old and tired, uh, owner of commercial real estate, specifically mobile home parks and self storage facilities. Uh, through our sales team, we make over a quarter of a million cold calls to mom and pop owners of, uh, self-storage and, uh, mobile home parks every year. And that's where we buy all of our deals or are off market, uh, direct to owner. And, you know, we've just found that, you know, when we're buying from mom and Pops, we're able to get, you know, uh, typically better deals, but mainly we're buying properties that are not being efficiently run. And when we take them over, you know, there's very easy to see things like, Hey, having your rent roll be digital and software instead of on a yellow pad of paper. Little things that we can do to tweak the operations to make it better. And hey, if that's how they're running the rent roll, imagine what else they're doing that we could tweak to more efficiently and and increase the No, I, so yeah, that's, that's our nutshell. Yeah.   Sam Wilson (00:03:46) - And, and I think anytime, and of course the, the manufacture to housing community space, even for the last decade has certainly been undergoing its fair share of sophisticated ownership groups. Uh, in fact, I would say it's probably more on that front than maybe less at this stage, cuz it's, it's been such a hot, uh, a hot, um, asset class to be buying in. But tell me some more other efficiencies maybe that you guys see some sophistication that you can bring to the table at scale, maybe that a mom and pop owner just can't afford to do with a single property.   Andrew Keel (00:04:20) - Yeah, I mean, the big one that comes to mind is sub metering the, uh, water and the water usage, right? The under each home, you know, now there's technology out there with internet connections. The sub meters actually have internet connection and will in real time notify you of high usage. So if they go over, uh, you know, high usage, we can stop it, right? You know, very early on, instead of waiting 30 days for us to get a, uh, uh, an invoice in the mail from the water company telling us that we have a water leak because our water bill is double right. You know, we're able to just react in real time where the mom and pops, they may not even be billing back for the water and sewer. They may just be including that in lot rent. So not only were we billing it back, but we're also catching leaks earlier to, you know, reduce that potential expense.   Sam Wilson (00:05:07) - Yeah. And it's small stuff like that. I mean, I don't know what, what do those meters cost you on a, on a per home basis?   Andrew Keel (00:05:14) - Let's say 500 bucks all in with installation.   Sam Wilson (00:05:17) - Okay. But, okay, so 500 bucks, let's assume it's a hundred pad, uh, a hundred, a hundred pad park, that's 50 grand, right? And so that's right to a mom and pop owner, that's a tough pill to swallow. Like, man, you know, I don't know. That's, we, we run this park and that's $50,000 and you know, he probably had a, had a new truck in 10 years, so, you know, he's looking at a new truck or backfilling water and goes, I think I'll just take the new truck. Uh, cuz you know, if you have to choose how to spend his money, where you look at that and say, how can we not put that amount of money into these parks? It just, it just makes financial sense.   Andrew Keel (00:05:52) - Like, for example, a park we bought it had water leaks and it was losing $2,000 a month on the water sewer recapture. Wow. So if you take 2000 a month, month, it times up by 12 months gives you 24 K a year in additional expense. If you're able to, you know, add 24 K in NOI to that property and then add a seven cap, you know, you just saved $342,000 over $342,000. So to spend 50 k to make 342,000, we're gonna do that every day of the week.   Sam Wilson (00:06:26) - For sure. For sure. You call me when you have that next, uh, next, uh, you know, uh, opportunity right there. If I can do that in a year, I'll, I'll, I'll be all, I'll be all about it. Thanks, Andrew. Um, no, that's fantastic. I love that. I love that. Let's get into the, the, the 250,000 cold calls comment. I mean, that's mind boggling. Are there 250,000 self-storage and or mobile home? Are there, are there that many combined in the United States   Andrew Keel (00:06:53) - That there there's not, yeah, there's about 50,000 or so of each asset class. Okay. And obviously, you know, for mobile home parks, that number's going down every year because it's really hard to get new ones developed and the existing ones are being torn down and turned into apartments or, or something else. Uh, you know, for it's self storage is obviously being built up, you know, uh, more and more. But, uh, you know, a lot of that is recurring calls. You know, they don't pick up, you know, you're leaving voicemails, you're doing different things. But, but yeah, I think that is our niche. And you know, for example, we have a $4 million property under contract right now that's supposed to close at the end of the month, a hundred percent owner financing. Wow. At 6% and a seven year term and 25 year amortization. Okay. So like a hundred percent l t v, you know, and, and do your return metrics on that when all of the capital you're raising is for improvements. Hmm.   Sam Wilson (00:07:48) - Mm-hmm. . That's amazing. That's amazing. Awesome. And people, people will tell you that those deals don't exist, but you're, you're living proof that that, that they do in fact still exist. What's it, what's it been like, give us some insight onto building a cold calling team and even getting the deal flow and data right? Such that that team can then continue to produce those phone calls. I mean, that's, that's a whole process all itself. Yeah.   Andrew Keel (00:08:13) - Oh, it a hundred percent is, yeah. We used a, a software called Reonomy to help identify property owners and get their contact information and then, you know, really identifying the team. You know, we found that it's better to get sales guys that can work part-time because do it eight hours straight of just cold calling. You're gonna lose energy and you're gonna, by the end of it, you're not gonna be as productive. So we have, uh, a team that works part-time, you know, four hours a day, right. In the mornings typically. And, you know, they're on a dialer, so they're hitting, you know, multiple numbers at once, you know, reaching out to people and, and it's been really productive for us, you know, building those relationships, you know, hey, they, they're not gonna wanna sell right when you call 'em right? They're, you're kind of caught 'em off guard, but it's getting the details on the property, seeing how it's performing, and then following up with them because life happens. I, i, if, if this cold calling has taught me anything, it's that, hey, you know, people are one heart attack away from fire sailing their property. It's all timing and being there when you know something happens to help give them a solution. Right. A a fast exit. Uh, because that's, that matters in today's world.   Sam Wilson (00:09:18) - It, it certainly does. And I was the unfortunate recipient of some news on some deals we'd been chasing a couple years ago. And, uh, you know, the seller at that point was just hard and fast. No, no, no, not gonna do it. And then, uh, I found out today that all the whole portfolio had traded hands. And I'm like,   Andrew Keel (00:09:34) - It's my own   Sam Wilson (00:09:34) - Fault for not staying in front of them. Right. I mean, it's my own fault. Those are lessons learned the hard way where you just go, okay, you've got to, like you said, it's one heart attack away from suddenly going, Hey, we're gonna fire sale this. You know, I got three months left to live maybe and I don't really care anymore, so somebody buy it so I can go do what I want for the next 90 days. Uh, yeah. And   Andrew Keel (00:09:52) - Right now, you know, with what's going on with all these, uh, interest rate caps that people are buying and, and what happened with these variable rate loans, you know, I think, I think there's more and more forced sellers than there are, uh, you know, people that, that would desire to sell, you know, at, at the right time. So there might be some opportunity there. Do   Sam Wilson (00:10:10) - You think it's happened because it's certainly, I've seen it happen in the, um, multi-family space. I hadn't really heard or thought much about it in the manufactured housing or community, uh, space. People taking on bridge debt, bridge debt is now coming due. They need to refi, but they can't, cuz it doesn't make sense. They're, they're doing cash in refis. I mean, are you guys seeing that in your, in your, uh, asset class as well?   Andrew Keel (00:10:35) - Not a ton of it. You know, I think it's still early even for multi-family. You know, I think it, it's still early, but there were some operators out there that took variable rate loans and now are negative cash flow. And I mean, I, I've seen it, right? These CMBS lenders are vicious. They will take your property back. They want to take your property back. Right. So it, it, it's really, you know, a matter of time before we see blood in the streets.   Sam Wilson (00:11:00) - Yeah. Yeah. That's unfortunate. Yeah. And that's, uh, and again, you know, I haven't seen it a lot in the multifamily space, but certainly have heard the rumblings and have, uh, you know, talked to some lenders and people that have indicated that they're, that they are seeing that, uh, indeed occur on the, especially on the cash and refi side, on, on multi-family properties, which has gotta be a painful situation Oh. Uh, for everyone. Uh, especially   Andrew Keel (00:11:21) - Everyone, especially   Sam Wilson (00:11:22) - Your investor base. Um, so yeah, that's, uh, let's talk about the affordable housing crisis. I mean, it's something, you know, we hear that those three words put together all the time, and you're in a space that is a, like you said, it's, it's a, it's not just a constrain, but it's a dwindling supply space. So what are you guys doing on that front to preserve and or create more affordable housing?   Andrew Keel (00:11:44) - Yeah, great question. I love talking about this because, you know, this is the win-win, right? You know, we're, we're buying these properties from mom and pops who have let things kind of dwindle, right? Like, we're buying properties that are 70% occupied, you know, so there's, there's more lots sitting there, but the mom and pops just don't have the effort. Or like you said, the, the funds to go and buy homes, bring them in and set 'em up on those lots, right? So when we're able to rejuvenate a property and come in with a lot of energy and a lot of new capital, it, it just, it, it is so awesome. That is why I love doing this business because I'm able to see lives change. I'm able to add affordable housing units to markets that desperately need it. And at the same time, I'm able to create a win for our investors because they're able to get great returns on their investment and also get great tax benefits because of these, these mobile home parks.   Andrew Keel (00:12:33) - But I think, you know, still the majority of mobile home parks, like over 60% are still owned by Mom and Pops mm-hmm. , and they've just kind of used these things as a retirement vehicle and haven't reinvested into them. So, uh, that vacant lot scenario is where we're adding affordable housing units. And, you know, the, the high level econ 1 0 1 is like, hey, the supply of mobile home parks are shrinking every year. That's like unknown. Just type in, you know, mobile home parks, uh, shutting down into Google and see what pops up. It's, it's all over the news because, uh, deferred maintenance, because redevelopment, you know, you name it. And we're able to buy these properties and keep them mobile home parks and increase the occupancy so that we're adding affordable housing. And, and that just matters that, that matters because we desperately need it. Manufactured housing can be built for around $50 a square foot where site built housing is over a hundred dollars a square foot. So it's like there's a huge win here, uh, to be had. And, uh, yeah, I'm excited to be able to add to that supply.   Sam Wilson (00:13:36) - Tell me about, tell me about, um, maybe community engagement inside of your, uh, communities. What's something you guys are doing on that front? Obviously retention of your, um, residence is probably a lot easier in your space, but are there things that you're doing to really improve the, um, just kinda the holistic experience of someone living in your communities?   Andrew Keel (00:14:00) - Yeah, I think the first thing is we always have an onsite manager that is, is a tenant that lives in our park. You know, and, and just giving them that point of contact really makes it feel, you know, more like a community because they connect everybody. They're talking with everybody. Uh, that has been huge. You know, we're, we're buying from mom and pops who have self-managed Yeah. And maybe they live a couple hours away and they don't make it to the property. Uh, you know, every month where an onsite manager that's working, even if they are part-time, you know, Monday, Wednesday, Friday, you know, you know, and whatever the, the hours are. But it's just good to have someone there that they can talk to and they can work through stuff and see the options. You know, we noticed that in, uh, during c o d, you know, there was a ton of rental assistance programs, but there was no one to like hold the, the hand of the tenants and help get them signed up for these.   Andrew Keel (00:14:49) - So our onsite managers really carried that load and, and sat down on the computers and helped, helped our tenants sign up for these rental assistance programs. And, you know, that is a huge burden off of their back. Now they can spend the money that they have on food and other resources instead of needing to worry, you know, they got thousands of dollars for their rental assistance and that was just a huge help. So having onsite managers and then obviously communicating well with our, with our resident base is, is huge for us. So those are two things, community engagement wise, uh, that we make sure to do every year.   Sam Wilson (00:15:19) - Yeah, no, I think that that's really, really cool. Thank thanks for sharing the insight on that. Yeah. And having that local, that person that's right there, living one of your neighbors. I mean, I think that would be just a huge, um, just a huge thing that would really, you know, again, not just resonant retention, but but from a, a, uh, feeling like you belong there sort of thing would, would make a big Yeah. A big difference on that front. You mentioned bringing homes in. So you buy a park, use the example, you said it's 70% occupied, that means, let's call it a hundred. I don't know how many units was there, but let's just make a number up and say it's a hundred. So you got 30 open slots, you're gonna bring houses in. Are you guys then selling those to your residents? Are you using those as park owned homes? What is that? What's your plan there?   Andrew Keel (00:16:02) - Our plan is, is we want tenant owned home communities. It's just more scalable and, and we're, we want to rent out the dirt, not the homes themselves. Right. You know, a lot of people don't, don't think about this, but manufactured homes are built differently. The drywall is not the same size that the windows are different sizes, the doors are different sizes. You can't just go down to the Home Depot and get some of these materials. So you're gonna have to special order them and, and ship them in. And, you know, with the logistics issues we've had the past couple of years, that can get expensive. So we don't want to own the homes. We want our tenants to own the homes and we will sell them, uh, sometimes via like a, a, a lease option or a, you know, a, a a rent credit program where they will make monthly installments towards purchasing the home. Uh, but mostly, uh, you know, there's financing companies out there as well, like Triad and PEP Lending that will finance our tenants and then we will just, you know, get law rent.   Sam Wilson (00:16:56) - Got it. Got it. So you guys aren't even directly buying the homes, you're just connecting the buyers with the, uh, manufactured housing, uh, manufacturers. Is that right? Or are you guys buying 'em, bringing 'em in and then connecting them? Some   Andrew Keel (00:17:09) - Sometimes. But, you know, everybody likes it with a bow on top and ready to go. So, we'll, we'll actually get the homes in and there's a program called Cash Program at 21st, uh, mortgage where we, we'll buy the homes or we won't even have to buy the homes. We'll get the homes moved in, get 'em set up on the lot, and then we'll market them and then, you know, funnel, uh, interested buyers to this 21st mortgage who's a part of Berkshire Hathaway and that whole, uh, you know, Clayton Homes, you know, Warren Buffet deal and they will finance our tenants.   Sam Wilson (00:17:38) - Got it. Oh, that's cool. I like that. I like the way you put that with, everybody wants it with a bow on top, cuz that's that's absolutely true. I know here, and again, I haven't had, uh, we haven't talked mobile home parks on this show probably, uh, maybe six, seven months. So I know the last time someone came on and really dove deep into the mobile home park space, even then they were experiencing just some supply chain constraints as it pertained to getting new homes, getting things on the lots. Has any of that lessened, or what's that look like now?   Andrew Keel (00:18:06) - Yes, it has lessened, you know, it was 18 months to order a home and it wasn't come in for 18 months. It was crazy. Wow. Back in Covid and all the, you know, the logistics issues. Uh, but now we're down to about four months. Okay. So we'll order it and four months it's coming in, which is amazing. I mean, I'm, you know, very grateful for that because 18 months was just so hard. And then they, they wouldn't tell you it was 18 months. Right. They'd tell you it was gonna be 12 months. Right. And then they'd push it back and then they push it back, and then it ended up being 18 months. So imagine your proforma when you're planning on income at, at month 13, and you're not getting until month 19. So there was a lot of operators hurting at that time, but things have improved on that front.   Sam Wilson (00:18:45) - Oh, that's great. That's great. I'm glad to, glad to hear that. Yeah. That's one of those things that, uh, like you said, if it's, if it's, you can't, you can't underwrite, you know, when, when timelines aren't kept from your manufacturers, you just can't, you can't stick to it. Tell me about this. You've built a team. You've, you've gone from, I think you started in fixing flip, is that right? If I'm remembering your story correctly in the beginning Yep. Picks and flipping. Yep. Now you've grown this, this huge mobile home park, uh, or mobile home community business. You've got team members, you've got cold callers working all day. You guys are selling homes, you're buying communities. I mean, you're going like gangbusters. What is one thing you feel like you've done really well that maybe somebody that's just starting out and or you know, has a little traction should emulate   Andrew Keel (00:19:28) - Hiring overseas? Hiring overseas and siloing off, you know, tasks and then documenting really well, if, if I was gonna, you know, do it all over again, I would've done that earlier. You know, you can hire more loyal and, uh, you know, less expensive help overseas that will be, will be just fully capable and then some to execute. And, you know, I, if you can do that, I, I really think every business owner should really explore hiring some overseas help. Mm-hmm.   Sam Wilson (00:20:02) -  mm-hmm. . Yeah. Absolutely. Absolutely. When it comes to things that maybe rewind the tape a little bit and, you know, you said, gosh, I could have done this better. What are, what are some of those things that come to mind?   Andrew Keel (00:20:15) - Yeah, man, I, uh, in my early days, you know, when we were just hiring people, uh, we didn't do like a personality assessment or anything like that to see if they would actually be good in their role, uh, long term. So we had a lot of turnover, uh, because it was, hey, we, we put someone that was not detail oriented in a role that required, you know, very detail oriented, uh, personality types. So now we use a system called the Predictive Index. Mm-hmm. . And it does a, a cognitive and a personality assessment. And it's just aligned our team with the roles and we're, we're fighting. They're staying longer, they're happier, you know, because we're playing to their strengths. So that's been huge for us.   Sam Wilson (00:20:59) - Yeah. Man, what a powerful thing that is. I can, I can just speak, uh, and completely agree with you on that front. Using a personality assessment and familiar with predictive predictive index, the disc test. A lot of those, uh, you know, maybe one, one, I don't know if one's necessarily better than the other, but I've used them both. And, uh, gosh, I was even having a conversation with a new hire yesterday when I was like, wait, I can refer back to your, um, personality test that you took. And I recognize that I need to speak to you and engage with you in a different way such that you understand what it is I'm trying to say. And, and give you what you need to go do your job.   Andrew Keel (00:21:38) - And Exactly.   Sam Wilson (00:21:39) - And I, that's so powerful. It's so powerful and I so powerful. And actually this, there was a team member that we just, this is the same team member we just brought on, but I had a role, I wanted to hire this particular, I wanted to fill this role and I already knew this person. I wanted to put her in that role. She did the personality test and I said, no, but there's another kind of blended role that we can put you in that will do a little bit of those things, but fill the gap over here much more meaningfully based on your skillset. She's way happier and she's crushing it. It's like she That's awesome. No, it is awesome. So I just thank, thanks for sharing that. Cause I think if people aren't utilizing those very, and they're not expensive.   Andrew Keel (00:22:17) - No, they're not. No.   Sam Wilson (00:22:19) - And it makes all the difference in the world. So I can just testify to what you've just said as a, as a leader, um, how powerful that is when we're building out, uh, our teams on that front. So very, very cool. You, you've shared with us so much here today, Andrew, on how to build a team, talking about, you know, making 250, which is an astounding number thousand cold calls, how you guys are buying, you're buying everything offline, buying from, from, uh, you know, mom and pops, how you're bringing sophistication to the industry in this space. We didn't even get a talk about self-storage. I mean, you guys are buying in, in, in that department too. Maybe you'll have to come back on show number two and tell us how you're, how you guys are finding opportunity on that front. Is there anything else really that comes to mind today that you'd say, man, Sam, these are some things that I really wanna share with your listeners that are relevant to what we're doing and that, uh, I think will make a difference?   Andrew Keel (00:23:09) - Yeah. I would say at, at the end of the day, uh, you know, being willing to, uh, give back and, and try to create win-wins, you know, in, in your business, right? Like, uh, our, our goal is not to make as much money as we humanly can, right? At the end of the day, it's creating a win-win for our residents. Mm-hmm. . So they're happy. And by doing that, they're gonna stay longer and it's gonna be a win for our investors because they're gonna have more reliable, uh, income and, and, you know, income and distributions off of their investments. So that's, that's something I can go to bed at night and lay my head down knowing, hey, I'm doing, I'm doing good in the world. I'm adding affordable housing and I'm, I am, you know, keeping these assets as mobile home parks in, in my case, uh, where otherwise they might have been redeveloped and, and turned into something else and these people would've lost, uh, lost their homes and lost their living arrangements. So, uh, yeah, I'll just spin that way.   Sam Wilson (00:24:06) - Awesome. Andrew, thank you for coming on the show today. I do appreciate it. Certainly learned a lot from you. If our listeners wanna get in touch with you and learn more about you, what is the best way to do that?   Andrew Keel (00:24:15) - Best way to do that would be to check out my website, it's keel team.com. That's just K e E L t e A m.com.   Sam Wilson (00:24:25) - Kehl team.com. We'll make sure we put that there in the show notes. Andrew, thank you again. Have a great rest of your day.   Andrew Keel (00:24:31) - Yeah, thank you so much, Sam.   Sam Wilson (00:24:33) - 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 Podcast, Spotify, Google Podcast, 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 Wheelwright    Tom is a CPA, CEO of WealthAbility®, Rich Dad Advisor, entrepreneur, international speaker, the bestselling author of Tax-Free Wealth and The Win-Win Wealth Strategy. Join Sam and Tom in today's episode.  -------------------------------------------------------------- [0:00] Intro [0:51] The 3 questions [1:57] Scaling CPA firms  [5:38] Things to hyperfocus on now  [10:08] Cost segregation firms [12:09] Solar opportunities  [20:05] Doing well / Making mistakes  [24:41] Closing  -------------------------------------------------------------- Connect with Tom:    Facebook: https://www.facebook.com/4wealthability/ Twitter: https://twitter.com/WealthAbility Instagram: https://www.instagram.com/tom_wheelwright/ Linkedin: https://www.linkedin.com/company/wealthability/ Web: https://wealthability.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 → sam@brickeninvestmentgroup.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: 00:00:00:00 - 00:00:22:07 Tom Wheelwright If you're in a location, if you have commercial property in a location that gets decent sunshine and you're not doing in solar, you're missing out on one of the easiest ways to make money there is right now. I mean, consider you get a 30% tax credit and with 80% bonus depreciation, you get a 65% tax deduction.   00:00:22:23 - 00:00:29:04 Intro 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.    00:00:31:16 - 00:00:49:04 Sam Wilson Tom Wheelwright is a tax and wealth expert. He's a CPA CEO of Wealth Ability. He's a rich dad, advisor, an entrepreneur, international speaker, and the bestselling author of Tax Free Wealth and the Win Win Well Strategy. Tom, welcome to the show.   00:00:49:23 - 00:00:51:12 Tom Wheelwright Thanks for having me, Sam. It's great to be with you.   00:00:51:16 - 00:01:01:16 Sam Wilson Absolutely, Tom. The pleasure's mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?   00:01:02:16 - 00:01:34:20 Tom Wheelwright Well, I started as I grew up in Salt Lake City, Utah, so I actually spent two years as a mormon missionary in Paris learning how to get rejected in French, which was kind of my start in entrepreneurship, and then started with Ernst and Young and built run sold CPA firms for the last 30 years. So right now, currently running a network of CPA firms around the U.S. So we have over 60 CPA firms throughout the U.S..   00:01:35:23 - 00:01:57:06 Sam Wilson Wow. That's that's a lot bigger than what I even understood here. You know, talking to you before you came on the show. So you have I would say then you have a comprehensive understanding of what it means to build and scale businesses among real estate holdings probably as well. So that's that's really, really fascinating. Building and scaling CPA firms.   00:01:57:17 - 00:02:07:11 Sam Wilson What's the need in the industry? I would think inside the United States that, you know, every town has its fair share of CPA firms. How are you finding opportunity in that space right now?   00:02:07:15 - 00:02:38:08 Tom Wheelwright Well, the challenge is, is that CPAs, we have a weird industry. We sell something that people don't want and we give away something they do want. So we sell tax returns, financial statements. Nobody really would do a tax return if you didn't have to. People need them, but they don't want them. And CPAs don't do a very good job of providing tax advice.   00:02:38:16 - 00:02:59:16 Tom Wheelwright They're they'll respond to your questions, but they really do not understand the tax law very well. And they do not do a good job of of really taking a proactive approach to helping their clients reduce their taxes, which there are thousands of ways to do it. And most CPAs, unfortunately, don't do that. So it actually makes it for a pretty blue ocean for us.   00:03:00:03 - 00:03:12:18 Sam Wilson Yeah, I would. I would think so. Speaking of on on the blue ocean, the term blue print comes to mind. It sounds like you guys have figured out a way to move into a city, set up an office. Here's how you do it. What's what is that playbook.   00:03:12:18 - 00:03:38:22 Tom Wheelwright For you, you know? Well, you know, we do we don't set up offices. We've actually we've actually brought in members into our network that are established CPA firms. And what we do is we train them and we provide a system for them. And then we we do some marketing and sales for them. So we're actually we're actually their resource to be a better CPA firm.   00:03:39:07 - 00:04:00:02 Sam Wilson Got it. Got it. And you mentioned there the two things, you know, that I think a lot of times and certainly been mostly my experience is that the tax planning, the tax the CPA side of it is a very reactive business. What do you guys do in order to make it in, make it and make that a proactive, engage with your clients before that tax bill comes due?   00:04:00:09 - 00:04:01:11 Sam Wilson What's that look like?   00:04:02:04 - 00:04:30:20 Tom Wheelwright We do a couple of things actually unique to us. First of all, with every new client, we actually build build out a long term plan of action for the long term strategy. We find out take a very holistic approach. We look at their we look at really four areas of their finances. We look at their wealth. What are they going to do with their money, which some you specialize in?   00:04:30:20 - 00:04:53:22 Tom Wheelwright I know we look at their tax, income tax, but we also look at their asset protection and their estate planning because you want to take a very broad picture if you really want to understand a client. And then we really focus on all the positive incentives in the Internal Revenue Code instead of worrying about the IRS is going to come get us.   00:04:53:22 - 00:05:14:09 Tom Wheelwright So we're looking for those things that the government wants us to do, things that they want us to invest in. Real estate being one of those and which one do they want to invest in? And if they're willing to do what basically partner with the government as an act to partner with the government will show them how to seriously lower their taxes.   00:05:15:03 - 00:05:38:08 Sam Wilson And that's the I like the I like the way you said that the positive incentives that are out there because yeah, I mean, so many of us we want to avoid like, oh, it's, you know, I want to make sure that I don't get hit with that tax or get hit with this tax. But you're kind of turning that on its head and saying, how do we how do we actually work alongside the incentives that are being placed out there to make this a more favorable outcome for us?   00:05:38:08 - 00:05:51:24 Sam Wilson Let's talk about those two or three things maybe that are on the top of your mind that you would say are some of the things that people should be thinking about right now. What's a what's a hyper focus, maybe for you and or your firms? You say, hey, here's advantages that that can be had at the moment.   00:05:52:17 - 00:06:28:13 Tom Wheelwright Well, we do a lot of work with real estate investors. Really. Our primary specialty is entrepreneurs who also invest in real estate and real estate. Of course, that has had huge tax advantages for the last several years with bonus depreciation, right? Where we get to not just take it over 27 half years or 39 years and commercial property, but we actually can take a deduction for things like the contents of the building, the land improvements on the building.   00:06:28:13 - 00:06:54:08 Tom Wheelwright We can take that deduction immediately. So what that means is that for a typical investor, if if there is let's say you got a 75% loan to value, you're probably going to get a deduction equal to the amount of your investment. Right. And that's a big deal. I mean, you can put $100,000 into an investment and get $100,000 deduction.   00:06:54:08 - 00:07:16:23 Tom Wheelwright That's pretty cool. Only in the last few years. So we've been will do that in the U.S. in real estate. It it's gone down this year so we were at 100% prior to this year. And then this year we're 80% about bonus depreciation. But remember, we still get the rest of the depreciation, so forth. But what I find is, is that invest ers and a lot of syndicators do this.   00:07:17:06 - 00:07:40:08 Tom Wheelwright They don't do a cost segregation, which is required technically it's required by law anyway. The IRS doesn't enforce that law, but it is required. And and what they don't do is go hire an engineer with a CPA and go out and actually do a real detailed analysis. And because of that, they end up leaving a lot of money on the table.   00:07:40:13 - 00:07:59:20 Tom Wheelwright As you know, I think the most important thing in real estate is cash. And you got cash to make the next deal. Right. And so you want your cash early. You don't want to be you want to be giving your money to the government to hold on for you. Right? You want to actually be using that money to invest.   00:07:59:20 - 00:08:19:12 Tom Wheelwright Marissa And frankly, they do too. I mean, that's the whole purpose of this incentive is so that the government is saying, look, if you will go out and invest your money and do it the way we tell you to do it, then we will actually provide that cash will help you with that cash flow. You don't have to pay taxes now.   00:08:19:12 - 00:08:51:21 Tom Wheelwright You can pay taxes later, maybe never depending on how serious you are as an investor. But definitely what we want is we know that commercial property, we know that industrial property, we know that agricultural, we know that housing, these are all necessary and important to the economy in the United States, that they're necessary aspects to our economy. And so we want to make sure that we take advantage of those and do the things that the government really saying.   00:08:51:21 - 00:09:12:03 Tom Wheelwright These are not these are loopholes, these aren't mistakes. We're not avoiding taxes. We are doing what the government has said is the law and that's actually one of the things that I'm really high on my mind right now, because we have so many people talking about the rich don't pay tax and they're not paying their fair share, which is they pay all of it.   00:09:12:08 - 00:09:36:22 Tom Wheelwright So that's hard to stomach that they don't pay their fair share because really the rich do pay most of the taxes and that, you know, somehow they're, you know, cheating. Well, I'll tell you what my my experience is. It's not frequently the rich people. I'm sure there are rich people who cheat on their taxes. But honestly, serious investors don't ever need to cheat because there are so many tax incentives.   00:09:37:20 - 00:09:50:22 Tom Wheelwright So I think that cost segregation and just taking advantage of that bonus to break depreciation is number one in my book right now. I just think so many people I'm seeing so many people not do it.   00:09:52:02 - 00:09:57:01 Sam Wilson That's why like, I mean, that seems like the lowest hanging fruit for any of us.   00:09:57:10 - 00:09:58:01 Tom Wheelwright Doesn't it?   00:09:58:05 - 00:10:07:15 Sam Wilson Yeah, even even in residential real estate. Like if you're a residential real estate investor, you can still get a court segregation study done. And in that.   00:10:07:15 - 00:10:07:22 Tom Wheelwright Yep.   00:10:08:00 - 00:10:28:05 Sam Wilson And it's not that expensive. I mean, really. Right. But let's talk about maybe that for a minute because I will say I've had, uh, varied successes with cost segregation reports. They can be wildly different, one firm to the next.   00:10:28:05 - 00:10:28:15 Tom Wheelwright They can.   00:10:28:19 - 00:10:38:16 Sam Wilson Same exact property. How does an investor know when they're dealing with a good cost segregation firm?   00:10:38:16 - 00:11:01:20 Tom Wheelwright Well, I think you can take some good rules of thumb to begin with. So on your bonus depreciation and you know, I think as a rule of thumb, you are your the contents of your building are probably going to be somewhere between 15 to 20% of the value of the building and the land improvements going to be another 5 to 10%.   00:11:01:20 - 00:11:24:22 Tom Wheelwright So you could be anywhere from 20 to 30% in that category if you're down below that, then I would be concerned. If you're up above that, I'd also be concerned. So you got to I see on both ends, of course, because like we like to say is that in in taxes, pigs are cute and hogs get slaughtered. So you have to be you want to be a little careful.   00:11:24:22 - 00:11:41:16 Tom Wheelwright But I really think that the most important thing, of course, you get a good referral, you get either from your CPA or somebody actually preferably your CPA because they actually know the industry and they're probably going to be the best. They're going to probably be the best referral source for you.   00:11:41:24 - 00:12:09:00 Sam Wilson Yeah. Yeah, absolutely. Absolutely. Yeah. That's that's a big thing. And even even an 80% bonus depreciation still, that's really strong. And something that I'm surprised to learn from you that that real estate investors, commercial real estate investors aren't taking advantage of that, that that truly blows my mind because that just seems so easy. Another one maybe that I think you and I talked about off air here is the solar.   00:12:09:03 - 00:12:13:11 Sam Wilson You said that there is good opportunity in solar right now. Please.   00:12:13:11 - 00:12:40:09 Tom Wheelwright Oh, my detail. If you're if you're in a if you're in a location, if you have commercial property in a location that gets decent sunshine and you're not doing in solar, you're missing out on one of the easiest ways to make money there is right now. I mean, consider you get a 30% tax credit and with 80% bonus depreciation and you get a 65% tax deduction.   00:12:40:09 - 00:13:06:14 Tom Wheelwright So you basically get so you get the 30% right off the top. So if you put $100,000 on a small commercial building, you know, okay, there's your example. I just did it on my building. And you did a that's $30,000 off the top of your taxes, right. And then 80% of 85% of the $100,000, which is about 65%.   00:13:06:14 - 00:13:38:24 Tom Wheelwright Okay. But that's just how it works, is 80% of 85% gets bonus depreciation. And then we actually get a haircut as the credit. But that's about 65%. Well, if you're in a 40% tax bracket, that's a pretty big number. That's actually bigger than the credit. So really what's going on is the government is saying, well, we'll pay for about two thirds of your solar and then what you're doing is you're reducing your own costs.   00:13:38:24 - 00:14:13:15 Tom Wheelwright Because here's the key, I think to solar. You need to make sure that you're not selling that power to the grid. You want to make sure that you're using that power. And if you're using that power, you're getting retail prices for it because that's something you're not pain, right? So you're getting retail prices. I know on our on my building, my return on investment is going to be somewhere in the neighborhood of 20 to 22% while on an annual because of that because of the tax benefits.   00:14:13:15 - 00:14:36:07 Sam Wilson Wow. That's I hadn't thought about the bonus depreciation side of that equation because this is something that we're working through right now on several properties and evaluating those and going, okay, so we put solar, you get the 30%. And then but I hadn't I hadn't put that bonus depreciation part back into that equation to see how how much sense that does make.   00:14:36:12 - 00:14:50:04 Sam Wilson One of the other things that I'm learning here is that there's even like I know one of the buildings we were looking at has it has an even other there's other economic bonuses inside of that because there's.   00:14:50:08 - 00:15:12:21 Tom Wheelwright That there are so so for example, first of all, with the solar, sometimes the you local utility will give you credits and they'll give you a rebate. So there's money there. Sometimes you're just your municipality will give you a rebate or your state. Remember, you got state taxes too, and bonus depreciation counts against state taxes as well in most states.   00:15:13:02 - 00:15:52:04 Tom Wheelwright Yeah. So that's an additional amount that you've got. You know, there are other things you can do. Of course the building, whether it's windows or, you know, other things, they're not nearly as impactful on your taxes as the solar. But remember, the batteries count, too, and the batteries are a key component because solar without batteries is marginal. But solar with batteries is really good because now you got you've got that storage so that if without that, you're actually ending up selling a lot of it to the grid because during your high production times, you can't use it.   00:15:52:04 - 00:16:10:05 Tom Wheelwright All right? And you need it when it's when the sun's not out. So you can store that in your battery. I've got a couple of batteries in my house. I've got batteries with my in my commercial property. And the batteries, I will tell you, there is they're as important as the solar panels.   00:16:10:05 - 00:16:29:00 Sam Wilson That's really interesting. Yeah. Because it you know, the direct consumption model works, I guess, to a certain point. But I would only imagine, like you said, that the battery stored in the back end is one of those things that that really makes the whole thing whole thing go round, you know, and there's differences, from what I understand in between some states are net metering.   00:16:29:00 - 00:16:44:14 Sam Wilson I don't think Tennessee is a net metering state. So I think like here I've learned this all here recently as we've been examining these products going, okay, so they're going to sell it just to sell it to us on the grid at $0.12 a kilowatt hour or whatever it is, I don't know. It was close to these numbers.   00:16:44:14 - 00:16:49:10 Sam Wilson And then if it goes back to the grid, they're only giving us $0.05 a kilowatt hour.   00:16:49:10 - 00:17:13:18 Tom Wheelwright Right? Right. So so you want to going back to the grid, you want to be using all of your solar. And if you've got a tenant, then what you want to make sure of is that the tenant's paying you, right? So you actually are set up so that the tenants because it because of the tenant normally pays for the solar for their power, then you're not getting any benefit right from that.   00:17:13:18 - 00:17:21:06 Tom Wheelwright Right. So what you have to do is you actually have to set it up so that you build a tenant for their power and the utility bills.   00:17:21:06 - 00:17:40:17 Sam Wilson You Yeah, well that makes sense. That makes a lot of sense. Do you know, are there this sounds like it's getting more challenging but are there I would imagine there are software programs and things that you can build in that help you calculate that and you're not going out to meters and writing things down, trying to figure out what the tenant actually bills you do.   00:17:40:17 - 00:17:41:13 Sam Wilson You know anything about that?   00:17:42:05 - 00:17:57:24 Tom Wheelwright Well, you would actually. Yeah. You actually do your own effectively your own meter so that you are you are actually taking advantage of and knowing what they're using and you're billing them, you know, whatever the whatever the normal utility rate is.   00:17:58:11 - 00:18:29:16 Sam Wilson Right. No, that's very cool. I like that. And this goes back to the positive incentive things because this is what somebody mentioned here to me recently. They said, look, they figured out that it's cheaper and probably a faster implementation because our our electric grid is so old. I mean, it's so old. They're said it's cheaper for homeowners to put in businesses, to put solar on their roofs and help offset the cost of upgrading the infrastructure and producing more electricity, give it to them and then put some massive incentives on it.   00:18:29:16 - 00:18:39:17 Sam Wilson And maybe that'll help kind of stave off the need for immediate, you know, reworking of the entire electrical grid. I mean, is that does that sound in keeping with what you heard?   00:18:39:17 - 00:19:08:15 Tom Wheelwright I think I think for sure there's that. And I'm, you know, the I mean, the the big problem is, is that if you're looking at from a math standpoint and you're talking about energy usage, solar is not entirely predictable. Right. But with your you know, with your own property, you're much better predicting that. Right? You know what it's going to have you know what your usage is.   00:19:08:15 - 00:19:30:03 Tom Wheelwright So it's really it's almost like like, you know how blockchain is distributed right out to the end. And Bitcoin, that's what makes Bitcoin work. Well, this is really just your distributing out to the end user. And I think when the end user takes care of it, then then the utility just doesn't have nearly as much that they have to produce.   00:19:30:12 - 00:19:48:07 Tom Wheelwright They don't, they, they can now use their, their established energy for, you know, for those special occasions when it's really cold or really hot. You know, so that they can maximize and don't have to build so much.   00:19:48:14 - 00:20:05:03 Sam Wilson Right? Right, right. No, that's really, really cool. Tom learned a lot here today. Let's let's take a look really over the lifetime of your career, I want to ask probably maybe some more, you know, things you've done right, things you've done wrong. You've built a lot of businesses. You've been a lot involved in a ton of real estate.   00:20:05:10 - 00:20:17:00 Sam Wilson You've done a lot of things over the years. So if there was one thing that you feel like you've done really well in your career and maybe one thing you feel like that was a mistake that our listeners could learn from, what would those things be?   00:20:18:00 - 00:21:02:08 Tom Wheelwright Oh, wow. I mean, there's it's so hard to pull from all those different mistakes because I've made so many, you know, I think the one thing that I've done really well is understood. I've learned what I really am good at and what I'm not good at, and I've stuck with doing what I'm good at. I find that the mistakes I make tend to be doing things I'm not good at or thinking, Oh, you know, well, this is tangentially related to so I'll go, you know, I'll go kind of my tone to that and I mean, for example, a good example was I was I got my series seven securities license years ago because I'm going,   00:21:02:08 - 00:21:27:12 Tom Wheelwright well, you know, financial planning tax go right together, right? Yeah. But the thing is, is that I realized pretty quick that that's a whole separate industry. And I don't want to I can't be really good at both tax and financial planning. Can't do it. So I very much find that the old saying a niche will make you rich.   00:21:27:23 - 00:21:54:08 Tom Wheelwright It's been very successful. I, the real estate investors I know who are super successful, they are very niche real estate investors. I met one yesterday literally. I met one yesterday that he specializes in small bay industrial properties, 2000 square foot base. So these are industrial properties. These are like, you know, like these are cabinet makers, people like that.   00:21:54:08 - 00:22:21:01 Tom Wheelwright Right. That's all he does. He's he's worth a fortune. He's made a fortune in that specialized area of investing. And he doesn't go outside of it any. And he stays in his. Yeah. He can expand his market, you know, his location a little bit, but he stays in his in that business. So for example, we build we have software, but it's software for our CPAs to use for the clients we have.   00:22:21:15 - 00:22:41:10 Tom Wheelwright So we have a software business, we have real estate, but the real estate is commercial real estate, the houses in our CPAs and and our business. So we don't stray from what we're really good at. And that's where we've been. That's where I've actually been most successful. And where I've been least successful is probably getting into things that I'm just not good at.   00:22:41:10 - 00:22:54:07 Tom Wheelwright Like I'm not a really good manager, I'm a much better leader than a manager. And so for me to be the manager is really bad idea and people are not going to like it. I'm going to cause problems.   00:22:55:02 - 00:23:12:20 Sam Wilson So I like it. I like it. That sound advice certainly appreciate you taking the time to share those. And that's I mean, yeah, that's that's something that, you know, like all of us can relate to, especially the the one about focus. I mean, just zero in in and stay in there. And that's a challenge. That's a challenge for, I think, all of us.   00:23:12:20 - 00:23:19:06 Sam Wilson And anyway it is. Yeah. I mean, especially as an entrepreneur, we only see opportunity. It's like, oh.   00:23:19:14 - 00:23:42:03 Tom Wheelwright Exactly, exactly. So literally, I'm an event, a mastermind group yesterday with 80 entrepreneurs. Right. And they're all doing different things. They all sound so exciting. They're great. And I, I actually talk to one that is doing something that I've been interested in. Well, he's like light years beyond. I mean, it would take us years and we'd never catch up, right?   00:23:42:05 - 00:24:00:01 Tom Wheelwright And I'm going, so let him do it. Right, right. We're way ahead in our industry. And, you know, we're taking on an industry that, you know, take, you know, taking on something that you're good at, that you really enjoy, that you thrive doing. I think that's what makes life great.   00:24:00:08 - 00:24:17:10 Sam Wilson Yeah, absolutely. Absolutely. And that that that brings you know, that's full circle to the idea of becoming a passive investor. Hey, if you want to you want to participate in that cool business, let me be a capital provider and you go and I'll just watch. I'll get your monthly report and it won't take any bandwidth from it.   00:24:17:10 - 00:24:23:04 Tom Wheelwright So that's I do a lot of that. I now do a lot of passive investing for that reason.   00:24:23:05 - 00:24:41:15 Sam Wilson Right, right. Because you can scale into things that you're interested in experts. Right, without being the expert. So that's very, very cool. Tom I've enjoyed certainly our conversation today. Thank you for taking the time to come on the show and really give us some insight into where we can be taking advantage of the positive incentives that are inside of the tax code.   00:24:41:20 - 00:24:52:04 Sam Wilson Learned a lot from you, learned from your mistakes and the things that you have done certainly really well. Thank you again for coming on. If our listeners want to get in touch with you and learn more about you and or your books, what is the best way to do that?   00:24:53:00 - 00:25:12:22 Tom Wheelwright Really best what I do is just go to our website well stability dot com and we're happy to evaluate your prior your tax return earns take a look at them see if there's something that we can do if if we can raise it if there if we can't we will let you know. We only like happy clients.   00:25:13:05 - 00:25:20:07 Sam Wilson Fantastic wealth ability dot com. We make sure we include that there in the show notes. Thank you again, Tom. Certainly appreciate it.   00:25:20:07 - 00:25:20:16 Tom Wheelwright Thank you.   00:25:21:23 - 00:25:43:08 Sam Wilson 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.   00:25:43:08 - 00:25:46:14 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Today's guest is Maria Zondervan Maria is the CEO of Blue Vikings Capital LLC. She began investing in real estate in 1996. She has 25+ years of experience, and has worked with a variety of asset sizes and classes.  -------------------------------------------------------------- [0:00] Intro [0:44] The 3 questions [1:44] What was the catalyst?  [2:30] Multifamily strategy [5:31] Affordable housing [9:06] Assumable loans [10:24] Talking to partners 1 on 1 [12:52] Nonprofit  [15:24] Scaling [16:11] The issue of teams [17:20] Evaluating partnerships  [19:03] Closing -------------------------------------------------------------- Connect with Maria:  Linkedin: https://www.linkedin.com/in/maria-zondervan-b5b61544/ Instagram: https://www.instagram.com/mariazondervan/ Facebook: https://www.facebook.com/maria.zondervan YouTube: https://www.youtube.com/channel/UC1lGslpmC0vtJaFrYzXAWcQ   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 → sam@brickeninvestmentgroup.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: 00:00:00:00 - 00:00:17:01 Maria Zondervan There is deals in any market and anyone who tells you there isn't. They're not working hard enough. Right. So there's still a lot of great assignable loans out there that are still in the two and 3% rate. So there are always people that need to sell for whatever reason. So you just need to find those.   00:00:17:13 - 00:00:40:22 Intro 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 Maria Zondervan is the CEO of Blue Vikings Capital. She began investing in real estate in 1996, and she has over 25 years of experience and has worked in a variety of asset classes and sizes.   00:00:41:02 - 00:00:42:08 Sam Wilson Maria, welcome to the show.   00:00:42:22 - 00:00:43:21 Maria Zondervan Lovely to be here.   00:00:44:07 - 00:00:52:11 Sam Wilson Thank you so much for coming on today. There are three questions I ask every guest who comes on the show in 90 seconds or less. Where did you start? Where are you now and how did you get there and why?   00:00:52:18 - 00:01:19:22 Maria Zondervan Well, I started back in college. I bought my first place before I even graduated college. So and then I just kept investing throughout my life, really alongside being an endangered species biologist, because that was my passion. But I knew I would never make money doing that. That's just the passion. But so real estate, let me do that. And today I am buying large apartment complexes and looking looking to the future to see what the next big challenges.   00:01:20:05 - 00:01:27:09 Sam Wilson While an endangered species biologist. That's pretty that's pretty fun. Now you're based where?   00:01:27:09 - 00:01:28:18 Maria Zondervan In Florida.   00:01:28:18 - 00:01:33:17 Sam Wilson Florida. Okay. Right. So you're in Florida. Did you work specifically in Florida or do you work all over the world or what was your.   00:01:33:18 - 00:01:43:23 Maria Zondervan I did work specifically in Florida. We got plenty of critters here to keep me busy. Everything from gators and snakes to birds and turtles, manatees, eagles, you name it. We got it. All right. Here.   00:01:44:01 - 00:01:58:21 Sam Wilson You got it. All right here. And you worked in that field, but also were growing your kind of own real estate holdings along the way. Yes. At what point in time what was the catalyst for you that said, okay, we're going to go bigger and do bigger assets and bigger things in the real estate space?   00:01:59:22 - 00:02:24:09 Maria Zondervan I actually had an autistic son wasn't part of the plan now, but he plans for these things that having a special needs child all of a sudden puts a whole lot more emphasis on you growing your wealth because you got to take care of them forever and beyond your own lifespan. So it became more important, and the closer he got to adulthood, the more I decided maybe I should leave this thing.   00:02:24:09 - 00:02:30:09 Maria Zondervan I'm very passionate about because I'm even more passionate about my son and make the leap to real estate full time. And so finally I did that.   00:02:30:18 - 00:02:44:16 Sam Wilson Got it. What did you start investing in? And I guess what was the was a strategy you took on because everybody. Okay, so now you've got a you've kind of got a Y defined for you, but then how are you going to go about meeting the needs of that?   00:02:44:16 - 00:03:04:05 Maria Zondervan Y Yeah, I mean the strategy was multifamily and I approach that by joining mastermind get around the right people, the right networks, and they will help point you in the right way. Right? You don't have to learn it all. You just know all the people know it. All right. And so so that was it. We knew multifamily was the path.   00:03:04:05 - 00:03:13:04 Maria Zondervan We knew that was where to scale. So I started educating myself on that and getting around people who do that until they made it look easy. And then I was like, okay, I can do this. And so I did.   00:03:13:17 - 00:03:39:24 Sam Wilson That's that's very, very cool. So where are you today in that multifamily acquisition kind of process? Because I know a lot of people, you know, the bigger institutions are Pencils Down recording this. What is this? This is April 18th of 2023. You know, a lot of people are pens, pencils down. There's some apprehension in the multifamily space. But it sounds like for you, you guys have found a niche that you're very not just confident in, but, you know, you're find a lot of opportunity.   00:03:39:24 - 00:03:41:19 Sam Wilson And so talk to us about that if you can.   00:03:41:20 - 00:03:59:18 Maria Zondervan Yeah. Yeah. I mean, there is deals in any market and anyone who tells you there isn't they're not working hard enough. Right. So there's still a lot of great assignable loans out there that are still in the two or 3% rate. So there are always people that need to sell for whatever reason. So you just need to find those.   00:04:00:02 - 00:04:20:22 Maria Zondervan We really like the affordable housing niche because there's such a demand for that right now and because properties are valued on the income they produce, a lot of times you can pick them up a few years before they exit out of some of the affordable housing programs where you're buying them in a way, in a way that they're at now, knowing they're going to jump up in a few years.   00:04:20:22 - 00:04:43:21 Maria Zondervan So that can be a really strong play. And then we also buy Forever Holds or we're actually building or creating them in some cases. And this is partly through my nonprofit, which is by Apollo, the list on which their mission is to provide housing and services for autistic adults like my son. And so those properties will never be sold, right?   00:04:44:04 - 00:05:06:12 Maria Zondervan So those are things people can invest in and have a forever income. And so we're not real worried about is it providing a huge return right now because long term it's going to provide buckets of money, right? So it's just a matter of which investors you have and what they're looking for. And for me, I'm looking for people who are trying to set up the future generations right now.   00:05:06:12 - 00:05:31:00 Sam Wilson That's really, really interesting. I want to I mean, you're you're tackling a lot. They're all at once from taking care of your own family, from then setting up investments, from what it sounds like for other families with similar, similar needs. And then also going out and playing, you know, just openly in the affordable housing sector. So, I mean, there's a lot of a lot of different pieces going or a lot of parts of moving, parts there inside of that.   00:05:31:00 - 00:05:51:19 Sam Wilson Let's talk a little bit maybe about the affordable housing component. You'd mentioned you like affordable housing. The demand is there, but yet some of these some of these properties may be exiting that affordable housing criteria here in the next two or three years when then it can be more to market rate to go into detail on that, if you can.   00:05:52:05 - 00:06:13:24 Maria Zondervan Okay. Well, yes, so there's like like tech and programs like that where they basically they put a cap on what you can charge for rent. And so that caps out what you're in a why is your net operating income and therefore the value of the property. So we buy it at that and then as those restrictions come off, then you can push them closer to market rents.   00:06:14:00 - 00:06:35:20 Maria Zondervan Now we typically don't go all the way to market rents because we believe in affordable housing. We want to keep it affordable. So actually by us flying it versus somebody else that would push it all the way up to to market rent, we're we're doing a bit of a service there too, but we're also helping our investors. So some of our investors, they still need to grow short term income and turn their money quickly.   00:06:36:01 - 00:06:58:12 Maria Zondervan So this is a way for them to do that before they move into long term hold. So they have more to put into those long term holds. So we're kind of trying to service both sectors by offering investment opportunities, both for short term and long term investors and for those that just want to have a mixed portfolio. But those properties are awesome because they're always full, you know, there's always a waiting list to get into those properties.   00:06:58:12 - 00:06:59:23 Maria Zondervan So it's a very safe investment.   00:07:00:16 - 00:07:26:04 Sam Wilson Yeah. Yeah. And that was one of my questions there was in the in the late tech resident base, I'll use that term, the resident base that needs a light tech or utilizes a low tech property. How is that tenant performing right now? I mean, things have gotten a little harder. I would think that's one of the first kind of income brackets to start getting squeezed.   00:07:26:04 - 00:07:28:15 Sam Wilson How are those how are those deals performing right now?   00:07:28:15 - 00:07:54:22 Maria Zondervan They're actually performing just just fine. So we're not buying rough properties for buying nice big class type properties. This is not seeing the class assets. We're not talking, you know, Section eight necessarily. A lot of people associate low tech with Section eight or low income housing with that sort of stuff. It doesn't have to be. Some of these properties are brand new built, beautiful properties for pools and clubhouses.   00:07:55:05 - 00:08:18:18 Maria Zondervan So I think it's there's some education that has to go into that, especially with their investors who may have that mindset of thinking it's slum kind of stuff. It isn't. You can have really nice affordable housing and the affordable criterias based on what you're providing. So what is affordable in a three bedroom, two bath townhouse community of this sort?   00:08:18:18 - 00:08:22:11 Maria Zondervan Right. So it's not it's not a one size fits all.   00:08:22:23 - 00:08:47:24 Sam Wilson Got it. Got it. No, that's really cool. And that's I mean, even that some education for me, you know, because I don't I don't play in that space very much. And it I don't I don't understand the types of assets that even go into low income housing tax credit properties. So that's really cool to hear that there are really nice brand new build US assets that you guys can build or not build but by and you know, run as a low tech property.   00:08:47:24 - 00:09:06:18 Sam Wilson So that's really, really cool. And I like the fact that in your affordable housing you're keeping it even when that affordable housing period or the high tech period burns off, you're still keeping, you know, rents where that tenant base can still afford that. Let's talk about a Super Bowl loan. That's something you had mentioned as well. I think that's a really cool strategy.   00:09:06:18 - 00:09:18:03 Sam Wilson I think it's a gold mine right now is buying properties with the Super Bowl loans in that fix, two and a half to three and a half, 4% even range. How are you finding those and why are sellers selling those?   00:09:19:17 - 00:09:44:10 Maria Zondervan Well, I can give you an example of a while. I just recently had it was a loan and the house kind of ties into to a broker we had worked with multiple times, knew we would close, knew we were good at that. And so he brought us this deal where basically partnership was falling apart. So I talked to a syndication attorney recently who says she will not even set up syndications where there are more than five partners.   00:09:44:10 - 00:10:04:20 Maria Zondervan She says there's just too many cooks in the kitchen and often it falls apart. And this was exactly that. There were eight partners trying to all decide how to do. It wasn't a syndication, it's just a partnership. But but they're just too many and they could not agree on a strategy. And so finally they all just threw up their hands and said, we're selling, you know, and they had this great estimable loan.   00:10:05:07 - 00:10:24:11 Maria Zondervan And, you know, we're willing to to take terms and and negotiate on price. And so because we knew we had to make up, you know, usually you have to bring a little more to the table, a little more cash to the table. Right. But your investors still want return, so they're willing to negotiate with you, especially when there's stressed and one out of something.   00:10:24:11 - 00:10:38:17 Sam Wilson How did you get it? Sounds like if they can't decide or can't agree on how to operate the property, getting that many partners to agree on what the terms are for sale could also end up being a bit of a quagmire.   00:10:38:18 - 00:11:03:21 Maria Zondervan We see. Yes. And this is why we're still in negotiations on it. This is an active, active deal, but we're getting close. And yes, that's exactly the problem is is getting everybody to terms, but you have to be a little more patient with them. You don't push. You just tell me you're there to listen. You listen to all their problems and all their complaints that all their other partners and you talk to them one on one, one at a time, all eight partners, you eventually make the deal.   00:11:04:07 - 00:11:27:07 Sam Wilson Wow. Yeah. That's that's a sound piece of advice. There's there's a there's a there's something you go to the playbook, you talk to them one at a time. Yeah, because I imagine the sparks would fly if there's, there's already tension getting all of them together to talk about it probably would not be a good a good move. I think back to a property we tried to acquire, gosh, it was it only earlier, maybe late 2019 and they had owned it since 1900.   00:11:27:21 - 00:11:45:19 Sam Wilson And so imagine all of the heirs. Yeah, it was it was a piece of raw land, but it was all the heirs that were in cousins and cousins on cousins and people don't even know each other. Needless. Needless to say, there was one person in the entire in the entire realm. One person did not want the deal to go through.   00:11:45:19 - 00:11:55:14 Sam Wilson And it completely just derailed the whole process. And it was and it was over. It was over pennies. And it just it anyway, I think back on that the amount of time we put into it, I.   00:11:55:22 - 00:11:58:07 Maria Zondervan Think I find the one thing that person does want.   00:11:58:11 - 00:11:58:22 Sam Wilson Yeah.   00:11:59:11 - 00:12:02:01 Maria Zondervan That is a statue of themselves. What is it?   00:12:02:07 - 00:12:03:19 Sam Wilson What is it exactly.   00:12:03:19 - 00:12:06:14 Maria Zondervan They gave it to. It was good enough.   00:12:06:14 - 00:12:11:13 Sam Wilson Yeah, right, exactly. Here, here's your statue. That's funny. I'm gonna remember that one.   00:12:12:03 - 00:12:30:08 Maria Zondervan That's a real thing. That's an actual case of. Yeah, it's heard that one on a on at a conference I was at somebody literally he didn't want his kids to inherit the property, but he wanted something to. He just hated his kids for some reason that he wants something as a legacy, but it wasn't going to be as good.   00:12:30:15 - 00:12:36:22 Maria Zondervan So the guy said, What if I put up the statue of you on the property? So have the property. And he said, Yeah, they gave it to that a killer deal.   00:12:38:09 - 00:12:40:11 Sam Wilson That's the funniest thing I've heard all day. Wow.   00:12:40:14 - 00:12:42:18 Maria Zondervan It's not from my playbook, but it's a good one.   00:12:42:20 - 00:12:47:19 Sam Wilson There you go. I like it. I like it. Start offering the absurd and they might take you up on it. That's.   00:12:48:00 - 00:12:51:24 Maria Zondervan That's not what they want. What is it they want to look at?   00:12:52:11 - 00:13:11:18 Sam Wilson Let's talk a little bit. That's funny. Thank you for sharing that. That's true. That's that's what yeah. That's some funny stuff right there. Tell me about the nonprofit you're running. I know that's a big part of your why, but tell me how you've done that and then I want to hear so let's hear a little bit about that and then I want to hear about just ways that you've scaled your business.   00:13:11:21 - 00:13:24:12 Sam Wilson That's because you've got to again, a lot of things going on. So I can imagine that you've just had a lot of processes and systems and things you've had to put in place in order to make this all possible. So let's hear first about the nonprofit.   00:13:24:12 - 00:13:47:22 Maria Zondervan Yeah, so Valhalla Villas is the name of the nonprofit, and the idea is to provide housing for autistic individuals who are longing for that independence, that they can't solely live on their own right. So 75% of autistic adults end up living with their parents forever. But the fact is, parents aren't always going to be there. And so those parents worry about who's going to take care of them later.   00:13:48:06 - 00:14:04:14 Maria Zondervan And there's often this drive when they get in their thirties and forties, you know, they want to be fully independent, but they're still living in that parent's house. And so the parents still trying to control, you know, and so here they can live in a community where there's services that take care of somebody there to look after them.   00:14:05:01 - 00:14:24:10 Maria Zondervan They can have roommates to cut down the costs of it, and they can learn independent living skills while they're have transportation provided because that's another biggie. They often don't drive and things like that. So kind of meets that needs. And the need right now is huge because one in every 44 kids in the US is now diagnosed with autism.   00:14:24:10 - 00:14:27:09 Maria Zondervan I know. Blows my mind. Yeah.   00:14:29:06 - 00:14:42:00 Sam Wilson How did you get that off the ground? I mean, that's I'm thinking drivers, that's busses that's you know, there's there's got to be some considerations on the way that properties are built on. I mean so many things go into that like how did you do it.   00:14:42:06 - 00:15:02:24 Maria Zondervan So, so ask me again in a year because it's not fully off the ground yet. So this is this is a fairly new venture, but we are partnering with other nonprofits that have actually done this. They just haven't done it for autistic individuals. So servicing other special needs. So we're basically stealing their playbooks. Happy to share with us because they know the need is tremendous.   00:15:02:24 - 00:15:29:10 Maria Zondervan So yeah, we're kicking it off here in central Florida and then we're going to take it nationwide because it's a very scalable plan. So two things we're going to build from the ground up using low tech funds. They have a special pocket just for special needs to do this. And then the other model is integrated housing, where we buy existing apartment complexes, which we already know how to do, and we integrate the services and shift about 25% of the population over to us to stick adult.   00:15:29:17 - 00:15:48:01 Sam Wilson Got it. Okay, cool. Yeah. What to keep tabs on this. Keep us posted on how how this all all unfold but that's a really cool a really cool undertaking. Let's talk about scaling what are some things you feel like you've done really well when it comes to scaling and growing your business that other people should emulate?   00:15:48:24 - 00:16:06:20 Maria Zondervan I think it's all about the networking getting in the rooms with the right people. It's amazing when you start talking to people about what you want to do, how many people are willing to help, you know, or just share their knowledge if you're in the right rooms, so be in the rooms with the people who are ahead of you.   00:16:07:02 - 00:16:10:20 Maria Zondervan And when you start to be the most knowledgeable person in that room, move to the next room.   00:16:11:17 - 00:16:21:05 Sam Wilson Yeah. Oh, that's great. That's absolutely great. What about when it comes to team? How how have you approached and or tackled the issue of team.   00:16:22:07 - 00:16:54:18 Maria Zondervan Teams are tough. So I tried to do most of it through partnerships instead of employee primarily to get more. For one thing, it's less expensive. You're doing equity splits, they're going to get more in the end, but you're not having to come up with the money upfront, which is very beneficial, but also it's easier to break apart. You know, systems are working, you can bring someone in on one deal or two deals and if things are working well and you don't want to go forward and do more deals for them, you don't have to because you didn't form.   00:16:54:22 - 00:16:57:01 Maria Zondervan They're not in your corporation necessarily.   00:16:57:08 - 00:17:23:16 Sam Wilson Right, right. Right. No, I like that. I like that. And that certainly has been an approach that I've seen a lot of people take. Is that more partnership side of things? Let's rewind maybe the conversation a little bit where you were talking earlier about partnerships and the challenges that you can face inside of those partnerships and then working through a deal you're buying because of a partnership gone bad, how should someone evaluate a partnership like that to make sure that they don't end up in that same spot?   00:17:23:16 - 00:17:26:10 Sam Wilson Maybe that some of these sellers are dealing with right now are?   00:17:27:08 - 00:17:48:16 Maria Zondervan Well, you should definitely know the people you're getting into with, right? People talk about it being a marriage. You're going to be together with those people for a long time, especially if it's like a forever hold, you know, something like that. So you better know those people pretty well. Don't jump at the first person that says, Hey, I can take your deal, or I've got the network to sign for this giant loan and you're all excited about that.   00:17:48:16 - 00:18:11:23 Maria Zondervan There are lots and lots of people who can do that, find the right fit. So it's about knowing what your vision is and and signing people that set that right. Don't try to sit there, make sure that they're fitting into your needs. So if you do, you have a mission statement. If you have your core values, you're looking for people that fit that.   00:18:11:23 - 00:18:15:15 Maria Zondervan You're not going to alter your mission statement of core values to to fit those people.   00:18:15:20 - 00:18:41:17 Sam Wilson Yeah. No, that's absolutely right. That's absolutely right. I love that. I absolutely love it. Maria, you've given us so much here to think about today, everything from acquiring Class B, like tech properties and how you can buy even those brand new low tech properties. Talk about affordable housing components. We've talked about the way that you're meeting the needs of special needs families and building your volleyball.   00:18:41:17 - 00:18:43:01 Sam Wilson Can you pronounce that? Valhalla.   00:18:43:02 - 00:18:48:09 Maria Zondervan Valhalla? It's Viking Blue Vikings. You know, there's a theme here. Yeah, it's. It's in the blood.   00:18:48:12 - 00:19:03:14 Sam Wilson I got it. I love it. Valhalla Villas. And just how you're stealing that playbook. I mean, it goes back to even the success leaves clues thing like hey, we'll just go take what somebody else is doing and then we'll repeat that. But but bring it over to the to the artistic community. So I love love what you're doing.   00:19:03:14 - 00:19:08:07 Sam Wilson Very, very cool. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   00:19:09:00 - 00:19:18:08 Maria Zondervan Blue Vikings Capital dot com. All my social media links are there. There's links to Valhalla. There's links to everything there. So start with Blue Viking's Capital, Dakar.   00:19:18:12 - 00:19:25:13 Sam Wilson Blue Vikings capital dot com. We will make sure we put that there in the show notes. Maria, thank you again for coming on the show today. I certainly appreciate it.   00:19:26:10 - 00:19:27:21 Maria Zondervan You're very welcome. Thank you.   00:19:28:08 - 00:19:49:18 Sam Wilson 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 or 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.   00:19:49:18 - 00:19:52:23 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Today's Guest is Levi Lascsak Levi is the owner of the most popular real estate YouTube channel in Dallas, Texas, which is rapidly growing. Within his first full year in real estate, he closed 64 transactions, equivalent to a volume of 33.5 million dollars, and received 3 to 5 inbound leads daily for the past nine months of 2021. Join Sam and Levi and today's episode. -------------------------------------------------------------- [0:00] Intro [1:01] The 3 questions  [4:04] How to educate yourself  [7:01] How to generate meaningful content  [13:01] How to strategize effectively and timely [16:47] Expanding the team  [19:45] Closing -------------------------------------------------------------- Connect with Levi:  Instagram: https://www.instagram.com/levilascsak/ Tiktok: https://www.tiktok.com/@thereelagents YouTube: https://www.youtube.com/@PassiveProspecting LinkedIn: https://www.linkedin.com/in/levil/ Book: https://a.co/d/b2AaCty    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 → sam@brickeninvestmentgroup.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: 00:00:00:01 - 00:00:18:23 Levi Lascsak Well, I think the great thing about YouTube is that you can I mean, the quality of the content is really better than than, you know, the quantity. You know, so it's not like you don't necessarily have to do something daily on YouTube. If you make one good video a week, then that can really build up a good presence for you.   00:00:18:23 - 00:00:29:09 Levi Lascsak If you do two or three, I think you'll grow a little bit faster. But you don't want, you know, quality to suffer on there. Now, we're not trying to go viral. We're trying to make the phone ring.  00:00:29:09 - 00:00:34:15 Intro 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.    00:00:36:06 - 00:00:57:16 Sam Wilson Levi Lasek owns the fastest growing and most viewed real estate YouTube channel in Dallas, Texas, and generates 3 to 5 inbound leads per day in the last nine months of 2021, their first full year in real estate, he closed 64 transactions, a total of 33 and a half million dollars in volume.   00:00:57:23 - 00:00:59:05 Sam Wilson Levi, welcome to the show.   00:01:00:07 - 00:01:01:02 Levi Lascsak Thanks for having Amazon.   00:01:01:08 - 00:01:09:01 Sam Wilson Absolutely. The pleasure's mine. LEVI There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00:01:10:02 - 00:01:13:03 Levi Lascsak All three in the 90 seconds or 90 seconds for each.   00:01:13:20 - 00:01:14:23 Sam Wilson 90 seconds all three.   00:01:16:08 - 00:01:34:14 Levi Lascsak And okay. So, I mean, I was in the military. I did that after high school. I grew up in a small town, Stephenville, Texas, not milking cows or I'd bull's not much else to do there. So I had no money and I figured the military would be a great way to get some money for college. The world was at peace in 1999 when I joined, and then two years later, September 11th happened.   00:01:34:24 - 00:02:00:24 Levi Lascsak I ended up getting deployed, spent a year in Iraq, you know, came back home 2006. And from there I just got in a variation of different sales jobs. So I've been in sales for the last, you know, pretty much 20 years of sales, hated prospecting. But the thing was, is that I had built up over the last five years, up to 2020, a very successful financial services business, my very own business, the firm, you know, I'd always had sales jobs, but I finally started my own business.   00:02:01:11 - 00:02:21:05 Levi Lascsak And then, of course, April of 2020, the world shuts down. So I was I was I worked with all the teachers in Dallas School District on retirement planning, and I had a teacher scheduled but like five times the teacher's income. So I was traveling the world. I went to 24 countries inside of three years. Well, I worked eight months of the year helping teachers.   00:02:21:05 - 00:02:40:12 Levi Lascsak It was very noble, I thought, on retirement planning, and then both of those were completely taken away in 2020, whenever the world shut down, right? So I felt like I lost my identity at that time. I'm and I was 41 years old. And so I was sitting there probably like a lot of people during the summer of 2020, asking myself, How do you start over without starting over?   00:02:40:12 - 00:03:12:11 Levi Lascsak You know, what's the next move? When are schools going to reopen? Would I even be able to go back to my business? Would it be there? And so those are some really tough questions I had to ask myself. And instead of watching Tiger King, I decided to start researching and trying to figure out my next move. And I had a bunch of friends that have always tried to get me into real estate, residential real estate, but I never wanted to be a real estate agent because I pictured them as cold callers, door knockers, handing out business cards, shaking hands, kissing babies and, you know, bugging their friends and family.   00:03:12:11 - 00:03:32:10 Levi Lascsak So I was like, that's not me. But finally, when I didn't really feel like I had any other options, I said, Okay, if I'm going to become a real estate agent, then then what I'm going to do is I'm going to try to figure out a way to attract business versus going into pursuit mode. And so that's what led me down the path of researching everything I possibly could.   00:03:32:16 - 00:03:42:08 Levi Lascsak I stumbled upon YouTube and I thought, maybe there's an avenue that I could, you know, create content on YouTube and attract clients. And that's exactly what happened to me.   00:03:42:10 - 00:04:09:03 Sam Wilson And that's really cool. I not really cool to the loss of kind of your other business and income streams and all those things. I'll get a really good thing going that you had built there and that's always painful, that transition period. What were some things though you said, okay, I want to go down this rabbit hole, but I'm not going to do it in the traditional sense of, like you said, going out and kissing babies and, you know, filling out thousands of forms because that that's that does that stuff is mind numbing.   00:04:09:12 - 00:04:19:14 Sam Wilson But what do you do to educate yourself on building the platform that you have? Like what were the things that said, hey, there are some success clues here that I can both replicate and do better?   00:04:20:14 - 00:04:46:00 Levi Lascsak Well, I believe you can hyper learn any subject in 60 days. And in this day and age, no matter what you want to do, I don't care if you want to be a multifamily investor, if you want to be a residential real estate agent, if you want to be a postcard marketer, if you want to be a plumber, even a plumber, I mean, I think if the information is out there, you could hyper learn in 60 days enough to make yourself more dangerous than almost 99% of the people in that field.   00:04:46:06 - 00:05:05:08 Levi Lascsak And so that was just something that I did with the with blogs, with YouTube, with, you know, books, everything, whatever it is you want to do the information is there, but you have to sit down, I believe, and completely focus on. And so that's what I did. I actually went down the path of the other social platforms because that's what everybody was telling me to do.   00:05:05:11 - 00:05:23:23 Levi Lascsak But they didn't fit with my personality. So I was kind of like, I'm not really sure if I want to be a dancing real estate agent on Tik-Tok, you know? And so I thought YouTube was really the last choice. So I was I was then, but then I learned YouTube is a search engine, not a social platform. And so that made a lot more sense to me.   00:05:24:03 - 00:05:46:11 Levi Lascsak And I was like, well, shoot, if I've been in Dallas for 20 years, I know Dallas. I don't know how to be a real estate agent, but I know Dallas. And if I make videos about Dallas, think about what your consumer, what your client is actually searching for. They're searching for answers on neighborhoods, suburbs, you know, schools, safety, things to do, jobs, those types of things they're not searching for.   00:05:46:17 - 00:06:01:11 Levi Lascsak They don't care if you know how to write a contract. They assume you know how to write a contract. So I didn't have to make a video about, hey, here's how I write a contract. You know, here's how I'm such a great real estate agent. I just started making videos about Dallas, which I knew. I knew the areas, I knew the suburbs.   00:06:01:11 - 00:06:17:10 Levi Lascsak I'd done everything in Dallas. I've been all over the place and I have friends that live in every area. So I can, you know, I've had discussions with them, so I was like, I'm just going to educate people on Dallas. And so that started to make sense for me. That was something I saw myself doing, and this can apply to any industry.   00:06:17:10 - 00:06:40:00 Levi Lascsak I mean, that's why we wrote the book. You know, passive prospecting was, for that matter, is that it doesn't matter if you're a plumber electrician investor, you know, you can have your clients, your next client will be at your fingertips if you're creating content and let and letting that content prospect for you constantly, it doesn't mean you you need something right this second, but whenever it's time, they'll be there at you, at your disposal.   00:06:40:13 - 00:07:01:20 Sam Wilson I like that. That that's that was one of my key questions for you was I think a lot of people struggle because I mean, content, yes. You have to be creating content. I think in today's environment, if you're not creating content, you're you're just you're playing 20 years behind the rules. But been even so, a lot of people struggle, myself included, even with a daily podcast or almost daily.   00:07:01:20 - 00:07:19:24 Sam Wilson It was daily for several years and now it's 3 to 4 times a week. But even so, I still struggle with that idea of like, what do I talk about? What do we do? What do we post? What do we how do you how do you establish and continue to generate meaningful content that people want to engage with?   00:07:21:09 - 00:07:40:08 Levi Lascsak Well, I think the great thing about YouTube is that you can I mean, the quality of the content is really better than than the quantity, you know, so it's not like you don't necessarily have to do something daily on YouTube. If you make one good video a week, then that can really build up a good presence for you.   00:07:40:08 - 00:07:59:11 Levi Lascsak If you do two or three, I think you'll grow a little bit faster. But you don't want, you know, quality to suffer on there. You could I mean, you look at everyone talks about Mr. Beast right now, which clearly he's gained a lot of momentum. But he said, you know, he makes he tries to make the best video again once a month, you know, and clearly, whatever he puts out is going to attract.   00:07:59:11 - 00:08:19:22 Levi Lascsak Now, we're not trying to go viral. We're trying to make the phone ring. So I think it's those types of things. You know, for me in residential real estate, I mean, I've got a ton of suburbs in Dallas and those suburbs break into neighborhoods and those neighborhoods break into, you know, you know, things to do. I mean, so if you just start kind of like breaking it all down, actually build a plan.   00:08:20:03 - 00:08:36:21 Levi Lascsak If you treat these platforms, especially YouTube, like a hobby, they'll pay you like a hobby. If you treat them like a business, they can pay you like a business. And so that means actually say, okay, what? How could I write down a hundred content ideas? And you probably could if you actually sit down and just thought about it.   00:08:36:24 - 00:08:53:19 Levi Lascsak Well, first of all, it's easy for me. It's, you know, every suburb and then every neighborhood in every suburb and then every county, you know, I mean, you could break it things and I would have tons of content. If you're in multifamily investing, it could be, you know, how do you find a deal? How do you structure a deal?   00:08:53:19 - 00:09:12:01 Levi Lascsak What do you do? You know, how do you find the capital? You know, it could be how, how, how, you know, you could there's a website like called also ask or ask also I think also ask. And so you could type in anything. You just type in multifamily in there and it'll give you a hundred questions that are very commonly asked whenever it comes to multifamily.   00:09:12:06 - 00:09:33:15 Levi Lascsak And so that could be your first 100 videos right there. You could go on several websites, you know, ask the public the same kind of the same concept. You could go look at other channels and the other channels are very simple, look at some, find some very popular channels, sort their videos, buy most popular and see which topics are really, you know, getting a ton of views.   00:09:33:15 - 00:09:57:15 Levi Lascsak I'm not saying copy them, but it should provide you some inspiration to say, okay, well, this person made a video about this suburb or, you know, how to structure multifamily deal that's very popular. So maybe the first video I'm going to make is how to structure deal, you know, or when you're actually going out searching around. We just we just did a new construction walkthrough the other day and we filmed that like a blue tape walk through, right?   00:09:57:15 - 00:10:19:01 Levi Lascsak So we were walking through putting blue tape, pointing out all the things. So to somebody who's thinking about buying new construction, they may have never done that before. They and they may not know what to look for. And maybe they contracted directly with the builder. And so they don't know what to expect. But now that they see our video we're actually going through, they're putting blue tape on every little nook and cranny.   00:10:19:01 - 00:10:39:02 Levi Lascsak And mark and scuff and chip and and we're being very, very tedious about it. But we walk them through that, the whole process. And you know what to look for on appliances, what to look for in the furnace, in the attic. So even just doing something like that in your daily routine can be documented. And that's another thing you can do is you can document over create.   00:10:39:02 - 00:10:58:01 Levi Lascsak And if you document, that's a real simple way to do that. So every single day, if you're intentional about this and you and you and you turn on the thinking light bulb in your head, you can say, okay, what am I going to do today? And what could I document that could be educational or help somebody else in this journey and how do I capture that?   00:10:58:01 - 00:11:17:00 Levi Lascsak And so I think I tell agents this all the time, you're making 100 pieces of content every single day. It's just a matter of whether you decide if you want to document it or not. So a lot of agents will go to an open house. They hate to do open houses because they're like, I sit there for 2 hours and nobody shows up and it's a waste of time.   00:11:17:00 - 00:11:36:09 Levi Lascsak But it's like, Yeah, but while you're in the open house, number one, you could do a property tour on video, then you could go to the kitchen and make two or three videos just about the kitchen, like, you know, what is this? What is that? How does this work? What you should look out for? You could go to the bathroom, you could go to the bedroom, you could go to every little section of the house and think about things.   00:11:36:11 - 00:11:57:14 Levi Lascsak Or if you find something that, Oh, this home is for sale, but I would never buy it because of this, you know, I mean, or I would buy this house just because of this feature. I mean, so there's there's ways to do that. And inside that two hour window, if nobody does show up to your open house, which means you didn't market it effectively in the first place, but if nobody shows up, at least you're there making content.   00:11:57:14 - 00:12:24:12 Levi Lascsak Right? And you could make probably 20, 30 videos, at least short form, and then you could even make one entire long form video around the whole, you know, and then you could be good for another week or two on your content just from that one little two hour window. So you have to think about if you go walk a property, if you're going to walk in a seven unit apartment complex, I mean, film, that whole thing, walk yourself through it, take a little selfie stick, talk to the camera as if you've got your your business partner or your investor right next to you.   00:12:24:18 - 00:12:40:20 Levi Lascsak And you're explaining to them, oh, this is look at this this guardrail. I mean, it looks like it's attached. But whenever you touch it, you know, it's not. So there's just every little thing that you are thinking about how you do your your business and your process, you know, could turn into content.   00:12:41:10 - 00:13:04:00 Sam Wilson Right? No, I think that's that's really great. And I like that that mindset shift of document versus create. I think that's I think this for a lot of people, you know, I'm not a very creative I just don't have that that bent but I can document I can tell you what I'm doing. That's that's a lot easier than going, gosh, like I may be super creative these these strategies.   00:13:04:13 - 00:13:30:01 Sam Wilson I would I would I would argue are the long game and it seems like it seems like you though have found a way to kind of crack the code and truncate that long game into some I mean, in order in order to go in and do what you did in 2021 and transaction volume, using this as your primary marketing method took some took some real kind of insight into how to crack that in compressed time frames.   00:13:30:01 - 00:13:31:21 Sam Wilson How did you do that or timelines, I guess I should say.   00:13:32:22 - 00:13:57:10 Levi Lascsak While I researched the platform for 60 days before I got started, I filmed for another 30 days before I ever published. So I filmed a month's worth of content ten before I ever published the first video. So I would be scheduled a month ahead on my content. What that does is that relieves pressure. And then also if something were to come up, which of course any time you start something, life happens, health happens, family happens, you know, real estate happens.   00:13:57:10 - 00:14:16:10 Levi Lascsak And then and then you start making excuses. Well, I can't film this week because I'm busy or this came up as I can't. Well, I didn't worry about that because I was already a month ahead. And then that month I was head I started filming the next month's worth of content. So that way if any little, you know, pebble got in my shoe and maybe I did miss a week or a day.   00:14:16:17 - 00:14:35:16 Levi Lascsak I wasn't scrambling, trying to produce the next content. The other thing was, is I noticed in my market there were a couple of agents on YouTube, but they were only doing one video a week. So I thought, well, if I'm ever going to catch them or even pass them up, I'm going to triple their effort. So I also committed to myself to do three videos a week.   00:14:35:22 - 00:14:55:23 Levi Lascsak And so with with zero subscribers, zero views, I just fell to it. I just felt the more content I'd put out there, the faster I hopefully I'll grow. And that's really kind of what happened. So I started to outpace those other channels and now I've passed them all up and now I've got almost a 7000 subscriber lead on that channel.   00:14:56:01 - 00:15:24:07 Levi Lascsak When I started that, one channel had 7000 subscribers. Now I've got a 7000 subscriber lead on them. So they they steadily grew, but I blew way past them. And now I'm just I'm continually compounding by the continued content, keeping up the pace, keeping the consistency. And so that's what kind of helped me. But also I met my business partner kind of at the right time and he started to handle the transactional side of it, which allowed me to continue to focus on the content side.   00:15:24:12 - 00:15:45:00 Levi Lascsak So we teamed up to where I would just start creating all the videos, the content, as soon as that client reached out, he would take over from there, take them out, show them homes, get them under contract. So he didn't have to prospect or make content. I didn't have to go out and show homes. So that helped me scale very quickly as well because I wasn't battling between two worlds.   00:15:45:06 - 00:16:13:05 Levi Lascsak So you do have some things, some logistical items. Plus, I started to hire people very quickly to start to outsource, you know, our administration task and things like that. So, you know, that is something very key. You will scale as fast as you want to based on your content production and based on your your team growth. So if you just try to be that solo person making all your content, doing all the deals, doing all the admin, you're going to get stuck.   00:16:13:05 - 00:16:23:12 Levi Lascsak You know you're going to get stuck in a rut for, for a while. So you've got to outsource everything as much as possible and focus on what you know will really move the needle for you the most.   00:16:24:02 - 00:16:47:23 Sam Wilson Yeah, that was me. My question was, how did you kind of balance those two worlds? And I think I think you answered that, which I think is that's that's a that's a very common I think I think thing in Alaska and a lot of real estate in a larger lot of real estate teams and or partnerships where there is one person that's handling either the outreach, the investor outreach, the whatever you want to call it.   00:16:47:23 - 00:17:08:18 Sam Wilson And then the other person that's handling more the business actually doing of what it is that the business was set up to do. I think that's not an uncommon path. Forward consulting on my question, like how did you how did you have all time for time for both? So I like that. At what point in time did you bring on people that were doing all your own video editing and posting all this stuff?   00:17:08:18 - 00:17:20:13 Sam Wilson I mean, again, you know, that's another just kind of task heavy just there's just not very much return on anything in that side of handling what you're doing. So how long did it take you before you're able to bring somebody on in that role?   00:17:21:20 - 00:17:48:05 Levi Lascsak I knew that from the beginning, and I've never, ever edited a video. So the cool thing is, is that you mentioned we did 64 transactions in 2021, which we did in 2022, 154 transactions just from the channel in 2022. So it compounded. But here's what stayed the same was my ad spend. My ad spend was zero. That was all organic and that was because people watched the channel and called us so.   00:17:49:05 - 00:18:11:01 Levi Lascsak So I never had a marketing budget whenever I started, but I had an editing budget because I needed number one, I'm not interested in editing. Number two, I know it's extremely time consuming. And and so therefore, if I would have spent all my time trying to learn how to edit, I would have gotten frustrated and I probably would have quit after the first video because I only didn't like to edit a video on my iPhone.   00:18:11:10 - 00:18:33:00 Levi Lascsak It's, it's that is just not my wheelhouse. And I but I understood that from the beginning. So it was something like, okay, I didn't want to spend a ton of money on postcards. Right? I didn't want to spend yeah. I didn't want to try to market myself on billboards or magazine ads, but I was like, if I'm going to do this video thing, that's one thing I know for sure is I'm not going to learn editing because the interest is not there either.   00:18:33:00 - 00:18:48:09 Levi Lascsak And if you're not interested in something, it's going to be very difficult to struggle through that, you know, or you will struggle through it. You can force yourself to do it, but it'll be a struggle. So I didn't want to hate my life either. So I was like, I'm just going to bite the bullet and hire an editor from the beginning.   00:18:48:09 - 00:19:10:05 Levi Lascsak Now, luckily it took only took about 90 days before I got the first deal under contract. So that made it all worth it. And clearly we compounded way past that now. So I would recommend if something's not your strong suit, you don't know how to do it. I would highly, highly recommend looking at your budget and trying to make the money to make that happen.   00:19:10:05 - 00:19:21:06 Levi Lascsak But. But video is so powerful you can build that out organically. But I think the best way to do that is having an editing team and not worried about, you know, trying to pay ads to to promote it.   00:19:21:12 - 00:19:44:00 Sam Wilson Yeah. No, absolutely. Absolutely couldn't I couldn't agree more. I have gosh, we're approaching 800 episodes. So, you know, a lot like you. And I think I messed with audio on a part of one episode one time and I'm like, this is awful. I got so yeah, I hear you man. Let's get people that are good. It's the who not how idea get people that are good at what they do in the right seats.   00:19:44:07 - 00:19:50:03 Sam Wilson Handling that side of things for us. Levi This has been a blast. Where do we get a copy of your book, Passive Prospecting.   00:19:51:09 - 00:19:52:09 Levi Lascsak Amazon.com?   00:19:53:08 - 00:20:04:23 Sam Wilson Fantastic. Look that up there on Amazon.com. Passive prospecting will put a show or put a link to that there in the show notes. Levi If our listeners want to get in touch with you, learn more about you, what is the best way to do that?   00:20:04:23 - 00:20:12:12 Levi Lascsak Yeah, passive prospect income. We got a lot of great information on there and then you can have me up on Instagram if you want as well. Levi Classic.   00:20:13:00 - 00:20:34:16 Sam Wilson Levi Last year will make sure, but the spelling there of Levi, his last name there in the show notes. And Levi, thank you again for coming on the day. I certainly appreciate it. Thank you. 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.   00:20:35:02 - 00:20:46:23 Sam Wilson 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 Brian Grimes Brian is an Ivy League educated real estate entrepreneur who launched his own real estate development company in his hometown of Philadelphia. He has gone on to gut renovate 300+ rental properties across the country using the BRRRR strategy. -------------------------------------------------------------- [0:00] Intro  [0:53] The 3 questions  [3:17] How to lead a company [4:52] Keeping systems simple  [10:58] How to scale  [13:35] What role are you wanting to get out of? [16:21] Finding opportunity  [19:48] What are you acquiring?  [22:12] Closing -------------------------------------------------------------- Connect with Brian:  YouTube: https://www.youtube.com/@BrianLovesCashFlow Linkedin: https://www.linkedin.com/in/brian-grimes-cfp%C2%AE-2b99b632/ Instagram: https://www.instagram.com/briangrimes_247cfu/ Free Training: https://workwithgrimes.com/cashflow50596073   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 → sam@brickeninvestmentgroup.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:   00:00:00:01 - 00:00:18:17 Brian Grimes Your value as an investor is finding good deals. You make money on the purchase. So you need to put yourself as the head of your acquisitions team. That is your most valuable position. Most investors think, Oh, I'll go stand in the house and point around. Are you going to know more than the guy who's been building houses since he was eight years old? His uncle taught him how to build. You will never know more than him. So why are you in his way?   00:00:23:03 - 00:00:49:02 Intro  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 Brian Grimes is an Ivy League educated real estate entrepreneur who launched his own real estate development company in his hometown of Philadelphia. And he has gone on to gut renovate 300 plus rental properties across the country using the birth strategy.   00:00:49:05 - 00:00:50:12 Sam Wilson Brian, welcome to the show.   00:00:51:18 - 00:00:53:04 Brian Grimes Thanks for having me. Really appreciate it.   00:00:53:10 - 00:01:01:17 Sam Wilson Absolutely. Brian, the pleasure is mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00:01:03:09 - 00:01:28:20 Brian Grimes Where I started is kind of at the bottom, working 100% commission, just kind of grinding to make ends meet. But I was paying myself first statement every check and putting it in a separate account with the purpose of taking that money and investing in real estate. So I started with a house, FHA house, buy something. I was going to live in the basement, rent out two units above me, ended up getting a job out of town.   00:01:28:20 - 00:01:51:08 Brian Grimes So I became an out of town landlord and having that experience of being an out-of-town investor, I just stuck with it, kept accelerating, gotten the full, got renovation. And that really took me to the next level of allowing me to scale through the better strategy. Buying for pennies on the dollar. Rehabbing. Refinance. Tenant. Repeat that process. And that pretty much grew.   00:01:51:08 - 00:01:52:23 Brian Grimes And so $50 million portfolio.   00:01:53:07 - 00:02:04:13 Sam Wilson Man that's cool I love that I love the stick stick with it story that you've got there. When did you know you were on to something and make that plunged of full time?   00:02:06:05 - 00:02:24:13 Brian Grimes I knew I was on to something when I got the first check because a lot of us real estate is just like sports. It's a it's a mindset. It's like 90% mindset, 10% skill. And the mindset that you start off with is I know people pay their rent, I know people pay mortgages, but they're not going to pay me, right, just because I'm the owner.   00:02:24:20 - 00:02:44:19 Brian Grimes And when you get that first rent check in your hand, that cash in your hand or a moving fee, that really just completely shifts your reality to think, you know, I can actually do this. And if I scale it up and put the right systems in place, I can do this at ten x or 100 x. So I really knew from that first check that, hey, this is for me, this is what I'm going to do for life.   00:02:45:00 - 00:02:50:04 Brian Grimes And it was then just about, you know, scaling. And you know, not making too many mistakes that would knock me out of the game.   00:02:51:06 - 00:03:17:17 Sam Wilson There's there is the the classic kind of trap that entrepreneurs get stuck in. And I know there's 100 books probably written on the topic, but where it's we have this grand idea, we say, okay, we can do it. And even if our mindset is right, we still find ourselves doing and being an employee inside of the business. And especially with what you're doing, I think I have a lot of respect for that because I never I never could figure it out on the side of things that you're doing.   00:03:17:17 - 00:03:44:13 Sam Wilson Like I did about 60, 60 housing flips, and I was just like, my gosh, like getting the the systems in place to make this work because every project was different. Everyone had its own unique challenges, and I never quite got my head wrapped around how to do that. That's my own limitations. I'm really curious, how did you systemize this and make it such that you could kind of back off from the day to day, you know, decision making process and actually lead the company?   00:03:46:04 - 00:04:13:23 Brian Grimes Yeah, it is people, right? You need good people. And we live in a global economy these days. So with Zoom, with LinkedIn, you can actually reach out and pull in talent, virtual assistants from places like South America, people who are going to really good universities, who are really hungry and have a strong entrepreneurial spirit. And when you take real estate as you keep accelerating, I mean, at first and you know this, you could stand in the properties and kind of watch them be built.   00:04:14:05 - 00:04:34:22 Brian Grimes But then as you're doing multiple deals, you have to rely on your systems. It becomes more of a mental game. So then the challenge is to take these mental components, break them into two separate divisions, and then put the right people in place to run them and then sit at the helm, only handle the escalations. And when you do that and find the right people and train, well, you can make it happen.   00:04:34:23 - 00:04:51:17 Brian Grimes I think if I have one superpower, it is creating systems that don't break at scale. They're very simple. So you can multiplying by 1000 X and he still won't break the complexes items that most people will build. They always break if you try to even ten X and they'll just break and fail on you.   00:04:52:14 - 00:05:18:09 Sam Wilson Let's dig into that a little bit. When you say that you keep your systems simple and then you see other people making that mistake of complicating the systems, what are what are some things that some tricks that you use or some some kind of metric not metrics. But but but but guardrails, if you will, that you employ that allow you or force you rather, to keep your system simple.   00:05:18:09 - 00:05:39:08 Brian Grimes I would say you always want to focus on leverage points. So what's the leverage point like? If I'm going out and inspecting new properties, I need to get a lot of volume into that process, right? So most people will think, well, when I inspect the new property, I want to send my best contractor out there to look at this deal because he's going to see everything and he'll be able to tell me everything all at once.   00:05:39:16 - 00:05:56:03 Brian Grimes Well, you're going to burn out your best guy is not scalable with scalable is sending in a junior inspector who may know a little bit less than your head guy, but he knows enough to do the prescreening at volume scale. You get five of these guys and then when you get a deal under contract, you have a window of time before you have to put a deposit down.   00:05:56:04 - 00:06:15:24 Brian Grimes Goes hard, then you can send in after doing negotiations, agreeing the pricing. Now you can leverage your key guy and he's not burnt out these fresh. You can see everything get back to you as information. So that's now a basic leverage system with a failsafe of your key guy where you're not burning out the wrong people and hurting your operation.   00:06:16:05 - 00:06:32:06 Brian Grimes But if you do it in reverse, you're going to fail. You're going to burn out your key guy. He's not going to be able to see as many deals. So you're not going to get the volume and you're not going to accelerate. And that's just more logic behind, you know, the way that I think everything I do is the same way how you do any things, how you do everything.   00:06:32:12 - 00:06:46:20 Brian Grimes Everything I do has a baseline logic behind it. So a lot of my mentees love me because as they learn more about how I do things, they can start to think like me and I become that voice in their head, and then they start seeing the results kind of immediately after that.   00:06:46:20 - 00:07:02:16 Sam Wilson I like that a lot. That makes that makes a lot of sense. Yeah. Send out send out the guy that again because I mean if you look at ten deals I don't know what your deal close ratio is. I'm sure you do. But yeah, what is it actually looks like? Let's just ask that. What is your deal closed?   00:07:02:16 - 00:07:05:22 Sam Wilson How many deals you do. Look at the deals you close.   00:07:05:22 - 00:07:24:12 Brian Grimes I say you got you have to screen. So I'll have my deal analyst screen through 100 deals to put ten on a calendar. And then out of those ten, we're going to push back and we'll probably won't like two or three of them will like seven will get our offers, maybe we'll get two under contract. So there's a lot of work behind.   00:07:24:18 - 00:07:42:17 Brian Grimes So you have to do a lot of work behind the scenes on a daily basis. But then those are three sectors. Now I have a deal analyst screening and putting deals in the funnel. I have a boots on the ground, guy running and inspecting. Then I have the failsafe inspector coming in after that when we get the contract negotiated and agreed to.   00:07:42:23 - 00:08:03:00 Brian Grimes So just breaking this thing down into something that always has a system and a failsafe because everything, no matter what business you're in, something will fall through the cracks. So if you don't have the failsafe for that item that falls through the cracks, you're going to miss it. You're going to lose it. So most of my systems will have a basic system and then a failsafe that's going to catch.   00:08:03:00 - 00:08:05:21 Sam Wilson Me, right? Because now your best guys only looking at two deals.   00:08:06:15 - 00:08:25:23 Brian Grimes I mean, he's only looking at two deals, right? Which means he can be in the properties where his value is the most. So you think about your value as an investor. Your value as an investor is finding good deals. You make money on the purchase, so you need to put yourself as the head of your acquisitions team. That is your most valuable position.   00:08:25:23 - 00:08:45:13 Brian Grimes Most investors think, Oh, I'll go stand in the house and point around, Are you going to know more than the guy who's been building houses since he was eight years old? His uncle taught him how to build. You will never know more than him, so why are you in his way? But on the flip side, do you need him out doing all of this work in the street or standing in the house directing air traffic controller?   00:08:45:21 - 00:09:09:08 Brian Grimes And then what technology can you put in his hands so he can see more because he's used to being on site? Can you give him technology that increases his vision so he can multiply his efforts? This is where your impact becomes the most valuable to your organization. So spending more time working on your business than in it and taking on that mindset of building a plane while you're flying it.   00:09:09:24 - 00:09:19:11 Brian Grimes So you're still you're taking flight. You're in there now. You keep building around, you keep adding better engines and more jet fuel, and you just keep going faster and higher.   00:09:19:20 - 00:09:29:01 Sam Wilson Is this something that you learn from an iterative process or do you feel like this is something that just kind of was a neat and a neat skill set for you?   00:09:30:07 - 00:09:58:13 Brian Grimes It definitely wasn't in the I mean, if there's anything to me about me, it's I can absorb other other people's energy and I can absorb systems very quickly. So I'm always a student of the game. If you give me the high end of your system, I can reverse engineer it down to the you know, I might need details, but I got to work at a startup in Brooklyn, one of the largest insurance tech fintech firms out there right now, policy genius.   00:09:58:19 - 00:10:19:06 Brian Grimes And I got to study. I was employee like number 22. I got to study these two founders who built out a company from 22 people to 600 people. And the division interact with each other and the technology and how you can scale a startup. Because as a real estate investor, you're not a investor, you're a startup. This is a mindset.   00:10:19:09 - 00:10:41:09 Brian Grimes You are a startup. So you need to act like a founder and you need to put technology into your business and leverage into your business to scale up. That's how you get ahead of other people who are of the mindset that they're just investors. So I learned by studying people who are doing it at a world class level, and then I took all of that learning and implemented it into real estate.   00:10:41:09 - 00:10:58:14 Sam Wilson That is really, really cool. I love that, that I mean, there's so much here to learn from you. I feel like I could just pick your brain all day long, which I hate the phrase by the way. I don't know why I just said that. I think it's a terrible brain pick. That's an awful statement. Anyway, let me say I feel like I could learn from you all day long, though.   00:10:58:14 - 00:11:22:05 Sam Wilson Is the is the point there, too, that I think that's really, really cool that what you're talking about, leverage points, building a system, finding the say or implementing a failsafe and building things that don't break at scale. I mean, that's the thrust of the show is like how how do we meaningfully scale our businesses to be in that S.O.S. or even in that owner seat that, you know, that's interfacing with your then CEO that's running the company?   00:11:22:05 - 00:11:42:24 Sam Wilson It sounds like you found found the way to do that. There is maybe one part of your business, though, that I would wonder how how do you effectively scale this side of your business? Because you have a boots on the ground program where you really you allow people to get inside of your mindset and allow them to get inside of how you do things.   00:11:43:10 - 00:11:48:03 Sam Wilson Is that a scalable side of your business? And if so, how?   00:11:48:03 - 00:12:08:11 Brian Grimes It is scalable? Because what I basically do is I tap people into my full, full service real estate model because one of my mentees asked me, Brian, how do I snap my fingers and just become you overnight? I'm like, Well, that's a complex question. And so I went into the bat cave, thought about it a little bit, and I came out and said, Well, I'll have a program where I find deals for you.   00:12:08:11 - 00:12:28:18 Brian Grimes I tap you into the lenders that will give you 100% of the money to buy or rent of the properties. We'll get the properties under contract, help you to negotiate them, build the rehab budgets, build the properties for you with our in-house contractors, do a full gut renovations, reconfigure them if you want to flip them or buy and hold them and allow you to do this from your kitchen table in your underwear.   00:12:29:04 - 00:12:53:16 Brian Grimes Because that's really how I am best out of town from the kitchen table with the kids on my lap. Right. So it's been wildly successful. It is scalable in the sense that right now we have it in Philadelphia, we're going to expand it into Baltimore as well. And it is scalable in the sense that once I take my people and train them into this, I'll train the deal analysts, I'll train the acquisition analysts, I'll have the boots on the ground inspectors.   00:12:53:16 - 00:13:22:24 Brian Grimes It's all just one big system so it can run with people. Nothing runs without people. Real estate is a ownership is a solo sport. Ownership of real estate is golf. Now it's tennis. But any doubles, right. It's just it's a solo sports track and field. But the business of real estate is a team sport. You need the architects, the engineers, the attorneys, the zoning planners, the insurance guy, the appraiser.   00:13:22:24 - 00:13:35:21 Brian Grimes You need everybody. All these bits and pieces and parts. So you have to be a both of those mindsets. If you get really good people and you have the right systems and a right blueprint, you can scale it to an infinite level.   00:13:35:21 - 00:13:52:24 Sam Wilson I love it. I love it. What is what is one role? Or if there is, maybe there's not maybe maybe you have ascended the mountain as it is. But what is one role, if there is one that you are actively trying to get yourself out of?   00:13:52:24 - 00:14:16:18 Brian Grimes I would say the here's the hardest role to get myself out of, but I love the role, right? It's what I spend my time doing, but it's the hardest one to get yourself out of is deal analysis. Because I grew up in Philly, I've lived breathe and, you know, sleep and dream Philly. Right. I know somebody to say on a street name right now and I know exactly where it is.   00:14:16:18 - 00:14:33:10 Brian Grimes I have a mental map. I know the properties where I know the CVS, I know the cash flow. It's hard to take that type of analysis and put it into somebody and build it into somebody so they can do the analysis. They can think like you, but not at the speed so that is the hardest thing to step out of.   00:14:33:11 - 00:14:54:09 Brian Grimes To train a deal analyst at the top level to be able to operate at my speed takes usually a year to a year and a half. Sure to really get them built in and ingrain so where they can go out and produce 100 deals a year. But that is the reward. If you train them and do it properly, they can go out and find 100 properties a year that will make you money each deal.   00:14:54:18 - 00:15:12:23 Brian Grimes So then all you have to do is then put the right construction team in place, put the right inspectors in place to keep an eye on everything and feedback, the information. And you can sit back at your kitchen table, air traffic control and make money from anywhere in the world and real estate. So you could be out of the country investing in different markets.   00:15:13:00 - 00:15:33:13 Brian Grimes I also know a lot of markets across the country that people have never even thought about tapping into. I got a guy in Arkansas right now that's buying land for $1,000 and building 50,000 properties that are worth, you know, 125,000. So when you have a model like that, you have a lender with an insatiable appetite, they just can't be filled.   00:15:33:24 - 00:15:49:02 Brian Grimes I mean, you could print 500 deals in a year. You can find 100 deals in a year, ground up on land lots and just tap in. So there's so much opportunity right now. It's like insane for me to sit back and see and be a part of with, you know, the community that I've built.   00:15:49:08 - 00:16:07:05 Sam Wilson I love it. I love it. And I think one of the key key things that you had said there was that you love kind of that deal analysis side of things. And so I love it. I would imagine that it's it's kind of a motivator for putting somebody else in that seat in its own right where it's like, Hey, man, I'm with you, man.   00:16:07:05 - 00:16:21:08 Sam Wilson I'm kind of a deal junky, too. It's like, I can look at deals all day long. That's fine. So why, why? Why put somebody else in that seat? If you're having a blast, it's like, why do I want to get up the roller coaster, man? We're having a good time. So I don't. I don't want to lose the front seat on this ride.   00:16:21:15 - 00:16:46:05 Sam Wilson So I love and that's that's absolutely cool. Let's talk about the state. Maybe we'll shift gears a little bit here from the tactical maybe to a little softer skill and talk about the state of the market. Like where, where, where are you guys? Maybe I could ask that question. Where if you want to answer this one, where are you guys finding opportunity right now or how are you finding opportunity and or what are you guys doing to protect your downside?   00:16:47:24 - 00:17:09:20 Brian Grimes I, I think where I've always operated, right, is part of my mission in real estate, is affordable housing helping to be a part of solving that affordable housing crisis. So creating workforce housing. I invest heavily in Co-Living, so I'll take properties that are three bed, one bath. I'll blow them up to the floor walls and rebuild them as three bed, three baths, three master suites.   00:17:09:20 - 00:17:30:20 Brian Grimes The only way to the bathroom is through the bedroom, and then you can rent them out individually. So you could take a property that would rent for 1250 a month, it'll rent for 20 to 50 or more. You can create $1,000 of extra cash flow on these types of assets. So I do a lot of co-living workforce housing and that protects the downside because well, two things.   00:17:30:20 - 00:17:46:17 Brian Grimes So how do I see the opportunity was one part of the question? Well, if I can take a property and produce 20 to 50 a month out of it and you can only get 1250 a month out of it, I could see a lot further than you. I can see way more opportunity. Even in a tight market like Philly, sixth largest city in America too.   00:17:46:17 - 00:18:12:03 Brian Grimes I'm protecting my downside because I have more rents coming out of each property and co-living I'm creating affordable housing so even in a recession, people start choosing cheaper alternatives because their money's drying up. So they actually flock to my products in my marketplace versus some of the higher end rentals. So I've always kind of stayed pretty conservative and low to the ground in that sense.   00:18:12:06 - 00:18:20:19 Brian Grimes So I'm conservative with strategy, but then I'm aggressive with scale and that's a moderate, aggressive strategy, we'll call it.   00:18:21:11 - 00:18:32:05 Sam Wilson Right. But that I mean, that's I love both sides of that conservative with strategy, but aggressive with scale because like you said, you're still going to be the least expensive option.   00:18:33:05 - 00:18:55:23 Brian Grimes And yet if I go down, everybody's out, you know, everybody's out of the pool. It's essentially like we got hit with a nuke at that point. Like, if affordable housing guys can't make money, then it's the economy's really bad. And we have a, I would say, more of a debt restructuring environment where people are just going to restructure the debt to survive because the banks can only do they can only foreclose so much.   00:18:55:23 - 00:19:06:06 Brian Grimes At some point. They just restructure the debt and extend, which we're seeing in the FHA market right now with the 40 year restructuring notes that have just kind of rolled out.   00:19:07:03 - 00:19:16:23 Sam Wilson Okay, I that's that's news to me. I haven't I haven't researched or actually heard anything about that. So maybe that's the only hang up. You're going to go, go, go do some.   00:19:16:23 - 00:19:35:08 Brian Grimes Yeah, there's some 40 year notes. Yeah, there's 40 year mortgage nos. If you were going to default on a 30 year FHA product, you were behind, you could restructure into a 40 year mortgage. So they will restructure the debt, take the past due balance, recapitalize it into the total amount, do in a stretch over a 40 year term.   00:19:36:04 - 00:19:47:13 Brian Grimes Wow. And that's the test that's been going on. I think that just got approved about a month ago. And I wouldn't be shocked if we don't start seeing 40 year fixed mortgages in 2024. Right. I can almost guarantee you.   00:19:48:00 - 00:20:20:07 Sam Wilson I would I would think that you're right. Just given given the state of the over the overleveraged state of Americans in general. It does. There's not the way out of the woods. Is is probably not pretty if there is one there at all. So that that's really, really interesting. What about on the acquisition side of things? I mean, being in the single family home buying space or maybe small multifamily space like that's been incredibly competitive.   00:20:20:21 - 00:20:30:21 Sam Wilson So what, what, what's a way that you're acquire. Not a way. I'm not talking about like a tactical here's how we go out, find the deals, but like what types of deals are you seeing come across your desk? That makes sense today.   00:20:32:14 - 00:20:59:03 Brian Grimes I think there's there's always what I found is there are always deals. Sometimes the market is tighter. Sometimes there's a ton of froth in the market. Right. But there are always deals. Here's the caveat. The best deals come on and off the market in 24 to 48 hours. Wow. So if you are not friends and this is my focus, if there's a strategy is speed, I can if a deal I've had deals like this the deal hit the market 11 minutes ago.   00:20:59:24 - 00:21:18:12 Brian Grimes My guys in it within an hour because I have the systems, we're in it within an hour. I already know what it's worth. We get an offer out the same day and it's under the contract before the sun rises. And then when the sun rises, now there's a bidding war. But I already got the contract. Right, because I can move that fast.   00:21:18:18 - 00:21:33:08 Brian Grimes I have those systems, I have those people in place on ripping and running. And we're analyzing so many deals that when we see something hit the market, I have for 55 K if it's undervalued, period. Why? Because I've done so. I'm analyzing 100 deals a week.   00:21:33:15 - 00:21:34:00 Sam Wilson Right.   00:21:34:08 - 00:21:54:07 Brian Grimes I know the whole market. This is the thing about real estate. It's not the stock market. There's billions of stocks. If you go into any major city, there's maybe 2000 properties on the market right now. You can see every one of them put a value on every one of them. And then when the new deals start rolling on, they can be positioned either undervalued at market or overvalued.   00:21:55:03 - 00:22:11:11 Brian Grimes And you then go after and cherry pick all the undervalued deals. But you have to be fast, you have to do the homework. And that's what most people don't do. They don't do the homework. They don't focus on systems. They have speed and therefore they miss out on all the best deals. And they say, Oh, I guess you have to go to an auction, go off markets.   00:22:12:15 - 00:22:31:18 Sam Wilson Brian, this has been absolutely fascinating. Thank you for taking the time here to come on the show today and really pull back the curtains on what it is you're doing and how you're doing it. I love I love just like you said, you started this podcast off by saying that it's mindset like you start there. Yeah. How it starts with how you structure, how you think.   00:22:32:00 - 00:22:45:24 Sam Wilson And then from there, all the systems and the processes kind of flow from from that initial point of getting your mindset right. So Brian, this has been a blast having you here on the show today. Learn a lot from you. If our listeners want to get in touch with you, what is the best way to do that?   00:22:47:11 - 00:23:16:20 Brian Grimes You can find me on Instagram. Brian Grimes underscore two for seven curfew for the 24 seven cash flow university. You can find me on YouTube. Brian loves cash flow and that's easy to remember because I love cash flow. LinkedIn Brian grounds real estate you can Google Brian Grimes explains this all back links to a free training that I have for you guys at WW dot work with Grimes dot com for slash cash flow work with Brian Scott for last cash flow it's a free training it'll show you how to acquire properties for pennies on the dollar all across the country.   00:23:17:02 - 00:23:22:21 Brian Grimes Just like I do. You don't want to miss out on that free offer, so make sure you guys have been fantastic.   00:23:22:21 - 00:23:28:08 Sam Wilson Well, make sure you put all of that there in the show notes. Brian, thank you again for coming on the show today. This was a blast.   00:23:28:08 - 00:23:29:04 Brian Grimes Thanks. Appreciate it.   00:23:30:00 - 00:23:51:11 Sam Wilson 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 or 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.   00:23:51:11 - 00:23:54:17 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Today's guest is Kunal Dewan    Kunal discovered his passion for real estate in 2010 when he acquired his first rental property in Southern California, while still working full-time as a civil-structural engineer. Over the next decade, he utilized his engineering and management skills in construction and value-add projects to invest consistently in rental real estate, building a strong cash-flow portfolio.  -------------------------------------------------------------- [0:00] Intro  [0:42] The 3 questions  [1:28] Multifamily  [6:00] The 3 myths of passive investing  [12:15] Too much value-add?  [20:00] Types of debt  [23:42] Closing -------------------------------------------------------------- Connect with Kunal:  Linkedin: https://www.linkedin.com/in/kunaldewan/ Facebook: https://www.facebook.com/dewan.kunal 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 → sam@brickeninvestmentgroup.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: 00;00;00;02 - 00;00;20;20 Kunal Dewan So the number one myth the president has to go through, they look at the property, they look at the market, the business plan, but they don't look at the property manager. You're the actual person who's going to make your dream a reality. They don't look at the leasing agent. They don't look at the regional.    00;00;20;20 - 00;00;23;29 Intro  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 Kunal Diwan is an engineer by education, an entrepreneur by choice, and a real estate investor by passion. Gardner Welcome to the show.   00;00;41;11 - 00;00;42;29 Kunal Dewan Thank you. Excited to be here.   00;00;42;29 - 00;00;53;03 Sam Wilson Sam Absolutely. The pleasure is mine. Kunal There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00;00;54;29 - 00;01;28;04 Kunal Dewan I started in Southern California almost 20 years ago when I put a condo with a small condo. And the journey since then in the last two decades with my engineering background, construction background, slowly scaling up to duplex a triplex two for like two small multifamily, two syndications. And here right now in my journey, I am going towards a vertically integrated firm so that we can take down larger assets and create passive income cash flow for our investors.   00;01;28;18 - 00;01;36;29 Sam Wilson Wow. Oh, that's really, really cool. So let's let's hear what what type of assets are you buying right now, then?   00;01;38;11 - 00;02;02;24 Kunal Dewan Multifamily. I only do multifamily, Sam. I've been doing multifamily. I understand multifamily. I'm confident multifamily. About 13 years of my life. I must I used to be a structured engineer in my previous life. So used to build design and build tall building skyscrapers, you know, residential, and then went to hospitals and then to mixed use and then to multifamily.   00;02;03;01 - 00;02;09;04 Kunal Dewan And then that's when I say, you know what? This is what I want to do for the rest of my life. So I only focus on multifamily.   00;02;09;13 - 00;02;18;01 Sam Wilson I love it. I love I love the focus. Have you ever dabbled in any other asset classes or is it always just strictly been multifamily?   00;02;18;27 - 00;02;46;05 Kunal Dewan You know, I started looking into self-storage for a little bit and, you know, and I'm glad I did. As I looked into self-storage in my extended friends circle, I have friends and extended family who invest in hotels. And so I looked into that and there are car washes in their extended family. But I'm so glad I learned about all this so that I know I don't want to do that.   00;02;46;23 - 00;02;55;29 Kunal Dewan So it kind of just helped me further go deep in what I do already. So that's why I only do multifamily because I don't want to do any of those.   00;02;56;14 - 00;03;05;06 Sam Wilson It sounds like you have found the power of focus to be part of your success strategy. Can you can you speak to that?   00;03;06;22 - 00;03;32;01 Kunal Dewan Indeed. You know, I. I don't do multitasking. I hate multitasking. I'm a strong believer of one thing and just one thing at a time and just do really, really good. So it applies to be time with the family, be it business, be it anything else. Now I'm guilty. That's not how I used to be, because I started with a W-2 job.   00;03;32;06 - 00;03;59;12 Kunal Dewan I'm a first generation immigrant, right? I mean, I started with $400, 20 years ago. I had to build something while I was doing my job. So that was my engineering. And I did my residential real estate eight years ago. And then after that, I built my first business, you know, and I started out with 20 $500 to that to multiple seven figures, multiple unit while I was doing my job.   00;03;59;24 - 00;04;21;16 Kunal Dewan So that was the time where when I was realizing, you know, in my early twenties, I can do I can rule the world, I can do everything only to realize, no, you got to go deep if you want to build up. So going back to engineering, the foundation has to be wide, it has to be deep so that the structure above can be as high as you want it to be.   00;04;21;25 - 00;04;45;28 Kunal Dewan So when I quit my W-2, I went all in on my business, my first business, then I went all in on my residential portfolio and started making as a passive investment. So my business is fully passive. Great team. I have a team of 20 plus people, they manage it. My residential portfolio, I have great people, handymen, managers manage that and now I'm going all in in my real estate syndications.   00;04;45;28 - 00;05;11;19 Kunal Dewan You know, I have done for syndications in the last 12 months and there are two in the pipeline right now as we speak. So and this is all I do right now. So the power of focus is so valuable. If you want to go long and far and truly create impact, I can talk about the same in my personal life, but I think you get the point one thing and just one thing at a time.   00;05;11;25 - 00;05;34;29 Sam Wilson And just one thing, man. And I wish I had met you about five years ago, and you could have given me that speech then, because that's that has been the theme of, you know, somebody asked me this in December, and it's like I look back at everything we've done to this point and I'm like, you know, it's all going very well, but is it as great as it could be if we focused and just stated one thing?   00;05;34;29 - 00;06;00;03 Sam Wilson And so we said, Hey, what do you do in 2023 to make it more meaningful? And I said, it's going to be focus and team like we are just focusing. So I love that. I love the way you've said that one thing and one thing alone in that that can be hard to do to turn off, especially with the, you know, for the for the entrepreneurs in our in our midst like you, I can imagine that the temptation to look elsewhere because there's always good opportunities coming our way.   00;06;00;03 - 00;06;12;08 Sam Wilson That's tough to say. No, but I love I love where you say in there on focus. Let's talk about the three myths of passive investing. I know we mention this here off air, but we'd love to get your insights on what that means.   00;06;13;21 - 00;06;38;14 Kunal Dewan Yeah. So, you know, when I started into real estate syndications, where now I'm going outside my own personal equity in creating equity for other investors around me friends, family, neighbors, coworkers, and then their circle, they don't have the real estate. I call it burn out that I went through. They don't have the scars and the wounds that I went through as a landlord.   00;06;39;00 - 00;07;02;01 Kunal Dewan And Ruth's syndications have gained popularity in the last few years. I'm less than a decade, right? So and now we live in I live in Southern California, and the entry level is the bar is pretty high. And plus there's regulation and lots of red tape. So we start looking to outside California to invest and the questions coming up, you know, okay, yeah.   00;07;02;01 - 00;07;30;05 Kunal Dewan You know, 80,000 a door, $100 in the door. Great business plan. Fantastic. All good stuff. And that's what that's all. They stopped the passive investor to stop that at that level. So the number one myth that passive has to go through, they look at the property, they look at the market, the business plan, but they don't look at the property manager, the actual person who's going to make your dream a reality.   00;07;30;25 - 00;07;57;25 Kunal Dewan They don't look at the leasing agent. They don't look at the regional, you know. So that was the reason that I am going into a vertically integrated firm because now in our company, in our partnership, we know the leasing agent, right? We know the handymen and the cousin who are doing the job. There's a relationship. So the gap between the business plan and the execution, the risk gap is very small because we have the control.   00;07;58;00 - 00;08;21;18 Kunal Dewan So I encourage all passive investors. There's nothing wrong in getting a third party property manager, but look at the track record of the property manager. Look at the challenges of that property management business right now in that market. Look at the the failures and success. Right? So that's that's my number one. Number two is we talk about data a lot.   00;08;21;27 - 00;08;45;24 Kunal Dewan You know, look at the data. Look at the data. That's great. And we look at the gateway markets, you know, like L.A., Southern California, great market invest. It has some lots of troubles. But so you had the market, you have the data, I call it the selective data, the data that kind of feeds your by box. So but they don't look at the big picture.   00;08;46;13 - 00;09;09;09 Kunal Dewan And in this picture, where does the sponsor fit in? Right. So, I mean, you are you are a sponsor. You know, your market back of your hands and. Right. And you had the data for that market. I would encourage I was your passive investor. I will ask you, hey, in your market, what are the bad points? Give me the data for the bad points.   00;09;09;09 - 00;09;40;12 Kunal Dewan So people think if I invest in get me markets, my investment is secure. Nothing can be further from the truth because who who is more important than what and where? Yeah, that that's the number two myth. And the third one, my favorite. And a lot of people cannot get their head wrapped around this. And this is coming from my, my construction background in my, my value project when I did buy for myself is I call it the too much value add.   00;09;42;06 - 00;10;04;22 Kunal Dewan Every neighborhood has a cap depending on the income, depending on demographics, depending on so many different factors, you know, job and employers, there's a cap there's a cap on the rent. This cap on the even the house price that people are buying right. So people think, okay, I'm going to give I'm going to remove the the plywood. I'm going to remove the countertops and put some granite.   00;10;04;27 - 00;10;24;11 Kunal Dewan There you go. That's 80 bucks. I'm going to remove the carpet, put some laminate flooring or tile flooring. That's another 80 bucks and rent. And they keep on tacking on this and they keep on calculating the extra revenue that product will generate. Right. Well, if you look at the graph from a mathematical perspective, the amount spent and the return received, right.   00;10;24;25 - 00;10;57;01 Kunal Dewan That graph, that's a there's a 200 of your rent gap between a great product and a product that you are buying. That graph has a really high growth in the beginning of the renovation, the first 5000 are you will spend you will get instant $80, $100. And if a dollars rent bar which is great sure but the last 5000 you will spend whatever that is, you know, build an extra countertop or a wire, five, package, security pad, whatever that is.   00;10;57;01 - 00;11;19;05 Kunal Dewan The return on that last is not the same as the first, so people tend to average it out. Okay, there you go. That's my average increase in rent by the money spent in CapEx. But that's not the way to do this because the last bottom 20%, 40%, that value add is not necessary. It's not because you're past the market.   00;11;19;11 - 00;11;40;19 Kunal Dewan So look at the value add plan. Look at the market, look at the comps, the true comps. I am a passive investor myself where I invest with other people. You know what I do, Sam, was that I called the market. I called the market myself before I spend my another 100 or 250 K as a passive investor, I ask you what are the amenities?   00;11;40;24 - 00;12;07;28 Kunal Dewan And they're this like a trash valet, and then there is a pad fee. I get all of that. Now I know this is my spectrum, this is the bare minimum rent and these are all the extra things happening based on certain amenities and the finishes. Then I come back to my plot where I'm at, and then I do my math myself and then I come up with the, the sufficient value add and I look at the too much value add and then I make the decision.   00;12;08;03 - 00;12;15;01 Kunal Dewan So that's my number three myth that every passive investor should consider before sending that money to the sponsor.   00;12;15;01 - 00;12;41;09 Sam Wilson Love it. I love it. That's a great that's a great very simple to understand, but great points you made there on, you know, the three myths that of passive investing. But let's let's talk about this too much value add maybe a little bit more in detail. When you say that, is this is this subjective? As in you say, okay, you know, each property is going to have its own version of too much value add?   00;12;41;24 - 00;13;04;17 Sam Wilson Or are there things that you see kind of across the board that sponsors are doing, such as the I don't know, the things you mentioned there, you know, wi fi packages, security cameras, etc., that just aren't getting that same return on investment that other things like flooring and countertops might. Or is it again, you know, the beginning question, is it a subjective thing or it's a property by property basis?   00;13;06;00 - 00;13;14;07 Kunal Dewan Yeah. So great question. Easy answer is it's a half, half art and half science.   00;13;14;13 - 00;13;14;23 Sam Wilson Okay.   00;13;15;11 - 00;13;38;13 Kunal Dewan And the way to look at it is, let's say you have two exactly same properties, literally on one side of the street, right, facing each other, exact same unit count mix, yada, yada, yada, right. And assuming the demographics do not change between the 40 foot wide street, right? Because demographics can change drastically, especially in big markets where you had where we are.   00;13;39;01 - 00;14;03;10 Kunal Dewan So assuming all that right now, you look at a small one mile radius, it's a long answer to your short question. But I really want to give some inside the way I look at you'll get a one mile radius. Don't go too far. Just one mile, and you can get the income and the demographics and even sometimes the number of people from depending how far you are from the census in that neighborhood, right?   00;14;03;16 - 00;14;28;23 Kunal Dewan Then you go three mile and you go five miles. So if you can draw these circles based on this income, you know, whatever your cap is, my cap is 33%. 33% is my maximum rent a family would pay. Right? So I backtrack. This is my maximum spendable money on the rent or other expenses, plus -2 to 3%, including amenities.   00;14;29;00 - 00;14;58;05 Kunal Dewan So let's say if the income is $100,000, that's $33,000 plus minus two three. That's a 36. That's three grand a month. So I'm talking here in Southern California, right? I invest quite a lot in Central Coast in California. So let's say $100,000, $36,000 is my total spendable money when it comes to rent and related expenses. So three grand a month, these two properties, this property is renting out, let's say 20 $900 with some basic finishes.   00;14;59;15 - 00;15;32;13 Kunal Dewan My property has older finishes and I can pump it up with some flooring and some current up, some nice paint to 30 $100. Right. I'm already ahead of my my underwriting and the market. Yeah. Anything over is not going to create a huge return without compromising my economic vacancy or physical vacancy provided the income in my one mile radius.   00;15;32;13 - 00;15;53;25 Kunal Dewan The math that I did is changing. So I look back five years or ten years. If the income is changing, the growth in the income is high enough, then I'll build this in my value add plan. But if the income is growing at 2% 5%, well, I'm going to build my disposable income to a similar number. So maybe 20 bucks.   00;15;53;25 - 00;16;28;09 Kunal Dewan 30 bucks. Why would I spend, you know, taking down the walls and adding a loft size living room and a $30,000 CapEx expense when I'm only going to get 5000 dollars extra? That's what I meant by extra value. So look at these numbers at a very molecular level because real estate is not local. It's ultra local. So look at all that and then make the decision what's my right value as I draw spectrum bare minimum value add, desired value add and too much value.   00;16;28;12 - 00;16;42;17 Kunal Dewan So in every business plan of mine I have a spectrum. So when we present that to our investors, we go with the desired value plan. Many times we don't even have to do that because the rental growth is sufficient or our execution is efficient.   00;16;44;13 - 00;16;54;20 Sam Wilson I love I love that. And so even in your deal decks, you will you will put out there the one, two, three, would you call that the minimum desired and too much?   00;16;56;15 - 00;17;15;13 Kunal Dewan I do. Only two and three. So so we actually put to the lender, we talk about everything so we can have the CapEx budget ready if we need it. But internally, so we do two underwriting. One underwriting is internal that I do myself where I know, okay, this will yield here, but too much data sometimes can blindside investors.   00;17;15;23 - 00;17;24;15 Kunal Dewan So I kind of just pick one. This is the plant based on this these that returns and we know anything over is just cherry on top.   00;17;24;23 - 00;17;56;06 Sam Wilson Right right. Oh, that's really, really cool. I like I like the way you think through through that I've not quite heard this that clear of an explanation of value add. I mean you hear that term but but but the too much value add idea and how to can quantify and qualify what that is tell me about what you guys are buying in the multifamily space right now and how that has changed over the last 12 months.   00;17;56;06 - 00;18;23;21 Kunal Dewan Great questions. And we can talk about another hour on just on this topic. A lot has changed in last 12 months. You know, the the deck was cheaper. It's a whole lot easier to execute right now. We all know what the seller is asking and what actually made sense. The gap has widened drastically. I mean, I was reading a report just a few weeks ago.   00;18;23;28 - 00;18;51;27 Kunal Dewan I think the volume is down overall. Nationally, it was a multiple round. Marcus Millichap is down by like 70% or more. That's a lot. So what we are what we are buying right now, our fundamentals have not changed. 12 months ago, the last year I did, I had a reserve of almost 7% of the equity raised and this lender, not lender, required.   00;18;51;27 - 00;19;15;21 Kunal Dewan This was our reserve because we knew where the market is going and we still pretty aren't sitting on the equity right now. And I'm actually kind of moved that to a CD just as a back up. So we knew what was coming. We always have the reserves, but now the market has changing, the volume has gone down, the type of assets are coming up online.   00;19;15;21 - 00;19;47;21 Kunal Dewan The it's hard to make numbers work, but when it works, it is a super sweet deal to the asset we are looking right now. The offer is tomorrow as we speak. The going in cap is in high sixes and R and the treasuries have dropped in last few days. So the debt we are getting in survives. Midwives to be are already in positive leverage right there and the rents are lower.   00;19;47;21 - 00;20;09;07 Kunal Dewan I don't know that inside details, but I feel that the seller might not be able to execute his business plans. He just wanted to get out, which creates fantastic buying opportunities. So we'll be buying. What we're looking right now is beautiful, fantastic buying opportunities. If we don't deviate from our buy box, the investment thesis.   00;20;09;17 - 00;20;23;27 Sam Wilson Right, right. Yeah. That's in that I guess that's that's the well maybe we can talk about the types of debt you're taking on and then I want to hear what that buy boxes and why.   00;20;23;27 - 00;20;57;15 Kunal Dewan Another one of my favorite topics agency debt strictly agency that we're not doing any bridge anything like that fixed my my first syndication first investment this was late twenties 2020s early 2021 when the bridge was like two and a half or less than three. Even then I did a fixed debt and because I believe in it, it's a long term play we in we are in a long term game.   00;20;58;08 - 00;21;35;10 Kunal Dewan I'm not talking two or three years, you know, even to my investors, my average world is five and seven years. We are talking cash flowing as long as we live. If we exit, we exit. But our goal is to actually refinance and not sell. So top that we're getting is strictly agency debt by box. The buy box is my box by box cannot be the same as your buybacks for anybody else because my buy box is through the lenses of the risks that I can take and is different than yours and the risk that I can take.   00;21;35;10 - 00;22;12;28 Kunal Dewan I'm not talking aggressive, I'm talking on the lower end because this is not my money. With all my money I could be. I can do whatever I want you know, I can buy whatever car I want was for somebody putting the money on me. Oh, my God. That's I'm going to take it to the next level. So I have these extra layers, my, my underwriting, you know, I have taken the templates from over over the years and I have modified average my own macros and I wrote my own scratches so I can see the spectrum of risks every time I send an ally.   00;22;13;25 - 00;22;47;27 Kunal Dewan I know at this purchase price what will be my risk and at this purchase price, what are my risk? And the same thing with the business plan. So that by box the investment thesis is different for every person depending on their personal situation. Mine number one is cash flow. I'm a believer that if the property cash flow within year one and the debt is stable, you can ride out any downturn because the horizon is when I die.   00;22;49;21 - 00;23;13;08 Kunal Dewan So because we have we are planning a long term wealth generation. This is not a cash flow mitigates. So even like right now the deal that we're going to do this week, they're like going out tomorrow, our first year cash flow is in high sixes. Now that's just first year as the operations improve, the A.I. improved, profit improved.   00;23;13;08 - 00;23;42;21 Kunal Dewan It's going to just going to go up. So down the line, five years, seven years, we going to refinance it and then hold it for eternity and keep churning the cash flow. So that's my number one buybacks, material cash flow. And then the second is now right now in today's market is I'm not going for deep value adds, I'm going for stable and just increase it by effective operations using our vertically integrated team.   00;23;42;21 - 00;24;09;23 Sam Wilson Those two those two things sound very sound sound policy and procedure. I like I like the way you think through both of those items. Kunal This has been a blast having you come on the show today. I've learned so much from you just in the way that you guys approach assets. You are three investor are passive investor myths we've learned about your kind of journey in the in the real estate space so many things here to take home and consider.   00;24;10;11 - 00;24;22;27 Sam Wilson I think the what the the third point there on the too much value add that was the one that was really cool or is it was how you calculate what too much value add is so present as with a lot of things to think about here today. Certainly appreciate you taking the time to come on the show today.   00;24;22;27 - 00;24;26;23 Sam Wilson If our listeners want to get in touch with you and learn more about you, what is the best way to do that?   00;24;28;13 - 00;24;31;25 Kunal Dewan LinkedIn, like I said, is the best way to reach out to me.   00;24;33;28 - 00;24;42;05 Sam Wilson Fantastic. We'll make sure we get a link to that there in the show notes. And again, thank you again for coming on today. This was a blast.   00;24;42;05 - 00;24;44;07 Kunal Dewan It's a pleasure, man. Thank you for having me, Sam.   00;24;44;24 - 00;25;06;08 Sam Wilson 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 or 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.   00;25;06;08 - 00;25;09;15 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Today's guest is Chris Seveney Chris left his cozy top floor corner office in 2022, after 25 years working in real estate development and construction. Chris has managed over $1B in new construction during his career and has grown his note business to acquire over 500 notes. Join Sam and Chris in today's episode. -------------------------------------------------------------- [0:00] Intro [0:54] The 3 questions  [4:09] Scaling mortgage note investments [8:10] Reg A vs Reg D [11:59] Terms, issues, and mistakes [15:58] State of the market [19:07] What type of distressed debt are you buying? [19:54] Return profile  [21:02] Closing  -------------------------------------------------------------- Connect with Chris:  Linktree: https://linktr.ee/creatingwealthsimplified Website: https://7einvestments.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 → sam@brickeninvestmentgroup.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:   0:00:00:11 - 00:00:22:14 Chris Seveney On multifamily deals is an example. You'll see an acquisition fee, an asset management fee, a management fee and disposition fees. And you have all these fees. The way we structured it was so simple where I have a staff of nine people right now that work for me and myself. Now we don't have fees or ratios. We're all salaried employees who take a salary.   00:00:23:01 - 00:00:48:16 Intro 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 Chris left his cozy top floor corner office in 2022 after 25 years of working in real estate development and instruction. He managed over $1,000,000,000 in new construction, and he's now grown his note business to over 500 notes.   00:00:48:23 - 00:00:50:10 Sam Wilson Chris, welcome to the show.   00:00:51:13 - 00:00:54:15 Chris Seveney Sam Thanks for having me today. Glad appreciate being here.   00:00:54:21 - 00:01:03:03 Sam Wilson Absolutely. Chris The pleasure's mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where you are now and how did you get there?   00:01:04:18 - 00:01:26:07 Chris Seveney So where I started, I've always been in real estate, but the tipping point for me to kind of starting my own path was when we, my wife and I went to go build our primary residence because we acted as a contractor. We see that out ourselves and that gave us a lot of equity to then pull some of that equity out to go start doing some more of our real estate components.   00:01:26:15 - 00:01:42:21 Chris Seveney So that's kind of how we got started. What was the second part of that? Where are you now? So where are we now? Like you mentioned, last year, we launched a regulation A-plus fund to raise $75 million to focus primarily on investing in distressed mortgage notes.   00:01:44:06 - 00:01:54:01 Sam Wilson That's fantastic. Okay, so you started when you did that first GC Your own home, was that before you launched in your development career or was that after?   00:01:55:03 - 00:02:15:09 Chris Seveney So it was when I was working for a developer is right after I started working for a developer. When I worked for GC, you know, you were working six days a week, 60 plus hours. You had no time for managing construction projects. Do your own thing. Then when you go to a development side, it's kind of like, you know, the the cozy side of things where all you do is scream at the GC all day long.   00:02:15:19 - 00:02:35:04 Chris Seveney And my boss at the time, super smart guy, you know, comes to me one day he goes, What are you doing for retirement? And I said, I got my 41k. And he laughed at me. He goes, Why don't you own real estate? You've been in it for 15 years. That's point time. And he had a he had five or six rentals that he had probably a portfolio at that point in time of like $5 million.   00:02:35:15 - 00:02:42:08 Chris Seveney And that gave me kind of the, you know, the start to want to go build my own real estate career.   00:02:42:24 - 00:02:58:07 Sam Wilson Got it. Got it. And so it sounds like the starting your own real estate career didn't go the traditional route. You've now since launched a reggae fund. You guys are buying distressed mortgage notes. I mean, was that the next step for you and how did you get into it?   00:02:58:12 - 00:03:19:18 Chris Seveney So yeah. So the next step actually was we were doing some fixing, I'll call it the bigger pockets BR strategy. We're buying some properties to renovate, rehab, refinance and then rent out. And we did two properties in the Washington, D.C. area where we're located and we had two little kids at the time and we were managing all this work.   00:03:19:18 - 00:03:47:05 Chris Seveney So my wife, after the second one, says, we're done. You know, it was it was just too much. And she was right. I mean, I was putting a lot of strain on us. But me being, you know, everyone calls me the squirrel and I can find anything on the Internet, you know, looking at what else I could invest in, in the challenge I was finding was, you know, the problem is trying to solve is what can I invest in that I don't have to be there within 15 minutes of getting a phone call to put an offer in on something.   00:03:48:06 - 00:04:08:24 Chris Seveney So traditional real estate kind of went out the door. So what I found was mortgage note investing. And when I found it, it actually ticked me off because I knew of private lending, but I didn't actually know you could buy distressed notes on a secondary market. So when I found out about it, I was actually a little upset, but actually drove me to want to learn more and get involved.   00:04:09:18 - 00:04:30:23 Sam Wilson Got it. I love that. It's one of those things, you know, we hear people and I hate to say this, but when someone tells me, okay, I'm a distressed mortgage note investor, I'm a note investor, I think if someone that my you know, kind of the mom and pop version of note investing, they buy, you know, five, six, seven notes a year and they hold them and, you know, parcel amount, do whatever they're going to do with those.   00:04:30:23 - 00:04:49:08 Sam Wilson You know, the various things you can do with notes. You've taken this to a very a much larger scale. I mean, launching a $75 million reggae fund is not buying 5 to 7 notes a year. So tell me, I guess when you when you mapped out your plan for this business, how did you I mean, in doing this at scale takes work?   00:04:49:08 - 00:05:04:21 Sam Wilson Because you correct me if I'm wrong, but I would think you have to have the right industry contacts. You have to have the right people that are selling those distressed notes to you, obviously bidding on probably pools of notes. Tell me just how you kind of wrap your head around that educated yourself and then said this is how we're going to go big.   00:05:05:19 - 00:05:28:06 Chris Seveney Yeah. So very unconventional of how I did this. I started out using my own money, which is conventional. I would say, or recommend. I started buying a few notes and you know, that continued to grow. And few things that I did differently were I'd be in some of these groups or membership classes and just like any aspect of real estate.   00:05:28:07 - 00:05:47:16 Chris Seveney 90% of people who are, you know, say, sitting at the table with you are window shopping. They're not even going to do it. They're just kind of wanting to see what they could do. So after I started getting a little momentum behind me, I was reaching out to those people and say, Hey, look, if this isn't something you want to do, come joint, venture with me, fund the deal.   00:05:47:16 - 00:06:04:04 Chris Seveney And you know, most people would get 5050 profits. I was giving 6040. So I was giving a little bit more. So I started to do a lot of those deals which for one on one joint ventures till I grew to a point where I, you know, wanted to do it within a fund model of a five or six.   00:06:04:20 - 00:06:26:01 Chris Seveney The first one was B, but when I said unconventional, what was unconventional about it is I knew real estate and I knew a lot of this aspect and I had some finance background. I actually went back to college, got a masters in finance and real estate and wrote my thesis in 2020 on how to raise $50 million to do a note fund.   00:06:26:11 - 00:06:49:22 Chris Seveney In my professors were private equity managers and everybody else who managed billion dollar funds. So I'm basically paying $3,000 for my you know, each class was around $3,000. So I paid 30 plus thousand dollars for my masters. But I was getting the education from people who have far exceeded, you know, anything I probably could get from somebody online.   00:06:50:03 - 00:06:56:04 Chris Seveney And most people pay that same amount in some of these training courses were a lot less a shorter period of time.   00:06:57:16 - 00:07:13:13 Sam Wilson And so you had these professors that were in the business, which is rare, I think, in the education sphere, to see these people that are practicing what they're preaching. But these these professors that you had to look at your plan and say, hey, here's how you can do it better. Were they kind of catalysts that help you refine it?   00:07:13:18 - 00:07:14:22 Sam Wilson What was that process like?   00:07:16:04 - 00:07:49:11 Chris Seveney Yeah, really helped me refine it in regards to, you know, as an there's a big difference from, like you said, the mom and pops and buying a few and getting to that scale of where you need to get to to get more of like an institution on to two fronts. One is buying the assets because once you hit, I'd say like a $10 million threshold of capital, that opens up like a completely different realm for you from the type of people who will want to invest with you.   00:07:49:11 - 00:08:09:21 Chris Seveney You a million or $2 million check. But if you only have $1,000,000, nobody wants to be 50% of your funding partner. A large part, people like to be a small component, but also from US asset acquisition. You see a lot more deals when you're telling people, Hey, I want to go buy two or $3 million right now versus somebody who, Hey, I want to buy 50,000.   00:08:10:23 - 00:08:27:06 Sam Wilson Right, right. Okay. So you guys said, look, we're going to launch a reggae fund. Let's get let's get into that. Why reggae versus reggae D? How did you end up deciding to do this particular model? And what are some of the challenges maybe that you faced along the way?   00:08:28:07 - 00:09:05:20 Chris Seveney Yeah. So the first challenge with not investing is you are the lender, so you're not taking on any debt. So it's good because your risk profile is very different than, say, a multifamily investor. And a lot of our investors came from investing in multifamily or other self-storage, other types of deals. That challenge is, you know, they can go get it that time, you know, getting 15, 18%, you know, in ERs on these other deals because they're levered, you can leverage it in 3% in 65% leverage to enhance those returns.   00:09:06:12 - 00:09:29:01 Chris Seveney Note investing you can't compete with that. If anybody, you know, saying, I'm going to get you as a note fund 18%, I'd be interested to see the types of assets you're buying because your risk profile is so high, because you know the investor money is your leverage. So what the reason and to answer the question of the regulation A is regulation A does get qualified by the SCC.   00:09:29:08 - 00:09:59:10 Chris Seveney So it's a much higher cost. You know, I'd say to get qualified is call it $125,000 compared to a five or six C, which you can get done for 1020 grand. But when you look at your audience, who are you marketing to when you're doing A five or six C and in real estate, you're typically marketing to other real estate investors who are accredited, which is, you know, 1% to 2% of the population pick a number of regulation a year.   00:09:59:16 - 00:10:18:12 Chris Seveney You know, you're fishing in the entire ocean because all you have to do is be above 18. You know, our minimum investment is 20 $500. You know, name A five or six C that you can get in the door for 20 $500. You can't. So, you know, we want to open up that pool significantly to other investors.   00:10:18:12 - 00:10:47:19 Sam Wilson Got it. So you said, all right, look, we're going to plop down 125 grand. We're going to launch a regulation, a fund. When you did that and I know you had some relevant industry experience up to that point in time, joint venture ing, buying, some notes, maybe buying I don't know how many at a time, but what do you do to really I guess there's a be the wrong term for it, but maybe just be the right one to give your investors confidence, especially your large check investors in a fund like this that, hey, we can do this at scale and we know what we're doing.   00:10:49:01 - 00:11:09:09 Chris Seveney Yeah. So prior to writing the regulation, A had actually done five other funds. Okay. And, but those funds, the way we did them were, you know, a lot of people just want to go out and say, okay, I want to go raise $20 million into a fund. You know, I'm an engineer. So, you know, I like the, you know, test improve different theories and so forth.   00:11:10:11 - 00:11:35:24 Chris Seveney So we did several different ones and we changed the terms. You know, we had one fund that was like a 5050 split with no preferred return, no management fee. We did one with a preferred return with a management fee and some split. So we did. We did one two years, we did one three years, you know, so we did these to gauge, okay, what is the best for both the investor and the sponsor?   00:11:36:09 - 00:11:54:12 Chris Seveney Because what you don't want to do is go raise $50 million or a large sum of money and have the wrong terms. You know, that can be catastrophic. So we did several different, you know, theories and how we were testing things. And each one of those funds, you know, again, past performance is in a future indicator of success.   00:11:54:18 - 00:11:58:14 Chris Seveney But each one, you know, we met or exceeded what we were looking to deliver to our investors.   00:11:59:09 - 00:12:18:21 Sam Wilson Right. Right. And that makes that makes a lot of sense. Let's talk about those terms a little bit, because if someone actually was reading a book here recently and they were at one point that the author made, was that as a new fund manager, that a lot of times what he would see is that the sponsors would end up not paying themselves enough.   00:12:18:21 - 00:12:39:06 Sam Wilson They do one or two things. Either it was either, you know, incorrectly weighted to the sponsor and or incorrectly weighted to the investor to where if you raised a $30 million fund, maybe the sponsor didn't build in enough really fees in there and things to make it worth them staying the course and or you know, it just it just was.   00:12:39:07 - 00:12:48:13 Sam Wilson So tell me how you've kind of thought through that and what what you found were the right the right terms and the wrong terms along the way? What were some of the things you did? Well, some things you that maybe you've corrected.   00:12:49:17 - 00:13:12:16 Chris Seveney Yeah. So one thing that is weird, you know, doing these other funds, there was one offering that we gave to have a pref and had too low of a management fee. So I essentially was managing this fund for two and a half years for pretty much nothing till the end, which, you know, I used to work, I was still working W2 at the at the time, but it was a lesson learned.   00:13:12:16 - 00:13:36:04 Chris Seveney Did I complain about it? Nope. That I, you know, change any of the terms. Now, it was a lesson learned. So I knew on the next one on the regulation offering, you know, I took what I learned from those other ones, but I also kept things extremely simple. You know, a multifamily deals is an example. You'll see an acquisition fee, an asset management fee, a management fee, a disposition fees.   00:13:36:04 - 00:14:00:05 Chris Seveney And you have all these fees. The way we structured it was, you know, so simple where I have a staff of nine people right now that work for me and myself. Now we don't have these ratios. We're all salaried employees to take a salary. So that's an expense that, you know, is the font, you know, we want the fund knows, hey, here's the expense that way.   00:14:00:12 - 00:14:21:00 Chris Seveney You know, the people who work for the company myself, okay, you know, we have to get paid somehow. Nobody should do anything for free. If they do, you have to be careful because if things go wrong, they may just want to walk because they're not making any money anyways. You know, for us we have a preferred return to the investors and then on the back end, that's where we get, you know, the back end side of things.   00:14:21:00 - 00:14:36:18 Chris Seveney So that's our incentive to want to do very well on the offering. And the same token, hey, look, you know, we're still getting paid that salary, which again keeps it very simple to make sure, oh, did I underestimate fees that I overestimate fees? You know, I don't have to worry about that.   00:14:37:02 - 00:14:59:01 Sam Wilson Right. Right now. That makes a lot of sense. I like that. Yeah. And that's something that we also have been working on here recently and even deals I'm involved in as a passive investor, it gets really confusing and I understand this where it's like, Oh, okay, well, we've got a, you know, a 7030 split and then up to a 15 IRR and then beyond that it goes down to 60, 42, at 89, it goes to 5050 and that's it, this extra hurdle.   00:14:59:01 - 00:15:11:23 Sam Wilson And you're like, okay, just tell me when there's an AC H please. In my account and I'll just trust you're doing the right thing because I know I just, I turn it off.   00:15:11:23 - 00:15:33:21 Chris Seveney So that's, you know, that's a great point because a few things with note investing. One is a lot of people don't understand the process of what you do. So there's an education component. And then when we're raising money, we can't take a multifamily apartment building, say, boom, here it is on marketing brochure. This is what you're investing in now.   00:15:34:01 - 00:15:54:12 Chris Seveney You're we're investing in blind pools, meaning we go raise the money, turn around and then invest it. So the investors basically really have to know their sponsor and trust us to do the right thing. So if we made it with all these other hurdles and everything, it would you know, it would be impossible. So we kept it simple of, hey, monthly distribution, monthly dividend.   00:15:54:17 - 00:15:58:03 Chris Seveney Here it is every month based off of, you know, this annual interest rate.   00:15:58:14 - 00:16:17:24 Sam Wilson Right. That makes a lot of sense. Let's let's talk a little bit maybe about that. The pool that you that these these pools of notes that you guys are going out and buying what is the what's what's the temperature of the water? I know it's probably changed in the last ten years, you know, from from one extreme to the other.   00:16:17:24 - 00:16:23:05 Sam Wilson But like what? What's that look like right now?   00:16:23:05 - 00:16:51:21 Chris Seveney Similar to real estate, you know, I started buying notes and Dow 20, I think end of 2016, I believe I was losers, you know, same thing. Real estate. If I could have bought a lot more back then, I would have, you know, based on pricing over the last several years has gone up significantly, many different factors. One is now properties now have a lot more equity in them than they did previously.   00:16:51:21 - 00:17:17:00 Chris Seveney So that reduces your potential risk, which and then of course, you know, impacts returns and valuations. There's been a lot less product. We are at historic lows for the amount of distressed debt around the country, mainly because of two things. One is the equity, the jobs market and of course, you know, government intervention, which, you know, besides just having loan programs to help those in need.   00:17:17:00 - 00:17:27:02 Chris Seveney Also during COVID, you know, a significant expenditure by the government to, you know, keep people who couldn't work to keep them employed or keep money flowing to them.   00:17:27:23 - 00:17:34:07 Sam Wilson Right. Do you expect that deal flow to increase? Decrease? What are you guys gearing up for?   00:17:35:18 - 00:17:59:19 Chris Seveney Yeah. So we have seen in quarter four and quarter one of quarter for 2022 and quarter one of 23. We were seeing about, I want to say roughly about $300 million of assets come across our desk each quarter. We've already seen in the first three weeks of quarter two of this year, almost that amount come across our desk.   00:18:00:16 - 00:18:09:04 Sam Wilson Wow. So in that is that is that is strictly distressed debt or that is a combination of distressed and performing and all the other stuff that goes into that.   00:18:09:16 - 00:18:48:09 Chris Seveney It's a combination, but it's been a combination. What we are absolutely seeing upticks in are the short term, you know, bridge debt financing that was either fixed and flip lenders. DC And there's we're seeing office loans of course because those are coming to maturity that can't get refinanced residential. What we're also seeing a lot of and what's making a comeback is the last several years there have been no call it secondary position lines which are typically lines of credit because not many people were getting them or whatnot.   00:18:48:19 - 00:19:06:17 Chris Seveney What we are seeing is an abundance of recently is people who took money out during 2020 or 2021, took lines of credit out to pay those credit card bills, and now they're back in default on the line of credit because they racked up that credit card debt again.   00:19:07:08 - 00:19:22:02 Sam Wilson Right? Yeah. That's that's really interesting. And I guess this brings up one more question that we haven't clarified yet in this fund. What is the type of distressed debt you're buying? Is it commercial? Is it residential? What are you guys focusing on?   00:19:23:09 - 00:19:53:10 Chris Seveney Yeah, great question. Primarily it's residential. We have the ability to do some small commercial, you know, some small multi-family as well. But we like to balance our portfolio to be about 70% non-performing, 30% performing a to give some cash flow coming in the door on some of those assets. And then the nonperforming, of course, also, you know, is our bread and butter, but typically, you know, the loans are single family residential.   00:19:54:01 - 00:20:07:22 Sam Wilson Got it. Very, very cool. And I got one last question. Maybe you can and maybe you can't answer this on the air. I don't know. But what's an expected return profile for a fund like this? Investing in distressed debt? Like, what's that look like for the for the average investor?   00:20:08:15 - 00:20:35:02 Chris Seveney You. Yeah yeah we can. So right now for our investors, you know, our target returns for them are 8 to 11% for the investor and that's out you know that is to the investor now returns on notes are slightly higher but when you again have to factor in, you know, your fees and everything that you know, salaries, payroll, you know, all that stuff, you know, that's and again, it goes back to that comment of no leverage.   00:20:35:02 - 00:20:56:08 Chris Seveney That's the, you know, the main driver of that fund. And when people look at some real estate, investors may say, oh, my God, that's you know, I won't get out of bed for 15%. You know, for us, we look back at, you know, you have to always look at and this is what I always tell people. You have to always look at the risk involved with the return that's being provided.   00:20:56:16 - 00:21:02:10 Chris Seveney You know, it's not just look at the number for what they say they're going to get. What type of risk are you taking by investing in that deal?   00:21:02:20 - 00:21:37:01 Sam Wilson Right. Yeah, absolutely. Absolutely. You know, and I hear a lot of investor sentiment and and for good cause and it makes me happy and it kind of speaks to my heart, which is, you know, more of the focus on capital preservation moving into that stuff that continues to produce and then gotten away from the I think investors while we've had a good run and everybody has had a great not and I can't speak for the whole every investor profile type but certainly seeing that shift more towards all right, batten down the hatches, let's find stuff that just plods along versus looking for that, looking for that home run deal.   00:21:37:01 - 00:21:58:02 Sam Wilson So that's very, very cool. Chris, I've learned a lot from you here today, everything from the challenges and the benefits of raising a reggae fund, the type of deals you guys are buying, how you guys are keeping deals, simple. Just kind of what your history was and how you actually got into this space. I think it's absolutely cool if our listeners want to get in touch with you and learn more about you, what is the best way to do that?   00:21:58:21 - 00:22:17:20 Chris Seveney Yeah. So they can go to our website seven E Investments, which is the number seven, then the letter E Investments dot com. Or they can email me Chris at seven E investments dot com. You can find me on LinkedIn, Facebook, my last name is which I'm sure will be in the show notes is not a very common last name.   00:22:17:20 - 00:22:27:24 Chris Seveney So you Google me. I, I'm one of two people and they have the same name. I have a cousin in Houston, but he's in a completely different asset class in business. So I'm the only one in real estate.   00:22:28:10 - 00:22:39:24 Sam Wilson Fantastic. And for those of you who are just listening that listening, that is seven and why so Chris 70. That's how you spell his name and then it is seven E, the number seven, the letter E investments dot com. Is that right.   00:22:40:20 - 00:22:41:05 Chris Seveney Correct.   00:22:41:11 - 00:22:46:14 Sam Wilson Cool. Well, make sure all that is there in the show notes. Chris, thank you again for coming on the show today. I certainly appreciate it.   00:22:47:15 - 00:22:48:12 Chris Seveney Thank you for having me.   00:22:48:24 - 00:23:10:09 Sam Wilson 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 or whatever platform it is you use to listen. If you can do that for us, that would be a fantasy tech help to the show. It helps us both attract new listeners as well as rank higher on those directories.   00:23:10:09 - 00:23:14:11 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.  

Today's guest is Chris Okada. Chris is a prolific dealmaker, entrepreneur, and CEO of Okada & Company, a multifaceted commercial real estate development, management, and brokerage firm based in New York City. Christopher is an avid blogger, speaker, and thought leader relating to entrepreneurship and real estate subjects. Join Sam and Chris in today's episode. -------------------------------------------------------------- [0:00] Intro [1:17] The 3 Questions  [3:51] Investment opportunities in other asset classes  [7:36] Real estate prices, trends, and risks  [11:03] State of multifamily  [14:50] Chris' NYC office space strategy  [27:30] Closing -------------------------------------------------------------- Connect with Chris: Instagram: https://www.instagram.com/chrisokada/   LinkedIn: https://www.linkedin.com/in/christopherokada/   Book: https://www.fromfeartofortune.net/   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 → sam@brickeninvestmentgroup.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: 00:00:00:07 - 00:00:49:06 Chris Okada If you're meeting the market. If rents, for example, were $10,000 a month for for a 1500 square foot just regular office space, and today they're at 7000 or it's a 30% drop. You got to you got to be able to meet what the tenant wants with a 30% discount. You got to have it designed the way they want it now because of work from home and because of co-working and all that stuff, when if they're going to leave their couch, if they're going to leave their living room, if you're going to leave your beautiful podcast room. What can I as a landlord offer you that would be equivalent to that?    00:00:49:06 - 00:01:12:14 Intro 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 Chris Okada is a prolific dealmaker, entrepreneur and CEO of Okada and Company, a multifaceted commercial real estate development management and brokerage firm based in New York City. Chris, welcome to the show.   00:01:13:25 - 00:01:17:12 Chris Okada Thank you, Sam. I'm super excited. Thank you for having me.   00:01:17:13 - 00:01:26:11 Sam Wilson Absolutely. The pleasure's mine. Chris, there are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?   00:01:27:23 - 00:02:13:11 Chris Okada Great. Starting with my father here in New York City, my family. This is our 54th year in commercial real estate in Manhattan, 1969. So it's a very different time. My father was very well known, and one of his key highlights was bringing over a Toyota motor company, Honda, Panasonic and Sony, and establishing their on US headquarters here in New York City as a commercial leasing broker representing, you know, the Fortune 500 of the Japanese manufacturers in the in the early stages of globalization in the seventies and eighties before it became what it is today. I started shortly after 911 and 12 and two, and I started as a leasing agent working for my father. And that's pretty much how it all started, you know, just started from the bottom. Now we're here.   00:02:31:27 - 00:02:37:07 Sam Wilson I love it. I absolutely love it. What is it that you focus on primarily today?   00:02:37:25 - 00:03:23:28 Chris Okada Great. So I am a very micro focused sandbox territorial person. That means that we focus on office leasing, investment sales and acquisition and development of properties in the Midtown Manhattan sandbox. Really, I would say from Soho to Rockefeller Center, right in the middle, mostly on the west side of Midtown, in midtown, south of Manhattan. So our portfolio of owned and third party at Avon Ivory is around 50 properties with total square footage about 2.6 2.7 million feet. So we eat, sleep, breathe New York City commercial, retail and New York City office. I would say that's 80%. However, in in markets like this and opportunistic times, we, of course, jump into multifamily and other sort of uses. But all in the sandbox, the midtown, midtown, south.   00:03:51:13 - 00:04:16:07 Sam Wilson I love it. I love it. Yeah. Being micro focused like that certainly allows you, I think probably, as you know, to get to know your investor or your investment profiles really, really well in what you know, what you guys focus on. It sounds like you get to know it intimately, but you do some opportunities that you're kind of seeing in some other maybe asset classes that haven't traditionally been what your core focus is. What do you see?    00:04:16:07 - 00:04:50:09 Chris Okada Yeah. All right. So in a post-pandemic world, we've seen so much sort of defaulting on mortgages, we've seen price prices come down 30 to 50% on on different asset classes. I have not and I was telling you briefly, I have not seen prices like this since 2009. I created a study called From Fear to Fortune Generational Opportunities in New York City Commercial Real Estate.   00:04:50:20 - 00:05:19:12 Chris Okada And it basically is a longitudinal study from 1993 to 2022 and a little bit, you know, a couple of months of 2023. And it basically outlines every decade New York City over the past 30 years and even further our 54 year history here in New York, prices really do come down every single decade, but you're only given two years in Manhattan.   00:05:19:20 - 00:05:50:24 Chris Okada On Manhattan Island, you're given two years where prices come down. And if you're able to acquire them and it really is timing. And, you know, there's two philosophies on now over time, the market or timing is everything. Right? So it's it's it's it's somewhere in there. But over the last 12 months, we've seen some real, real up price decline because of the interest rate environment.   00:05:51:07 - 00:06:30:28 Chris Okada And because of that, I think that people that are able to acquire at these 30, 40, 50% discounted price points, they're going to see some incredible ROI when the market recovers. And New York City, specifically every single decade from the past 100 years, has always rebounded and gotten more expensive than the last cycle. So, you know, the housing and real estate crisis of 2008 was supposed to be the worst crisis since 87 or 89, and if not that, then 1929, right?   00:06:31:06 - 00:07:08:28 Chris Okada So the financial crisis, but we're seeing pricing equivalent to 2009. And I do think that there is risk involved. I think that it is definitely a scary time for a lot of your listeners. If I were to zoom, you know, what about office? Would you jump into a 50% vacant office building work from home? But there's a reason it's priced 30, 40, 50% below 2019 levels, and that's because of that.   00:07:09:23 - 00:07:36:23 Chris Okada And for the very few that are able to jump in and seek, you know, these distressed assets and find a way to make them fully cash flowing at new risk at levels, I believe they're going to do extraordinarily, extraordinarily well this this decade towards when we're in a full recovery mode. So that's essentially the thesis.   00:07:36:28 - 00:07:55:16 Sam Wilson I love it. I love it. There's so many questions that come into that. One of one of the first ones, though, is when you say you've seen price levels reset for that 2008, 2009 time, is that is that an adjusted number based on inflation and other factors? Or is our straight dollar for dollar.   00:07:55:28 - 00:08:17:25 Chris Okada $3 per per square foot dollar? Wow. You know, so everything that I do in my world is on a price per foot because that's the only way I can assess a million square foot building in San Fran and a million square foot building in Dallas. And compare it to here in New York City is on a price per foot.   00:08:19:07 - 00:08:54:22 Chris Okada So looking at the price, the the price over the square foot of the property, we're seeing deals being done at $350 or $400 per square foot. The top was 1000, so or $900 per foot. So really we're seeing some, again, 50% discount. I mean, as a whole, our study shows that the peak of the market was broke, 900 to $950 per square foot in the last cycle in the 20 tens.   00:08:56:17 - 00:09:22:19 Chris Okada And if you're picking up a building, even if you got to do put $100 of putting construction and improvements or whatever it may be to improve it and rent it, and maybe another 50 to $100, if you're all in cost basis, is 40% below the last, you know, the heights of the market. And you have a fully cash flowing, turnkey, fully renovated property.   00:09:22:19 - 00:09:50:04 Chris Okada I believe the bet is that it's going to be a 2 to 3 x multiple by the end of the decade. Sure. And this is really based on on on just data. If New York recovers to anywhere in the 2013 to 2020 levels for pricing and you're buying at three, $400 a foot and it recovers back to five, six, $700, you know, you're doing all right.   00:09:50:04 - 00:10:25:11 Chris Okada If it hits the peaks of eight, $900 a foot and you're all in at 600 and you're at 5050, you know, 5050 on your LTV at two X, it breaks records like it does every single decade in history. The sky's the limit. Of course, it's scary. You know, you're borrowing it eight, nine, 10% money, you know. So interest rates are scary.   00:10:25:11 - 00:10:34:17 Chris Okada Vacancy and cash flow is scary. So there are risks in bonds and you have to sort of have a business plan around that.   00:10:35:19 - 00:11:02:16 Sam Wilson What you're doing, I feel like is is again, it's a it's a very local, I think, thing that you are able to see and capture maybe that the rest of us outside of the New York City markets don't necessarily see. Yes, we've seen, I think, you know, price levels in activity in other asset classes slowed down. I think we're like a 74% year over year decline in multifamily sales was a it was a statistic.   00:11:02:17 - 00:11:03:08 Chris Okada Yeah, we did.   00:11:03:08 - 00:11:17:19 Sam Wilson I had read yesterday we've also seen prices, you know, start to decline on the multifamily sale side. But I don't think we've come anywhere near on a national level from seeing them return to that 2829 pricing value.   00:11:17:21 - 00:11:58:14 Chris Okada Actually, I think inflation, I think multi-family is doing very, very well. It's sort of when you speak to we've probably spoken to 50 private equity real estate funds over the last couple of months. What are you asking them? What they're doing, what they're up to. Everyone wants multifamily, multifamily or fully leased. Industrial is the crown jewel. But then, you know, you're paying 5% yield and, you know, maybe even four or maybe maybe you can get to 6% cap on the capitalization rate, but you're at negative leverage, right?   00:11:58:17 - 00:12:36:07 Chris Okada So we're a contrarian investors. I do think that interest rates will come down. But for anyone and you and you saw there's a portfolio on the sun down in Texas, they had to give back the keys to 450 units. And that was I think that news broke yesterday. So it's not all Sunbelt, all multifamily. Lee is very strong, but for the most part, I do think that if you're cash flowing today and you don't have a refinance coming up in the next 12 to 24 months, you're doing really, really great.   00:12:36:07 - 00:13:02:29 Chris Okada If you if you locked in a ten year like mortgage at three and a half percent, you know, in 21 year you're the best. And it's multifamily. I mean, that at that point, you just, you know, clip coupons. And even if you bought a25 cap, you know, you're 150 basis points above your debt. You know, you can't go wrong.   00:13:03:06 - 00:13:48:01 Chris Okada It's really just the short term money that's causing all this agita, that's causing all the stress. And I think the best part and the best lesson for all of us in commercial real estate and in investing and people that want to grow regardless of where you are, is that you got to love the biz when it's good and you got to love the biz when it keeps you up at night and you know, this market, especially with with the interest rate environment, it really just weeds out people that may not, you know, that are in it just for the money and maybe not in it for the long haul, because it's hard.   00:13:48:06 - 00:14:19:27 Chris Okada It's tough. It's tough. And one one anecdote that I tell everyone is that a black swan event and New York City had many 911. I mean, you know, that's just one, you know, the Hurricane Sandy, that was a huge blow, the financial crisis and now the pandemic. We had a business plan that said if there is a million people outside in Times Square, our properties will never come down in value.   00:14:19:27 - 00:14:49:29 Chris Okada That was literally here. We, you know, three years ago. Exactly. In April of 2020, there was not a soul in sight. And everyone left Manhattan and everyone left the city. So, you know, you always have to try to prepare for the black one as best as possible. And really, that just means having a conservative savings for each one of your properties and having, you know, people say different things.   00:14:50:00 - 00:15:21:07 Chris Okada 12 months of mortgage and operating expenses in the bank account for the for the property. Some really conservative people say 24 months, but when times are good and the properties are well behaved, you're like, no, I'll keep two months, you know, two months in the end. And then that's when, you know, you need to be pretty conservative and have a strict cash flow policy and black swan policy of all the properties.   00:15:22:16 - 00:15:24:01 Chris Okada So for sure.   00:15:24:23 - 00:15:44:04 Sam Wilson Here is a question I want to we've got about 5 minutes left here on the show, and I really want to hear your kind of strategy that you guys are implementing behind this office space window that you're finding in New York City right now. How are you taking those down? I know you mentioned nine, 10% debt on them.   00:15:44:15 - 00:15:49:14 Sam Wilson How are you taking them down? How are you making them cash flow and how are you offsetting and or filling that vacancy?   00:15:51:07 - 00:16:18:18 Chris Okada That is the that's the big question, right? That's the big question, because the tenancy and the vacancy is the enemy along with it's a perfect storm. And but that's why the values are have been beaten up so much. So we are specialists in leasing. We lease we do corporate we've been doing corporate leasing and office leasing. We continue to do office leasing.   00:16:18:18 - 00:16:48:08 Chris Okada Our portfolio is 2.7 million feet. You know, when when times are good, there was less money to be made because there was less vacancy to be to be quite frank, year over year, office activity is up 76% as far as commission income and as far as square footage, I think it was I have to double check those numbers, Q1 23 versus Q1 22 and Q1 22.   00:16:48:08 - 00:17:08:11 Chris Okada We are coming out, I think December of 21 and January was all Micron and you know, we were not out of the woods in 21. So in 22 we were just starting. Now we're full blown. It's here in New York. It's 83 degrees. We're having a heat wave, you know, record highs of heat. You know, spring is in full swing.   00:17:08:17 - 00:17:36:23 Chris Okada And even though it's extremely challenging, if I turned off the news, I turned off CNBC. I didn't read Wall Street Journal. Our office leasing business is doing well, but we are super micro. We we, we have a, you know, an online strategy, social media strategy to really do whatever it takes to fill up our, our vacancies for our our own properties and others.   00:17:37:04 - 00:18:27:17 Chris Okada So it does take time if you're meeting the market. If rents, for example, were $10,000 a month for for a 1500 square foot just regular office space, and today they're at 7000 or it's a 30% drop. You got to you got to be able to meet what the tenant wants with a 30% discount. You got to have it designed the way they want it now because of work from home and because of co-working and all that stuff, when if they're going to leave their couch, if they're going to leave their living room, if you're going to leave your beautiful podcast room, what can I as a landlord offer you that would be equivalent to that?   00:18:27:17 - 00:18:52:12 Chris Okada And I have a we have a few ideas that were, number one, fully furnished, number two, fully designed, number three, turnkey. Like literally, I'm bringing your bringing your microphone in your laptop. If if that's what you've you're bringing a notepad, your phone and a laptop, and your eight employees will be there and the rest, the other ten will work from home.   00:18:53:15 - 00:19:19:09 Chris Okada And so we sort of have that down packed. It's it's not these large spaces it's no longer see is a great cubicles that's done. Everyone wants to feel comfortable. They they want a lounge sort of comfortable design, an upscale atmosphere. It doesn't have to be stuffy, but it does have to be thoughtful in design. That's what people want.   00:19:19:09 - 00:19:40:08 Chris Okada They like artwork. They they want to feel that it's that there's warm bodies and then they have to be well located. So they have to be in areas that it's it's kind of cool. You know, maybe there's a park a block away. I should go for a walk in the park. So the properties that are near the parks, they do better.   00:19:40:23 - 00:20:13:16 Chris Okada The properties that are near new, you know hotels we are just ad partners of ours are opening just open the Virgin Hotel with Richard Branson. That was last week and that was super fun and super cool. It was on the same day he opened a hotel. Now that he bankrupted one of his his space or subsidiaries, I'm not sure which one, but I do remember that.   00:20:13:16 - 00:20:44:00 Chris Okada Wow. This guy just read today breaking news that Richard Branson is be all one of his subsidiaries. And here he is laughing and smiling and cutting the ribbon for a $400 million hotel with his name on it. So, you know, I it's really about having a good plan, meeting the market and being a strong entrepreneur or to be able to take the pressure.   00:20:44:12 - 00:21:17:13 Chris Okada This whole education for me of this downturn, not even 21, was all right, 22 was scary. You know, the whole world was closed up, really. 23 And with the inflated interest rate environment, this is tested. Everything that I've been through and I and I believe that if and when you want to grow to the thousand dollar portfolio, ten that whatever ambitions you have as far as the real estate operator and owner, it will be tested.   00:21:17:22 - 00:21:41:28 Chris Okada And that's why I looked at Branson. I was like, Wow, how do you feel about having your New York? I interviewed him 2 seconds on the red carpet. How does it feel to have your own? And he's like sort of like giddy about it. But at the same time, he had a multi-hundred million, if not $1,000,000,000 venture, just go bankrupt.   00:21:42:09 - 00:22:17:28 Chris Okada And I and of course, I'm not going to ask him, oh, how did you know how to go with Virgin Galaxy or whatever, you know, whatever subsidiary it was. But that's it takes grit. It takes a lot of stress, it takes pressure. And being able to understand that pressure. And once you are put in that sort of situation where it's tough, you're not you're now ready for the next level, you will now be ready for the next level.   00:22:17:28 - 00:22:50:23 Chris Okada Whichever level that is. And for me, you know, working on and having, let's say, five, five properties here in midtown, of which maybe 75% are well-behaved, 25 are not well behaved, and the not well behaved ones are the ones that are keeping me up at night. The thought processes screw it. If, if, if, if a 30 of $30 million project could keep you up at night, why not just go for the gusto?   00:22:51:11 - 00:23:16:16 Chris Okada Go for it. Go for a hundred million? What does what difference does it make? Go for a billion? Because the amount of anxiety you get and if if worst case scenario, it all falls through, you fall flat on your face, you know, and it doesn't work out. It really just doesn't work out. And something happens. And now, you know, the Sun Belt is no longer interesting.   00:23:16:16 - 00:23:40:20 Chris Okada And, you know, rents are coming down and, you know, there's all kinds of, you know, interest rates are up and you're refinancing. You're at three and at 7%. Now you got to put up another $30 million. You don't have $30 million, whatever the story may be. And you come, you come and you and you come up and you survive that you're ready for the next level.   00:23:40:27 - 00:24:06:04 Chris Okada You've been you've you've been, you've walked the fire and now screw it. And I think Grant Cardone, who I'm sure you know, I think he is one guy and his story really that resonates with me is in oh eight, he owed $50 million to the bank. Now $50 million. That's a lot of pressure, you know, to personally have to cough up.   00:24:06:04 - 00:24:37:15 Chris Okada And if you don't have 50 mil in the bank, which most operators do not have. But let's just be clear then you got to liquidate everything. And if you don't got it past that, then, you know, Chapter 11 or Chapter seven, bankruptcy code. And so if he's going to go through all of that pain for 50 million bucks, why not just go for 500 million and then why not go for a billion?   00:24:37:20 - 00:25:03:18 Chris Okada And I think that that's that that resonates with me. But you got to walk that fire and you got to sort of feel that, you know, and all business plans are good. They are good. But you got a black swan event, No. One in 2020 because we are too busy worried about our toilet papers, you know, and, and, and the groceries and just survive in a pandemic.   00:25:04:15 - 00:25:50:23 Chris Okada No one thought about interest rates potentially growing 5% in 12 months. There's no way to have predicted in 2019 that in 2023 or 24 that the world was going to be the way it was. It's impossible to predict it. So all you can do is do your best with the information you have. And for us, we're pretty freaking good at leasing office space and we're doing whatever we can to buy low and get to cash flow as soon as as fast as humanly possible using all the the tools that we have, which is basically social media, networking, cold calls, you got to do whatever it takes to fill that tenant stack and fill that capital   00:25:50:23 - 00:26:09:25 Chris Okada stack, making. You got to reach out to you got to go on 50 podcasts. All right. You got to you got to go on 50 podcasts and let everyone know, hey, you know, like this is this is an incredible time. Maybe you're not maybe you're not there yet. Maybe you're not feeling it. But this is what we're doing.   00:26:10:12 - 00:26:32:08 Chris Okada And why don't you you know, come on our journey and say hello, and how do we make money together? That's essentially what we what we try to do. But the business plan is still the same. How many calls are you going to make today? How many presentations are you going to make to make this week or plan? How many luncheons do you have to go on?   00:26:32:08 - 00:27:07:20 Chris Okada How many email campaigns are you preparing? How many social media things are you, you know, is your social media calendar up? What is your PR up to? Have you been in the paper the same game in Brick, an investment group as Okada and Company? It's just the avatar. The target is different and that goes for any business, whether you're an insurance or an real estate or you're trying to raise $1,000,000,000 fund, you know.   00:27:08:13 - 00:27:09:19 Sam Wilson Indeed. I love.   00:27:09:19 - 00:27:10:07 Chris Okada It. That's it.   00:27:10:16 - 00:27:30:06 Sam Wilson I love it. Christopher, this has been a wealth of information. Thank you for taking the time here to come on the show today. I think what you're doing is really cool. I love the way you guys are taking down assets, how you are contrarian. I think that always speaks to me. Anybody who's looking look and laugh when everybody else is looking right is somebody that I want to get to know better.   00:27:30:06 - 00:27:45:26 Sam Wilson So thank you for taking the time to come on the show today and really share with us the opportunity that you guys are finding, especially in the office space, one that is, you know, kind of the estate is the dog. Everybody's kickin right now and you're going, hey, man, there's this. This is where you get paid. So I love I love how you're doing that.   00:27:45:26 - 00:27:50:09 Sam Wilson If our listeners want to get in touch with you and learn more about you, what is the best way to do that?   00:27:51:17 - 00:28:21:18 Chris Okada Oh yeah, for sure. Instagram, Twitter, LinkedIn. I think those are the three most active social media platforms and it's at Chris Okada, if you want to look at the study, it's W WW from fair to fortune dot net and that has my investment thesis, it has my belief and it has the raw data and everything that we do is data based.   00:28:22:03 - 00:28:34:26 Chris Okada So, you know, it's really bets based on historical data and you know, so follow me at Chris Okada and would love to connect with any of you great.   00:28:34:26 - 00:28:48:25 Sam Wilson Or both of those there in the show. Notes from fear to fortune dot net and Chris Okada, for those of you who are listening a c h r i s okay a day. So Chris Okada, Chris, thank you for coming on the show today. I certainly appreciate it.   00:28:49:22 - 00:28:53:19 Chris Okada All right. Bye. Thank you so much for having me. Good luck out there.   00:28:54:02 - 00:29:15:16 Sam Wilson 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 or 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.   00:29:15:16 - 00:29:18:23 Sam Wilson So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Today's guest is Karl Krauskopf    Karl helps High Net Worth Investors, Physicians, & Executives achieve their financial goals through apartment investing. He is a corporate strategist turned CRE entrepreneur. Join Sam and Karl in today's episode.  -------------------------------------------------------------- [0:00] Intro [1:22] The 3 questions  [4:30] Ground up?  [6:25] State of the industry  [8:02] What are you hunting? [9:41] Challenges when scaling [10:54] Long term strategies [12:07] No amenities, what do you do? [15:04] Sticky tenants? [17:12] Lending  [19:34] Long Term vision [21:38] Advice  [22:50] Closing -------------------------------------------------------------- Connect with Karl LinkedIn: https://www.linkedin.com/in/karl-krauskopf/ Facebook: https://www.facebook.com/karl.krauskopf.5 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 → sam@brickeninvestmentgroup.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:   00:00:00:03 - 00:01:00:28 Karl Krauskopf How can we offer him in this right in a low cost way. So it doesn't seem like an agenda, but bike racks. Right. Bike racks is a great way of making sure that you've got a decent amount of storage. We also would go in and what we have done is we've we've gone in and we've looked at the laundry facility itself, upgrading the washer dryer for the laundry matter, the laundry and servicing area. And then they start then we start having the conversations about, hey, you know, this is what this is what we're doing. This is our plan. We're going to be coming in and raising rents and then start talking to them about what those rent increases will be. And then we also give them the opportunity to opine with us and to come to the table and say, hey, you know, that's fine, but here's what's not working in our unit. Here's what's not working in the common spaces, giving them kind of a town hall type environment to do that in in again and in a way that, you know, is semi controlled. So that way, you know, things don't get out of hand.   00:01:01:11 - 00:01:19:28 Intro 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.    00:01:20:05 - 00:01:22:19 Sam Wilson Carl Krause Kopp is a corporate strategist turned CRC entrepreneur. Carl, welcome to the show.   Karl Krauskopf Thanks for having me. Super excited to be here.   00:01:22:25 - 00:01:31:11 Sam Wilson Absolutely. The pleasure's mine. Carl, there are three questions I ask every guest who comes on the show in 90 seconds or less. And you tell us, where did you start? Where are you now and how did you get there?   00:01:31:19 - 00:02:43:25 Karl Krauskopf Sure. So ten years, corporate strategy, business development scaled a $50 million business services company into $150 million before we started printing up the pig to go to market and sell. And, you know, at that timeframe, I started looking at alternative investments, alternative vehicles to wealth generation. Got turned on to real estate, small multifamily duplex, bought a duplex, moved into single family flipping and fell in love with it. I really did really well for a couple of years and organically grew an investor group. Folks were just, Hey, I'd love to get involved in real estate. I don't have the time. I have the money. So I started working with a couple investors, one off, and then that grew more or less out of control where we had too many investors, not enough deal flow. So then I started looking at what's the next what's the next evolution of of CRT getting into ground up construction. Same problem happened there and that moved into multifamily. Now where I'm at and will continue to be for the foreseeable future. And I live in Seattle, Washington and looking at continuing to be opportunistic in Washington, but more so looking to plant the flag in North Carolina.   00:02:44:04 - 00:03:09:27 Sam Wilson Okay. Okay, cool, man. I love it. I love the kind of process that you've moved there through each each phase along the way, you organically grew an investor base. That is something that is probably one of the more challenging pieces of the puzzle for new and beginning commercial real estate investors. What were some of the things you did to, as you put it, organically grow that base?   00:03:10:08 - 00:04:12:27 Karl Krauskopf Sure. So just being in it was unintentionally being in front of people, going to network groups, going being on on social media regularly and and again, just having, you know, decent relationships with family, friends and with people specifically in the Seattle market. Seattle obviously being a high tech, high salary kind of employment employee base or employee market. So relatively easy to find individuals who had the liquidity to invest, but again, didn't have the time. So again, just flipping, this is my story. This is what I'm doing. And, you know, we were at the time this was, you know, started about four, four years ago. This was at the time where, you know, we were in a great bull market. So we're coming into obviously different times. Right. We're but second quarter starting second quarter, 2023 right now. And things are a little bit quite a bit more bearish than they were four years ago. So it's a little bit more difficult and you got to be a little bit more on top of it going forward.   00:04:12:27 - 00:04:30:03 Sam Wilson Yeah, absolutely. So in that four year window, four years ago, you were doing fixing flips and ground up construction. And so you've exited everything. Everything you've done ground up is now built, so. Yep. Got it. Wow. Okay, cool. Is ground up something you would do today?   00:04:31:06 - 00:05:30:21 Karl Krauskopf You know, I'd be I'd I'd opportunistically look into it. Now I say that and I'm also looking at my ground up construction in my backyard right now. So building a detached 80 you backyard cottage, 2000 square foot here in Seattle, Washington. Seattle does allow us to separately pass a loss and create condominium associations on single family lots. So what I'm doing right now, building up ground up construction, thousand square foot, getting separate financing and going to hold it long term where we'll be I'll be making certainly a 1% that yeah, that proverbial 1% rule where my cost of construction is less than 1% of the rent essentially. So, um, yeah. No, it's, it's going great, so love it. I would still look at it, but you know, right now I don't think I'm as as bullish on it as I was, you know, let's call it a year and a half ago.   00:05:31:04 - 00:05:41:13 Sam Wilson Right. Well, and it sounds like, you know, the project in your backyard is is a convenience project and not something you're looking to scale that side. Right. Business necessarily so I mean.   00:05:41:13 - 00:05:52:05 Karl Krauskopf Yeah, no, that's exactly right. So it's a it's a convenient it's a low risk, right. My my cost basis is is the construction itself because I own the land already, right. Yeah.   00:05:52:06 - 00:06:34:02 Sam Wilson Right, right, right. Yeah. You're not taking on the, the large scale development risk maybe that that, you know, some other people who are either I mean I get it on both both ways on the show, but people are like, no, now's the time to do ground up development. I'll give you a compelling reason why you're the next person. Say no. Here's why you should run so I think that's really, really interesting. Focusing in now on the multifamily space. I asked this question all the time. You know, we've got a couple of multifamily projects, but it's not something not something I focus on. A And so I guess I just want to hear your state of the industry maybe, and then or hear what you think the state of the industry is and then, you know, maybe how you guys are finding opportunity today.   00:06:34:28 - 00:08:02:00 Karl Krauskopf So I think rents are obviously flattening out. We're we're starting to see that here in Seattle. We've seen, I would even venture to say, close to dipping of of rent prices. And, you know, I think I think that's obviously poses the biggest threat right now. I think also the other threat is regulations around, you know, affordable housing and requirements from the city municipality, which is, you know, one of the big reasons why I am looking at elsewhere outside of this market, you know, affordability regulations as well as and I'm talking more so, you know, hyper local market, not necessarily the national market because I do believe, you know, in in a nutshell, real estate is is is all hyper local. And and I think the other one obviously being is no Seattle specifically just in Washington in general, just doesn't have the availability of, you know, class B, class C type properties where, you know, you can go in and scale a sizable a sizable business. Right. You know, back in the sixties, 1780s, Seattle in the in the Washington state was just they just weren't building these 100, 200 unit complexes. Whereas, you know, you look at any of the Sunbelt markets, you've got plenty of stock in that class C, Class B hundred at 200, 250 unit complexes that are, you know, still getting traded at decent cost basis here.   00:08:02:20 - 00:08:15:02 Sam Wilson You know, that makes that makes a heck of a lot of sense. So what where are you finding opportunity? Is it in that 100, 200 unit size of complex or what are you hunting right now?   00:08:15:17 - 00:09:40:02 Karl Krauskopf Sure. So hunting to two different spaces are two different types of assets in the multifamily space. It's the 30 to 50 range. So that's, you know, proverbial mom and pop size buyer, you know, first time investor, first time multifamily buyer coming out of, you know, they're hey, you know, exactly where I was a year, year and a half ago where, you know, I was kind of grew out of that development, grew out of that single family and mid-size small, small multifamily and wanted to bite on to something a little bit different and, you know, I feel that there is going to continue to be that buyer pool and that that buyer pool is not going to dry up. And that 30 to 50 range, you're still operating in such a space that doesn't require the quagmire of needing payroll, but not having the operational budget to allow for it. And you know, where you see that 50 to 100 a unit range really falling into that, where again, you need somebody on site, you don't have the money to pay for them. So you're having to be super creative in order to get what you need in a low cost way. Now that hundred, 200 range obviously is a little bit different where, you know, you have the operational budget, you have the and obviously you need it, but you're also not necessarily competing just quite yet with the institutional, institutional buyers.   00:09:41:18 - 00:09:53:11 Sam Wilson How or what are some of the challenges maybe you're facing right now on scaling properties in the 30 to 50 unit range?   00:09:53:11 - 00:10:53:11 Karl Krauskopf You know, I would say it's it's finding the solid property man, a property manager who's got a good control over in-house construction, repairs and maintenance construction. So they actually either a own or B employee some they employ some form of on in-house crew and also have decent relationships with subcontractors and know how to manage those subcontractors and know when to outsource that. So I think that's that's one of the big challenges from a scalability standpoint that, you know, you anybody will face when going into this into that 30 to 50 range. So it's it's imperative in finding, you know, again, a property management company who's got the in-house crew and the relationships in a project, essentially a project manager, to be able to manage those subcontractors.   00:10:54:01 - 00:11:06:21 Sam Wilson Is your strategy to acquire, you know, several of these in a specific area. So then you can have your own in-house asset manager that's local or what's what's the what's the long term strategy? Sure.   00:11:07:01 - 00:12:06:07 Karl Krauskopf Sure. No, I think I think the long term strategy in the 30 to 50 unit ranges, not necessarily to scale just in in this space. Right. You know, in in order to get to that 150 unit, you really need to be able to understand how how to essentially how to asset manage. Right. And so I think a lot of the those 30 to 50 small multifamily ranges is going to provide the teeth cutting environment to be able to learn how to asset manage, how to property manage. Even so that way when you do get to that space, it's going to be an effective transition into the larger scale and beginning to have those conversations around, you know, should I should not should I take on property management and house obviously, you know, that's that's the next kind of several evolutions ahead of where I'm at right now. But it's certainly, you know, again, the stepping stone in getting to that space.   00:12:07:11 - 00:12:34:05 Sam Wilson When you're dealing with a 30 to 50 unit size, you're going to you're going to be kind of amenity like it would be. My guess would be my conclusion. I don't know anything in that space, but I'm just imagining that, like you said, you've confirmed that, okay, it's amenity. Like, what do you do? You know, what do you do to meaningfully raise rents to, you know, just just to add what's a value mean as ceiling? I mean, five question here, what's a good way to implement a value add plan in that in that range? Because if you can't offer amenities and things that kind of bring in the higher paying tenants, what do you do?   00:12:44:24 - 00:15:03:26 Karl Krauskopf So first off, it's finding how can we offer amenities right in a low cost way? So it doesn't seem like an agenda, but bike racks, right? Bike racks is a great way of making sure that you've got a decent amount of storage and that yeah, I guess I would say targeted storage, meaning if you've got a bunch of ones and one ones in it too, they're a small space, you know. Do you have the parking? Do you have, do you have a large enough parking space, a parking lot where you can add in, you know, makeshift, let's call it makeshift exterior storage sheds to looking at your unit mix. What can you do from a low cost perspective to add some some amenities? Again, storage bike racks we love again, because these are, you know, class C, class B type properties where, you know, they're either in urban infill areas and they just don't have that that type of product or that type of amenity. Again, bike racks, storage, you know, we also would go in and what we have done is we've we've gone and we've looked at the laundry facility itself, you know, assuming that they they don't have a unit washer dryer upgrading the washer dryer for the the laundry mat or the laundry and servicing area. And that's been one area that, you know, the tenants have really, really enjoyed and have really felt. This value add that we're bringing in is kind of sprucing up, making those general spaces more warm, more welcoming and, you know, so that way they're not getting off of work and scurrying into their apartments. They're more so walking in. They feel proud of the space that they're in and then they start. Then we start having the conversations about, hey, you know, this is what this is what we're doing. This is our plan. We're going to be coming in and raising rents and then start talking to them about what those rent increases will be. And then we also give them the opportunity to opine with us and to come to the table and say, hey, you know, that's fine, but here's what's not working in our unit. Here's what's not working in the common spaces, giving them kind of a town hall type environment to do that in in again and in a way that, you know, is semi controlled. So that way, you know, things don't get out of hand.   00:15:04:24 - 00:15:17:22 Sam Wilson Right? Do you do you think and I'm again, I'm just projecting here. Maybe I'm imagining is the is the tenant in a 30 to 50 unit sized building, do you find that they're stickier tenants.   00:15:18:18 - 00:15:41:10 Karl Krauskopf When I when I'm I'm thinking about my tenant base right now on our central Washington apartment complex and the average tenancy there is a little over three and a half years. So in my opinion, that's a pretty and, you know, obviously you don't have the data, so you can't see what the high end and what the low end is. High end is, you know, we've got someone who's been there for 30 years. So you kind of discount them. And from a single year turn perspective, you know, out of the turnovers that we're getting, we're only getting about 10% of those are one year tenants. So we've got a pretty we've got a pretty strong tenant base that's staying with us. Yeah, that's staying with the apartment itself.   00:16:05:12 - 00:16:25:11 Sam Wilson That's a really compelling statistic if you want to call it that or. Sure, yeah, probably not the right word for it, but but a three and a half year tenancy, I don't know what the national average is or even what the you know, your that local market average would be. But again, I'm just kind of imagining that that in that particular is an advantage to what you're doing, I guess, is what I'm getting to. Yeah. Is that the type of tenant that would like to stay in an amenity light situation that, you know, obviously has a commensurate rent to go along with that, but also probably isn't someone that is moving a lot. It is probably a very stable tenant base and I would think three and a half years you know is a pretty a pretty long tenancy would be for an industry.   00:16:49:26 - 00:17:12:26 Karl Krauskopf Absolutely. And you know, one of the big things that drives, in my opinion, tenancy tenant, that length of tenancy is going to be your unit mix as well. Right. Your studios, you one ones are going to be a little bit more on the transient side. This particular apartment that we own is a solid higher mix of twos and threes.   00:17:12:26 - 00:17:21:02 Sam Wilson That's really, really cool. I love that. Let's talk about lending. How what was the lending environment like right now on these types of assets?   00:17:21:13 - 00:17:51:02 Karl Krauskopf Sure. So on the 30 to 50 unit range, especially here in Washington, 30 to 50 unit range are going to be relatively old. So they're going to be in the, you know, predating the seventies, back to the 20 1920s. And the the issue with getting any kind of agency debt on that is going to have to do something that's cost prohibitive, which is seismic retrofitting in order to qualify for agency debt. So that leaves, you know, either a bridge debt, which I am vehemently against or recourse local credit union, local banks, which is what we are using right now.   00:18:05:09 - 00:18:13:21 Sam Wilson Got it. Got it. That's yeah. Seismic retrofitting. Never heard that that terminology. But it sounds like something that would be.   00:18:13:29 - 00:18:42:19 Karl Krauskopf Oh, it's, it's, it's a challenge and it's expensive. You know, I did that with the single family flipping when we had to go in and do these big gut jobs and studs out remodels, and you're essentially having to go into your entire STEM wall. So where the concrete where the foundation meets the the wood framing and do these massive earthquake straps to make sure that the house is protected when it shifts left to right and ensure that the house just doesn't topple. So obviously and I think in some of the developing world, developing countries, you know, there's been earthquakes that have just completely annihilated cities and towns. And you look at kind of the reason why it's there's earthquakes, you're shaking them side to side. And, you know, none of them are earthquake retrofitted.   00:19:03:08 - 00:19:29:09 Sam Wilson Wow. That's that's wild. Absolutely wild. Well, yeah. So let's avoid the expense of having to do seismic retrofitting. I'm sorry. I don't know anything about that, but that's that's that's really not a cool couple of words either way. You look at it. Tell me about how we talked about the lending, the type of debt that's available on this, what your grand strategy for you and how you're going to build your company in acquiring these assets.   00:19:29:09 - 00:19:33:28 Karl Krauskopf So the question again restated is how are we growing our brand?   00:19:34:04 - 00:19:49:19 Sam Wilson What's your long term vision with this? I guess I'll just I'll just turn redness back right into what we talked about earlier in or before we got on air, was that you said, hey, I'm doing this as a solopreneur. There's a lot of people that go out, they build their business, they syndicate it, they raise capital, they bring other people in. You want to take your business in a different direction, and I'd love to hear what that is.   00:19:53:02 - 00:20:37:26 Karl Krauskopf Yeah. So right now it's it's all about how do I create the systems and processes to delegate and then automate some of those processes? And again, you're looking at your, your deal flow, your, your underwriting, you're closing and then you're at your effectively your asset management. So looking at it from a funnel in that sense, it's where can I plug in, where can I hire either local staff, local people that I've met from the meetups, networking events here in Seattle and even potentially leverage virtual assistants to help with again deal flow underwriting is are the two primary areas for immediate delegation in hiring and hiring team members. So right now that's that's my you know as of April 2023 that is my number one focus and getting some folks hired and getting that process started. So that way I can boil myself up, bring myself up and focus on the capital raising asset management.   00:20:56:04 - 00:21:18:22 Sam Wilson Got it. Got it. I love it. Carl, you're doing some really cool stuff and I have a particular affinity for kind of exactly what you're doing. I think I think it's a it's a largely overlooked space. I know you said it's a mom and pop space, which I think is is I don't know. I find a lot of strategic advantage to finding those mom and pop spaces just from a a lack of sophistication standpoint. Anytime you can come into an industry like what you're doing or this particular, you know, a niche within an industry and bring sophistication to it, it's just it's a it's a goldmine for those that are willing to go in and really roll their sleeves up and figure out ways to systemize. And like I said, this brings sophistication to the space.   00:21:37:10 - 00:21:38:10 Karl Krauskopf Yeah, absolutely.   00:21:38:10 - 00:21:51:05 Sam Wilson Very, very cool. What you're working on, if you are listeners, one piece of advice, maybe something you've done right or something that you've done wrong along the way, that you can help them either either repeat and or avoid. What would it be?   00:21:52:17 - 00:22:25:18 Karl Krauskopf That is a that is a great question. So I think the number one piece of advice is, you know, understanding what your end goal is. Right. Why are you doing this? It's and it's you know, it's it's the proverbial why, of course, you know, a family being able to have that. Like for me, it's it's it's it's having having that legacy being able to go wide and go deep in terms of a legacy, being able to offer not just to my family, not to my friends, but also to the community in having and bringing you know, comfort. Right. For me, growing up, it was, you know, I was a little bit of a challenge situation. I was blessed. I had a great, you know, great roof over my head. But, you know, understanding that there were people that worked with us, worked with my family from a landlord perspective, you know, if I have that opportunity to do and bless somebody else like that, like that's that's what I want. I want to be able to bless families as much as possible.   00:22:50:01 - 00:22:58:19 Sam Wilson Man, that's awesome. Carl, thank you again for coming on the show today. I certainly appreciate it. I learned a ton from you. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   00:22:59:06 - 00:23:04:29 Karl Krauskopf I love LinkedIn. I'm on there daily, so come follow me. Carl Krauss Cops on LinkedIn.   00:23:05:14 - 00:23:11:01 Sam Wilson Awesome, fantastic. We'll make sure we link to that there in the show notes. Thank you again, Carl Will coming on. Certainly appreciate it.   00:23:11:12 - 00:23:12:13 Karl Krauskopf Thank you, guys.   00:23:13:10 - 00:23:34:22 Sam Wilson 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 or 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 Noel Parnell.  Noel, a Philadelphia native, has been involved in real estate for as long as he can remember. Always a visionary, Noel recognized an entry point into the field that he had once dreamed about during the peak of the 2008 Great Recession. -------------------------------------------------------------- [0:00] Intro  [1:20] The 3 Questions  [2:58] Noel's Start [4:28] Financial Freedom  [6:52] What are you buying today  [8:43] Noel's best deal ever  [16:15] 11 month old owning 11 units  [19:17] Finding deals now [21:09] Closing -------------------------------------------------------------- Connect with Noel: Linkedin: https://www.linkedin.com/in/noel-parnell-83114214/ IG: https://www.instagram.com/ks_investments/ Facebook: https://www.facebook.com/noel.parnell 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 → sam@brickeninvestmentgroup.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:   00:00:00:02 - 00:00:50:14 Noel Parnell I met this woman on a plane from Lubbock, Texas, going to Houston. I missed my flight, first of all. So I was supposed to be on this plane, got on this flight here later on in Dallas, going to Houston. She was coming from L.A. This apartment was owned in a trust. Her husband was the person that was communicating to the property manager. She wasn't paid for over a year and a half after his death. And I say, hey, this is my name. I'm like, Hey, I'm actually going to Houston right now if I can turn this building over. Would you mind selling it to me? You did a handshake deal there. I get down there. I fire the property manager. I say, hey, I had I had her blessings. I brought her with me. We have our blessings. We fired the property manager. I took over the building that day.    00:00:50:14 - 00:01:01:23 Intro 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.   00:01:02:05 - 00:01:17:13 Sam Wilson Noel Parnell is a Philadelphia native. He's been involved in real estate for as long as he can remember. He says he's always been a visionary and he recognized an entry point into the field that he wants to always dreamed about during the peak of the Great Recession in 2008. Noel, welcome to the show.   00:01:18:01 - 00:01:19:24 Noel Parnell Thank you for having me. Thank you for having me.   00:01:19:24 - 00:01:28:01 Sam Wilson Absolutely the pleasure is mine. Well, there are three questions I ask every guest who comes on the show in 90 seconds or less. Where did you start? Where are you now and how did you get there?   00:01:28:17 - 00:01:40:08 Noel Parnell I start I started out of being laid off from the Great Recession. I was working as a scientist at GlaxoSmithKline or second one where I where am I now?   00:01:40:15 - 00:01:43:05 Sam Wilson Why did you start? Where are you now and how did you get there? Yeah.   00:01:43:07 - 00:02:17:05 Noel Parnell Okay. Where am I now? I am a full time multifamily syndicator. And how did I get there? Is that I want it to scale because my ultimate goal is to eventually buy into a sports team. And so that's the ultimate goal. I want to buy, preferably the Philadelphia Eagles, but a lot of thought was at the line when that. But you can also with a lot of people don't know you can syndicate to be minority ownership and to a lot of sports teams out here whether it's basketball hockey I'm a I'm an avid sports man so that's my that's my why.   00:02:17:11 - 00:02:57:20 Sam Wilson Got it. Got it. Hey, I love it. I love the vision in the dream. I want to scale into owning a sports team that that's not on my list. But I mean, it's it's sounds interesting. I mean, why not? Why not? The sky somebody has to own them. So. That's right. Why not you, man? I love it. I love that. I love that that that again that vision casting there. That's a that's a lot of fun. So tell me this. What does your business look like today? You lost your job in 2008. You said, hey, I'm going out to get into the real estate game. Which man? I think for anybody with the skill set you probably now possess like 28 would be just a goldmine for many of us going, okay, now we can just pick deals up.   00:02:57:22 - 00:03:03:12 Sam Wilson You didn't enter into 2008 with a skill set ready to acquire distressed assets. How did you do it?   00:03:04:04 -00:04:25:18 Noel Parnell Now, I always laugh at this. I was a Barnes and Noble cheapskate. I would go to Barnes Noble's and go to the real estate section and it wasn't even sexy then. So I would I would put a place card, take notes and come back to Barnes Noble's every day for that. And I was, I think back at it now. I was like, I could have purchased the books. I don't even know why. I would just go back. The Place Cooler were still there and I would just take notes on what I wanted to learn. And then I was a little bit of a you to where I was going. All right now to buy property with no money down with no money at all. And that's where like different things will come up, seller financing, things of that nature. But that's that's how it kind of got the ball roll in. And I think the biggest thing was, was my first my first property was house hacking and the contractor did such a bad job. What I mean, I could turn on my basement light, it wouldn't come on, but the third floor light would, you know. He did. I have I had I had ductwork that went to nothing. So it was there, but it didn't connect. So that was like, oh my God. So I started Googling and learning how to like YouTube and fix things. And that also was one of the catalysts like, Shoot, I'm doing this enough. I can I can do this.   00:04:25:18 - 00:04:37:09 Sam Wilson That's wild. My gosh. What did you scale into bigger assets? What was the tipping point for you that said, you know, enough of this single family house hacking, there's got to be a better way.   00:04:38:07 - 00:06:51:18 Noel Parnell So so I think when I look at it as when did I create my financial by tooling so always really methodical, you know, about my plans. I didn't hate my app, you know, I was a former pro runner and then I went right into track and field. So I went to the Beijing Games, you know, as a guy run in 2008 and then went right into, you know, working at GSK and I didn't hate my job because got laid off, but I read a Tony Robbins. I heard him speak and he another book called Unshakable that came out later on. But he spoke about having these financial steps of vitality, like, what do you actually need to actually, like, live? And I'm worked out everything. I need it. And I knew I need it at the time. I needed 11 properties and duplexes are triplexes and each door had them make $200 and that way all I needed was seven grand per month netting and I would be cool. So that was my first thing I did. I did as a secure my financial vitelloni and then everything else was playing with house money. So I was doing like seven units at a time. Sometimes I was averaging about, you know, between a year's of 2014 and 2019. I was actually about 15 or 16 projects a year. And so I got up to about, I hope now about seven or eight properties that are like a mixture of duplexes and triplexes. And I went to scale to the multi families that I needed to create my net worth because the ultimate goal is I want a half, you know, I want to, I want to sit courtside somewhere or I want to be behind a bullpen or, you know, or in the oldest, the owner's box, you know, you know, doing those type of things. So that was the the the main goal was like, how can I scale? I had already achieved financial freedom within, you know, eight years. I was very conservative, but I achieved it by 1215. I was I was I supplemented my income, which was a high six figure income. I did that already. But now I'm thinking I need I need to go bigger because I want to own a sports team. And that's why I got to the multifamily realm.   00:06:52:02 - 00:07:10:15 Sam Wilson Got at me and I think, I think that's really, really cool. Yeah. To sit in the owner's box that's a that's got to be a different a different feeling altogether. No. We're circling back to where where we started. But that's that's a fun a fun on that side of things. You decided to get involved in multifamily. What are you guys buying today and why?   00:07:11:10 - 00:08:43:06 Noel Parnell So we still buy B and C class buy where it's a little bit of the C, I still do. But I think primarily my group around capital, it's me and two other women, Tiffany Spann and Lupe, a child. They're both from the D.C. area. We prep mom for not only do B class like our B B minus is where we go. Just because we're looking at we like to do tours. So we're not taking really our clients in our investors into like really crap areas and that other side cause that's what C class C class is low hanging fruit and it's no, it's the common joke is C class is the yo the crack of of those buildings. So I have that silo with ground capital where we're looking for be class value add properties after 1975 buildings or later. And so that's what we look for there. But then the other side of it is that we still do some of the C class and D class properties and that's part of our, you know, affordable housing to make sure we kind of look at as a a slash business and stewardship, because we do see a disparity of the, you know, the separation of, you know, building class and people being able to afford things. So we know we want to actually bring out a great product for people in these, you know, underserved areas. Like, you know, we can put a brick product there. And I think right now there's a there's a lot of there's a lot of lot of fruit there for people that are trying to get in there in that area.   00:08:43:22 - 00:08:51:06 Sam Wilson Mm. No, that's great. I love that. I love that. What's the best deal you've ever done?   00:08:51:06 - 00:12:09:03 Noel Parnell Oh, it's going to be the latest one. You know, it's this 20 unit building. It's a small building. But, you know, I got this building for under $5,000 and it wasn't vacant. It was at when I when I got it was that maybe 72% occupancy. And so what I did was go in there and increase rents gradually on this. This is January, increase rents on the vacant units. I opposed striking the parking lot, giving design, I mean assigned parking. So I freeze not not net operating income that way. People that didn't have leases, I brought them up because the buildings were like, man, they were about maybe $400 on the market. And so I didn't bring them. But the 400, I brought them up to 200. I'm just like, Hey, this is the more and this is like you get what your, your, your, your clientele or your tenants and which I say I work for them is like, hey, I know you've been here for a while. This is what everybody's paying here. You know, your $400. I'm always paid for it. You're $400 below anything in this area. I'm raising your rent. $200. You know, I think that's fair, because everything else, you know, is going up. You know, as far as, you know, insurance goes up every year so that by far that is the the best deal I've done to date. And I at least give you a little bit better amount on this. I met this woman on a plane from Lubbock, Texas, going to Houston. I missed my flight, first of all. So I was supposed to be on this plane. We met up in Dallas because there's no direct flights from Lubbock. Everybody, if they are not there. No, there's no direct flights. And so I in the January, January 24th, there was a snowstorm in Lubbock. That's why I missed my flight, got on this flight here later on in Dallas, going to Houston. She was coming from L.A. This apartment was on in a trust. Her husband was the person that was communicating to the property manager. She wasn't paid for over a year and a half after his death. So I'm hearing her when we're first class. I always tell people it's really poor. It's about the fly. First class, if you can. A lot of things go down there and I hear a conversation and I say, Hey, this is my name. I'm in like, Hey, I'm actually going to Houston right now. I'm actually going to Houston for a Robert Martinez apartment rock star. I'm going to his mastermind. And I say, Hey, this is what I can do for you. If I could turn this building over, would you mind selling it to me? We did a handshake deal there. I get down there, I fired a property manager. I'll say, hey, I have I had her blessings. I brought her with me. We have our blessings. We fired the property manager. I took over the building that day. So this is January. Now we're January 24th, right? Today we're at 24, 26. So now I'm helping to set up accounts. So the February 1st rent does not go to the old manager. So I'm doing all of this within the three days and make sure all the tenants know like, Hey, there's a new sheriff in town right here. So that's it's really it's really crazy.   00:12:09:19 - 00:12:28:00 Sam Wilson Wow. So you went for a you went for a mastermind and ended up acquiring a property for five grand. Why? I mean, there are so many questions and I know I want to spend the whole time, but this is a fascinating story. Why would someone get rid of a cash flowing asset for five grand?   00:12:28:11 - 00:13:02:09 Noel Parnell So what I always tell people is like you have to find out what someone's endgame is and and what her what her issue is. What was our problem? Her problem was that she hasn't been paid over a year and a half. Her mortgage is auto debit. And so a part a conversation is saying, hey, I will go ahead and I will ensure that that's what you're getting your monthly rental payment which is which is for a P and I was 70 $700 at that time. The building was already collecting at 14 grand a month. She just wasn't receiving it.   00:13:02:18 - 00:13:04:14 Sam Wilson So who was who where was the money going?   00:13:04:21 - 00:13:07:12 Noel Parnell It was going to the property manager. That was a painter.   00:13:08:08 - 00:13:09:21 Sam Wilson Oh, I got the.   00:13:09:21 - 00:13:10:16 Noel Parnell Property management.   00:13:10:16 - 00:13:11:14 Sam Wilson Was ripping her off.   00:13:11:21 - 00:14:37:23 Noel Parnell Ripping her off. And so I said, would you be interested again? Would we have for a second time? I said, Would you be interested in a, what I call a creative deal? I was like, What we call is a subject to do. I was like, That's what we'll go ahead and chance the deed. I'm sure that your mortgage and your interest is paid. I mean, this is not coming out of your personal. It was actually coming out of her trust. So she was bleeding her trust. And so I said I would make sure that gets done. You assurance and taxes will be paid. And this is where I tell people, this is it. This is the risky thing right here, because remember, this is a handshake deal. And I said, I'm going to take care of that for you. And but you have to agree that you're going to go here for this. And, you know, you always give the disclaimers. There's a due on sale clause. This can happen like that. Get there, always move with integrity, people. Okay, so we always just disclose all those. But the risk was on me because I'm paying. I'm already fully immersed. I said, You know what? I'm paying this. The deed wasn't even in my name yet. The deed did get transferred over until maybe. But right now this is almost the second week of March. So that means I was doing things to the building, paying taxes, the insurance, and I didn't even own the they own the building yet as far as the deed owner.   00:14:38:01 - 00:14:38:15 Sam Wilson Mm hmm.   00:14:39:09 - 00:14:51:17 Noel Parnell And that process, that was the risk part. But sometimes you have to have one. You have to have a little gut feeling there. But I. I'm not going to lie to you. I was like, man, it's this is it's risky, right?   00:14:51:17 - 00:15:04:16 Sam Wilson In her and in for her. Yes. Covering that monthly mortgage payment was part of it and also probably just didn't have the skill set to own and operate that building. She wanted out. It sounds like she just wanted out.   00:15:05:02 - 00:15:39:20 Noel Parnell And this is and think about this. I know because we're going to we're in the process of refinancing that building right now. And so she's going to get some money because right now she only owed or C, I think seven of the 65,000 on the building was left. You know, the building came in at three, 3.4. So she's getting that was another part of the agreed to a sum that she has. She gets her sum. I get my sum. And what the back side story of it is that she wants to invest the Crown Capital way. After that.   00:15:39:20 - 00:15:46:10 Sam Wilson She wants to reap the proceeds and then turn around and reinvest it. And that's that's that's genius. I love it. You built.   00:15:46:17 - 00:16:00:03 Noel Parnell It. It's like being in the right place, the right time. The LLC is call flight 885845 because that's the flight that I was actually on. So that was the flight. That's the LLC that yeah, that was the building.   00:16:00:03 - 00:16:15:24 Sam Wilson I love it. I love it, man. You can't, you can't make those up. Like that's just that's just a good time. I've done plenty of subject to stuff and yeah, there's a lot of a lot of moving pieces there. But when for the right situation, it makes sense.   00:16:15:24 - 00:16:27:21 Noel Parnell The right situation has to happen. And like I said, that you have to be at the right time. I still can't explain like this being at the right time or the right place that that happened to happen, you know?   00:16:28:14 - 00:17:02:07 Sam Wilson Yeah, no, I love that. I love that you've got a lot of moving talk. Speaking of moving parts, you've got a lot of things that you are investing in. I love kind of your creativity. You sound there. It appears that you're very opportunistic and willing to go out and try new things and do new things and I think that's that's a fun a fun part of maybe your story there. You and I off air got to talk about your son and the amount of real estate that he now currently owns. Maybe you can give some more color to that story.   00:17:02:21 - 00:18:42:24 Noel Parnell Yes. So I have a I'm a new dad. So, so excited. But my son has 11 units now. He has a five unit and aa6 unit property right now. And so my plan for him is to acquire 3 to 4 small multi families for a year for him. And the rental income from from that will be separated in two different places. One goes into a self-directed IRA, where I'm the custodian, and then you have another one which you have. They call you teammates and you t you gimmes, they're custodian accounts for children and what you can do with those is that once the money is placed in that you can invest those into an ESP 500 index fund. So I'm letting him reap the benefits of compound interest. So my goal for him is to be liquid at least 5 to $6 million by time he's 18 and it will have a ton of properties. You know, if I start with that goal of 3 to 4, at least minimum of two, I'm not doing a 529 for him. You'll have you know, he'll have the properties. Once I actually refi the properties for them, they will go now into a trust form.   00:18:23:09 -  Noel Parnell I choose an irrevocable trust. So that's the ones I use. So they're not subject to income tax and estate tax and within that they're revocable trust. You can have life insurance policies in there as well. So you can you know, I always say, you know, talk to your estate lawyer and your CPAs, but you can really set that up to really set up your children.   00:18:43:13 - 00:18:52:04 Sam Wilson That is awesome. I love, again, the creativity that goes into that. You didn't mention here on the recording, how old is your son again?   00:18:52:17 - 00:18:57:05 Noel Parnell He's he'll be 11 months on the 70 of April.   00:18:57:05 - 00:19:02:07 Sam Wilson So he owns he owns a an apartment for every month he's been alive.   00:19:02:15 - 00:19:03:03 Noel Parnell Correct.   00:19:03:09 - 00:19:04:20 Sam Wilson That's awesome.    00:19:04:20 - 00:19:17:02 Noel Parnell And I'll Split up half of my portfolio into a trust already for them. So I cut up my half and gave it gave it to him and you know. But yeah. To start him off right now, I think that's that's cool.   00:19:17:02 - 00:19:36:24 Sam Wilson That's really, really cool, man. Your 11 month old son owns more real estate than most most people do in the world. So that's that is really, really cool. We've got just maybe one, one and a half minutes left here. No. Well, we've got to sign off. I want to hear, if you don't mind sharing how you guys are finding deals right now.   00:19:36:24 - 00:19:41:24 Sam Wilson I think you've seen some shifts in the market. And I want to hear what those are and how you guys are finding deals.   00:19:42:20 - 00:20:22:11 Noel Parnell I guess right now we're finding deals directly to owner and that's the and they're very responsive now to this a lot of the mom and pops that own you know buildings they have like units between 20 and 60 unit buildings. Some of them have some bigger ones. The children don't want them. And and they're ready to get out. So I've been using different platforms such as either Costar or Rihanna, me and we'll filter my class year built and I have a team that's been reaching directly out to them and that's been very it's been a very good response currently within the last six, seven months.   00:20:22:20 - 00:20:27:14 Sam Wilson Right. And that flies counter to maybe what you were seeing a year, year and a half ago.   00:20:27:14 - 00:21:09:08 Noel Parnell Yeah, you wouldn't get anything without a broker. And I would always tell people, you know, you know, if you're looking at some of the top brokers and this is only my suggestion, don't go after the top brokers. Most of those top brokers have been in the game for years. They already have. Their preferred list is better to maybe go in that brokerage and get someone that's hungry just like you and build that relationship with them and you guys built to you or her, you know, whatever them what are now well built together and that's I think that's more viable than trying to go after the person that's been a broker for the last 20, 30 years because they have their list already who they trust. That's going to close the deal. You know, the heart that you get in there are really slim to none.   00:21:09:17 - 00:21:19:11 Sam Wilson Slim to none, man. I love it. Noel Parnell, thank you for coming on the show today. This was lots of fun. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   00:21:19:22 - 00:21:30:07 Noel Parnell Yes, I'm on LinkedIn. That's my playground. So it's no Parnell LinkedIn and also can be found on Facebook at no Parnell. Again, the IG right now I don't have one yet, but it's getting there.   00:21:30:12 - 00:21:34:02 Sam Wilson Awesome. Hey, thank you so much. I do appreciate it. Have a great rest of your day.   00:21:34:11 - 00:21:36:01 Noel Parnell As well, sir. Thank you so much for having me.   00:21:36:14 - 00:22:01:05 Sam Wilson 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 Eddie Martini.  Eddie was born and raised in Northern California. Last summer, he and his family liquidated all their California assets, packed up their two Labradoodles and mountain bikes, and embarked on a tour of the USA in a 5th wheel. Along the way, they discovered some wonderful corners of America and ultimately decided to settle in middle Tennessee. The trip could not have made that a successful experience without proper planning and financial strategies.  “There is nothing accidental when it comes to building sustainable wealth. Having the right team in place will help you plan, build, manage and protect your wealth. I am the head coach of your team helping to guide you and empower you as the team captain.” - Eddie  ----------------------------------------------------------------------------- [00:00 - 03:32] Intro [03:33 - 08:51] Financial planners vs real estate  [08:52 - 13:57] Climbing out of debt  [13:58 - 15:49] Financial education [15:50 - 20:08] Network of trusted professionals [20:09 - 21:06] Closing  ----------------------------------------------------------------------------- Connect with Eddie:  Social Media: @martinilegacy, @eddiemartini Website: www.MartiniLegacy.com Connect with Sam Wilson: 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 → sam@brickeninvestmentgroup.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:   00:00:00:00 - 00:00:30:23 Eddie Martini We have already formed a strong savings habit, which I think a lot of people try and skip. They think that, Oh, no, I got to get my money to work. I've got 100 bucks. It's got to be 200 bucks by next month. And while there are other people out there that yes, I've successfully done that, I've found that for most I just caused actually more stress in my tagline is creating financial peace. That's why I'm here to help people. Do I really think if we can sleep well at night and get ourselves a firm foundation, we will make better financial decisions. And the better financial decisions we can make, the better people will become in society.   00:00:31:08 - 00:00:50:18 Intro 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 Eddy Martini will help you plan, build, manage and protect your wealth. Eddy, welcome to the show.   00:00:51:18 - 00:00:54:00 Eddie Martini Good morning, Sam. Good to see you.   00:00:54:00 - 00:01:04:05 Sam Wilson Absolutely. You as well. Eddy, there are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now and how did you get there?   00:01:04:05 - 00:01:47:22 Eddie Martini Absolutely. Yeah. So I think I started with most with residential buying my buy, my first home in Lincoln, California, right before that area had really started its big boom. I was back in 2002 and from there we graduated into really more sold land development building custom projects and those type of roles had aspects. And then we eventually got into commercial, which was a really big step for us, allowed us, you know, took some time to get some means together to build, to step up to those bigger purchase prices. But the gains were also coinciding with that. So never really looked back once we kind of got our feet wet there, I still touch all aspects of real estate, but definitely a big fan of that being a major part of my portfolio.   00:01:48:17 - 00:01:59:08 Sam Wilson Got it. So you're still you are actively involved in real estate, but I think we talked about this maybe before we started recording. You're also a wealth coach. How did those.   00:01:59:08 - 00:01:59:19 Eddie Martini Yes, sir.   00:02:00:03 - 00:02:03:14 Sam Wilson How did those two kind of become what they are today?   00:02:04:19 - 00:03:11:16 Eddie Martini Absolutely. I appreciate asking. So, yeah, being being in the industry, I just really noticed there were some serious voids that were that I found being a realtor and trying to help people accomplish their financial goals. And one of those largely is as a realtor. And even when I was a lender, I just didn't really have the time that was needed in a lot of cases to really help coach people along on understanding the power of money. And a lot of people came to me looking to try and get into real estate investing, but they had outstanding credit cards they're paying 18 or 22% on. So I just felt like they kind of had their finances backwards and I really wish I had the time and energy back then to dedicate to it. And now that's where I focused my time on since 2020 is really being able to take that necessary time to break down personal finance, separate the difference between good and bad debt. Then once we can understand that how to get on the right side of compound interest or we're earning it instead of paying it, and through strategic savings, we can put some money away on four or 5% compound guaranteed rates return and then leverage those savings to invest in things like real estate.   00:03:11:16 - 00:03:33:19 Sam Wilson Right. That makes that makes a lot of sense. There are there's some probably tension, I think even in my own self, maybe I'm projecting this, but tension between the traditional financial planners that, you know, hey, we're going to you know, we're going to clear up your debt and then we're going to invest in the stock market. And then there is the real estate investors that are like, man, it's only real estate.   00:03:33:19 - 00:03:55:11 Sam Wilson That's all there is to it. And it sounds like maybe you think there's a blend of several different approaches, like maybe maybe whole life insurance is part of that, if I'm understanding kind of what you're saying there as part of that strategy. So tell me kind of what you're what the whole view looks like, I guess, for you, as you maybe even in your own portfolio or what you would recommend to people today?   00:03:56:07 - 00:08:31:14 Eddie Martini Absolutely. So, yeah, I follow a four tier hierarchy of wealth chart, which I do have available. What's anything you'd like me to share? But I really think it's important to start with a firm foundation of guaranteed rates of return. I think typical financial planners like you were mentioning, they're really quick to get people involved into what I consider a Tier four asset class, which is on collateralized high risk, maybe high return type asset classes.Those are things like or even your traditional 41k or Roth IRAs, they're still playing in that same game stocks, bonds, cryptocurrencies, these are all things that don't have a collateralized asset behind them. You're kind of buying into ideas and oh yes, I hope this is what things are going to come out to. Instead, I think if we can build a foundation again of not only create an emergency fund because the first thing we have to do, we have to separate ourselves from an emergency. And so we have to do that with some cash reserves. Then we want to create an opportunity fund is our next tier. That's really an opportunity to invest in ourselves. And Sam, I'm sure you can agree we are our number one asset. At the end of the day, there's not going to be one investment out there that ever outperforms what we do cumulatively. And really even that top performing asset that's still credit to you and I, because we're the ones that made the decision to pursue and take advantage of that investment opportunity. But a lot of times it takes skill sets, it takes joining mastermind groups, people that are already doing it. And to do either of those things, it takes means to be able to invest in ourselves. So once we get our tier one established, which is our emergency fund, I think if you're employed, you want to have at least a three month pad just in case stuff hits the fan. You can regroup, can get some wind back in your sales and move forward. If you're self-employed, you should actually set your goal a closer to 12 months. The Reserves. Things happen when you're self-employed into the extra time to breathe. Once we get into Tier two, we establish opportunity fund to get where we can invest ourselves, maybe invest in a business we already have going. We might need to get some new equipment, new machines, or again, develop new skill sets, hire new people, whatever that may be. All of those things take me inside. So instead of locking our savings away again, like we mentioned, those previous asset classes, 41k Roth IRAs, which really those are set for long term way down the road. I think we need to empower ourselves, maintain access to that cash flow, to, again, invest in ourselves and things we understand. Once you develop those skill sets and we've we've got ourselves feeling really confident and hey, we can actually move forward with investing. And we've already formed a strong savings habit, which I think a lot of people try and skip. They think that, Oh no, I got to get my money to work. I've got a hundred bucks, it's got to be 200 bucks by next month. And while there are other people out there that yes, I've successfully done that, I've found that for most that just caused actually more stress. In my tagline is creating financial peace. That's why I'm here to help people. Do I really think if we can sleep well at night and get ourselves a firm foundation, we will make better financial decisions and the better financial decisions we can make, the better people we become in society. And that's when we can finally enter into Tier three. And that's where you and I find our sweet spot. Those are collateralized assets. Things like real estate, maybe doing some private note lending with people where you still have a piece of real estate behind it that allows you to feel comfortable lending money to people, knowing you have the ability of recapturing that asset if and when maybe payments don't start coming back in. And then even things like commodities, like investing into oil, natural gas, those have some great tax advantages, very similar to real estate. And that's what I'm all about. I want us to really think outside the box and start saying, Okay, that's great. I have my ordinary income warrant for kind of getting taxed to heck right now on those dollars. What are some other streams of income that I can add? There may be more tax favored, and that's where I love these tier three assets. Things like real estate, especially commercial real estate. We have 39 years of depreciation that you can write off and it's just an amazing, amazing asset class to get yourself into. And like I said, those commodities, you invest $100 into a new prospect for developing oil and collection of oil. Awesome. You've got 100,000 bucks now you can put against the income that's coming off of that asset. So when we start seeing ways of having great tax planning in place, as well as combined with some great estate planning, we can start seeing that we can get into a position of owning nothing but controlling everything. And that's what I like to get people in to me.   00:08:31:14 - 00:08:51:21 Sam Wilson And that's I love the I feel like you've given this talk before. That's really good. That's really, really good. It was clear. I appreciate that, too. It's like these are these are the four, four steps you can move through. I think for many people and correct me if I'm wrong, but these these steps, they feel daunting when you look at it.   00:08:51:21 - 00:09:06:22 Sam Wilson You're just like, my gosh, like most people, you know, the kids are screaming at them, they're busy at work. They're this or that. The other. Like finding a way to carve out the time to create this plan is almost a hill too high to climb for most people. How do you overcome that?   00:09:08:05 - 00:13:19:12 Eddie Martini Indeed, and I've been there and done that. And I remember at the very beginning of my journey and trying to climb out of major consumer debt when I was really just began playing the money game wrong. I did it understand a little bit being in real estate, the power of leverage, but I still was leaving myself exposed to liability with carrying credit card and other consumer debts. So once we can get ourselves understanding that there is a difference between good and bad debt, I like to actually utilize a lot of Dave Ramsey type of solutions there in getting that initial momentum developed. So I am a Ramsey certified master coach and so I love the basics of what he teaches. I just think there's a certain point where he falls a little bit off my radar and I like to shift gears a little bit in that I do appreciate the value of leverage, and I think it's great. Yes. If you could spend 100%, 400%, I should say, on a piece of real estate. Good for you. However, I think if you take a step back and understand that, well, I could take those same dollars and 4 to 5 x my efforts here. I think at the end of the day you're going to see that there's be a lot more wealth accumulated by taking different steps there. But the initial steps that get that momentum built and so things like getting your credit cards in order of your lowest payment to highest payment, not even worry about interest rate, just lowest payment, the highest payment that allows you to get that initial momentum going. And once those debts are cleared, it's amazing to see people go, wait a second, I do have four or 500, maybe even $1,000 per month that I was throwing away. The now of these past few months, I was able to scrub down. I get cleared. I do have some money to put away in savings and then they can start to see, okay, cool. After your one year or two year, three or four, this is what compound interest looks like. Wow. I've never been on this side of the fence. This is cool. Now, once those have grown. Now let's go back to our wealth coach and say, okay, now how do we really make some money? And that's, again, where we start taking steps of. All right. Well, now, actually, that you're talking about this, let's get some other things in place. And so I'm sure you can agree that estate planning, tax planning play a major role in our success when it comes to all types of investing in all types of business. So we have to get those plans in place, understand that you do need a will put in place. You need to take that stress off of you and understand where things are going, where your children are going, all of that good stuff if and when you pass. And the next layer to that is developing a living trust. And that's what I mentioned before, where we could own nothing but still control everything. And it's a beautiful puzzle. What we all these pieces put together that does appear and it get it takes a lot of pressure off us because we're talk about money daily with our spouses. We're talk about money daily with our children, which are things that are not happening in American households on average. So we need to break that mold. I'm here to dispel the whole myth of trust fund babies. I think all of us should take a step back and figure out some sort of planning to put in place or there's going to be something left. I don't care if it's a $5,000 check or $5 million check to leave it behind. There should be something to show your children and our grandchildren that listen. My elders took time to make sure that not only did I pass along, did they pass along property value, they pass on human life value to me. And that's how we can dispel that myth and all those little steps from paying off the debt, starting to save, starting to see compound interest to close in your first deal. All of that was just a snowball effect, but you had to take that first step of saying, Hey, I need to reach out. What I'm doing today is not getting me where I want to go. So if I want to do something different about tomorrow, I need to make some changes. Where do I start? And so I actually offer free complimentary consultations to people. So there is no cost to really get that first initial conversation going and stirred up. And then from there, as long as we both both parties agreed there's value to be added, we can move forward and some one on one coaching sessions. And I work with a three phase system. It's super simple. And again, that first phase is free. Phase two is where we really master personal finance and then phase the reason we get really excited is we start building wealth, gets in estate and tax planning together and, and things go really well from there.   00:13:19:12 - 00:13:57:00 Sam Wilson I like the idea of, of focusing in on the estate and tax planning side of things. I think that's for so many people, it's an overlooked step, even for friends and family of mine that are very high income earners. The idea of either having income producing real estate that produces paper losses and we were talking about this yesterday. You know, I was talking to somebody yesterday about this and it's like, well, you're going to get your K one this year. You know, we'll show a, you know, gosh, with with bonus depreciation last year, the last of your bonus depreciation, I'm sure bonus 100% bonus depreciation is like, okay, so you put a hundred grand on the deal.   00:13:57:22 - 00:14:21:24 Sam Wilson You're going to get like a $90,000 write off or something like that in year one, which was crazy. And they're like, Well, yeah, I'm not quite sure. I'm not sure I understand all that. I'm like, Wow, you're this far along. And the idea of passive losses against an income producing asset is somehow eluded you. And it just goes to show the lack of education, I think, overall. What do you think about that?   00:14:22:22 - 00:15:22:01 Eddie Martini Oh, absolutely. 100%. I mean, a little known fact is people that are out there that are actual financial advisors, it is not a pre wrote requisite when they're earning that degree. It's even for them to take a personal finance course. So the whole system, I think, is super backwards when it comes to this. You know, they kind of go through their schooling in education. And then, of course, at the end of the day, they've got people behind them that are saying, hey, push this, push that, this is what's going to make the income. And I'm not saying that people are out there doing anything ill willed. It's just these are the tools that they have in front of them. And so they're basing things off average rate of returns instead of actual rate of returns. Most financial advisors don't even know what internal rate of return means. They don't they don't love they want they don't want to talk about that because then also you have to factor in their management fees. It factor in tax implications and all of a sudden that S&P 500 average rate of return of 9.98 turns into maybe six. And I'm sorry, a maybe six is not going to cut it for most of us when it comes to retirement.   00:15:22:12 - 00:15:49:09 Sam Wilson No, it's not going to cut it for for retirement or even living expenses today, unless you just have an enormous sum of money earning that 6% of year. It's it's still not going to not going to move the needle in any really meaningful way. It sounds like from all the different things that you've got going on here from, you know, collateralized assets, on collateralized assets, that opportunity funds getting, you know, you're setting up your base of guaranteed rates of return.   00:15:49:09 - 00:16:06:13 Sam Wilson There's a lot of different. And then getting into your estate and trust planning and things like that, you have to incorporate a lot of other industry professionals alongside of you to get this kind of picture all put together for somebody. How have you vetted and found those people that you like to work with?   00:16:07:17 - 00:19:52:20 Eddie Martini Oh, absolutely. That's such a great point. Sound. Yes, this is definitely nothing I'm doing on my own. I consider myself as a wealth coach, kind of more of a hub. So I'm your central spoke there that all the outer spokes are going to be connected to and it's just a great to have me. I'm kind of your backboard so you're going to bounce ideas off me. We're going to talk about things, talk it through. And then once an idea actually comes together and we do some math behind it and get through some truth concept software and really see, hey, what does this deal look like when a stand on its own two feet and they say, yes, we want to proceed forward? Absolutely. So we need to have people we need have trusted lenders in place. That's really the first step. And then you get connected to say they know, all right, what is this really going to cost me to build to finance these transactions? Next thing you need a real estate professional. You need someone that whatever type of asset class you're pursuing that that person does this all day, every day. And luckily with me being in both of those industries for over two decades, I know the questions to ask. And so I can actually help with that vetting process. So a lot of clients come to me and they say, Hey, I already have a realtor friend or family member. I said, That's great, let's get connected and make sure that they're on par with what we need here. Sometimes it might just be a residential specialist. They've never even touched a piece of commercial real estate. And I'm not knocking giving a family member a shot. I'm just letting everybody know there's in the day this is a business transaction and you really have to try and set personal stuff aside. So sometimes what I can do is connect that friend or family member with a vetted commercial realtor and they'll love that and participate and learn along the way and even share in some of the commissions, which really is a win win for everyone, because they now just help that family member get into a whole new, exciting aspect of real estate and in a business that they're already involved in. So that works out really, really well. And again, the next thing to talk about, there is a difference between a CPA and a tax planner. So you have to have both on deck and they need to be able to communicate well together. And so I have my network really across the nation and even into Canada to make sure that these vetted pros are available, to have these in-depth conversations. And again, there's a big difference. There are a lot of CPAs stand for can't protect assets, not certified public accountant. So you really have to take time to ask them the right questions. And that's what really helps having a wealth coach is we can do some role play together. We can say, okay, great, you're the tax person. I'm going to ask you some questions and it's going to be recorded calls. You can go back and write these things down. You can have our session on the background when you're vetting the CPA over the phone or again, if you to do it together, great. We could spend time doing that together. And so it's really important to have all those as well as an actual estate planning attorney. So that's kind of the final piece of the puzzle is saying, hey, listen, we've got all these other professionals. We've found some properties we want to secure and they even come to me, they already have some properties secured in their possession. Great. I explaining to them the liability exposure that's now in place and some steps we can take to get rid of that liability exposure. And that gets back to the point of owning nothing and controlling everything. So all of these kind of come together. And so a really cool synergy and it's really powerful. And the more transactions you do, the more often you're talking to these people. And it's just like when we start, you didn't even talk with your spouse about the monthly bills or the budget. Now all of a sudden you're in a completely new person, you've shed your leaf and you're just like, Yes, this is what I do now. I talk about money because the more I talk about more comfortable and with it, and I love talking to people because guess what? When I'm on the phone with my real estate planning attorney, that means things are happening. I love having these calls now, I don't mind that, you know, they're on retainer for 250 an hour. That's a good 250 to spend per hour, because I know I've got something on deck that's going to be 10 to 20 up now.   00:19:52:20 - 00:20:08:22 Sam Wilson This is awesome. Eddie, thank you for taking the time to come on the show today and really just break down for us. Your whole strategy, your approach, your thoughts on how to organize our finances both personally and also inside of the real estate side of things as well. This has been a lot of fun having you. Come on.   00:20:08:22 - 00:20:14:01 Sam Wilson I learned a lot from you here today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?   00:20:15:04 - 00:20:38:03 Eddie Martini You bet they can visit Martini Legacy.com They'll take him direct to the website there and and they can learn a little bit more about my past and history. There's also a calendar on their weekend schedule, that complimentary consultation. And if you're on social media, just look up at Martini Legacy. I'm all over the place and then myself personally at Eddie Martini and I try to put content on both of those to make sure people, you know, can access that as needed.   00:20:38:16 - 00:20:41:08 Sam Wilson Awesome. Eddie, thank you again. I certainly appreciate it.   00:20:42:06 - 00:20:44:12 Eddie Martini Pleasure, Sam. Thank you for having me on. Look forward to talking to you soon.   00:20:45:02 - 00:21:06:12 Sam Wilson 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 episode features Stephen Davis. Stephen is the CEO of a real estate coaching program with over 2000 members. Has helped hundreds of thousands of people learn how to build wealth with real estate through his daily radio show and one on one consulting.   -----------------------------------------------------------------------------   [00:00 - 03:13] Intro [03:14 - 04:40] Finding passion  [04:41 - 09:52] How to scale commercial real estate [09:53 - 13:00] Who is your first hire? [13:01 - 16:33] How have things shifted? [16:34 - 19:09] Financing for under occupied properties [19:10 - 21:11] Preferred investments [21:12 - 23:18] Mistakes to avoid [23:19 - 25:13] Closing    -----------------------------------------------------------------------------   Connect With Stephen Facebook: https://www.facebook.com/TotalWealthAcademy/ Website: www.totalwealthacademy.com Email: steve@totalwealthacademy.com   Connect with Sam Wilson  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 → sam@brickeninvestmentgroup.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:   00:00:00:02 - 00:00:09:16 Sam Wilson What are some of the key hires? When you think about that, you say, okay, we're going to go scale. Like who? Who is the first person you typically recommend? Someone brings on?   00:00:09:17 - 00:00:26:02 Stephen Davis For me, it's the property manager themselves. Later on, it's the asset manager. But I want a pit bull in that office. A woman or man who is driven by the numbers.   00:00:26:13 - 00:00:52:11 Intro 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.    00:00:52:17 - 00:00:54:00 Sam Wilson Stephen Davis, the CEO of a real estate coaching program with over 2000 members. He has helped hundreds of thousands of people learn how to build wealth with real estate through his daily radio show and one on one consulting. Stephen, welcome to the show.    00:00:55:16 - 00:00:56:24 Stephen Davis Good to be here. Thanks for having me.   00:00:57:06 - 00:01:05:22 Sam Wilson Absolutely, Stephen Pleasure's mine. There are three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there?   00:01:07:18 - 00:03:13:01 Stephen Davis Well, I started back at age 27. I was you know, I had the corporate America mindset. And I thought that's how you got wealthy and you just climbed the corporate ladder and things like that. So I worked for five years, 70 hours a week, won a national sales contest, got one a trip to Hawaii. When I got back from Hawaii, they cut my pay by 20 grand a year.And what it did is it woke me up to the stupidity of depending on a job as your sole source of income. And I couldn't sleep at night. And people don't like this joke. But when you're working 70 hours a week, who's romancing your wife? It ain't you. And I was about to lose my wife, and I'm broke. You know, I had negative cash flow, and I couldn't sleep at night, so I was up watching these late night infomercials. Carlton Sheets. Dave Delgado I bought every one of them, bought every one of them, spent about 30 grand and took the boot camps and stuff. But when I got back from the boot camp two months later, I was making more money wholesaling than I was at my job. So I quit the job, saved my marriage, moved on to flipping, then single family rental had over a hundred single family. Then I learned about apartments and started doing little apartments ten, 20, 40 units. And then learned about big apartments, 200, 500 units, and then learned about passive investing. So as soon as I learned about passive investing, I realized that I was a good apartment operator, but not great because it wasn't my passion. My passion is teaching. So I found people that were great at managing and owning apartments, and I gave them my money as a passive investor, sold all of my real estate and do nothing but passive. I've been in as many as 4000 apartment units at one time.   00:03:13:07 - 00:03:35:08 Sam Wilson That's really, really cool. I love I love the transition there. You know, you went from one to the next to the next and then figured out along the way what you're good at and what you're not. How how did you really, I guess, build what it is that you do today? Because I think those are you know, they're two different components of the same thing. But it is that question make any sense? Like how did you go from activity?   00:03:35:09 - 00:04:40:09 Stephen Davis Yeah. What happened was what happened was a lot of friends were asking me what I was doing, you know, because I went from a Ford Festiva to a Ferrari and they were like, What in the world are you doing? And I found myself loving, sharing the ideas. Then I started working for a little real estate investor group and all I wanted to do was teach, and it was just so much fun for me. So when I found passive investing, I was reading Stephen Covey at the time and he brings up a lot of points about your purpose in life and your passion. And I started questioning that, and that was when I said, you know, when I wake up to go to an apartment complex, it's okay. But when I wake up to go teach a class, I'm fired up. I don't even need coffee. It's like, man, I can't wait to get in there and share these ideas. So that was how I found my passion. And that's what I do now.   00:04:41:10 - 00:05:04:04 Sam Wilson That is awesome. Let's talk then about the types of students you work with. The and really the thrust of this show, you know, is how to scale commercial real estate. So, yeah, you're inside view of what people are maybe doing right, what they're doing wrong, what kind of floor is yours to kind of take that idea of how to scale commercial real estate and tell me how you incorporate that into what you do?   00:05:05:21 - 00:08:06:10 Stephen Davis Well, my students range from beginners who are wholesaling and flipping to medium, advanced, medium. I would say somebody who's got 20 or 30 single-family houses. I think once you move into commercial, you're advanced, even if it's just a little ten unit apartment because you now control the value of your apartment raising, you know why and so on. And I think that with the advanced investor scaling is probably the hardest thing to teach. It's very easy to teach someone who's aggressive, wants to change their life, to run an apartment. You just get in there and you bust your ass and you learn all the skills and get it done. But getting that second apartment where you start scaling up, that's where the challenge comes in. And one of the big things, Michael Gerber wrote the book The E-Myth. He brings up the point that you only own a business if you can disappear from it for a year and make the same amount of money as if you're there. If you disappear and you make less money, you're just self-employed. Well, most of the what people who call themselves entrepreneurs, they're really self-employed with these apartment complexes. They're running it day to day. Well, if you're going to scale big, you've got to move towards not all the way you can move all the way to business owner, but you've got to do less and less and less inside the actual business and take on more of a leadership role. And where I see it the toughest is simply and this is said with respect because these are good people, but we all have an ego and we all can get arrogant at times. And when people are scaling and they're bringing on a team, they sometimes think, you know, nobody can do it as good as I can. And that type of arrogance will hold you back. Okay. Let's say you're right that no one else can do it as good as you can. You're screwed. You're dead in the water. Whatever you can handle in your 40 hours a week. And I hope people are working much more than that. It's just not healthy that you're screwed. That's it. But if you're humble and take on the leadership role and really focus on training your people to be almost as good as you. That's when scaling occurs. When you've got a team you can depend on and you can throw another 300 units or another 400 units, and that's just the sky's the limit at that point.   00:08:07:08 - 00:08:35:07 Sam Wilson It really is. And I think I think one of the challenges that many of us probably face is that when is the right time to bring that person on or person's Yeah. Team in? It's like, well, we've got to have cash flow in order to pay those people to come on. But we got to have it's kind of like which one, which one comes first? And I bet it's probably unique to every situation, but what are your kind of thoughts around when the right time to build that team is?   00:08:35:13 - 00:09:52:16 Stephen Davis Yeah, the first thing comes to there is never a right time, you know, it's one of those where you just got to leave. It's just like when you first bought your very first apartment. If you waited for it to be the perfect time, you waited too long. You know there's never a perfect time. You got to just jump. Now it needs to be with wisdom and education, but it's never going to be the right time. The way that I'm seeing it is people are like one of my guys, Robert Martinez. He had about four or 500 units. I think it was just two complexes. He just made a decision that he was going to hire. He bit the bullet and hired the people. He's now over 5000 units because he bit the bullet, paid the money and trained the people. And he's an excellent trainer. He's got an ego, he's proud and so on. But he knows how to be humble too, and really train people to do what he does.   00:09:53:04 - 00:10:02:15 Sam Wilson What are some of the key hires when you think about that? You said, okay, we're going to go scale. Like who? Who is the first person you typically recommend? Someone brings on?   00:10:03:24 - 00:11:38:04 Stephen Davis Yeah, for me, it's the property manager themselves. Later on, it's the asset manager. But I want a pit bull in that office. A woman or man who is driven by the numbers that understands in a why that you can lower the expenses or raise the rent and affect the. You know, I I've gone to apartment complexes and what we call an intervention where an apartment complex is doing poorly. And I go there with a couple other syndicators to show them what they're doing wrong. And almost every time the team doesn't know what you know is it's like the whole every thing you do every day, all day long is to increase the you know, I and you guys weren't even trained to understand in a why there's the big problem they need to know how an apartment runs, how apartments are valued. They need to even understand cap rates, which I don't fully understand cap rates. And I've been at this for 33 years, but they need to have a general feeling for cap rates and in a way and understand that's their mission. But yeah, I like the property manager. Then when I get when I, when I see people get above that third complex, they really need an asset manager as well.   00:11:39:09 - 00:12:01:20 Sam Wilson You define the difference. Obviously the property manager is at the property level, but an asset manager. What how does that differ, I guess, for the team, if it's if it's a team insider or your key hires inside of your own in-house team, I think a property manager is somebody that could be or property management could be third party.   00:12:01:20 - 00:12:29:09 Stephen Davis Yeah, I'm not objected to third party. I've never been real happy with them. But if it it can leverage your time and then you can move on to the asset manager and the. All right. The way I define it is the asset manager look at all the complexes or all the commercial property at the same time while a property manager is looking at one space.   00:12:29:09 - 00:13:00:05 Stephen Davis Yeah. So I think that's a simple it's a simple definition, but it works for me. Once I've got the asset manager, that's more free time for me to go hustle the next deal to negotiate, do my due diligence and put that thing in the portfolio. So yeah, I think the first one for me is having that property manager where you can sleep at night knowing that in a way is being looked after.   00:13:00:18 - 00:13:33:06 Sam Wilson Right? No, absolutely. I love that. I love that you get a front row seat to a lot of deals, a lot of different sponsors, a lot of just stuff really across the country. I would imagine that we're recording. Yes. April 11th, 2023. What are some things how how have some things shifted in the last 12 months? And what are some strategies maybe that you guys are changing on, especially, I guess, is it pertaining to the multifamily space? You sound like that's what you deal with quite a bit.   00:13:34:11 - 00:15:02:04 Stephen Davis Yeah, we do. We do self-storage, we do senior living, we do some hotels, things like that. But probably 80 or 90% is apartments. The trend that I'm seeing. And it's not a major trend, but with the interest rates being a little bit higher, there's more people in distress situations when the government, you know, their solution to inflation was to raise the interest rate. Well, when you pick up one end of the stick, you pick up the other end. Well, they crushed the stock market. They slammed people with bridge loans. So there's a lot of people out there with bridge loans that the interest rate has doubled and now they have no cash flow and they want to let the asset go. And there's some a symbol. I think the last three apartment complex we bought had a symbol portions and we bought them and we assumed, say, 60%. Then all we had to finance was 20% at the higher interest rate, but it was locked in. It wasn't adjustable. And that way we were able to turn it into a safe, secure deal where they couldn't because they had that bridge loan. So I think that distressed property is what we're really focusing on over the next 12 months.   00:15:03:09 - 00:15:24:09 Sam Wilson That's interesting. And it sounds like you're already beginning to see some of those properties come to the surface. I haven't really you know, I've heard people forecast distress. I've heard people say, okay, you know, when these bridge loans come due, when X, Y or Z happens, then we'll see opportunities to go, you know, pencils back up again and start buying. But it sounds like you're beginning to see that.   00:15:26:01 - 00:16:32:07 Stephen Davis Yeah, we're we're very aggressive from the point of view that we understand we make money in both the up and down markets. You know, that's the glory of real estate, man. I love it. But in this little depression, we'll call it not a recession yet there are a lot of opportunities in Houston. One guy lost like 22 buildings. We picked up a couple of those. And I just think there's going to be a lot more people with these bridge loans coming due and they're not the greatest operators. So the banks looking at them going, we're not going to refinance you. You know, you're 65, 70% occupied. You need to sell. Well, because of our educational system and our total wealth academy, our properties are 94, which is really as high as you can get, 90 to 94%.The banks are refinancing us.   00:16:34:08 - 00:16:45:06 Sam Wilson Our how are you underwriting those deals and or getting financing on those deals if they are not 90% occupied, maybe they're 80 or 70%.   00:16:45:06 - 00:17:29:16 Stephen Davis Yeah, we're having a good luck. Yeah, that's an easy one. Larger down payments. We weren't you know, we went from 25 to 35. One of them we paid literally cash for. But this is not an exaggeration. It appraised for 23 million. We picked it up for 15 million cash. So it just depends on the deal. Sometimes we got to put up bigger down payment. Sometimes we have to pay cash, sometimes we have to have CPAs with millions and millions of dollars in the bank, you know, to get into the deal. We had one deal where the KP, it went from no deal to a deal because we put in a guy with 11 or 12 million bucks in the deal.   00:17:30:17 - 00:17:59:02 Sam Wilson Wow. Well, let's talk about that for a second. I like I like that strategy, bringing on a key principle to help take those deals down. And I'm sure that these are long term relationships for you where they know what you do and understand how you know how the process works and have confidence in what you do. Let's talk real quickly then, just if you don't mind share. And how do you structure that with a key partner or a key principal on a deal like that? How do you incentivize someone in that position to come on board and do a deal with you?   00:18:00:00 - 00:18:31:21 Stephen Davis Yeah, he gets part of, let's say that the sponsor is getting 30%. He may give the CP five of that 30% to be the KP. Well, the KP may put $1,000,000 in the deal and have like the example I gave you and still have 10 million in the bank. But his million dollars, his rate of return is going to be 40 something percent because he gets 5% of the deal plus the percentage he got for putting up the million.   00:18:31:21 - 00:18:34:18 Sam Wilson It becomes pretty easy math then at that point.   00:18:35:03 - 00:19:10:00 Stephen Davis Yeah, yeah. Being a KP, you know, people talk about it being risky. Yeah. Every first off, everything's risky. Asking a beautiful girl out, going to the grocery, everything's risky. To avoid risk is to avoid life. But it's an educated risk when you know the sponsor. This sponsor had won like 15 awards as real estate investor a year from National Apartment Association, Texas Apartment Association, Houston, a bar, you name it. So it was a worthwhile risk for him.   00:19:10:00 - 00:19:38:21 Sam Wilson Sure. Absolutely. Absolutely. Thanks for taking a few minutes there to share. Just kind of you guys how you guys are structure in those because that I've seen it all over the map and I'd love to hear different ways different people are setting those deals upset. That makes a heck of a lot of sense. You've moved into the passive investing phase of your career here. Many, many years ago. What are things you are currently investing in and what are things that you are avoiding and why?   00:19:40:08 - 00:21:11:10 Stephen Davis I like just about all spaces. If I've got a strong sponsor, I like self-storage, senior living in apartments, the best. Most of my money's in those three spaces. The only thing I won't do is college towns. And I'll tell you why. One of my good friends bought a college dorm college apartment complex, covered here, and the college added 60% more on site housing. Needless to say, that deal was sold for less than they paid for it. So that's the only thing I really avoid anything. That's just a normal survey as to families in residential or service, to companies in commercial. That's where I like to keep my money, where I'm really focused on how is this particular asset helping and serving others. If it's helping and serving families, man, that's a no brainer. If it's helping and serving businesses, I think it's a little bit riskier. But if you've really got a good product and you can really help a business, they're going to stay with you. So I like all I like those three the best.   00:21:12:20 - 00:21:30:03 Sam Wilson That's fantastic. I love I love your insight there. I've never heard that college towns comment before and that that makes a lot of sense to me and certainly appreciate that. If there is one mistake you could help our listeners avoid, what would it be and how would you avoid it?   00:21:30:03 - 00:22:21:21 Stephen Davis Going too fast, I think is the only big one. All the rest of them are easily managed. I don't think that anybody should move on to their next deal until the rehab is complete, the property is stabilized and you're paying cash out to your investor. There's in other words, it's rocking and rolling where I've seen a couple of syndicators or sponsors make a mistake. They've got two deals that are not quite stabilized, not quite there. And they go for a third. And then all their energies towards that third one, the other two get worse. So be wise. Get your initial property stabilized and cash flowing to your investors before you pick up another one.   00:22:22:11 - 00:22:43:17 Sam Wilson That's sound advice. And I think that would probably correct me if I'm wrong here, but that would probably especially pertain in the early on phases. You know, if you're at oh yeah, 19, 20, 21 properties at this point in number 20 is still in the stabilization phase. You've probably got the team that will go ahead and ensure that 20 gets done so you can buy 21. But if it's one, go to two or three. Your point, I would think that.   00:22:47:17 - 00:22:58:08 Stephen Davis Is yeah, I can agree with that. If somebody's got a team, he's got 20 apartment complexes and one or two of them are not stabilized yet, that guy can do whatever he wants.   00:22:58:08 - 00:23:18:18 Sam Wilson Right? Right. But early on that going too fast. Yeah, it's somebody said that to me here recently. It said something. You shouldn't be so much afraid of failure as you should be, you know, afraid of not unexpected. But, you know, the to the growing too fast. Like unexpected success. Yeah. It's like, oh, my gosh, we're just. We're growing so fast.   00:23:18:18 - 00:23:39:02 Sam Wilson We're not prepared for it. So that's that's sound advice. Certainly. Appreciate that. Stephen. Thank you for taking the time here to come on the show today. This was certainly a lot of fun. I loved your insights there on team building on, you know, what assets are available to marketplace, where you guys are see and risk, where you get to see an opportunity, what you love to invest in certainly shared a lot of wonderful insight here with our listeners. If they do want to get in touch with you and learn more about you, what is the best way to do that?   00:23:43:17 - 00:24:18:15 Stephen Davis You know, they can and do two things. Go to the total wealth academy dot com if they want to check out our coaching program. I also on my radio show give out my email. I love email questions. Yeah. I don't want anybody worried about bothering me. I, I literally get a dopamine rush every time I reply to an email. It's bizarre. I don't know why, but I do it. Steve at Total Wealth Academy dot com. Steve at Total Wealth Academy dot com. 24 hours a day firing.   00:24:19:04 - 00:24:22:04 Sam Wilson That's fantastic. And Steve, what is the name of your radio show?   00:24:23:08 - 00:24:29:16 Stephen Davis It's the Total Wealth Academy Radio show and they can find out information on it at Total Wealth Academy dot com.   00:24:30:01 - 00:24:40:16 Sam Wilson Total Wealth Academy dot com. We'll make sure we include both of those. The email as well as the link there to your website here in the show notes. Steve, thank you again for taking the time to come on the show today. I certainly appreciate it.   00:24:42:04 - 00:24:45:23 Stephen Davis Man. I appreciate it. It was truly fun and and honor.   00:24:46:14 - 00:25:13:01 Sam Wilson 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 this episode Adam Gower shares his unique career path and experiences in different industries, including real estate and startup investing. Adam Gower is the foremost authority on real estate crowdfunding (aka syndication) and has published five books on the industry. Dr. Gower combines a lifetime of experience in real estate investment and finance with best-of-class digital marketing strategies. The conversation covers investment decision-making and using language that resonates with investors. Adam gives valuable insights for real estate investors and those involved in capital raising.   -----------------------------------------------------------------------------   [00:00 - 02:35] Intro  [02:39 - 04:42] Adam's experience and business focus. [07:04 - 08:45] Adam Gower learned digital marketing skills, landed his first client, and developed the most advanced digital marketing systems for real estate sponsors. [09:22 - 13:42] Two ways the industry evolves: through technological advancements and changes in communication language. [14:12 - 17:23] Conduct regular surveys of  investors using tools like SurveyMonkey. [18:51 - 22:53] Current state of the real estate market [22:54 - 23:30] Closing   -----------------------------------------------------------------------------   Connect with Adam: https://www.facebook.com/GowerCrowd/ https://www.linkedin.com/in/gowercrowd/ https://twitter.com/GowerCrowd Other resources from Adam:  Book: https://hub.gowercrowd.com/nows-the-time/ (not free but just $7)   Connect with Sam Wilson  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 → sam@brickeninvestmentgroup.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: 00:00:00:06 - 00:00:23:11 Adam Gower You and I might use the terms principle preservation, but what you'll discover when you talk to your investors, they won't use that language. They will say, I want to protect my investment. So don't try and be clever and say we're big on principle preservation because no one will understand it. And they're not using that language anyway. We are focused on protecting your investment.   00:00:23:17 - 00:00:34:18 Adam Gower That's the language they use. Use that language back at them and that's how you will animate responses that you want in terms of getting investments.    00:00:34:18 - 00:00:58:18 Sam Wilson Adam Gower is the foremost authority on real estate crowdfunding and has published five books on the industry. Dr. Gower also combines a lifetime of experience and real estate, investment and finance with best of class Digital Marketing Strategy. Adam, welcome to the show.   00:01:02:18 - 00:01:05:06 Adam Gower Thank you for having me. Sam it's a pleasure to be here.   00:01:05:07 - 00:01:15:14 Sam Wilson Absolutely. The pleasure is mine. Adam There are three questions I ask every guest who comes on the show in 90 seconds or less. You tell me, where did you start? Where are you now and how did you get there?   00:01:16:00 - 00:01:46:20 Adam Gower I started pulling wires for an electrician in Southern California in 1982, and that's how I started crawling around in basements and attics with dust mites and spiders. But from there, I started raising capital from Japanese investors for multifamily ground up developments in San Diego. I ended up in Japan actually heading up Universal Studios, real estate development across Asia Pacific.   00:01:46:20 - 00:02:14:22 Adam Gower I was president of that division and in 2012 when the Jobs Act passed, coincidently I was doing some seed and angel investing actually in startups, and that's how I learned the language of digital marketing. And from there, I have built the actually the all modesty side, the foremost marketing agency for sponsors raising capital online.   00:02:15:10 - 00:02:34:02 Sam Wilson That sounds I mean, I got, like, a really colorful lot. I can't speak today. Colorful career. It's good. That's a problem here. When we're on a podcast and I'm on my own mouth to work. But it sounds like a really colorful career all the way. Not not the 2012 till now has it been, but it almost sounds like a shift. You know, one side of the business and then something completely new. Is that is that a fair summary there?   00:02:39:15 - 00:04:42:08 Adam Gower It sure is. I actually some you know, I went through the savings and loan crisis. I was when it hit. I was in my mid-twenties, mid to late twenties. And on paper I had I was a multimillionaire. I mean, I'd invested in all the deals that I was working on and considered myself to be very wealthy and successful and and the bottom fell out and I lost everything. I really went to zero. I actually went into that. It was worse than zero. Wow. And so that was my first experience of why this time it is different is nonsensical. I think about how this time is different. And then the second go around, after I finished at the studios running their real estate and Asia Pacific was the global. Oh my goodness me. Sorry, was the global financial crisis of 2007. And I had been lucky enough to sell my entire portfolio in oh seven. So I got out, I was cash rich, no legacy issues, and I was brought into a major bank to help them clean that balance sheet. And during that period, I saw hundreds, if not thousands of commercial real estate or the commercial loans collateralized by commercial real estate developments and value added, I mean, you name it, that had all gone bad.And so I saw the way that everything that was the second time I saw how stuff can go bad. And so I just it kind of made me gun shy, to be quite honest with you. And I just decided to become a somebody that produces the shovels for the miners. So I produced that. Yeah. Outside the gold miners, only very few made money consistently in the long run. But the guys that built the shovels, they're the ones that you still talk about today. And so that's what I'm doing, although I do do some investing as well, just to be clear.   00:04:42:22 - 00:05:09:07 Sam Wilson Right, that is. I love that. And yeah, I can only imagine, you know, having narrowly escaped because you're one of the few in the oh seven, oh eight or nine crisis that walked away with your shirt on. Certainly, I would say 95% of the guests that have come on lost the talk about that lost a pile of money in that period. Yeah. So you get out of that, that's actually very lucrative.   00:05:09:09 - 00:05:32:19 Adam Gower That was actually a very lucrative period for me. I'm sure what I was doing was transacting for both the bank and then subsequently for Colony Capital, who are one of the biggest private equity funds in the world at that time. Right. Real estate price, actually. And my job was to manage these last large portfolios of non-performing loans and to sell them, right? And so I made a lot of friends because I was helping people to buy distressed deals at discounted prices.   00:05:40:22 - 00:06:03:05 Sam Wilson Right. Right. Yeah, absolutely. Absolutely. That's that sounds right. And we could probably spend the entire show focused on that. But I really want to hear what birthed your idea. Okay. You're going to sell shovels. You're going to. But this is this is kind of a left turn with a brand new set of people you're working alongside of. How did that come to pass?   00:06:04:10 - 00:07:03:12 Adam Gower Yeah, it's funny. I was actually telling one of my sons this yesterday that sometimes know you got a passion for something, but you don't really know where it's headed. Hmm. And the same was true. And I learned speak Japanese. People ask me, What are you going to do with us? Well, I'll figure that out when I speak it, right? When I got my Ph.D., people ask me what you're going to do with that. I've got I don't know. I'm going to get it and then I'll figure out how to use it. And the same is true of digital marketing. I actually started we were we bought a house up on the Central Coast and I was commuting back and forth from L.A., actually from Beverly Hills. So we had a house there. We had one on the Central Coast. And so spending a lot of time in the car and I figured, you know, I'm going to learn. I got I suddenly got this Ph.D. I want to do a podcast. So I started listening to how to do a podcast podcast. And I didn't really know where anything was going to lead.   00:07:03:18 - 00:07:04:08 Sam Wilson Sure.   00:07:04:08 - 00:08:45:11 Adam Gower But I learned how to produce a podcast, how to edit audio, how to build a website, how to create an email list, how to market analyst. And it started to snowball. I suddenly started finding that there were people coming to me that I didn't know, who knew who I was, who thought I was the bee's knees, because there was always the, you know, the few people as well. And I'm like anything at all that I have to say. But I then spoke to one of my friends who was a major sponsor, and I said, Hey, listen, I can do I can build a machine for you that attracts investors based on the models that I've developed for myself. Why don't you give me a shot? And he said, Well, have you ever done it before for a sponsor? And I said, No. And he said, Oh, I give ourselves. So he was my first client. And since then, if I can just wrap up, since then we've developed by far the most advanced digital marketing systems for sponsors in the industry. Nobody comes close and our clients manage over 35 billion, have over 35 billion of AOL and have probably raised and I say this now cautiously, I know they've raised at least 100 million because I have them on video saying that. But I don't have on video what they've really raised. And that is probably in excess of $1,000,000,000 in real estate equity capital. So we've we that's how we grew really was not really knowing what direction we were in and just going with the market and serving our clients basically what they need. Yeah.   00:08:45:20 - 00:09:04:11 Sam Wilson How, how much of what you do is just constantly in flux. I feel like there's this, this constant moving thing of like even, you know, I have a somebody that works for me, can't think of what our title is at the moment. Golly, I told you, I can't speak and I can't think. It's a tough day here.   00:09:04:11 - 00:09:12:12 Adam Gower On the show. So drink that does it. You know, some that's the problem. The only problem with that is I never know if it's too much or too little.   00:09:13:17 - 00:09:22:12 Sam Wilson Well, that that would be an electrolyte drink here today several of those and maybe that's maybe that's what's wrong the salts off in my head. No, but.   00:09:22:17 - 00:13:42:19 Adam Gower I think I can answer your question. I know what you're asking. And at my my drink of choice is heavy caffeine in the morning. So I'm hyper amped. So you ask me about, you know, what, what kind of variables or how how does the industry evolve? There are two ways that it does that basically. Sure. That are tech technology variances that are constantly changing, are constantly being upgraded, constantly. There are new opportunities to, you know, for tech platforms and techniques to exploit to maximize your performance. And we stay on top of all of those. We have a large network of developers who we work with. We have an inner circle, we share ideas, we explore everything, we test everything on the gold crowd dot com website. And if it works, we roll it out as clients, so we stay ahead that way. But if you are not a tech person, there is another profoundly important flux in the market that happens all the time, sometimes with much bigger impacts. And funnily enough, some this is what you and I touched on in our pre podcast chat and that's is the language of communication. So you have to as a kind of basic, basic rule, you need to be communicating with your network at least once a month. We did an investor sentiment survey at the end of last year and you got to be sending out newsletters at least once a month. And if you're if you've got deals that you're trying to raise money for, if you're sending out newsletters, if you're doing paid advertising, it really doesn't matter. Or you're on social media, LinkedIn or Twitter or Facebook. It doesn't really matter what the medium is that you're using to communicate, you have to be tuned in to what investors primary concern is today and now. So you can use the approach language to draw them into your ecosystem, into your network. And I will tell you that at the beginning of 2022, just to underscore this, I'll give you some very specific counsel now on this. At the beginning of 2022, you could still be talking about earning passive income and building wealth long term. And it's like falling off a log raising money since interest rates have gone up since the Russian invasion of of the Ukraine, since cap rates are going up, prices are coming down, the stock market has fallen, inflation is eating away at savings. Home prices are coming down, investors are feeling less wealthy and they are migrating to a principle preservation investment strategy. They are primarily focused on not losing money. So you have to use language that encourages your investors to understand that you are taking a defensive posture with your investing today. Explain how you're doing that and that's how you're going to draw them in. So, by the way, there is a second form of a second type, second language pattern that's working, particularly well at the moment. And that's, again, something that we talked about this on the live podcast, remarkably as hesitant as investors are today, and I'm talking about passive investors, our accredited investors to invest in deals. They can always be in, motivated to unlock their wallets when they think they are getting a bargain. So if you have distressed deals, if you're able to find a deal that has some kind of distress component, the seller's forced to sell for some reason, whatever the story is of the deal, particularly if it's some kind of forced exit that has yielded a better the market price, that is the kind of language that you want to be using in your marketing because that is how you will activate an investor base that is otherwise sitting passively waiting for opportunities like that.   00:13:43:23 - 00:14:11:15 Sam Wilson I like I like that a lot that you've hit on some really I think valuable things there. And when you said the primary concern today, I wrote the question how so? You've hit on a lot of things. I think that investors are thinking, are there other ways that or other mediums or channels that you're using that kind of let investors tell you what it is that their primary concerns are as well to kind of help craft that?   00:14:12:19 - 00:17:23:21 Adam Gower That's a really good question. So as a digital so what we do with our clients is we encourage them to communicate, as I mentioned to you regularly. Yeah, that means no less than once a month, right? Periodically. It's actually really useful for you to conduct a survey. Just conducts a survey sent out an email. You know, if you're doing a monthly or weekly or biweekly newsletter that goes out to all your investors. Yeah, every six months or so. Whatever you want to know the answers, what's going on, conduct a survey and say, well, no newsletter. In fact, says another Pro-tip in the subject line, which is what people drives people. To open the emails, use the subject line. I have a small favor to ask. Everybody opens those emails, but that's just the coolest thing. So I have a small favor to ask. We like to set them up. We've sat them out with Google Surveys or SurveyMonkey. I like SurveyMonkey because they provide you some nice analytics. Afterwards, you pay for a month, like on Dropbox to get more than 100 it some functionality, it's worth it. Just send out a survey to your investors and ask them. Actually ask them I want strong. But here's the thing to be really careful of when you do it. When you build a survey, make sure that the questions you ask elicit answers that are actionable. Don't ask questions that are like, okay, interesting, but what can we do with these answers? You can't do it. So think ahead. If we get a set of answers to this question, how will we use those answers? So, for example, one thing that you could ask is, oh, and also trying to use multiple choice. So what's driving your investment decision at the moment? What's your biggest concern is inflation? Is it wall is a politics is just ask a series and then always include a other option that somebody can fill out. So that's that's another kind of pro-tip it's just helps people move through faster and then always also include an open ended at least one open ended answer that doesn't have a checkbox, right? So whatever. It's I mean, just pick one question like that and then gather those answers and that's they will tell you. The other thing is that once you get those answers from your prospects or from your list, use their language. So, for example, you and I might use the terms principle preservation, but what you'll discover when you talk to your investors, they won't use that language. They will say, I want to protect my investment, so don't try and be clever and say we're big on principle preservation because no one will understand it and they're not using that language anyway. We are focused on protecting your investment. That's the language they use. Use that language back at them and that's how you will animate responses that you want in terms of getting investments.   00:17:24:12 - 00:17:42:16 Sam Wilson That that's really sound, sound advice because we do we get lost in our own little world of phrases and, you know, acronyms and all this stuff. And then, you know, the everyday investor, they need their care and they just get confused by it and they're like, okay, this is this is stupid. And they just stop.   00:17:42:16 - 00:17:53:21 Adam Gower Well, you know what they say don't that they say that if you want if you want to impress people, use fancy language. If you want to raise money, dumb it down. You know how to use fancy language.   00:17:55:05 - 00:18:08:11 Sam Wilson I like that a lot. So you've built this platform, you've mastered digital marketing on the capital raising side of things. I think, if I'm not mistaken, you've written, what would you say, five books on the dot.   00:18:08:11 - 00:18:17:09 Adam Gower I think five now have five at least. Yeah. Five maybe six six actually. But five, five about commercial real estate investing.   00:18:17:15 - 00:18:46:08 Sam Wilson That that is really, really interesting. I want to get your thoughts on really where we are in the economy. I know you've mentioned, you know, talking about how investors appetites have changed, how raising money maybe a year and a half ago was like falling off a log. Things are slowing down. You mentioned earlier you just you kind of chuckled when you heard you said when they say the phrase this time is different and you kind of just laugh at them a little bit like you're a bunch of idiots was kind of what the summary laugh is, what I, what I heard there. So give me kind of your thoughts on those three things I just threw out, if you don't mind.   00:18:51:11 - 00:22:03:06 Adam Gower Yeah, okay. I'm not sure if I can remember all of them, but there are a couple of things. So you asked what's going on in the market, by the way, just to come back to this this time is different. I didn't laugh. I actually cried in 1989 when the market collapsed or 99, 89, 90. I actually believed what everyone was saying about this time is different. The San Diego was in San Diego. The economy is booming. People are migrating here. Prices are going up. This time is different. Real estate prices are never going to come down. I really believed it. So it was a hard shock when I realized, no, actually things do come down and they come down hard when they do. So just to correct that now I know there's no such thing as this time is different. That's a whole different story. Two things you asked about. So what's going on in the market at the moment? So you mentioned that your listeners primarily are professional real estate investors, people who are raising money like capital raises, looking for capital to to, you know, to finance the deals. So there's two things going on. First of all, you've got a lot of distress. I don't care what anybody says. Everybody is starting to sweat bullets about interest rates, resets and debt and interest caps expiring. That's there's a lot of stress out there in the market. And so the first thing that that's sponsors needs to be thinking about is risk rescue capital, maybe putting in some equity to try to push down that leverage if your banks will allow you to do that, because they're going to want you to start paying down debt before they'll refinance it. And it's going to be very costly money as well. So you are going to need equity, end of story, right? Probably in Q3. Q4 is one, it's going to really hurt. And the second thing is opportunities. The flip side of that is people that are, you know, sponsors who have who are new to the game, who have figured out how to do multifamily investing from, you know, an online education program or something within the last ten years. They're going to lose a lot of assets and those assets are going to be considered distressed. They will sell at below market. They will, but they're going to be tricky to unwrap as well, especially if you're buying notes. But what it does speak to his opportunity to buy at below market period of wealth transfer both of these events or both of these factors in the economy require capital. You have to have equity capital and the best people to get that from today is individual investors, not institutions, not family offices. Everyone's on the sidelines, individual investors that your best alternative source for equity capital, both to save your own deals, buy it through recaps and also to capitalize on deal flow when distressed deals start coming down the pipe.   00:22:04:00 - 00:22:52:22 Sam Wilson Yeah, that's it. I mean, that goes back to your own personal experience in the 0708 period of being cash rich and seeing opportunity when it presented itself at that point in time. And it sounds like you think that's kind of where we're heading again, which I couldn't disagree with you on that front by by any stretch. This has been absolutely fascinating. I've learned so much from you today from the digital marketing standpoint, from just how you your your experience both in commercial real estate and then also master digital marketing, talking about things that investors are concerned about today, how to discover what our investors are concerned about today and how to speak to that. So many things here to learn from Adam. Certainly appreciate you coming on the show today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   00:22:53:15 - 00:23:22:23 Adam Gower Thanks for asking, Sam. So really the best way is just to go to the website Gallup crowd dot com that's gio we are crowd galore. Crowd Dotcom. There are over a million words of content on sites and totally everything you need. There's all kinds of free courses and and training and sign up for the newsletter we have a newsletter, goes out every Wednesday covers the real estate syndication industry is free can always unsubscribe, but that's the best way to find me.   00:23:23:12 - 00:23:26:22 Sam Wilson Adam, thank you again so much for coming on the show today. I certainly appreciate it.   00:23:28:09 - 00:23:30:13 Adam Gower Thanks for having me, Sam. It's been a real pleasure.   00:23:30:13 - 00:23:51:23 Sam Wilson 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.

What do successful investors have in common? And what does it take to be a better one? Our experience working with successful investors tells us that above and beyond hard work and dedication, mindset plays a crucial role in developing a successful investment portfolio. So, what particular mindset sets an extraordinary investor apart?    Sam Wilson of Bricken Investment Group reveals the answers in today's episode. With ten years in the investing business and having built a diversified portfolio of several asset classes, Sam has learned from experiences, both pleasant and painful, what mindset to keep in order to benefit from any stage of the market cycle. From humble, working-class beginnings, he has achieved abundance and transformed his life. Listen and be inspired!   Key Points from This Episode: Sam's backstory and upbringing that honed his entrepreneurial flair. Sam describes the period filled with panic and fear between selling his business and getting into real estate. How did Sam gain clarity on the direction to take and decide on the path to real estate? Why Sam struggled to focus on one asset class in the beginning and ended up investing in a broad range of asset classes. Why did Sam become more selective and discriminating with his investments now? Why did Sam decide to focus on laundromat facilities and target this for investment growth and scale? Sam's reading on the real estate market and the strategies he's employing to cope with the changes. What type of mindset influences Sam's actions and decisions amidst a changing and dynamic environment? Sam answers the Rare Air Questionnaire.   Tweetables: “Do not mistake activity for progress.” - Sam Wilson   “You don't have to say yes to everything. Find the ones that make sense for you now.” - Sam Wilson   ”It's not ‘no' or ‘never'; it's ‘not yet'.” - Sam Wilson   “I want to stop trading time for money. And the only way I can do that is to scale.”- Sam Wilson   “People who take care of their health take care of their health in any market cycle.”- Sam Wilson   “I always assumed that success was for somebody else.” - Sam Wilson   “Be aware of your handicapping behaviors, stop those and start refining and perfecting the one thing you're focusing on while accepting that success is for everyone.” - Sam Wilson   “There are not many things I've gotten right but there are a lot of things I've gotten wrong.” -   Sam Wilson     Links Mentioned: Bricken Investment Group Mastering The Market Cycle: Getting the Odds on Your Side by Howard Marks Invest with CF Capital   About Sam Wilson Sam Wilson is an active investor in self-storage, parking, retail, multi-family apartments, RV parks and single-family homes. He hosts the “How to Scale Commercial Real Estate Podcast”, where he interviews real estate experts to give listeners the tips, tools, and tricks to scale their investment portfolio.    Sam holds a bachelor's degree in business finance from the University of Memphis and holds his real estate license in Tennessee. In addition to his years of real estate experience, he also has a diverse background in business ownership, building construction, and management.

In this episode, I have the host of How to Scale Commercial Real Estate Podcast, Sam Wilson. Sam is an active investor in self storage, parking, multi-family apartments, RV parks, and single-family homes. How does Sam do all of these alone while making millions? Find out in this episode! Learn How to Get Your First Deal in 60 Days or Less!http://linktr.ee/ElitestrategistSAM WILSON'S SOCIALSWEBSITE: https://brickeninvestmentgroup.com/INSTAGRAM: https://www.instagram.com/howtoscalecre/PODCAST: https://www.youtube.com/@howtoscalecommercialreales334/

Welcome to the How to Scale Commercial Real Estate Show. In this episode, USA Today bestselling author and real estate attorney Angela Lalande joins us to talk about her book, The Lighthouse Method. In the book, Angela discusses how to rise out of darkness and achieve success in life and business. She shares her own story of overcoming failure and finding her path to success. Angela explains how the Lighthouse Method can help others break free from negative self-talk and false beliefs, and replace them with truth and positivity. Tune in to hear more about Angela's journey and the Lighthouse Method.   Highlights    [00:00 - 03:57] Finding the Light Within Yourself Angela shares her story of how she graduated from college and found herself cleaning toilets at a gym. She realized she was not using her potential and sought to change her situation She is now a real estate attorney and bestselling author She wrote "The Lighthouse Method" based on her own journey from darkness to light, and hopes to empower others to overcome setbacks and rise out of darkness   [03:57 - 08:09] The Lighthouse Method The Lighthouse Method is a framework for overcoming setbacks and rising out of darkness It involves confessing, repenting, forgiving oneself and others, and replacing negative self-talk with the truth of who you are The end result is a mindset shift and breaking agreement with the devil, which allows you to become a prism and shine your brightest   [08:09 - 12:49] Becoming a Prism: The Importance of the Lighthouse Method The Lighthouse Method is important because it offers a roadmap for anyone who is going through a tough time in their life. The method is based on the idea that everyone has the potential to overcome adversity and achieve success. By following the steps outlined in the Lighthouse Method, people can break free from negative patterns and shift their mindset to one of positivity and resilience.   [12:49 - 15:42] Final Statements Reach out to Angela See links below Final words     Tweetable Quote   “In life there are a lot of failures and rising, failing and rising. And so, for me I rose up after failing to get to where I am today.” – Angela Lalande   “"If you're postured in humility, you confess. You repent, forgive yourself and others, and then replace the negative self-talk, false accusations and lies with the truth of who you are. That you are actually brave, courageous, more than a conqueror.” – Angela Lalande -----------------------------------------------------------------------------   Connect with Angela through her Instagram and her company's webpage at https://lalandetitle.com/   Also, be sure to check Angela's book The Lighthouse Method: https://www.amazon.com/Lighthouse-Method-Shine-Again-After-ebook/dp/B0B9QJ9QN7     Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:     00:00 Angela Lalande: So, if you're postured in humility, you confess. You repent, forgive yourself and others, and then replace the negative self-talk, false accusations and lies with the truth of who you are. That you are actually brave, courageous, more than a conqueror. The end result is a mindset shift and truly you break agreement with the devil, you become a prism. 00:23 Intro: 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.   00:35 Sam Wilson: Angela Leland is a USA Today bestselling author and real estate attorney who desires to empower others to shine their brightest. Angela, welcome to the show.   00:44 Angela Lalande: Thank you, Sam. Thank you for having me. 00:46 Sam Wilson: Absolutely. Angela, there are three questions I ask every guest who comes to the show in 90 seconds or less. Can you tell me where did you start? Where are you now, and how did you get there?   00:53 Angela Lalande: Yes. So where did I start? Gosh I realized I was not using my potential and I would found myself cleaning toilets at a gym. And I thought, this was after I graduated from college, and I thought: "There's so much more I can do with my life". And so now I'm a real estate attorney and, you know, bestselling author. And so, really in life there are a lot of, you know, failures and rising, failing and rising, you know, that happened. And so for me I rose up after failing to get to where I am today.   01:23 Sam Wilson: Wow. That is quick. You did it. 90 seconds or less. That sometimes can be hard. Real estate attorney. Failing to rising. I know this is the title of over of your book. What is that actually? I know it was, it's the Lighthouse Method.   01:37 Angela Lalande: That's it. Okay. Yes. The Lighthouse Method.   01:39 Sam Wilson: Before we get too far in, tell our listeners where they can find it, and then I want to hear your story and talk about the Lighthouse method and how this has really come to be.   01:47 Angela Lalande: Thank you, sam. Yes, the lighthouse method. You can find it on Amazon. Really if you Google the Lighthouse Method and my first name, which is Angela, it should pop right up. And so that's where your listeners can find it.   02:00 Sam Wilson: Awesome. Cool. So tell me the backstory, the inspiration for writing the lighthouse method. It sounds like it stems from potentially a painful period in your life.   02:09 Angela Lalande: Yes. It, it did. And so, I was in my own darkness about 11 years ago, almost 12 now. And so there's a period of time where I had my own journey of coming from darkness to light. And so now that I am healed, I desired to empower others to also rise out of darkness. You know, I was thinking about your listeners. I would imagine there's a vast majority, if you took a survey you know, if your listeners took a survey and you had asked them: "Hey, how many of you are dealing with a deep monumental setback or a dark period are you in the dark right now?" I would imagine if they were being honest with themselves, a vast majority would say: "Hey, yes, that's me". And so, so it really I knew this message was kind of burning in inside of me for a while now. And in fact, the book stayed, it started in the form of a letter that stayed in my laptop for more than a year. Before I got a book coach and we hashed out the outline and everything and it de developed after another year into the book that it has now become.   03:04 Sam Wilson: Wow, that's really cool. So what is the lighthouse method and tell me this, maybe even before we get into that, why do you think this is important? I mean, it really sounds like it applies to anybody in life, anybody in business, anybody trying to do something. But how does this really apply, I guess, to everyday people and why?   03:24 Angela Lalande: So, any person, no matter where you are, you know, we all have things that happen in our lives that cause us to, to shrink into the dark. It's just a part of living. Dark circumstances can arise out of nowhere. Sometimes we make choices that put us in the dark. Sometimes things happen to us that put us in the dark. And then, yes, this can happen. And you know, I know that your show, you deal with a lot of investors now in the first person that they need to invest in is really in themselves and in order to do or scale their businesses the way they need to properly, they need to be out of the dark themselves.   03:57 So this can empower your listeners as well as any person who may be dealing with a situation or a setback in how to over overcome, because we were all designed and created to shine. That's it. And so, for those people who may think that they're alone, you are not alone. And there is a place and a strategy to overcome. So these steps, I make it simple. You know, some people may be so, far in the dark. They didn't, don't know where to start to get out of it. So this book lays out these steps and really my path and how what were the things that I did during my time or how did I get out of it? And so that, that's what happens here in this book.   04:32 Sam Wilson: That's really interesting. Tell me what are the steps? If you can, and I know the idea here is that our listeners end up going out and actually reading the book, so I'm not asking for the whole book.   04:44 Angela Lalande: Yes, I'm gonna lay the steps out for you and I wanna go into a couple of them for, but just because of Tom, I know I can't do all of them, but and cut me off if I need. You need to.   04:53 Sam Wilson: No, carry on, please.   04:55 Angela Lalande: Because they're so wonderful and important. So the five steps in the lighthouse method. First, you prepare to rise up. Secondly, become a prism. Three, have the right support system. Four, bend your light and shine and then five is find harbor and become it. So I'll explain these a little more detail first in preparing to rise up and I'll really probably go into one and two deeper, but especially two. In preparing to rise up, you must first cast the vision for healing. Think of some of the greats throughout history. Before Leonardo da Vinci painted the Last Supper. He saw the masterpiece in his mind. Before Venus and Serena Williams were tennis legends. They saw themselves as champions. They cast the vision. The same can be said of somebody looking to rise out of the darkness of depression, anxiety, or fear. If they see it, they be can become it. So you must first cast vision. Then you commit to taking regular actions to stay healthy. This is really filling your time with things that are good for your mind, body and spirit. One of those things is listening to a podcast on overcoming. So this is, you know, since we're doing a podcast right now, you know, if you can find somebody's story. Somebody who's overcome may be listening to their own victory will give you the courage to walk towards obtaining your own. So I love that. So you cast a vision. For healing, you commit to take regular actions. To stay healthy, you honor your emotions. That's thirdly in preparing to rest. Honoring your emotions means you must feel pain, grief, anger, sadness, and process them to heal you. Process instead of suppress. Suppression will only take you further into your own darkness. So those are a couple of steps in preparing to rise, that's the part I wanna dive into quickly. The second step become a prism cuz it's really exciting for me. And it's really the other steps developed around this one: become a prism. So, in order to become a prism you must be transparent and purified where the impurities in your life are extracted. This allows you to be a conduit for light. Now become a prism. Why did I need that step? That it's because of Augustin-Jean Fresnel. Did you recognize that name from science?   07:13 Sam Wilson: I do not.   07:14 Angela Lalande: Well, I didn't know him either until I started researching lighthouses. Okay. Cuz his name kept popping up. So, and you probably didn't realize I'd be giving you a science and history lesson today, but here we go.   07:25 Sam Wilson: I love it.   07:26 Angela Lalande: Augustin-Jean Fresnel, the world knows him as the French physicist who's invention of the Fresnel lens, revolutionized lighthouse technology in the early 19th century. His invention is called "the invention that saved a million ships". So a Fresnel lens, isn't that amazing? So you save so many lives. The Fresnel lens is made up of concentric sections of distinct prisms or triangular pieces of glass. It can take all the light. And chand it out into the night, penetrating the night to over 20 miles out to sea. So before his invention, too many sailors were lost to shipwrecks because the light that admitted for the lighthouse was not bright enough. So ships would run a ground on rocks. Sailors would die because they could not see where they were. So it's the prisms in the lighthouse that cause a light to pierce at night. But a prism doesn't always start out in the way we might imagine. Before it can become a beautiful creation, it must go through a purification process. And let me drill that down a little bit more. So, prisms are typically made of glass. Most glasses made by combining sand, soda, ash, and limestone, and melting these materials at a very high temperature. Once this happens, the impurities inside melt away and the dirt and debris transforms into a beautiful, pristine sustaining creation.   So just kind of giving that visual there. Just as a prism must go through a purification process. We too must go through our own purification process in order for our light to pierce the night. When we are cleansed, when all our dirt is washed away, we can see and be seen with clarity. So in the book, and I'm not gonna dive into them, but I do have a purification process that I do list in there which is made up of five parts. I like the number five, I guess. Humility, confession, repentance forgiveness and replacement. So quite simply, and not quite so simply, if you're postured in humility, You confess your sins are wrongdoings. And sometimes you're not only confessing your sins, you're just confessing what happened to you?   Because if you were put in the dark by someone else's choices, sometimes, you know, we confess one to another, right? So, if you're postured in humility, you confess. You repent, forgive yourself and others, and then replace the negative self-talk, false accusations and lies with the truth of who you are. That you are actually brave, courageous, more than a conqueror. The end result is a mindset shift and truly you break agreement with the devil, you become a prism.   10:05 Sam Wilson: Angela, it sounds like a lot of this is a mindset shift that not just somebody who's maybe struggling with some deep, dark, heavy thing, but that all of us can benefit from. I mean, is that a fair analysis?   10:19 Angela Lalande: Yes, absolutely. And I love that you're asking that question with the prism. If you think of the qualities of a prism, it's transparent. It's see through that it's not clouded or muddied by something, even if it's an a belief that's not right, you know? We are created to create and to achieve and to go for things and not be stuck in a box. So when we are transparent and can see clearly, we're able to see that we're made for much more than we give ourselves credit for. Isn't that right?   10:50 Sam Wilson: Absolutely. No, that, that's very cool. What do you think someone, if they spent the time to investigate this and say, man, this is maybe some, something to dig into, like what has been the effect in your life and maybe what do you propose could be the effect for other people as they go through this process?   11:08 Angela Lalande: Yeah. Yeah. I think for some people when they start the book and really as they're reading, they may be able to - some of their own personal experiences, things that may, they might not have even thought about for years that they didn't realize was even holding them back. May come to the surface and then which will be great, is because when they come to the surface you can deal with them and then overcome them and release them. So, you know what I love about, the last step is find harbor and become it. That's when you courageously rise out of the waters of depression, anxiety, fear, or whatever those waters are that are holding you back.   And you actually take your place, your rightful place, which is on the shore looking out. And the benefit is somebody who you know, has healed. You're able to find somebody else. You'll be able to look past yourself and outside yourself to find other people and bring them home. So that's the goal.   11:59 Sam Wilson: I love it. And that's a great analogy. I hadn't quite tied all those together yet. I'm a slow learner here in that is the lighthouse method. I've always said that for, the easiest way to get over depression or, you know, feelings of like, you know, unhappiness is to go find somebody else in need. Like the fastest way is to go serve someone else. It's like, oh man, like, I can go help this person. By the time you're done helping them, you feel a whole lot better about yourself, which is a weird, kind of self-serving way, but it's mutually beneficial. So I love it. 12:31 Angela Lalande: You're exactly right because in doing that you're taking the focus off yourself. You're seeing the need of somebody else. If we continue, if we only focus on ourselves. A, things may seem bigger than they actually are, right? It's, you know, when we can actually look at others, we're able to have a heart. Our heart posture is different. What I mean?   12:49 Sam Wilson: Yes. Yep. Absolutely. Absolutely. It is. No, I love that. And I think so many, so, so many times we have, you know, we go through goal setting exercise as we go through like, Hey, what do I want 2023 to be like, what? You know, we go through these processes. And somehow there's always in the end of it, I think we're always setting bigger and better goals but the idea of, I think you said taking your rightful place, I like that. I think that's a great way to put it. Where it's like, no, like I, I will live into what I was created to become and here's how I'm gonna do it. So a very cool book. I think this'll be fun and hopefully speak to some of our listeners and maybe they can get a copy of this book and really dig in deep on it. I know, I certainly will. Just for a personal exercise. Cause I think there's always value in things like this. I forget where I heard it, but it was something to the effect of everything you want lies on the other side of fear, right? If only we can push through the things that we're afraid of or that might be holding us back if we can somehow, you know, take your method here. I love the steps that you've outlined there. So anyway I won't keep talking about it. I'm just gonna go read your book and digest it from that point forward. I do want to just shift gears real quick though, and hear a little bit about your real estate attorney business, what you do on that front, and maybe give our listeners, you know, part two of who Angela is?   14:05 Angela Lalande: Thank you. Yes. So I am the CEO and owner of Lalande Title. We are a real estate closing company in Louisiana. So we offer title services, settlement and escrow services as well. So when people are in layman's terms, if they're looking to purchase a home or property, or you know, investors who are looking to invest in property, we handle all the paperwork at the end, we pay all the parties. It's the happy place at the end. Of course, during, there can be problems that happen we have to work through or some other things. But usually at the end of the day, it's always a happy place to be because the seller gets money and the buyer is, has new property. Hey, fantastic. We wanna make sure we include both of those there in the show notes. Angela, if our listeners wanna get in touch with you or learn more about you, what is the best way to do?   14:51 Angela Lalande: Yes. I would say, you know, our website through the Real Estate Company. The title company is www.lalandetitle.com. That's LALANDE title.com. You can also find me on Facebook, Angela Lalande. And on Instagram as well. You can find with company or my personal Instagram account, @aclalande. And I would love to connect.   15:14 Sam Wilson: Fantastic. Thank you, Angela, for your time today. I certainly appreciate it and look forward to getting a copy of your book.   15:18 Angela Lalande: Thank you, Sam. Appreciate you. Take care.   15:21 Outro: 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 Podcast, Spotify, Google Podcast, 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. 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 this episode, Sam Wilson, an active investor, will give us insights on how to adapt to discomforts that will lead us to amazing results. He will also give us tips, tools, and tricks to scale our investment portfolio.   3:48 Being okay with being uncomfortable 11:20 Quality and becoming more purposeful 14:00 Readjusting your goals 19:57 Using personal growth to manifest into your business "There's no failure, there's only feedback." About Robnett's Real Estate Run Down With over 27 years in the real estate industry, Shannon shares actionable advice on wholesaling, fix and flips, single-family, multi-family, and more. Hear real people talk about all facets of the market, including analysis, challenges, management, and successes of investment-grade. Every conversation provides the foundation for a thriving career. Guest Bio: Sam Wilson Sam is an active investor in self storage, parking, retail, multi-family apartments, RV parks and single family homes. He hosts the “How to Scale Commercial Real Estate Podcast”, where he interviews real estate experts to give listeners the tips, tools, and tricks to scale their investment portfolio.   Sam holds his bachelor's degree in business finance from the University of Memphis and holds his real estate license in Tennessee. In addition to his years of real estate experience, he also has a diverse background in business ownership, building construction, and management.   Website: www.brickeninvestmentgroup.com LinkedIn: linkedin.com/brickeninvestmentgroup Facebook: facebook.com/brickeninvestmentgroup Instagram: @howtoscalecre

Today's guest is Keith Blackborg, a CPA and real estate investor who helps his clients achieve financial independence. He believes that cash flow is the leading indicator of success, and that net worth is the lagging indicator. Keith and his wife became self-made millionaires by the age of 30, and they transitioned their active investments to passive income. In 2019, Keith started Financial Journey, a community focused on helping people build wealth and achieve freedom.   In this episode, Keith shares how he has transitioned from being solely focused on his business, to also focusing on his family and community and talks about his journey and expertise in the financial and real estate worlds.     Highlights     [00:00 - 03:50] How Make the Most of The Obstacles in Your Life. Keith Blackboard, CPA, wealth optimizer and tax strategist, started out in San Francisco as a corporate accountant for Deloitte. Then moved to Texas, started buying rental houses, and eventually a CPA firm focused on real estate investors. Keith shares his story of how he switched to commercial real estate in 2013, but exited investments in 2016 and traveled the world for 3 years. Started Financial Journey in 2019 to help high net worth individuals build wealth and make work optional     [03:50 - 07:52] Optimizing Wealth to Make the Most of Your Income A wealth optimizer offers independent advice on taxes, investments, and life optimization. They have experience in the commercial real estate syndication world. This allows them to understand how deals work and what effects they have on the value of an investment. They also can offer their services at a fixed monthly fee, which helps clients save money while receiving independent advice.   [07:52 - 11:49] Roth IRA Strategies Worth Millions Keith explains how a person can save money by doing a rollover of their traditional account to their Roth account This can be done with the help of a third party, and if audited, the individual has the option to have an independent tax professional verify the rollover.   [11:49 - 15:38] Building a Supportive Community for Wealth Management Keith's motivation for starting their business was to provide a supportive community for wealthy individuals. Keith's business focuses on helping clients optimize their wealth, investments, and taxes. Keith recommends seeking professional guidance for wealth management when net worth reaches $200 million. [15:38 - 18:10] Closing Segment Reach out to Keith See links below Final words   Tweetable Quote   “It was no longer about the money. It was more about how do I help and serve others. And that was a paradigm shift for me”. – Keith Blackborg   “Life can really take over. Business can take over if you want to, and that's why anytime think going forward, it really had to be about life. It couldn't just be about the business”. – Keith Blackborg -----------------------------------------------------------------------------   Connect with Keith through his LinkedIn or write him an email at keith@financialjourney.life Be sure to also check his webpage at https://www.financialjourney.life/about-us/     Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:     00:00 Keith Blackborg: Selfishly, I also like sharing wealth and taxes, and Uber drivers can only accept so much of that. And so this for me was a format where it was no longer about the money. It was more about how do I help and serve others? And that was a paradigm shift for me. 00:16 Intro: 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. 00:28 Sam Wilson: Keith Blackboard is a cpa, a proud father, a husband, a wealth optimizer, and tax strategist made wealth of business in reach work optional by age 30. Keith, welcome to the show. 00:39 Keith Blackborg: Thanks so much for having me, Sam. 00:41 Sam Wilson: Absolutely. Keith, there are three questions I ask every guest who comes on the show. In 90 seconds or less, can you tell me where did you start? Where are you now, and how did you get there? 00:51 Keith Blackborg: Great question. I started off San Francisco, California. Realizing in corporate accounting for Deloitte that this is not what I wanted to do for the rest of my life. Moved to Texas. It was 2010. There was a apparently a great time to start buying rental houses. So I started off my wife was working in the real estate education group, ended up taking over a real estate business. 2010, I started a CPA firm focused on high net worth real estate investors. If somebody's a guru or a well-known person outta the Dallas area, there's a good chance their former client of mine. Grew that up. 2013, we switched to commercial real estate. Syndication, active and passive investments in apartments and hotels. 2016. Fast forward, a few things happened. One, I had a business that was doing great from the external perception. On the inside, my marriage was a wreck. I was on the brink of divorce and I knew some things had to change. Also around that time I thought Hillary Clinton was gonna get elected and the real estate market was gonna crash. I was wrong, but I ended up exiting out of our commercial real estate syndications. Sold the CPA firm, and then just spent the next three years traveling the world. And so we had fun, a lot of healing, reconciliation. There's just some really great things that came out of it. But life can really take over. Business can take over if you want to, and that's why anytime think going forward, it really had to be about life. It couldn't just be about the business. Fast forward to 2019, I got the best souvenir I could have ever had from our travels, and that was our firstborn son. He's now a three-year-old. And I now have a nine month old along the way that's been born. Kids have humbled us, so no more kids for us since, that's as much as we can handle, but we're so grateful that we have that. In 2019, I started Financial Journey, which is really about helping a community. Build wealth, get freedom. If you already have a three to 20 million plus net worth, if you can live off five to 10% of whatever your net worth is, then you're the ideal person for me to help you make work optional within three to five years by showing you the right wealth, investment strategies, et cetera. It's fun for me. I still get to talk wealth and taxes, but it's more than that. It's about having life, having fun, and enjoying the journey. 03:05 Sam Wilson: Man, that is really cool. I like that. I mean, that's a very colorful journey because you started off in corporate accounting and then you saw the value of commercial real estate. You said: "Hey, we're gonna go long in that. We're, you know, passive and active syndications". You went long in that, so you understand that I think really well. You know, the value of creating income, producing assets. So you've got experience on the corporate accounting side, on the accounting side and then you took three years off, which is awesome too. I'd love to, we could probably spend the rest of the show just telling all the cool places you went and saw over the course of three years. 2019 comes around though, and you say: "Hey, look, I see an opportunity to really, I guess take the high net worth individual and become a tax strategist for them". How do you build a company around that? How do you hang out a shingle and let people know that you think you've got something and you can help 'em? 03:58 Keith Blackborg: Well, I don't fit any box clearly well. I'm, in some ways, some people try and describe myself as a financial advisor. If I had the licensure as a financial advisor, I could not talk to people about all the alternative investments. I'd be stuck limited to selling you stocks and bonds and other traditional investments. And my advice would be worth a lot less. And so instead, as a CPA, I get to still talk about taxes, about investments, but it's worth so much more than that. I love finding ways to really integrate, synergize, optimize your wealth, your taxes, your life. It's all gotta start with what you want, and then we reverse engineer the wealth that goes around that. 04:43 Sam Wilson: That's really fascinating. What are the common problems that you're solving when someone comes to you and they say: "Hey, I need a tax strategist". By the time you have reached the 3 to 20 million net worth, you've done something right already in life. What do you do differently? Maybe that the other advisors, strategists, CPAs, people who have not done for them previously. 05:08 Keith Blackborg: So as a wealth optimizer, one: I've got a full view of what, how everything looks. So, I officed with syndication attorneys for five years. I'm not an attorney, but I know a lot about areas that a lot of attorneys don't know. And so when it comes to one independent person who can stand back and look at all the stuff you have going on: wealth, taxes, insurance, risks, life, and really help be that independent voice that's not really trying to sell anything. It's just a fixed monthly fee that we work together for. And it means that you've got an independent advisor who can help you through all this. That's invaluable for a lot of people to have and somebody who truly knows more than, at least in taxes and wealth, more than many of the professionals. I'm not trying to get too high and mighty. I've just seen a lot. I love learning, I love exploring, and new strategies are like my favorite thing to do. I just geek out on so much. And then I love to take the complex stuff and how do we make it actionable and simple? I speak the technical language and the people language. 06:14 Sam Wilson: Yeah, and you've spent plenty of time in the private placement world to understand, you know, how those deals function as well. Which, I mean, a lot of times your strategists don't. They may have a cursory understanding of it, but not, they haven't been in the weeds in it maybe like you have. 06:31 Keith Blackborg: If I wanted to make as much money as possible, I go back to commercial real estate syndication. My mission is, it is not just be about the money anymore. For me, given the little bit of my story shared, it's gotta be about helping other people live their life and get the most out of what they have. I know it, it sounds altruistic, but it's genuinely what I love and value. 06:51 Sam Wilson: And that's great. I love that. I mean, there's so many people that don't honor what it is that feeds their soul, and it sounds like you found a way to do that. And so that's really cool. I love that. Tell me this, you know, you said you love working on the newest strategies, the newest ways of getting things done. You kind of, I think you, the words you use where you geek out on it. When you say that, what are some things that come to mind. 07:13 Keith Blackborg: Ooh, we've got one that we're doing in our community right now. So guess you're familiar with investing in apartments. So let's say you're gonna put a hundred thousand dollars with you and you're buying something at an 80% occupancy. And as part of that deal, we're gonna take it down to a 60% occupancy and the NY is gonna roughly drop in half the net operating income, so the department's value on paper drops in half. So let's say I did that investment with pre-tax traditional 401K money. I get an independent valuation done when the occupancy is dropped, and now that investment, at least on paper, is only worth $50,000. So I do a rollover of the $50,000 asset valuation from my traditional account to my Roth account. And because I've invested with you. Three years later, it pops up to being worth $200,000, but all within a Roth account. So if we were to back that up, we got a hundred thousand dollars tax deduction per putting it into the traditional account. We offset that with $50,000 worth of taxable income, and then we've got 200,000 that's never taxed again in your life, potentially worth millions of dollars over the course of your life if you're not never paying taxes on that. 08:23 Sam Wilson: That's next level strategy that you don't hear much about that sort of thing. How complicated is that and what sort of risks are involved in implementing a strategy like that? 08:36 Keith Blackborg: So for you as the individual very little effort for you. In our community, the way it works, it's just something that gets included as the package. As a syndicator, if you like to syndicate deals, you're probably don't mind spending three to $5,000 on getting the valuation done. And then if you're able to track additional funds because more people wanna invest with you cuz they can do a discounted rollover, that's a huge value add for both you and your community. And so it's simply a matter of people put in their money, they've gotta have their money in some sort of a self-directed account. I like solo 401k.com as who I've worked with a lot in the past. They've got really favorable fee structure and you can self-direct it. They put the money in. I show them the valuation done by a third party. They get the 10-99 done. If we get audited, you've got the independent tax professional who can go back and prove out the audit, prove out the valuation. But beyond that, now you've got the money and the Roth and you're kind of set. So, I've got technical guides and stuff to back all that, but that's a simple version. 09:41 Sam Wilson: I love it. That's cool. You mentioned the, you quote your community several times. What is that? 09:48 Keith Blackborg: So initially when I first started was all about me, my knowledge, my expertise. When you develop a group of people together and you see how much knowledge, I've got people with over a billion dollars worth of real estate in the group. I've got others, doctors, surgeons, all sorts of people that are all different places. So from the small to the really large. But everybody together, there's a common theme of life and wanting more of that. And when you get a generous group of people who are willing to help each other, it's not about me anymore, it's about unlocking the community or finding the right person to talk to, whatever it is. So now I don't have to know everything. It's just about highlighting the person with the experience and skills in whatever you need help with. And so a lot of our community events are now about connecting people together in different ways and very intentionally. And so it's now my mission to unlock the knowledge already within the community, and it is just so much more powerful. People get what they need when they need it from each other, and it's just a very fulfilling environment when you go from in a community event to actually. It's nurturing versus you've probably been to an event where there's none of that and it can be life sucking where you're done within a couple hours. 11:01 Sam Wilson: For sure. For sure. Was this a community that you built specifically around your kind of tax strategy? Tell me, you know, for listeners are curious... 11:10 Keith Blackborg: So you say tax strategy, that's probably about 5% to 10% of what I do. So tax strategy is important. But there's the wealth, the life, there's all that stuff that goes beyond that. The legal, the entities traveling together. We've got a family trip to the Caribbean here in May, so maybe even her go abundance, but deeper than that. 11:29 Sam Wilson: Got it. This is awesome. How did you build this community? What were some actionable steps you took? If there's somebody out there that has, you know, the desire and the capacity to build a community around whatever it is that they're trying to build it around, how did you do it and what would you recommend someone do? 11:45 Keith Blackborg: I think you start with what it is that you and your family wants. What it is goes back to that center. For us, when we were traveling the world, it was very lonely to travel by ourselves. So the selfish part of me was like: "Hey, I'd like some friends to be able to travel with other people that can do this with". Selfishly, I also like sharing wealth and taxes, and Uber drivers can only accept so much of that. And so this for me was a format where it was no longer about the money. It was more about how do I help and serve others? And that was a paradigm shift for me. And so initially it was just started with me sharing, giving yourself away for free. And in time it was like: "You know what I can make a business out of it. I can grow this and let's have some fun along the way. So, I've got my parameters on when I'm gonna work or not gonna work, but within that I'm gonna go as fast as I can as a racehorse around the track to get stuff done. Cuz that's me, that's my personality. I enjoy it. But then at the end of the day, I'm gonna come back, connect with my wife at around 5:00 PM and we're gonna go do something with the kids. And for me, so often balance is not something built because you have balance. We out of imbalance and focusing on different things is how we came together and what feels like a more balanced life today. 12:57 Sam Wilson: Got it. That is really cool. I love that. Yeah. The ability to find balance in this is hyper important man, and it's not something. We can work ourselves to death if we're not absolutely careful. Let's talk a little bit about what you guys do on the kind of pre-family office stage. I know there's like this you get to a stage where you've got enough wealth, you can really start a family office. Where is that? And then at what point does somebody in their kind of wealth journey reach out to someone like yourself? Is there, when do you recommend that happens? 13:32 Keith Blackborg: So full family office where you've got attorneys, investment professionals, accountants that work fully for you. The very beginning where it starts to make sense is a 200 million net worth. And then really where you're hit your stride is 500 million. And so for me there's a way where people kind of get lost in the middle. You're probably stuck right now in the place where you talk to the tax professional. You talk to your legal guy, you talk to your broker, you talk to all these different guys, and you're trying to coordinate that all yourself, and you're probably not an expert in all those areas and don't even know if they're doing a good job. So in, in our case, it's having somebody that can look over your shoulder and help you make those decisions or work through that. Being in a community of people that is familiar with that and that is able to help guide you, makes all the difference. There's a key transition most business owners make, and that is they focus on their business, they focus on their work, and they get lost in that career, that work. But somewhere along the way, maybe halfway, two thirds of the way, They need to focus on making wealth the business. So in the beginning, if you had a thousand dollars and you could earn a 20% return, that's $2,200. So not super exciting, but if you had a million dollar net worth or a 10 million net worth, and with some effort, you can make a 20% of return. That's $200,000 or 2 million. And often people will have these businesses that they could sell and be worth three to 10 million plus, but they're often only making a couple hundred thousand dollars a year, and they could do so much more if they spent even just a little bit of time optimizing their wealth situation, their wealth, their investments, their taxes, beyond a traditional financial advisor who's typically only selling you products. 15:18 Sam Wilson: That's a painful lesson. I'm sure you've seen many experience, many times where you're like, you could take what you own, sell it, and then generate passively the same amount and or more income than what it is you're making right now by running that company. Like, that's a hard place for a lot of founders. I would imagine. That's kind of like a founder's syndrome to not ever want to let go of it. 15:40 Keith Blackborg: Absolutely. 15:41 Sam Wilson: Wow. That's really cool. Keith, I'm enjoying learning from you. I mean, you take a really unique strategy, a really unique take on a lot of the way that people think about money, but then also think about how they organize and set up their life for success. I mean, I know you said tax strategies only about five to 10% maybe of what you actually do, but I mean there's so much involved here. I know we can't cover it here in a 20 minute show, but just knowing that there's people out there like yourself, that handle these things in a really unique and fresh way, I think is yeah, really refreshing. So thank you for taking the time to come on the show today and share with us kind of your history, your work history, and how you've came to, it sounds like even through a period of pain and trial that you kind of developed this whole system for yourself and for your own family first. So I think that's really cool firsthand experience. Thank you for sharing it with us. If our listeners wanna get in touch with you, learn more about you and what you do, what is the best way to do that? 16:36 Keith Blackborg: So you can shoot me an email at keithfinancialjourney.life. But probably one of the best ways to experience what I do, to experience the community is join for a quarterly wealth builder experience. So we just hold an event online. It's about two hours as really a way for you kind of experience to learn some things, get connected with some other successful people, and learn some tax strategies, learn some all strategies, some things you probably never heard of before. Like discounted rollovers. There's a lot of things that people are not familiar with and I love just adding a ton of value. I start with giving and then it's just kind of fun to see where people go from there in that community and how they give to each other. That's a great way to just start off and learn more what where you are at and where maybe you need to go. And that experience will help you understand where you're at in that journey. 17:25 Sam Wilson: Is there a website where they can find out more or sign up for that wealth builder? 17:30 Keith Blackborg: financialjourney.life. And then maybe we can leave a link in the show notes to the page. 17:35 Sam Wilson: So absolutely will do financial journey.life. If you're just listening, look that up when you get a second. But we'll also include that there in the show notes. Keith, thank you again for coming on today. I do appreciate it. 17:47 Keith Blackborg: Thank you, Sam. I appreciate you having me. 17:49 Outro: 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 Podcast, Spotify, Google Podcast, 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.    

Check it out on Spotify: https://spoti.fi/33Z4VsE Check it out on Apple: https://apple.co/3AHc2DT Sam has 9 years of successful real estate experience in self storage, parking, multi-family apartments, single family homes, RV Resorts and laundry facilities. His diverse background in business and real estate has allowed him to participate in a variety of asset classes and bring strategic value and meaningful relationships to each opportunity. He hosts the “How to Scale Commercial Real Estate Podcast”, where he interviews the brightest in the industry to teach others how to grow their portfolios. Dreams: Time and Money Freedom. Enjoy his time and family See the world Introduce Them to: Somebody that still remembers what it's like to scale a business in the early stages and remembers where they came from. Favorite Book, Movie, or Podcast: Favorite Book is the Bible Contact them at: Www.brickeninvestmentgroup.com

Check it out on Spotify: https://spoti.fi/33Z4VsE Check it out on Apple: https://apple.co/3AHc2DT Sam has 9 years of successful real estate experience in self storage, parking, multi-family apartments, single family homes, RV Resorts and laundry facilities. His diverse background in business and real estate has allowed him to participate in a variety of asset classes and bring strategic value and meaningful relationships to each opportunity. He hosts the “How to Scale Commercial Real Estate Podcast”, where he interviews the brightest in the industry to teach others how to grow their portfolios. Dreams: Time and Money Freedom. Enjoy his time and family See the world Introduce Them to: Somebody that still remembers what it's like to scale a business in the early stages and remembers where they came from. Favorite Book, Movie, or Podcast: Favorite Book is the Bible Contact them at: Www.brickeninvestmentgroup.com

  Today's guest is 26-year-old Allon Avigi. He started a Real Estate acquisitions company when in 2017. Since that day, he has become a developer, fund manager, landlord, flipper, and art collector! Now, he's focusing on growing his companies and creating quality content around what he has done and continues to do. He founded AVGI, a real estate investment firm that purchases opportunistic assets in New York as well as secondary and tertiary markets throughout the United States. The firm currently has $70 million of real estate holdings across Houston, Arkansas St. Louis, Binghamton, New York City, and Long Island.   Highlights:    [00:00 - 11:19] Learning the Trade at A Young Age Allon shares how he got started in Real Estate Business and how his parent's hustle was a school for him when he was a kid. Allon discusses why learning how to talk and approach people was the greatest lesson of his experience with his parent's business. Allon shares how started in the Real Estate Business and how got his first deal   [11:19 - 18:24] Dedication Makes Things Move Forward Allon talks of his passion of making deals and his insight on how to get great deals. Allon explains why a team with negative-minded people could be detrimental to your business.   [18:24 - 19:39] Closing Segment Reach out to Allon See links below Final words   Tweetable Quote   “The market, at the end of the day, dictates how well your product's going to do if you do everything else correctly. If you do everything else incorrectly, there's no question you're going to fail”. – Allon Avgi -----------------------------------------------------------------------------   Connect with Allon through his Instagram and LinkedIn.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:   00:00 Allon Avgi: As long as the deal is good, the money's out there. The market dictates whether you're going to do well or not with your deal, right? You can handle everything. You can handle to the best of your ability. Leasing, renovations, all that good stuff, right? Financing. But the market at the end of the day, dictates how well your product's going to do if you do everything else correctly. If you do everything else incorrectly, there's no question you're going to fail, right? That's not even a discussion. But if you do it all right, the market's going to tell you your feedback. 00:29 Intro: 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. 00:41 Sam Wilson: Allon Avgi is a 26-year-old entrepreneur buying and repositioning properties across the country. They currently have over 70 million in assets under management. Allon, welcome to the show. 00:52 Allon Avgi: Hey, man. Thanks for having me. 00:54 Sam Wilson: Absolutely. Allon, there's three questions I ask every question. Who comes to the show in 90 seconds or less? Can you tell me where did you start? Where are you now, and how did you get there? 01:02 Allon Avgi: I started at 21 years old. I was a student at Hofstra University in Long Island, New York. I started with a dollar and a dream, bought a house in Westbury hard money loan, 12% interest, two points going in. I just got started with that house started rolling from there. 01:19 Learned how seller financing worked. Ended up getting a couple owners to hold mortgages for me. Thereafter, I learned about syndications and raising. That was my like, big ticket item for my first bigger deal. I began getting into new developments, building the teams one brick at a time, baby. And now I've got 70 million AUM. 01:37 I've got a solid, fantastic team, 25 full-time people, and we're scaling rapid fire. It's a lot of people for the light amount of AUM we have. So I have the infrastructure to go to a billion dollars as we speak. 01:49 Sam Wilson: Wow, that's a lot of moving pieces. Did you grow up in an entrepreneurial family? Was there a mentor along the way that just kind of showed you the ropes? Or is this just something that just comes to you naturally? 02:00 Allon Avgi: So very entrepreneurial family is a great question because naturally that's what everyone would expect, right? It's you don't just roll like that. My parents came to America about twenty, twenty and eight years ago when I was a little boy, and my father didn't speak any English. 02:16 So when he got off the boat, he was just learning the trades. He started working as a construction guy. They used to pick him up daily and he would do day labor stuff. He used to deliver mattresses. My mom used to sell mattresses at a local furniture store. And one thing led to the next, they ended up saving up enough money to buy a van. 02:36 The van turned into a moving business. The moving business turned into a furniture store. And then my parents had a furniture store that I grew up watching them work and sell and be part of retail got crushed in '08 . And as Wayfair, Amazon, overstock got stronger and my parents wanted out. So when I built my real estate business, they ended up leaving and they both came to join me. 03:00 Sam Wilson: Wow. That's that's really cool. I love the hustle there. There's no, I mean, for, I guess for some people there's probably the golden ticket. But for anybody that, that's building something ground up, there's just no easy way to do it besides just grind it out. I mean, and you watched your parents do it. What were some of the things you felt like you learned growing up, watching them work a furniture store? 03:21 Allon Avgi: Well, I, I learned how to talk to people. That was a big one. Many people in this new era have a challenge talking to people and getting to the point or closing the deal. You know, it's like, what do you want from me? 03:32 Right? When people start talking to me and they're like I'm a New Yorker at this point, I'm a tough New Yorker. I love Memphis. But when I go to these places and people start talking to me and like trying to figure something out, I'm like, what do you want? Just tell me what you want and then we could see if we can get there, you know? 03:48 Sam Wilson: I like that. I like the learning to talk to people. Yeah. It's funny, man. The tough New Yorker you get in the south, you know, here in Memphis. And that is something that even for me, having a lot of family from the south when we moved down here, took me a little bit to get used to. Cause it will take eight to 10 minutes of... even when family calls me, they talk for 10 minutes before they actually tell you what they called you about. And I'm like, come on, what'd you call me for? But still figuring those nuances out, working in the furniture store is, I mean, you learn from an early age, like you said, how to close the deal. 04:17 That's a skill set that you now have ingrained. Just naturally that you know, , you'll never lose that. So that's really awesome. You bought a house, hard money loan, 12 points or 12%? Two, two points upfront. How did you convince the hard money lender that you were capable of making the deal happen? 04:37 Allon Avgi: Well, you know what? But before we go into that, back to the furniture store, there were a lot of nuances and tiny little things that I didn't realize back then that were so impactful today. 04:47 Sam Wilson: Please. 04:47 Allon Avgi: And for example, when I was a kid, my parents were like, you wanna make money? Sell furniture. That's the only way you're gonna make money, you know, through here cuz we don't have money to give you and we're not going to give you money, even if we did. So I used to go to the store, I used to talk to people as a 12, 13, 14 year old and try and pitch them on a bed frame, a mattress, a headboard. You know, a dresser and if I closed a deal, I would get 5% commission. So those are good times. And then I ended up figuring out, I'm a kid. It's tough to sell as a young guy because people don't take you as seriously so I built websites around furniture and I used to bring in the furniture from different manufacturers. Nobody knew how old I was back then. Right? Cause nobody knows how old you are behind a computer screen. And this was before the Wayfair era, so I used to bring in this furniture. I would repackage it at the store. I would end up putting it on a FedEx truck, a UPS truck. This was all hand delivered type of thing. Back then, I would call UPS, I'd order it online. Get the truck in the dimensions and everything. Now everything's much more streamlined. Back then it wasn't. And I would drop ship furniture across the country and the things I would learn is like, price better than your competition if you're offering the same product, right? So today, and I'm buying an apartment complex wherever, right? Let's say I bought 67 units in in Cabo, Arkansas. Right next door is an apartment complex. They're charging $850 for a mid grade product. I'm putting in higher end finishes, I'm charging $875. Small bump, almost irrelevant to the average renter, but $25 more than justifies high end finishes. 06:24 So it's like those were things I learned back then If something's much better quality you can force the appreciation. Right now in Long Island, there's major players here, like Fairfield Heatherwood. These guys that I can't compete with right this second. So what I do is when I buy complexes near theirs, I I put in the same, if not greater finishes, and I'm charging less, right? Even a hundred, $200 less, it draws people in. So I stay at full occupancy, regularly. 06:52 Sam Wilson: Wow, that's cool. What great lessons to learn early on. And I like the idea of no one knows how old you are behind a computer screen, so it's like, you know what if I can't sell it to you in person, I'll sell it to you over the internet. And like you said, it just doesn't matter at that point. They're not gonna judge you based on your age. So that's really cool. Do you wanna jump then into the conversation, talking about your first deal, how you got that done, and then kind of how you transition to bigger assets? 07:18 Allon Avgi: Yes that first deal, it was found through a friend of mine at Hofstra at the time. He found the deal. He wanted to be a broker. I I went out and looked for money and looked for money. I couldn't find money anywhere. And then I knew this guy. He saw what I was posting on social media. He found credibility through that and my history. He spoke to my parents. He knew my parents, and he ended up saying, you know what? I'll give this kid a chance. And he ended up lending me money. And and that was it, and it was history from there. 07:47 Sam Wilson: What did you do with that property? 07:50 Allon Avgi: I rented it out. I still have it till this day. I didn't know about the birth strategy back then, so I didn't refinance it right away. I just sat on it and I just paid down the loan as fast as possible through the income of the property and side hustles. That's why when people gimme excuses today "Oh, but I'm busy between this and this". I'm like: "So you don't wanna do what I do?" You know, cause when I was in your shoes, when I started, I found every mode of income possible. I dropped ship furniture, I knocked on people's doors, I managed their social media accounts. I ended up. I mean, God, I was babysitting dogs, you know, like I was dogsitting. I did everything under the sun to make a couple bucks to pay off this high interest loan. So I could take that and I could go into the next deal and do something else. 08:34 Sam Wilson: Right. Oh, that's cool. That's very cool. When did you decide to start doing bigger assets? 08:41 Allon Avgi: Well, I always wanted to do bigger deals. I just didn't know how. You know, looking back today, people asked me, what would you do differently? And what I would do differently is I'd start bigger. . You know, so that's probably the only thing I'd do differently if I went back. Start much bigger. 09:00 Sam Wilson: Start much bigger. No, that's great advice. I think people often struggle overcoming the mental hurdle of like, okay, we're going bigger, but how are we gonna find the money to do it? How did you do that? 09:11 Allon Avgi: Well, you find it, right? It starts with a deal. So as long as the deal is good, the money's out there. The market dictates whether you're going to do well or not with your deal, right? You can handle everything. You can handle to the best of your ability. Leasing, renovations, all that good stuff, right? Financing. But the market at the end of the day, dictates how well your product's going to do if you do everything else correctly. If you do everything else incorrectly, there's no question you're going to fail, right? That's not even a discussion. But if you do it all right, the market's going to tell you your feedback. 09:45 Sam Wilson: How did you go out and raise capital maybe for the first deal? Tell us about that and maybe how that's changed and how you guys handle capital raising now. 09:53 Allon Avgi: The first deal I already did five projects with hard money and seller financing, and now I'm sitting with this higher net worth guy, awesome guy. Shout out Mike, investor 'till this day and good friend of mine. And I'm sitting with him and he's like: "Show me what you're doing now, kid". And I'm like: "Here, I bought five houses. This is what I'm doing. This is how it looks". And he's like: "You're paying 14% interest. 12 and 2! What are you out of your mind?" And I'm like: "What do I know? You know, like this is a good deal to me. I thought this was a good deal". And he's like: "How about I give you a million dollars and we do a couple properties with no interest, just cash, and do your thing". If you could carry a 14% interest rate, you can definitely yield me much more. If you're still making money on 14% interest, how much can you make if we're partners?" And that's what we did. And that's how I raised my first round. 10:45 Sam Wilson: Wow, a million dollar check on your first raise. That's really an exceptional story. I know that's probably not the case for many people to have that type of investor, but I mean, what a cool thing for him to see the potential in you. " Hey, man, you know, here's an open checkbook. Let's go do this". 11:03 Allon Avgi: Well, one he's also... How do I put this in nice terms so I don't offend too many people, but I'm no bitch and he's no bitch, you know? And we're talking and he's like: "How much do you wanna start? You know, what do you want? And I'm like: "Well, I'm already doing these houses. I've got a couple million in real estate through hard money. Like, I wanna start with a mil, you know? And let's start with a million dollars. And he's like: "A million dollars I can do. That's a good start. Let's do it". You know? And.. 11:30 Sam Wilson: What'd you go buy? 11:32 Allon Avgi: Easiest that a couple houses all cash. Renovated. Refinanced in a year. Got him back all his money, rolled it into another deal. 11:40 That's awesome. 11:42 Sam Wilson: Tell me, I wanna talk about two things. How you guys are finding or where you're finding opportunity right now? I know you've graduated to a few different asset classes. It sounds like, multi-family some warehousing and things like that. But how are you finding opportunity in today's environment? I mean, 2022 has changed a lot of things for a lot of investors. What's your strategy now? 12:04 Allon Avgi: I mean, I am an aggressive deal junkie. I love doing deals, you know, and I love doing great deals. So the strategies transition to no floating rate debt, nothing with short term projections anymore. We're working strictly on five year projections, no liquidity events in the near term. And we're still doing just fantastic deals. I mean, we're retrading everybody that we're under contract with. And it's working of course, because everybody understands the economic climate. If they don't, we back out. Right? There was one deal that somebody didn't, we backed out. It was all right. We parted ways. So fantastic deals. No floating rate debt and no short term projections. 12:45 Sam Wilson: I like that. That sounds really good. And you say short term projections. Five years is... Five years tends to come around quick. Are you underwriting an exit in five years? Are you underwriting holding it in perpetuity? How does your exit strategy change? 13:00 Allon Avgi: It's looking like a five year liquidity event, whether it's a refi or a hold standard. Right. But we're going on a seven year, plus one it's called, so a seven year term plus one. If we have to extend plus one if we have to extend. 13:13 Sam Wilson: Got it. Got it. That's that's exceptional. What about team? That's something I want to hear about. You know, it sounds like you've figured out pretty fast. You're a fast learner. You certainly learn a lot faster than I do. You figured out pretty fast how to grow your assets,. How to, you know, partner and find money. But then talk about team building. What was that process like for you? Who were some of the first people you brought on? And then of course, having a 25 person team for a 70 million in assets under management. It's a lot of people. You know, I know you said you guys are poised, you're kind of positioning your team before you buy the assets. So give us kind of that full breakdown. When I say team, what does that mean to you? 13:48 Allon Avgi: Okay, well, I'm all about the team. Everybody says that. Everybody knows that. You know, but what I think that they don't really grasp is that you have to be quick to let people go. It takes me a while to bring somebody on. I'm very picky with my people. I'm very picky. Oh, it's almost crazy. It's almost insulting how picky I am with people that come around and I'm so fast to cut them off, and what's the word I'm looking for? Unapologetic. You know, so I've swapped maybe 10 people in my office like that. On the drop of a dime. You say something outta place, you act outta place. I feel a little bit of negativity out. Don't want it. I need positive. I need positive people around me. I need good energy. We're building a billion dollar company at the moment, multi-billion down the line. I need that kind of energy in the door and intelligent. 14:41 How do you go about vetting? You say you're super picky. What's your process for acquiring talent? I look for track record, I look for connections. I look for intelligence, right? I run disc tests on people, and then I run basically excel modeling tests on people. Now I have a really good infrastructure of people with me that are also absolutely brilliant. So they gauge who we bring through the door as well, and that's been instrumental in picking who we're taking on next because there's an environment and energy that we need to sustain. 15:14 Sam Wilson: What about positioning your team for growth? I know you said you're shooting to have a billion under assets under management by the time you're 30. Bringing on that team and positioning your team ahead of the growth curve, how do you hire for that? 15:30 Allon Avgi: Sam, that's probably the best question you've asked me. 15:32 Sam Wilson: Well, I'm sorry if all the rest of them sucked, but... 15:35 Allon Avgi: No, they weren't bad. But that is a great question and let me tell you why. Because as the operator, as the person that did it, it's hard for you to put in other people's eyes, right? For them to see your vision. It's hard for you to explain to them your vision and have them execute to go big, right? Cause a lot of people are scared of going big. 15:59 Sam Wilson: Sure. 16:01 Allon Avgi: How do you enable them to go big? And I can't answer that question. I'm still trying to figure that out. That's been one of my biggest struggles. My biggest pain points right now is we're at 70 million, we're about to put another 25 million under contract as we speak. How do we double that in the next quarter? And that's scary to other people cuz they're thinking, you know, it took you five years to get to 70. I have you know, zero. So, how are we gonna get to a hundred in, you know, one 15th of the timeframe? 16:34 Sam Wilson: Yeah. But momentum, momentum begets more momentum. It's like a snowball. It's like, you know, it takes a while to get the initial ball going. And then after that, it seems to go a lot faster. And it seems to happen suddenly, like, oh my gosh, this thing got really big, really fast. But that's part of the process, I think. But my question more was strategic in the sense that, hey, we're gonna go big. How do you know who to bring on the team ahead of that going big? 17:02 Allon Avgi: I mean, it's pretty easy, right? You want people that have been part of those environments before. So I've been poaching people and I don't know a better way to answer that question. You kind of gotta be rough around the edges. You gotta take people from places that have done it so they can do it with you. 17:19 Sam Wilson: Well, and there's nothing wrong with that. It's there's, we're launching a business right now and not that I poached them, but they were employees at another company. And it's a non-real estate related business, but I saw 'em and it said: "You guys are awesome at what you do. You're just employees here. Why don't you go start your own thing. I'll help you launch it". You know, and they're like: "Hey, cool, let's go do it". Nobody got poached. But at the same time, they're employees and it's like, you know, there's not a lifelong contract to work at a particular location. It's just, you're talented and the grass is greener over here. Come with us and join our team and let's go do something. 17:52 Allon Avgi: So how many people do you have on your team? 17:54 Sam Wilson: That's a great question. I don't even know cuz we're involved in so many different asset classes and different projects. I mean, every team is a little bit different. You know, we can get into that later though. Let's see, what else do I wanna ask you here? If I missed anything here, Alon that I should have asked you? Things that you say "Hey, you know, this is something really relevant that we're working on right now. That's cool, that's fun that I'd really love your listeners to". 18:18 Allon Avgi: I think you did great. I think you're awesome. I'm just doing deals, baby. I'm just rocking. 18:23 Sam Wilson: Rocking and rolling. I love it. Allon, thank you for taking the time to come on the show today. I certainly appreciate it. Learn so much from you. I love the hustle. I mean, learning the hustle at an early age speaks to my heart. It's something that I like you grew up with and I think learning the hustle at an early age is just an invaluable skill set that you'll carry the rest of your life. I love the momentum you develop. I mean, you're 26, obviously, you know, you've done great things and you've made it a lot further than a lot of other people have. And I just love the vision that you're carrying for with your company. So well done. Certainly appreciate coming on today, sharing your insights with us. 18:54 If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? 18:59 Allon Avgi: Social media at Allon Avgi. I'm there. I always answer. 19:03 Sam Wilson: Fantastic. And for those of you who are listening, if you're curious, that's A L O N. A V G I. So @Allon Avgi. Alon, thank you again for coming on today. Certainly appreciate it. 19:14 Allon Avgi: Thank you, my friend. 19:15 Outro: 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. 19:36 So appreciate you listening. Thanks so much and hope to catch you on the next episode.    

In today's episode, we are going to talk with Real Estate Investor Sean Thomson. Over the last decade, Sean has been perfecting his processes of scouting, acquiring, and investing in real estate. His approach and philosophy are informed by his passion for building wealth and achieving financial freedom for his family and his investors. Sean considers the health of his investors financially and personally to be one of the most rewarding parts of pursuing financial freedom.   He loves to find and encourage fellow investors so he founded Thomson Multi-Family Group to allow interested, accredited, and sophisticated investors to partake in the investment opportunities that he develops throughout the country. Sean and Sam will dive into the essentials of asset management and the important role that it has, guiding and assisting those looking to acquire properties. Sean also is going to share his experience that had to build his family business and the vision that he created for his company: helping people to achieve the “Next Level American Dream”.   Highlights:   [00:00 - 03:15] Scaling a Family Business • Sean Thomson has 13 years of experience in real estate and has moved from single-family residential to multifamily residential in the past three years. • Sean shares how he found it difficult to scale his business and decided to move into multifamily. • Sean explains his passion for asset managing and how he wants to make sure investors have a "locked down" program.   [03:15 - 07:04] The Personality of an Asset Manager • Sean argues why a syndicator is not typically good at being an asset manager, and how outsourcing this role to another party can be beneficial. • He also discusses how someone that is good at making quick decisions isn't ideal for being an asset manager, as they need to be detailed in their work.   [07:04 - 10:38] THE MVP: Mission, Vision, and Plan • Sean boils down the essentials of what an Asset Manager needs to do in their role. • Every project needs a mission, and without knowing what that is, it's difficult to know how to get there. And to establish a mission, first you need to understand what the project is intended to achieve. • Once you have a clear vision for the project, you can create a plan to help achieve it.   [10:38 - 14:09] Optimizing Outcomes to Mitigate Risk   • Sean provides insight into how he executes asset management strategies for the properties that he represents. • Sean explains why an asset manager will need a business plan and be in agreement with the property management company   [14:09 - 17:24] The Importance of Managing your Assets • Sean discusses the key points of asset management, including the 2% management fee that every client pays. • Sean recommends the importance of reaching out to an asset manager at whichever stage the client is, as he can provide guidance and assistance throughout the process. • Sean emphasizes the importance of systems and processes in asset management, saying that his company is scalable and able to take on more properties with an asset team.   [17:24 - 18:47] Closing Segment ·        Reach out to Sean o  See links below ·        Final words   Tweetable Quote   “I always wanted to be something more than just a worker in my whole life and I thought real estate was a way to do that and I did”. – Sean Thomson   “Every project needs a mission. If you don't know where your destination is with your project, you don't know how you're gonna get there”. – Sean Thomson -----------------------------------------------------------------------------   Connect with Sean on his Instagram and LinkedIn or check his company's website at https://www.thomsonmultifamilygroup.com/ and https://www.unionassetadvisors.com/   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com   Want to read the full show notes of the episode? Check it out below:   00:00 Sean Thomson: The two basic functions of an asset manager. If you wanted to boil it down to like the essence of what an asset manager should be doing, it's to optimize outcomes for the investment and to mitigate risk, right? So, you're trying to capture as much upside in the investment possibilities you can, and you're trying to take away as much of the downside as you can, right? For us our starting process is we look at, I call it the MVP, but it's the mission, vision, and plan. So, every project needs a mission, right? If you don't know where your destination is with your project, you don't know how you're gonna get there. 00:31 Intro: 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. 00:43 Sam Willson: Sean Thomson has 13 years of experience. He moved from single family residential to multi-family residential three years ago, and has since then created an asset management company for independent owners. He also works alongside in the business with his daughter. Sean, welcome to the show. 01:00 Sean Thomson: Thanks, Sam. Thanks for having me on. Appreciate it. 01:01 Sam Willson: Absolutely. The pleasure's mine. Sean, there are three questions I ask every guest who comes in the show. In 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get? 01:09 Sean Thomson: Uh, so I started single family. I always wanted to be something more than just a worker in my whole life. And I thought real estate was a way to do that and I did. Just never knew how to kind of get that as a business. And I started single Family with the home Veteran franchise. The We Boley Houses guys. 01:24 Sam Willson: Wow. 01:25 Sean Thomson: And you know, single family was great. I had a small little business. I've never cared about being the biggest, you know, the doing the 150 wholesale a year, whatever, things like that. 01:33 I wanna do a good job, right? For me it's about quality, not quantity. And my single-family business just wasn't scaling to the level I needed it to at, you know, on a pace that I wanted. And so, I thought: "Well, there's gotta be a better way to do this". And I always thought apartments were outside of my reach. You know, I didn't think a guy like me could do it. And I met someone who was into syndications and was a regular guy like me and was doing it, right? So, I learned that, hey: "It's possible for him, that means I could do it. So, I convinced him to teach me how to do it and then took a year or so to decide on whether or not to shut down my single family and move into multi-family. And then that was the case. Joint forces with my daughter as she was coming outta college. And now we have a small family business that does multifamily syndications. We just launched our asset management business as a third-party service. We thought that asset management was a critical, you know, pivot point in success or failure in multifamily. 02:22 It's where everything comes together and the critical decisions are made. So, we wanted to build for ourselves and our business a best-in-class asset management program for us. And it turns out that there's a lot of people that need this help, right? They need it on some level. 02:36 And so we thought: "Well, we built this out. Our business looks pretty efficient. It looks really good. We think we're doing a good job. Maybe we can help other people". And so that's what we launched. That was the genesis of launching our asset management business. 02:46 Sam Willson: Gotcha. Yeah. That's really interesting. It sounds like there was a pain point or there was something along the way that you experienced either personally or you watched others experiencing that said. "Hey, we're onto something here. We need to launch this asset management business. 03:01 Sean Thomson: Yeah. Well, for us it was just a matter of wanting to be good, right? We just wanted to be really good at what we do. And, I talked to investors that I respected that have been in this business a long time. I mean, when I say investors, I mean people that put capital into these deals. And their first question to me every time was: "Who's your asset manager?" And I would say: "Well, we are. We're of new multifamily operation, right? So, they would always say: "Okay, well, who else is on the team, right?" And so, I said: "I'm gonna be the best I can at this because this is critically important to investors. I wanna have this locked down". And so, we started researching what are the best practices in asset management? What's the best operations? You know how this works? We called in experts, we talked to people that we know. We talked to other syndicators. And through this research I discovered that there's a lot of syndicators that are just, you know... Like, I'm not a great asset manager. I'm, personality wise, the worst asset manager you could probably have. I'm great at Big Picture. I can make big decisions really quickly and rapidly, but a true asset manager is a very detailed in the spreadsheets, on the phone calls every week. You know, it's a grind type job, right? And so, someone like me who's good at syndications, buying deals, finding deals, get talking to investors, things like that. I'm not a great asset manager. So, by nature syndicators just don't make great asset managers, and a lot of them are trying to do the job, right? So, they just need help doing it, I think. And then there's people that are great at it, but they wanna focus on finding more deals or finding more capital to raise their business level. Right? And outsourcing that to somebody else is important to them. So, we just found a need for it through our kind of desire to be good at what we do. And we thought. "Well, you know, we've built this business. We think it's gonna be just substantial. So, let's see if we can help other people". 04:44 Sam Willson: Talk to me about, normally I would think of an asset manager as one of the key team members. Especially on a syndication team. Obviously, you got your investor relations people, you got your acquisitions, but asset managers a key seat on the bus. How do you guys as a company integrate into those existing teams? I guess just talking about that process, cuz I would imagine that's an interesting and kind of tricky interface, making sure that you're serving the other members. I don't know, does that question even make sense or am I just stumbling all over my words? Like I feel like 05:13 Sean Thomson: No, it does completely. And that's the first question I get from most guys. Cause they don't understand how we would fit in because, we're not a stakeholder. Right? And so, the decision-making process is still in place with a stakeholder. We don't make big decisions for the sponsored group or the stakeholders in the deal. We just do the day-to-day operations. So, we take the tedious and the tedium away from the sponsors, right? So, you don't have to be on the weekly call. We'll take care of the weekly calls. We'll make sure the property manager's hitting their KPIs. We'll establish the KPIs for the property management team. We'll monitor, you know, CapEx, you know how that's going. We'll make sure lease up are happening. We'll make sure turns are happening. We'll make sure all that sort of tedious work is happening. Take all those things off the plate of someone that can go out and now find deals, right? So instead of being on phone calls and dealing with property management issues that are below 2,500 bucks or whatever it is that don't really need to be in the ownership seat, those decisions can be made downstream. So, we're taking that sort of in between property management and ownership and those tasks, those daily sort of tedium tasks. We're taking those off the lap or the desk of the ownership group. So, it's, but the decision making and the strategy is all still in the ownership's hands, the responsibility to do a good job with the project is still part of the ownership's decision-making process, their sponsor group or whatever they are structured. We're just taking the day-to-day grind stuff off their responsibility. And I think, that is a hard concept because I think most sponsors are just accustomed to being the asset manager, or bringing someone in on the sponsor team to be the asset manager. And that role still has to be filled in terms of like decision making, but it doesn't have to be filled on the day to day. So, like that you can outsource, and that's what we're providing. 06:55 Sam Willson: Got it. Tell me, you've hit on a few things there, just maybe there's some listeners that don't necessarily understand everything an asset manager may do. So aside from the things you've already mentioned, what are some other pieces of the puzzle that you guys pick up in this process? 07:10 Sean Thomson: The two basic functions of an asset manager. If you wanted to boil it down to like the essence of what an asset manager should be doing, it's to optimize outcomes for the investment and to mitigate risk, right? So, you're trying to capture as much upside in the investment possibilities you can, and you're trying to take away as much of the downside as you can, right? For us our starting process is we look at, I call it the mvp, but it's the mission, vision, and plan. So, every project needs a mission, right? If you don't know where your destination is with your project, you don't know how you're gonna get there. So, we start off with establishing mission. What do you want to create here with this community? And then we create a plan or a vision to kind of get on that path, right? So, the vision for us is the journey we're gonna take. I'll give you an example. Let's say one of our core missions with the property is to create a safe environment. Well, how do you do that? So, your vision would be to increase security, increase lighting, increase amenities around the courtyard or whatever. And then the plan would be: How many lights do we need to put in or how many security systems do we need to put in? And so, we break it down to all that. And if you start with that, those three steps, and infuse that with communication with your property management group all the way through to your investors, and everybody's on that same mission, vision plan, and then you drop in some accountability with KPIs on your financials, on your property management group, on everybody involved that's trying to accomplish a goal. And then you layer in communication to make sure everybody's on the same page throughout the whole process. I think you're doing those two functions, right? You're giving yourself the best opportunity for upside and you're mitigating your risk on the downside. And then, so some of the things we'll do on the risk side, we'll do insurance assessments, tax assessments, all those things that can get you on the financial side unexpectedly with tax increases. We'll fight taxes, you know, when those come up, we'll make sure our insurances are optimized. You know, just things like that you don't always think about. But those things need to be done. 09:05 Sam Willson: Absolutely. Absolutely. How have you taken this role on without creating a new team member? For every new sponsorship group, you work with. 09:20 Sean Thomson: Well, so we are kind of doing that. So that's the objective, right? So, if you're a dedicated asset manager and you're doing the day to day. Property management is critical in all these multifamily operations, everybody knows that. So, if you have a great property manager, and you're dealing with that property management team and you have good ownership and you have good communication between the two. An asset manager, just operating the day to day should be able to manage about, eight to 10 properties for a good asset manager. Okay. And so, we're new, so we're just getting started, but we have a team member in place now that are ready for clients to, you know, manage those clients. And as we grow, we're bringing in asset managers specifically to do this task, right? And then we'll just scale those people. So, we have a dedicated person to those accounts. Just like property management does, you have a regional manager for every 10 or eight properties that they're doing. So, we're gonna do the same similar model, but on the asset management side... And so that person will be dedicated to those properties and nothing more. That's all they'll do. 10:17 Sam Willson: Got it now. That's really, really fascinating. Tell me about technology, cuz one of the things, like you said, communication's a big piece of this equation. What are you guys implementing on the technology side, that is really making this probably more seamless. 10:35 Sean Thomson: Well, we're looking at different tools that are available now. We have, everything's customized. So, my wife is a wizard with spreadsheets, you know, Excel and stuff. Before she worked with us, she managed about a billion dollars' worth of inventory for JC Penney's, and they do a lot of that work in Excel and forecasting and things. She was the person that a buyer would decide: "Hey, I want this blue shirt. And they would come to them and say: "Okay, how many small, medium, largest go to every store in the country? And, you know, how are we gonna allocate all these things?" And her team would figure that stuff out, right? So financial modeling for her in Excel is pretty much second nature. So, we've spent the last. Several months, maybe a year, building out our processes and systems to do this job for this business for us. And she's built all of our sort of internal systems and we're utilizing that, that we have for other people's businesses as well. But we're also in communication with higher technology providers, you know, a prop tech companies that are providing this service to talk about, some synergies there, right? So, there are some prop tech companies that have a software application for like financial auditing and, some of those financial things. They can't do the people part. But they can do some of the technology part. And so, we're in communications with them to see if hey, maybe this tool would be a better application for us, that we can optimize the outcomes for our clients. But right now, everything we have, we built. So, maybe it could be a case of where we take our solutions and create a prop tech solution for later on down the road. But that's what we're doing, right now. 12:03 Sam Willson: So, Asset management. You optimize outcomes, you mitigate risk. You guys are bringing on somebody that's gonna manage eight to 10 properties, and that could be a variety of clients. But I mean, that's a lot of backend, kind of ticky tacky admin stuff that, for guys like you. 12:20 Sean Thomson: Right. 12:20 Sam Willson: I just, I get lost when you, my eyes glaze over. It's like... I don't know, let's go buy something. But I don't, I can't, I can't quite, you know, stay in the weeds that long. I stink at it. So you're speaking to my heart there... 12:33 Sean Thomson: But that's the whole point really. 12:34 Sam Willson: It really is. It really is. And I think the interesting part to this is that then it's one more way for people to scale. Like they could come to you and say: "All right, I'm gonna take down 20 properties next year and it's up to you to go out and figure out the asset managers, cuz then I don't have to worry about that piece. I don't have to find that team member to put on my own team". How do you guys, if you have already, but how do you guys work out billing? Like how do you work out, like onboarding? I'm really just curious how someone integrates into your system. Like, how does that work? 13:10 Sean Thomson: Well, it's simple. So, we have to figure out if we can even help somebody, right? So, we don't want to take on clients that we can't drive value for, right? If you're doing a great, and you don't need me, I'm not gonna take you on as a client, right? If your property's unsalvageable, I'm definitely not taking you on as a client. I have to be able to drive value for somebody. I have to be able to optimize that upside and mitigate that downside, right? If I think that we can do a great job for somebody then there's a synergy there and we can work together, right? So, our first step with anybody is we gather information from, you know, someone that contacts us. and we look at their project and say: "Hey, can we provide value here?" And if we can provide value here, then we start to have a conversation about, okay, what would this look like? You know, can you guys provide us the information we need? How does this work? And that's really the first step for us though, it's can we provide value? And in terms of onboarding, if we decide to be, you know, take you on as a client, and the client wants to work with us, the first thing we do is create an asset management plan. And we have to have a business plan to operate the property. A lot of operators already have a framework of asset management plan, but we're gonna build our own more in-depth asset management plan and we'll look at everything starting with the PSA, the PMA, all the agreements that you have signed already. We'll look at your insurance, we'll look at everything and try and figure out how to optimize moving forward. And we'll create an asset management plan. We'll get buy in with the property management company. We'll get buy in with ownership, make sure everybody's on the same page, and then we'll start to execute that asset management plan. Was kind of the thing I mapped out in the very beginning. That's where everything starts, is with your mission, vision, and plan. And we'll create all, you know, a document, a living document that does that as we move forward into the future. And we'll revise that as, things change, but that's kind of the how we structure and get things started. So, first of all, can we drive value for this client? Secondly, let's gather the information that we need to create the asset management plan. And then third, we just, we get buy-in from everybody and start executing. In terms of like fees everybody sort of underwrites a 2% management fee into their structure almost every time, right? We've got it figured out. I think that we can make that a 2% asset management fee of work our business as well. So, we have underwriting and we can provide some due diligence, oversight, things like that, that are sort of additional services. But if you wanted us to just do the two the day-to-day operation, you know, admin stuff that, that we've discussed that 2% fee would be sent to us. 15:32 Sam Willson: Got it. Got it. That makes a lot of sense. Very cool. I love that. Last question for you on this is where in the process should someone reach out to you? And you mentioned the word PSA and things like that, so it sounds like fairly early on, but just curious what you would recommend to somebody if they're looking to acquire an asset and they're like: "Hey, you know what? Sean's group might be a great fit for asset management". When is ideal for them to reach out to you? 15:58 Sean Thomson: Anytime, really. If you have properties under management, we can help you probably. If you're trying to acquire properties, we can provide some sort of guidance to get there and then take over once you've closed. So really kind of anywhere you are in that process, even if you have several properties that you may be struggling with. Asset management, you know, I know a bunch of guys that have six, eight properties and they're just like: "Man, I just can't keep up. I have a person in the office that's managing the assets and I just can't keep up". You know, for us, we're scalable. Right? So, the idea for us is to be able to take on 10 properties with an asset team. And then if you buy five more, we can just bolt on another asset manager, get them trained, get everything going in our systems. So, we really, our systems and processes are the strength that we have. And our training, our new asset manager, just making sure they're on track is really all we have to do, right? Because we have, you know, systems and processes that function throughout the system. So, for us it's scalable. So, it really kind of, wherever you are in your portfolio life cycle, we should be able to step in and give you some assistance and we can, you know, go through all that on the onboarding and see where we are. 17:04 Sam Willson: Right. I love the idea of implementing a scalable solution. That of course is the key to what we're doing here, name of the show, which is doing things that we can scale, that we can grow and have an infinite horizon or trajectory of growth there. And also, I think what you said there was great, we said, you know, the systems and processes are your strength, and that's true for any business. And no less in multifamily and asset management. So that's very cool. Sean, I have certainly enjoyed our conversation today. Thank you for taking the time to come on and really break down the nuts and bolts of asset management and just the opportunity to build an asset management company and how you're gonna use that company to then serve your clients here in the future, both inside of your own business. And like I said, with other syndications and other deal sponsors. So, very, very cool. If our listeners wanna get in touch with you and learn more about you, Sean, what is the best way to do? 17:51 Sean Thomson: Well, there's two locations. So, you can go to our thomsonmultifamilygroup.com website for our acquisitions business. Thomson's spelled a little bit uniquely as T H O M S O N, but it's a thomsonmultifamilygroup.com there. And then if you are curious about our asset management business, you can go to unionassetadvisors.com 18:10 Sam Willson: Union Asset Advisors. We'll make sure we include both of those: Thomson Multifamily Group and Union Asset Advisors there in the show notes. Sean, thank you again for coming on the show today. I do appreciate it. 18:20 Sean Thomson: Yeah, thanks, Sam. I appreciate you having me on it. 18:22 Outro: 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So, appreciate you listening. Thanks so much and hope to catch you on the next episode.    

Martin Perdomo also known as "The Elite Strategist", is an inspired instructor, speaker, and entrepreneur that has inspired thousands around the globe and is the host of Latinos in Real Estate Investing Podcast. Martin is now available for leadership training, Sales Training, Business consulting, and coaching. Martin's Elite Real Estate Strategies with the Elite Strategist DVD is Featured on Amazon and all major online and offline retailers.   Martin is the founder and host of the Stroudsburg Real Estate Investors club. With his leadership, the group has gone from zero to over three hundred members in less than two years. He currently manages and operates a Real Estate Investing firm operating over five million dollars in assets and he helps investors get above-average returns by investing passively in multifamily Real Estate with him and his team. In this episode, Sam and Martin are going to discuss why to educate people on real estate investments, the passion that Martin made him start his podcast, and the journey that led him to find financial freedom through real estate investing.   Highlights:   [00:00 - 05:45] Hustling Until You Achieve Your Goals Martin Perdomo is a real estate entrepreneur, trainer, podcast host, speaker, consultant, and mindset strategist. He aims to educate people and get them started on their journey to financial freedom through real estate investing. Martin started investing in real estate in 2007, bought his first property two years later and it burned down in 2012. Since then, he's learned to focus on the long term and has shifted his thinking when evaluating properties. He currently owns 108 units of multifaceted real estate, including 40 units next to each other.   [05:45 - 11:04] Alternative Real Estate Investments Martin shares his story about the dream that he had when he found his passion for real estate investments, at 17 years old. He discusses his latest long-term goal to be true: owning a hotel. He then explains the advantages of why owning a hotel can be a great investment. Martin talks about his diversified assets and his strategies to make those assets scalable.   [11:04 - 15:33] Finding Your Public Martin talks about how TV commercials gave him a great lead in the area that he works. He shares how he identified the demographic that he wants to buy from and the strategies to do that. Why TV commercials are an underrated strategy to scale your real estate investments.   [15:33 - 19:38] Helping the Community: A Passion Martin shares his real purpose in the business of the real estate. He discusses the importance of mindset and skill set in achieving success, and how shifting to an abundance mindset has changed his life for the better. He also discusses his podcast and his meet-ups, and how he created those spaces to help others achieve success in the business of real estate.   [19:38 - 20:56] Closing Segment Reach out to Martin See links below Final words   Tweetable Quote   “You gotta let people know what you're doing. You gotta take action. Like the old saying of ready, fire, aim. Just ready, action, and then readjust and aim again and adjust accordingly”. – Martin Perdomo   “Once I shifted my mindset right from a scarcity mindset to an abundance mindset, my life changed”. – Martin Perdomo -----------------------------------------------------------------------------   Connect with The Elite Strategist himself, Martin Perdomo on his Facebook, Instagram, LinkedIn or check out more ways to reach him out in his Link Tree. Also, check his podcast Latinos In Real Estate Investing Podcast, and his YouTube Channel.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:   00:00 Martin Perdomo: And if you're doing something you gotta let the world know that you're doing it. You're doing something. "Hey, this is what I'm doing. You're raising money. "Hey, I'm looking to help people, get above average return on their investments, right? You gotta let people know what you're doing. You gotta take action. Like the old saying of ready, fire, aim. Just ready, action, and then readjust and aim again and adjust accordingly. 00:19 Intro: 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. 00:31 Sam Wilson: Martin Perdomo is the host of Latinos and Real Estate Investing podcast. Martin aims to educate people and get them started on their journey to financial freedom through real estate investing. Martin, welcome to the show. 00:43 Martin Perdomo: Sam, thank you for having me, brother. It's a pleasure and an honor to be able to share with your audience. 00:48 Sam Wilson: Awesome Martin. Glad to have you on today. There are three questions I ask every guest who comes on the show. In 90 seconds or less, can you tell me where did you start? Where are you now, and how did you get there? 00:58 Martin Perdomo: Started investing in real estate in 2007. Bought my first property. I was a mortgage broker, so I had FOMO, fear of missing out. Everyone was buying real estate and I was giving money away basically back in those days. In '05, '06 and '07. And I bought my first investment property, paid $275.000 for it. Knew nothing about real estate investing. Only did it because I knew that was a way to financial freedom. You hear it, you know it intuitively, but there's more to it than that, as you know. Bought it two years later, a hundred thousand under water, same property, was worth $179,000 and 14 years later had an appraisal come here. Last month I bought a property not too far from it. He was using a comp property, same property, two doors down, exact same property. Sold for $385,000. So don't wait to buy real estate. Buy real estate and wait. 01:47 Sam Wilson: What did you do with that house? 01:50 Martin Perdomo: Good question. I've had it, I bought it cuz it was close to the university by ESU University and I rented it to college students. And what college students typically do is they rent it in, they rent it around May, and they go to May right when school starts and around May, around April, they start winding down. These kids didn't pay their light bill, so one kid was studying with a candle in the. And the curtain caught on fire. Mattress caught on fire. They burned my house down. I like to think that I kind of attracted that because I was like my energy energetically, I was felt like, so stuck with that property cuz I didn't know what I was doing. That it was like the universe, God was the way of getting me out. 02:38 Sam Wilson: What year did it burn to the ground? 02:40 Martin Perdomo: I burned to the ground in 2012. 02:44 Sam Wilson: Okay, so you held it through the recession? 02:47 Martin Perdomo: Yeah, I held it. 02:47 Sam Wilson: Held it, which is, yeah, which is the right move. 02:50 Martin Perdomo: Yeah. There was no other move. I was broken. I didn't know what to do, brother. I didn't have the education I have today. But in hindsight, you know, it was a, if I would've held on. I still would've won. 02:59 Sam Wilson: You still would've won. And I think that's the thing that, the lesson that so many people probably didn't employ, you know, for those that were in unable to, hold on. That's a different story, but everybody panics when they see that the comp value of their property goes down. How has your thinking shifted now when you evaluate and look at properties in light of that experience? 03:20 Martin Perdomo: That's a great question. I just bought a quad. Up the street from here. And I was just in a meeting with my business coach this morning and he asked me a similar question cuz we're looking at: "Hey, the stuff we're flipping". And the difference in my mindset and what I look at now is I look at the longview. I focus on 10 years, 15 years. I look at the long view of things. I don't just focus that interest rates are going up. Hey, this happens. Interest rates go up. I don't concern. Prices are going down. Hey, this happens. Prices went down. There's always a panic in the market, Sam, no matter what. Last year's panic, what was it? "Oh, this is a bubble. People paying $20,000, 40,000 over asking 22, 21". Right? 21 and 20. That was it. In '19 and '18 before Covid, what was it? "Shit, any moment of recession's gonna happen, we're due. It's been, we're the longest bull market in history, and we're due". So, it's the media. There's something about human beings. We're always looking for what's next around the corner that can come kill us. But if we can just, when it comes to real estate, I like to think of it as long term and when I think of it of long term, all the noise goes away, right? All of the noise goes. 04:24 Sam Wilson: That's exactly it. Yeah. Somebody, and this is kind of in line with that, but somebody asked me this yesterday. It was like talking about a couple bees of real estate we own. I said "Look, I'm gonna hold those forever. It's long term I'm gonna hold 'em until I no longer want to own them". Like we buy stuff today that produces an income and I wanna hold it. No, I don't want to anymore. And I really don't care what the value of it is on paper, as long as it continues to produce revenue. I'm happy man. Yep, that's that's really cool. You mentioned a quad, you mentioned a single-family residence. How many aspects of real estate are you involved in at the moment? 04:58 Martin Perdomo: So, we buy apartment buildings. We currently own 108. It goes up and down cuz we flip and we also flip. So, we currently own 108 doors. We own a bunch of assets. Our biggest asset is 40 units. And 17, right next to each other. So, we do a multifacet of things. We currently have a television commercial locally. We're marketing to motivated sellers. We're just kind of lining ourselves and getting ourselves ready for if there is, and I use that word intentionally, if there is a real correction, because it's just so different, you know? We have people with interest rates of 2% and 3% that, yeah, they might have overpaid last year, but where are they going? There's an affordability issue. Where are they going? They can come rent from us, from you and from me for, you know, for what they're paying for. The less, they're paying less for mortgage. I don't know, you know, there's a lot of hype about the market this to market that. Either way I always plan for worst case scenario. I'm planning when the fear starts, because the fear mongering has already begun. Mainstream media is already, you know, putting the fear and human beings, especially people that aren't like you and I in this business, educated, they're gonna panic and they're gonna get scared. We flip, we buy fix and flip properties. I enjoy that. That is fun for me. And we also buy and hold long term. We're in the middle of buying a hotel right now. We're looking to acquire a hotel right now. I'm really excited about the future. Future's Bright Sam. Future's bright, brother. That's all I could tell you. man. Future is bright. I'm excited about the future. 06:27 Sam Wilson: I love that attitude. Somebody asked me that a couple weeks ago. They said, Hey: " Is now a good time to get under real estate?" I'm like: "Yes, absolutely it is. Like now is a great time to get in". Tell me about your hotel. We've talked about multifamily; you've talked about single family residences; you've talked about flipping. Tell me about your hotel, and then I got some other follow up questions, but we'll start on this. 06:49 Martin Perdomo: Yeah, so as a young, as a kid, right? I remember, I'll share the story with you. My wife and I, we've been together 25, 26 years now, and we were teenagers, we were kids, right? When we first started dating. And one day I used to work in the body shop in New York City in Harlem. I dunno if you're familiar with Harlem. It's, you know, common place in New York City. And it was really rough man. Really rough place. It was burnt down buildings, crack buildings, low place in the late eighties, nineties. And it was 1997. One day I used to work in this place called The Body Shop on one 25th and Fifth Avenue. My wife comes to pick me up, my girlfriend at the time, and I look across the street and I see this building and this burnt down. In the hundred 25th and fifth, and I say, you see that building across 300? I said: "If I could buy that building, fix it, and renovate it and rent it, we can be rich". I'm 17 years old, right? And she's no way. She's looking at the area and she's saying: "No way". But we've always, my wife and I have always romanticized with owning bigger assets. We're owning big assets. We've always talked about owning a hotel, like that's a play. So, I'm at a place in my career where it's about the game. You know, this is fun for me. And it's like Monopoly. So, you buy houses, and then boom, you put the hotel. So, one of my long-term goals is, has always been to own hotels and we are about to, we've looked at a couple, I think we're about to go on the contract with one. It's 38 keys cuz that's the language in hotel. So, it's 38 doors equivalent to 38 doors. So, it's 38 keys. Its small hotel here in the Poconos, but it's the locations amazing. The locations across the street from a casino, from Mount Airy casino. Here in, in the Poconos and it's close to the ski resorts. It's like the strategy. We did the numbers and we're talking about 173% return on investment to our investors when we raised that capital. It's an amazing deal where we don't have on the contract yet, but by the time this podcast comes out, it should be on the contract. 08:35 Sam Wilson: Man, that's awesome. I love that. I love that. What are you doing with it? Are you gonna turn it into? A lot of not a lot of, but many guests who come on the show that are buying hotels, are doing like the Airbnb model, getting rid of the front desk. They're making it keyless. They're going to... 08:50 Martin Perdomo: Yeah, so we're toying around with that idea because we're in the Poconos. So, Poconos is a very resorty vacation area, so it's perfect. It's across street from the casino. We're toying around with that idea. You know, we have an affordable housing crisis across the whole country. 09:04 There's no different here, right? We're thinking about creating some extended stay. We're toying around with that idea, but that's the primary right now, what we're thinking is creating it into an experience type of hotel. And what I mean by that is partnering up with a bus company that'll bus people into: Hey, the ski resort, bring you back to the hotel, take you to the casino, take you to the indoor water park that we have here. Just kind of making it that hub. But not the price of Camelback where they have the indoor waterpark and all that stuff, right? But uh, kind of, that's what we're envisioning right now as we're in the beginning stages of that particular deal. 09:38 Sam Wilson: That's really cool. Let's talk about how you are finding opportunities. There's, each of these channels has their own unique acquisition strategy, you know? 09:49 Martin Perdomo: Yes, sir. 09:50 Sam Wilson: So how are you having such a diverse asset? Or such diversified assets that you're investing in and then finding opportunity in a meaningful way? 09:58 Martin Perdomo: So that's a really great question. I do multiple things. First thing is, we have our own marketing channel. All our properties, we buy 'em off market. Everything's off market. We do it through mailers. We don't do a lot of mailers, but yet we do. We have a television commercial, just gives us local branding recognition. We get a lot of calls from there. I'm actually hosting tonight, my every other month meetup. So, I host a meetup and I fill the room with investors and I just educate and empower and help, you know, just give, I give, I like to give. This is why I do things like this. I like to give and help others come up. And through that means it just kind of gives us that credibility and they know we're real buyers cuz there's a lot of pretenders out there. As you know, Sam, there's a lot of guys: "Oh, I'm a buyer". And we have a broker channel. We have relationships. Just through the year that I built through all the stuff that I do: the meetups, the advertising, just I'm very involved. This is what I do. I do this. Every day, all day, every day, 24/7 a week, brother. This is all I do is real estate. We've got multiple angles and multiple things that we work on. Property managers bring us deals, brokers bring us deals, wholesalers bring us deals. We have our own marketing that bring us deals. So, we are just constantly letting people know we're buying. And if you're doing something you gotta let the world know that you're doing it. Right. You're doing something. "Hey, this is what I'm doing. You're raising money. "Hey, I'm looking to help people, get above average return on their investments, right? You gotta let people know what you're doing. You gotta take action. 11:29 Sam Wilson: I love that. 11:30 Martin Perdomo: You gotta take action. I like the old saying of ready, fire, aim. Just ready, action, and then readjust and aim again and adjust accordingly. 11:39 Sam Wilson: That's awesome. Tell me about the TV commercial. That is not a medium that many people are utilizing today. How do you calculate return on investment on that? 11:51 Martin Perdomo: That's an amazing question. And before we did it, we toyed around with that. And the thing is, that really gets us deals for our single-family distress owners. And it's very strategic. We're very strategic in where we advertise, what TV channels we advertise on, and who is it that's watching what we're selling, right? And we advertise on like the Jerry Springers of the world shows. The court tv, daytime shows. Right? Well, who's watching those? The people that are distressed, they're going through a divorce, people that are losing that don't have a job or, and we advertise day at night, right? Third shift people. So, we're very specific on the demographics and who we're getting in front of, you know, maybe grandma, grandpa that's got that old house that's falling apart or it's got that old 10-unit apartment building that they no longer can handle. And here's this guy on TV saying: "Hey, we'll buy it 21 days or less, or we'll give you an extra $5,000, regardless of the condition". 12:45 Sam Wilson: And that, that's the demographic. I guess that was gonna be my follow up question is who's the demographic who you're shooting for? And... 12:52 Martin Perdomo: Yeah, that's the demographics for that's what's watching that, right? It's not, you know, guys like you and I are not watching Judge Judy. Let's be real, right? We're not watching Jerry Springer, right? We're working, we're hustling, we're running and we're leading our teams, and we're doing things differently. 13:05 Sam Wilson: Yeah. No, we are not watching either of those daytime TV shows. I wish it'd be nice to have that amount of free time to go, you know? But I wouldn't spend it doing that if I did have the free time. So regardless, I'm still not watching it. What about cost on that? I know that there is no cost when advertising works, right? It's a return on investment is what you're really looking for. But I am really curious, like when you look at that and before you launched into it, was it a tough pill to swallow to say: "Man, we gotta shell out X number of dollars for a TV commercial? 13:35 Martin Perdomo: It was not cuz I just believe in investing in my business. It's just: " Hey, I'm gonna invest in my business no matter what". I processed it when I looked at it, I processed. I said: "This makes sense". And this is a model that's working for the other investors across the country. And then when I looked at the numbers, it made even more sense. I got one of my invoices and I'm looking at the invoice, gives me the time and what channel it plays and what I'm paying for that slot. 32nd slot. I mean, I am blessed brother because of where I'm located. I'm not in Philadelphia or the New York City market. I'm like kind of in between. And so, the slots that I'm paying $15 for a 32nd commercial. Dude. I know some late-night ones I'm paying $5; some I'm paying $35. In other slots, I'm paying $50 depending on the show and the slots. So, I'm looking at it and I'm saying, hey man, what does it cost me to pay per click, right? What does it cost me on the PPC leads. The PPC leads, because I do that too, those things cost me. I'm bidding, right? That's my money's going up. I gotta bid a dollar amount that I bid every day, and when I use it, it's over. I'm like: "Hey, wait a minute. If I'm gonna spend $5 in a commercial on the low end, $50 on the high end". Depending, I got commercials from $5, $15 and $35 and $50. I'm like: "This makes sense". And not only that, but I get the credibility in the community like: "Hey, these guys are the real deal". If they're on TV, they must be doing something right. It's the psychology of what people think. And when my sales guys show up, their life is so much easier, right? Cause hey, we got you from the TV there. They're not competing with wholesalers. It's my guys show up and if there's a deal to be done, we're gonna do the deal. So, the cost is not cost prohibitive. However, I did want to go into other markets closer to the Philly market. Lehigh Valley area, which is closer to the Philly market. And now it starts getting whoa, really expensive per spot. $350 per spot. And again, I'm just, you know, in the right location for what we're doing. 15:33 Sam Wilson: Right. 15:35 Martin Perdomo: But again, I mean if, let's say that ad ran 15 times at 400 bucks a slot. That's, let's call it six grand you went out the door and you closed one good deal out of it. Yeah, so I did the numbers. The numbers for us. I could tell you; I don't mind sharing this. The numbers because of my market, my demographics, the numbers wind up being somewhere close to six grand a month. After it's all said and done, I'm probably in $95,000 a year. But if I do a couple flips and like we make usually our return on our investment in the first quarter for the year. Like we know how to run the numbers. We know the market; we understand interest rates are going up. So, we know, if we're buying a property to flip. In this economy, we're not buying anything that ARVs over 300. We want to stay low for affordability, cuz we're always gonna move that product. And then, we're always picking up stuff. We're always adding to our portfolio. So, we pick up through that commercial, a 10 unit, a 15 unit, cuz a grandma will watch us or the grandson is gonna watch us with grandma and say: "Hey grandma, we gotta call that guy cuz that apartment building you have is falling apart. We need to sell it". 16:37 I Sam Wilson: It's brilliant. I love it. You know, the other thing I love about that is that it separates you from everyone else. And I always said that with pay per click, back when I was doing single family stuff, it was like I can outspend most of my wholesale competition. And while you might say on the front end, that doesn't make any sense. Well, like you said, you know, you're paying for that in the first quarter. I remember my pay per click budget. I did single family 2018, and in the first 30 days I'd already paid for my years budgeting with pay per click. It was like, I can outspend you and that puts me the front of the pack over everybody else because I can do that. And it's a different medium. This is a very different medium as well, so you're separating yourself both by medium type and by the amount of money you can devote to actually advertising on that front. So that's really, really cool. Martin, before we sign off here, I do want to hear about your podcast. Why you started it and just gimme a little bit of insight on that. 17:32 Martin Perdomo: So, for me, I'm a big personal development guy. I'm a big mindset guy. I believe that success is 80% mindset and 20% skill set, and that's combined is a hundred percent success. And for me, coming up I realized that once I shifted my mindset right from a scarcity mindset to an abundance mindset and that's a loaded statement. But once I shifted my mindset from one to the other, my life changed. And that's when I really started celebrating my growth. And I really started making bigger and power moves. And I've always, the purpose of my life is to empower others to be the best version of themselves. So, while I love real estate. I love the game. I love what I do. I really do. And I also host a podcast, cuz I wanna help other people come up. I really want to wholeheartedly like: "Hey man, you can do this too". If a poor guy like me from the ghetto and the hood in Washington Heights in New York City can come from nothing and do this. So can anyone else! If you are not, if you are really determined and you wanna, and you work on yourself, and you work on your mindset and you work on your skill set, you can do it right? Everything about: "Oh, I don't have enough money". It's a limiting belief. Who says you need your money. That's all limiting belief. It's just, go get educated, listen to podcasts like this. Listen to Sam, listen to podcasts like mine. Go and listen to other smart people that are doing it. Gather the information. Take action. Then adjust. Ready, fire, aim. Right? Take action to adjust. So, it's because I just love to empower and help others. I'm hosting my meet up tonight. That thing takes me five hours out of my day. Five, six hours. I gotta go set up at the church, cuz I host it at the church. I gotta go set up, prepare the content, write all this stuff, and it's It takes a lot of work to do. But it's more fulfilling to me when I see that guy that does his first deal and they're like: "Martin, thank you cuz you shared that and you showed me this and you showed me that". Man, that fills me. 19:31 Sam Wilson: Right. That's really... 19:33 Martin Perdomo: It's all worth it when like I see others like helping others and others are coming up. 19:38 Sam Wilson: Martin, I absolutely love it. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? 19:43 Martin Perdomo: Yeah, they could just go to Latinos and Real Estate Investing podcast, check out my podcast or check out my YouTube. I'm constantly putting out vlogs out on my projects and what's going on. I literally just walked from one of my projects up to the road here. My roofers are putting on the roof and that property I just bought. So, I'm constantly putting up content, giving people the real deal, right? On my channel, YouTube channel. I give people the real deal. I tell you the truth about evictions and what really happens. I give it to you all straight. Construction workers, what really happens with them if you're not, if you're not doing it the right way, they will kill you. They will hurt your business if you know them. 20:16 Sam Wilson: Right, right. 20:17 Martin Perdomo: You know, they can check out my YouTube: The Elite Strategist. Or my podcast: Latinos and Real Estate Investing podcast. Or Instagram. I'm on Instagram and Facebook. "The Elite Strategist. They can let me up there too. 20:26 Sam Wilson: Awesome. Martin, thank you so much for coming the show today. I certainly appreciate it. 20:30 Martin Perdomo: Thank you brother. I appreciate you! 20:32 Outro: 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So, appreciate you listening. Thanks so much and hope to catch you on the next episode.    

Jorge Abreu is the Co-Founder and CEO of Elevate CIG. Jorge has been Investing in Real Estate for over 15 years. He started in Single Family, small Multifamily properties and eventually worked his way up to large 100+ Unit Multifamily. He also started and built a Construction Company which is the in-house construction arm for Elevate. Jorge and his company Elevate combined have acquired 6,849 Units. They have exited out of 1,416 of those units and currently have $500M+ Assets under management. In this episode of How to Scale Commercial Real Estate show, Sam and Jorge are going to discuss rate caps, what to look out for when buying Class A and Class C properties, the growth that Jorge has done in Elevate, and Jorge's approach when it comes to real estate investments.   Highlights:   [00:00 - 04:03] Elevate Commercial Investment Group: A Growing Business ·        Jorge has been investing in real estate for over 15 years and has acquired over 8,000 units. ·        Jorge is currently working on deals that are lower risk than in the past due to the current market conditions. ·        Jorge is also looking into options such as seller carryback and agencies to lower the risk of investment.   [04:03 - 08:10] Avoiding Interest Rate Caps Can Affect Property Values ·        Jorge discusses how the capital stack has changed for the company, which has led to a shift in returns. ·        ElevateCIG has been able to maintain attractive returns by avoiding interest rate caps and by building up reserves to buy future properties. ·        Jorge also shares how interest rate caps can have a negative effect on a property's value, and how the company has been able to avoid this by purchasing properties on the front end.   [08:10 - 12:39] Why Class A Deals Are a Preferable Investment ·        Jorge explains the differences between Class C and Class A apartments, and how Class A offers more margin for investors. ·        He also discusses how the market conditions for debt and equity have changed, with debt having lower leverage on entry and equity diluting returns, but still seeing opportunities. ·        And explains how they are positioning themselves to take advantage of these changing market conditions, with a focus on class A deals where there is a large gap in the market rent.   [12:39 - 16:19] Reaching New Heights ·        Jorge spoke about the team's approach to buying properties, noting that they are very methodical and take into account a variety of factors when making decisions ·        His team is also working to build relationships with large equity partners in order to bring them deals should they become available. ·        Laying the groundwork for future deals early is important, as large equity partners are more likely to invest with a company that they know is prepared to move quickly   [16:20 - 16:31] Closing Segment ·        Reach out to Jorge o  See links below ·        Final words   Tweetable Quote   “We're really pushing to get the top of the market rents with our properties. We've been able to continue to increase rents and haven't had any issues”. – Jorge Abreu   ----------------------------------------------------------------------------- Connect with Jorge Abreu on his website and write him an email at jorge@elevatecig.com   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:   Jorge Abreu (Teaser) 00:00 So, kind of just positioning yourself in that way. I do still see a lot of opportunities. We're doing a lot of class A stuff right now, where we're buying straight from the developer and we've had a lot of success with that. There's still a housing shortage, right? That's still a thing. And yeah, recession is gonna affect that, but depends where you're at. Intro 00:19 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 00:31 Jorge has been investing in real estate for over 15 years now. He started in single family, small multi-family properties, and eventually worked his way into large 100 plus unit multi-family properties. They have acquired over 8,000 units to date. Jorge, welcome to the show. Jorge Abreu 00:47 Thank you. Excited to be here. Sam Wilson 00:48 Absolutely. It's a pleasure to have you on. If I recall, and I'm going back I don't recall, what was it here, Jorge, the last time you came on this show? May 19th, 2021. That was episode number 171. I don't know what this will be when it comes out, but we'll be in the 700. So, it's been a while since we've connected and caught up. I'm glad to have back on the show just to hear kind of how things have changed from that point till now, where you guys are, what you guys are doing. So, if you're listening to this today and you want to hear kind of Jorge's backstory a little bit more, go back to that episode. Again, that's episode number 171 on May 19th, 2021. Nevertheless, Jorge, it's great to have you back on the show. Thanks for being here.   Jorge Abreu 01:27 Yeah, yeah. Just a little, little's happened since, right? Sam Wilson 01:31 A little bit. A little bit. It's been a busy last I guess this has been in, what's that, 18 months? My math is probably bad here on the fly, but close to 18 months. So, tell me, where are you guys now? What are you guys working on? What's the state of Jorge and his company? Jorge Abreu 01:47 Yeah, you know, things got a little crazy this year with the Fed raising the rates and we had a lot plans for ending this year pretty strong, which I feel like we, we still are, but we've had to make a lot of adjustments on the type of deals that we want to take down and how we're gonna structure those, how we're gonna structure the capital stack. You know, the lenders are tightening up rates are a lot higher than they used to be, and. Just getting creative, man. I never thought loan assumptions would look these attractive. But yeah, they sure are. You know, we're asking every seller to carry back some of their money if they're willing to. Getting creative. Sam Wilson 02:25 Getting creative. I want to hear as much as you are willing to share on that topic. I know you said that you're adjusting the structure in the capital stack. How are you changing that capital stack? I know you touched there on asking the sellers to do seller carryback. Any anything else come to mind that you guys have adjusted on that front? Jorge Abreu 02:45 For sure. So, I mean, we've seen opportunities popping up. We think they're gonna continue on. There's gonna be a lot more opportunities coming next year as well. So, for us to put a deal on contract right now. One, we gotta feel comfortable with the basis, a low basis of entry. That's been a struggle on itself, right? Trying to get these sellers to reality. So, it's been a lot of submitting offers and just following up and staying in front of them. And then, what we wanna do is we either want to have that loan assumption, like I talked about, at a low interest rate. If not, we wanna see if going in with agencies a possibility. The leverage is gonna be really low when we do that, most likely depending how much value we need to add to the property. But if not, you know, we're, we got one right now that we're gonna be doing a local bank at a fixed rate. Just trying to avoid those. Those adjustable rates at all cost the really high-rate caps. And then filling that gap, right? So, if our loans are coming in at, let's say 55 to 60% LTV, then that's where we're gonna ask the seller if they're willing to carry back some of their funds then possibly bring in some private equity, JV equity, you know, fill that gap and then finally come in with the GP equity as well as some of our investors. So, it's become a little bit more work, but it, you know, I've been through a down cycle and I know the last time we kept buying and everything we bought turned into gold later. Sam Wilson 04:15 When you start changing the capital stack, that dramatically, it really changes the dynamics of the return profile. How are you doing that and still producing respectable returns or I guess attractive returns, perhaps I should say to your investors. Jorge Abreu 04:34 Yeah, man, it goes back to some of those things I mentioned, right? So, a seller carries, when we're asking a seller to leave some of their funds in the deal we're asking for some pretty attractive terms. I mean, we've gotten some at 4%, 6% not a two-year balloon either. We're talking about like a 10-year balloon and give ourselves space. So, when you do that, it increases the returns, same thing with if we're bringing in a JV equity or private equity partner you know, we've been able to, we've got one partner right now that we use quite a bit, and they're at right around 11% all in down to a six or 7% on the current part of it, and then the other piece gets accrued. So that also helps with the returns. And then the expectations of our investors. We've come down a little bit on that, especially on the IRR and some of the equity multiple. We're still trying to hit that two X, but um, yeah, just, it's still better than putting it in the bank, as far as the returns you're gonna get. As long as you're with an experienced operator, I do think operations is gonna be very important through these times. Sam Wilson 05:46 Yeah. And that's uh, that's a great point. And I was reading something earlier that in that said something about whatever the particular asset class was, and it said buying in this particular asset class. Beats Wall Street any day. And so just playing off of what you said there is better than putting the money in the bank. Maybe those return profiles are shifting and I think it's gonna take a little bit of us training our investors to say: "Hey, you know, downplay your expectations, cause we've really ridden a really good ride for a while but still a good place to be". I was talking to another sponsor here recently and this is a topic I am relatively ignorant on, so I will need to have your help in kind of filling the gaps. You were talking about interest rate gaps. And how they had, and maybe you can explain this for me and then tell me how you guys are avoiding this if it has affected you at all. But he was saying: "Hey, we had a property" and they were paying like $1800 bucks a month for the interest rate cap, whatever, and now it's costing 'em $18,000 a month. To the point where the property's no longer solvable. And I said: "my gosh, like how did that happen?" I didn't quite understand that. Can you tell me about interest rate caps? Is that something you guys have exposure to? How does that work? And is how has that changed now for you guys, if at all? Jorge Abreu 06:58 So usually you pay for it upfront, right? So, a lot of the ones that we have... Sam Wilson 07:04 It was an interest. It was reserved, I think was the word he used. Jorge Abreu 07:07 Okay. Okay. So, we got one deal that has, that, it's a Freddie floater and it's got the reserve and yeah, it's gone up quite a bit. You know, we were. Pretty shocked. But we've been able to add enough value to that property where it's not an issue. But yeah, that's just one. On the other ones that have a rate cap, it's we purchased it on the front end and most of 'em we did pretty well on cuz they're paying out more than we paid for it. Sam Wilson 07:31 Got it. Okay. So, there was, there's a reverse way that, that could pretend. Again, I have no exposure to this personally which is why I don't understand it, cuz I've never had to deal it. Jorge Abreu 07:40 Yeah, it's you're building up a reserve to buy the next one when the term ends. So, if you do a one-year term, then Freddie wants you to have that reserve to then buy it for the following term. But as the price of the rate caps go up, so does that reserve to keep up with it? Sam Wilson 07:58 Got it. That's, see, I need, I needed an explanation on that. See, if you're listening here, there's always something to learn. And that's, uh, that makes a lot of sense, because I asked that sponsor to explain it and they couldn't quite put it in words that I could grasp. I'm like: "wait, huh, I'm confused here". So, there you go. That makes sense. So, when they have to re-up their policy, then they've got... Jorge Abreu 08:17 Right. So, if the Fed comes out and softens their approach right. Then that reserve should start going down to go down as well. Sam Wilson 08:24 Wow. Yeah. That make, that makes a lot of sense. Well, good. Well, I'm glad to hear that you don't, you guys don't have a lot of exposure on that side. You said that agency debt has a low leverage. Is that always the case or is that just unique to the way or the market conditions right now? Jorge Abreu 08:41 The market conditions, cuz the way they're sizing up the deals on the exit of it is lowering their leverage on the entry. So, you know, they still say the 70 to 75% or whatever, but when you actually size up the deal, you're more at 50, 55%. Sam Wilson 09:02 Okay. And that's do you think that's all bad actually as a deal sponsor to have lower leverage? Jorge Abreu 09:08 No, absolutely not. It's. How you gonna fill that capital stack? And what returns are you going to have your investors expect? And obviously there's more equity, so that dilutes the returns. Sam Wilson 09:21 That's the downside. Diluted returns, but the upside is less exposure. Jorge Abreu 09:25 For sure. Sam Wilson 09:26 On the debt side of things, what do you think opportunities are coming? You know, how are you guys positioning yourselves for the opportunities coming your way? Jorge Abreu 09:37 You know, I think we positioned ourselves already with a lot of the main brokers on the fact that when we put something under contract, we're closing. You know, we have that, track record. So, when there's an issue on a deal is when they usually come to us, which is where we want to be. We're also reaching out to other vendors you know, debt brokers or the lenders themselves and just putting that in, in, in their ear. " Hey, we're here. Let us know". We know it's maybe you're not taking properties back right now; you're having conversations and we want you to think of us. So, kind of just positioning yourself in that way. I do still see a lot of opportunities. We're doing a lot of class A stuff right now, where we're buying straight from the developer and we've had a lot of success with that. There's still a housing shortage, right? That's still a thing. And yeah, recession is gonna affect that, but depends where you're at. Sam Wilson 10:38 Yeah, no, absolutely. Tell me about the Class A. That's a really interesting, probably not the thing I would've expected you to say. So... Jorge Abreu 10:46 Yeah, I mean...   Sam Wilson 10:47 Why Class A? Jorge Abreu 10:48 Well, one, it's a lot easier to manage. Sam Wilson 10:51 Makes sense. Jorge Abreu 10:52 Yeah. And you know, so one that gap between the Class C and the Class A during this whole run we had in the market, that margin began to shrink, right when you're buying. So, we bought end of year, last year we bought a class a deal for I think it was about 180 a door. And Class C deals were selling for 130, 140 a door. You know, it doesn't, it didn't make sense, right? So that's when we started looking at it a little bit harder and going after more of 'em. And as far as adding the, everybody always says, well, how are you gonna add value to that class A deal? And it depends look, a lot of developers are there to build these apartments. Get 'em filled as quickly as they can and get rid of 'em. They don't wanna operate 'em, they don't wanna push rent. They don't wanna see how much other income they can put in there. And I mean, that's what we specialize in, right? So, we come in and we say: " There's this much gap in the market rent that we know we can take that opportunity". And then we know we can implement let's say internet or whatever it is, all this other income and I barely have to do any renovations versus a Class C, I'm almost gonna increase it by the same, but I've gotta do a ton of renovations and I have the risk of all this old plumbing and old electrical so yeah. Sam Wilson 12:17 That makes a heck of a lot of sense to me. I mean, I wouldn't see a reason to invest in Class C with those dynamics that you just mentioned, that it just doesn't pencil. Have you seen any softening in the class A demand? Jorge Abreu 12:31 Not so much. That's another thing. You know, we make sure that we're positioned to not have to be like an A plus product. We're really pushing to get the top of the market rents. With our properties we have not. We've been able to continue to increase rents and haven't had any issues. Sam Wilson 12:49 That's awesome. No, very cool. I love the way you think and just your overall approach to how you arrange debt, how you arrange your equity stack or the capital stack as a whole. You know, the types of assets you guys are buying. It seems like you've put a lot of thought in and have moved pretty methodically through this process. Does that sound about right? Jorge Abreu 13:09 Yeah. Sam Wilson 13:10 Jorge, you guys, I mean, we talked, you know, a little bit about you guys being very methodical in what you do. I know we talked a little bit about you guys have been reaching out to brokers and other industry players in the market saying: "Hey, keep us in mind in case you find stress in particular deals we wanna obviously be your first call". Is there anything else you guys are doing right now, maybe isn't action oriented or taking, you know, buying things, but just positioning yourself for a change in the market? Jorge Abreu 13:35 Yeah, I mean, there's a ton, right? So, like I mentioned before we're, we're talking to a lot of our vendors that we have relationships with already, and reminding them: "Hey we're still here. We plan on continuing to be active. We wanna buy a lot of deals next year. And you need to come to us if you have something", right? We're also making sure we line up large equity partners, building those relationships, even if we're not putting a deal in front of 'em, we're just kind of touching base with them. And letting 'em know that we're ready for them to be ready when we bring 'em a deal, and that's it. We have other CO-GP investors that look for deals for us too and bring us deals. So, kind of just letting them know exactly what we're looking for. And then hopefully all that comes together.     Sam Wilson 14:16 Yeah. It's not necessarily the one ingredient that makes the the recipe. It's a whole bunch of things all at once. So that's that's really cool. I love that. One last question for you there when you talk about lining up large equity. How do you position large equity and say: "Hey, in the future I want to have or we may have an opportunity for you". Is that patient capital? Or is it, I guess in my lack of understanding, I would say that they're like: "Hey, this is going to work. And if it's with you, it's not with you, it's with somebody else cuz we can't have it sit here. Jorge Abreu 14:49 That is true with an individual, right? If it's a 10 31 or let's say somebody sold a business and they've got that money sitting there. Not necessarily for some of these larger private equity firms, right? They're constantly raising equity or, if it's a family office they usually have a good chunk of money to move around. So, more of that level and kind of just: " Hey, let's get vetting us out of the way. What do you need to know? How do we skip that whole part?" Cause we wanna be able to bring you a deal and move quickly. Sam Wilson 15:19 I love that. I love that lay in the groundwork early. Very cool. Jorge, thank you for taking the time to come back on the show here today. Certainly, appreciate it. Loved hearing your market, just kind of, sentiment or your view on where the market is and how you guys are positioning yourself to take advantage of the next opportunities coming your way. Have enjoyed it thoroughly. If our listeners wanna get in touch with you and learn more about you, what is the best way to do it? Jorge Abreu 15:43 Best way to do that is uh, they can check us on our website. So if they go to elevatecig.com, stands for Commercial Investment Groups. So, elevatecig.com. Or if they wanna shoot me an email, it's Jorge or Jorge, jorge@elevatecig.com. Sam Wilson 16:01 Fantastic. We'll make sure we include both of those there in the show notes. And Jorge, thank you again for coming on. Certainly, appreciate it. Jorge Abreu 16:06 Thank you, Sam. Appreciate it. Outro 16:07 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So, appreciate you listening. Thanks so much and hope to catch you on the next episode.    

Underwriting. A skill set that Vessi Kapoulian became an expert, in and with it scaled her business. In 2017, after arriving in the US from Bulgaria, Vessi started the journey that led her to control a small portfolio of investor real estate properties in Tennessee and Florida. In this episode, Vessi and Sam embark on managing operational expenses and capital expenditures and discuss how the current market conditions are impacting their business, and how their strategies for protecting themselves are evolving.   Highlights:   [00:00 - 07:32] The Start of a Journey ·        Vessi has 18 years of business experience, 14 of which are in commercial lending and four in business management and sales, and controls over 161 doors. ·        Vessi is focused on multi-family real estate investing. ·        She shares how transitioned from single-family to multifamily real estate investing and how she uses content, underwriting, and deals to scale her business. ·        Vessi shares how she manages her deals, stay patient and keep the feedback loop open with brokers.   [07:57 - 14:40] Underwriter's Tips for Surviving a Sellers' Market.   ·        Multifamily is a team sport. Partnering is essential for the growth and scaling of your business. ·        For Vessi, it was difficult at first, but eventually became easier as she learned more about the market and became more efficient in her underwriting. ·        Vessi recommends following underwriting models that are best for you, trying different models, and joining underwriting communities. ·        She also recommends being mindful of insurance rates and adjusting your assumptions as needed.   [14:40 - 17:00] Scaling on a Threating Economy ·        Vessi raised her reserves and CapEx in order to have more protection in the event of a market downturn. ·        This increased spending is partially driven by higher labor and supplies costs, as well as increasing operating reserves. ·        Vessi predicts that cap rates will continue to increase, resulting in return compression for buyers and sellers.   [17:00 - 17:59] Closing Segment ·        Reach out to Vessi o  See links below ·        Final words   Tweetable Quote   “I think having clarity of goals and your why, will pull you up further during good times, and push you forward during tough times”. – Vessi Kapoulian   “Underwriting is an art and a science. It's constantly evolving and that's what I love about it. As the market evolves, you evolve your underwriting with it. So, it's not something static, it's something fluid that constantly changes over time”. – Vessi Kapoulian   ----------------------------------------------------------------------------- Connect with Vessi Kapoulian on her website and write her an email at vessi@thevessik.com   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:   Vessi Kapoulian 00:00 Underwriting is an art and a science. It's constantly evolving and that's what I love about it. So, I'm still feel like I have a time to learn. And as the market evolves. You evolve your underwriting with it. So, it's not something static, it's something fluid that constantly changes over time. Intro 00:18 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 00:30 Vessi has 18 years of business experience that includes 14 years of commercial lending and four years of business management and sales. Today, Vessi controls over 161 doors. Vessi, welcome to the show. Vessi Kapoulian 00:44 Thank you so much, Sam. It's a pleasure to be here and excited about our conversation today. Sam Wilson 00:49 Absolutely. The pleasure is mine, Vessi, there are three questions I ask every guest who comes from the show in 90 seconds or less. Can you tell me where did you start? Where are you now? And how did you get there? Vessi Kapoulian 00:58 Happy to share that. So, one could argue that my real estate journey, or the seed for my real estate journey was planted back in Bulgaria behind the Iron Curtain, when not many people knew or there wasn't really a developed stock market. And so, when people talked about investments, they, in most cases, they would refer to hard assets like real precious metals. But that seed didn't quite germinate on my end until 2017 and when I made my first investment after arriving to the US and really following a more traditional path of going to school, climbing the corporate ladder. So, I made that first investment out of state. I live in Los Angeles, California, where they're great natural appreciation benefits, but it's very difficult to cash flow. This cash flow was my goal that kind of forced me to look out of state. So, I started in the residential space, actually Memphis, Tennessee, buying a single-family home there and then another, and another eventually expanding into the Florida market. And I asked myself, how do I scale this further? And that naturally led me to look into multifamily. I started devouring a ton of content, joined a mastermind, started underwriting, evaluating deals, and officially made that transition earlier this year by closing on two deals. One is a JV in Tampa and the other one is a syndication in Augusta, Georgia. And continuing to look to grow and scale in the multifamily space. Sam Wilson 02:29 That's fantastic. How many single-family homes did you have before you said there's gotta be a better way? Vessi Kapoulian 02:35 I got up to four properties, five doors, and that's when I figured I need to start making that shift. Sam Wilson 02:44 Good for you. That's, you know, the, I hear a lot of guys who come on and they're like, you know, we've had 20, 30, 40 doors, and they're like, wait, we just can't. We can't meaningfully scale this, so you must be smarter than the rest of us in that you learned your lessons earlier on, so well done. That's fantastic. So, you got out of single-family, you said, and were all those, I'm assuming, were those turnkey properties? I mean, were the things you were managing yourself. What were those single-family residences? Vessi Kapoulian 03:09 Yeah, I started with turnkey rentals and um, I do have third party property managers who are my boots on the ground and that I vetted before really making that leap. So, I don't self-manage those. I definitely manage the manager and certainly learned quite a lot that I could transfer onto my multi-family portfolio. Sam Wilson 03:29 That's great. And you said the first deal you got into in the multi-family space was a joint venture. Tell me how that deal came to you and you'll break down the structure of the joint venture, maybe for our listeners who haven't done a joint venture yet, or maybe even how that came about. Vessi Kapoulian 03:45 Absolutely. So, what I decided to focus on are two things at the beginning of my multi-family journey. One is a market. So, I selected the state of Florida since I already had some presence there. Property manager boots on the ground. And the second part was the skill set, and that's underwriting acquisition. Particularly in the state of Florida, as I was doing my research, I quickly found out that 92 to 93% of the deals are sourced via brokers versus going direct to seller. And since I still have my full-time W two job, I decided to focus on the 92, 93% of the market. So, I started reaching out to brokers, eventually getting on their lists to start receiving deals to analyze. 04:33 And every deal I would analyze, I would always respond to them with feedback on why it doesn't work at that moment of time. And kind of reminding them of what my acquisition criteria. So, that was quite a bit of a journey. It took about six months underwriting nearly 200 deals, so that's a deal a day. Of those only five were LOI worthy. And of those five, only one actually want the and that was an 11-unit class B property in the market of Tampa. We, it wasn't large enough to syndicate however, through a mastermind that I had joined, I already had connections with potential JV partners, one of which was, or still is in Florida, and served as boots on the ground. 05:22 So we joined, he and went after the opportunity. I can talk about the closing process as well because that wasn't smooth sailing, to say the least. But we were able to get it done. And now working on stabilizing the asset. Sam Wilson 05:38 Now that's really cool. I love I love that story. How did this joint venture partner approach you, or did you approach them? Vessi Kapoulian 05:45 I approached them and as I was looking for deals in parallel, I was looking to continuously reach out to people, build relationships. Really make sure that the people I work with have similar values, similar goals. And so, there were a lot of conversations that were taking place kind of behind the scenes, if you will, over a period of time. And that really allowed me to get to know the people that I'll be working with. That particular mastermind also facilitates in person events, so I had a chance to meet them in person so, it really happened organically over time. By the time that I had the deal on the table, I already had the infrastructure set up in order to take that deal down. Not only from a partner's perspective, but also having an insurance agent, the property manager, everything lined up so we can execute smoothly on the transaction. Sam Wilson 06:39 What was the purchase price on that 11-unit deal? Vessi Kapoulian 06:42 2.1 million. Sam Wilson 06:44 2.1 million. Okay. And so, your joint venture partner brought all of the equity, is that right? Vessi Kapoulian 06:49 That's not right. Um, Okay. So, there's four entities and we're split 30/30, 20/20. And I have a larger share, mostly because of finding, organizing, setting up the deal, underwriting the deal and really having a more active part in the asset management. However, everyone has their role. We all have weekly JV calls, their certain partners who help with the boots on the ground aspects, some of the contract contractor pricing and vetting taking minutes. Reaching out to local vendors. And then we have various projects that are taking place. So, each person has a role in that project, so it's not just me. And that's been really helpful. You often hear that multifamily is a team sport and I could not agree with that more. Could I have done this on my own? Maybe. But I think in the long run it would be very difficult to scale if you were to do this on your own. So, it's been amazing to have the help from my partners. Sam Wilson 07:50 That's absolutely right. And that's something that you know, we talk about a lot is the you've gotta have partners if you're going to scale, what's the, what's that line? If you wanna go fast, go alone. If you wanna go far it was, it goes, I can't remember the rest of the phrase, but something like goes a group or as a team, something like that. If you are listening to this, you're probably like, you got it completely wrong and Sam, you're right. I probably butchered that. But you get the big idea there. And that's funny cuz I had an investor call here, gosh, with me two weeks ago maybe, and they're like: "How many partners are on this deal? And I said: "There's four of us and here's...". And they're like: "Why are there four of you? And same question they posed to me and I'm like: "Let me just explain to you why there's four of us. Cause here's what the four of us are doing". And they're like: "Oh, that's a lot. I go: "Yeah, I just can't do it on my own. I could maybe, I, maybe if I were, you know, this was all, I did that one single deal maybe, but even then, it would be just a lot. Tell me about the 200 deals that you underwrote. I mean, that's a lot of underwriting in, a lot of patience. And a lot of feedback to brokers going, hey, this doesn't work. I mean, did the brokers get tired of hearing from you saying "No"? Vessi Kapoulian 08:51 Probably. And that's always a risk you take. But at the same time, I think it's even worse if you are kind of silent and constantly pulling deals because they see who's pulling the deals and the packages and of course they share that with their investor list. So, there is a way to track who's actively looking at these deals. So, I certainly didn't want to be the person who's only taking information and not giving them any feedback. And it's helpful for them to get that feedback because then they share that with the seller and certainly, we are entering different waters in the current market environment, but at the time when I was looking, everything was extremely competitive. Definitely a seller's market. So having that feedback is important. And yes, it took a lot of tenacity, but at the end of the day, it's important to know also why you're doing it. And my why is what was driving me. I think having clarity of goals and your why, will pull you up further during good times, push you forward during tough times. It certainly was not easy, especially when there's a lot of noise around and you hear people closing deals left and right, and here I am trying to find the one. Um, Also I will say that especially in the beginning, a lot of these deals I underwrote for reps because I really wanted to master underwriting. So even when I got a deal that I knew right off the bat, probably won't meet my investment criteria due to submarket location or maybe age of the property, this and that, I would still go and underwrite it fully. So, I could develop that muscle memory, if you will, of being very efficient in analyzing deals. And what that helped me also over time is learn the market learn expense, line items, vacancies, everything that you need in order to more accurately project the performance of the property. It was a learning exercise, but also a way to build relationship with the broker community. Sam Wilson 10:50 No, I think that's absolutely great. I mean, that's what a skill set to have really honed. Did you have any guidance along the way, helping you kind of define or refine that skillset? Vessi Kapoulian 11:04 Absolutely. So, I joined a lot of, there's a ton of online groups or communities that specialize in underwriting. There's also books and a ton of content that you can devour if you will. So, I definitely took advantage of that. Also, within the mastermind that I'm part of, people ask questions, support each other. So, I use, definitely utilize those forums. But really the most I learned is by actually doing it getting into those spreadsheets, diving into the formulas, and actually going through the packages and underwriting those deals. So, it was a combination of taking action and then continuous education. And I'm still learning. Underwriting is an art and a science. It's constantly evolving and that's what I love about it. So, I'm still feel like I have a time to learn. And as the market evolves. You evolve your underwriting with it. So, it's not something static, it's something fluid that constantly changes over time. Sam Wilson 12:02 What would you recommend if someone, and maybe you already answered this by saying the online community, you know, books that you can use, things like that. This is a conversation, actually, it came to me yesterday with somebody and they spoke. "Hey, I want to learn and master underwriting and, I've done my fair share of it, but I'm not sure I've mastered it. It's not something I spend my every day doing. But if someone were to follow in your footsteps, what would you tell them to do if they wanted to? Other than maybe getting their reps in, but to learn and master underwriting. Vessi Kapoulian 12:33 So, I would start by encouraging them to select a model. There are a lot of different underwriting models out there, and when people ask me which is the best one, my response is usually the one that's best for you. So go ahead, and try different models. Some are free out there. For example, Robert Beardsley has won and he wrote a book on underwriting that I've definitely, I've read. Use his model. So that would be one. They're paid ones. The ones I've used most frequently is the Michael Blank Syndicated Deal Analyzer. And there're a ton more. So, I would encourage people to experiment, see the one that's suits them best. And if you're an Excel guru, over time you can also build one of your own because there's always something lacking in each model. It's not gonna be perfect. But I would start there and then joining various underwriting communities. Saturday there's like a three-hour meetup focused on underwriting led by Charles Siemens, so that's one I attend regularly. That's a good way to start. And of course, if you're part of a mastermind, there are subgroups there. But those would be a few ways to get started. Is picking up a model and start to analyze deals. Maybe pick a deal, maybe not in your market if you're too afraid to start reaching out to brokers in your market. But start analyzing and maybe team up with a buddy, where you can compare notes and learn along with each other. Sam Wilson 14:01 That's awesome. That fantastic list of resources there for our listeners. Thank you for sharing all of that with us. One final question here for you, and maybe this will lead to other questions, so maybe I lied there, but tell me this: how has your underwriting changed in 2022? Vessi Kapoulian 14:19 That's an excellent question and I probably would have answered it differently at the beginning of the year, but a lot has happened since the Feds started raising rates in March of this year. There are a few changes that I'm making in my underwriting. From a top line perspective, certainly moderating my rent growth assumptions to low single digits versus high single digits or low double digits. So that's one. Normalizing the vacancy assumptions as well because occupancy levels are starting to decline and that's just part of the market cycle that we are in. On the expense side, being even more diligent with my insurance assumptions, particularly in Florida. Rates have increased exponentially and in some cases it's not uncommon for them to the preliminary call that you received from your broker to change by the time you close. So constantly staying in touch with the insurance broker to make sure those rates are relevant. Increasing my reserves for operating expenses and CapEx, on the CapEx front. That's partially driven by the labor and supplies, material costs. And then operating reserves, just building in more cushion at least six months. In order to have that protection, should the market turn even more sour. And last but not least, cap rate reversion. I know historically most people look at 10 basis points per year increase. I've accelerated that just based on what I'm seeing in the market today. And I, one example I would give is in the Orlando market. Cap rates are currently at 4.7 versus three same period last year, and most assets are now trading at five. So that is real, that is happening and not surprising, right? Given the pace of the interest rate increases. But those are some of the changes I've started to make into my modeling and projections to, in order to get more realistic, or one could even say more conservative. Projections and assumptions. Sam Wilson 16:24 I love it. Those are very tangible things that you're doing in your underwriting that really make a big difference in the beginning obviously the amount of money you're willing to pay for an asset, which is yeah, that's a... Vessi Kapoulian 16:34 Absolutely. Yes. And it's for sugar, unfortunately, right? I like to be conservative, but it's also resulting in return compression, which is now making deals even more difficult to pencil in. At least from my experience, while there has been some adjustment in seller expectations, maybe 10, 15% of the list price those seller expectations haven't fully adjusted. And that's what's leading to that return overall return compression. Sam Wilson 17:03 Right? Right. Yep. And that takes time for people to get realistic on what their assets are worth. I know I certainly have made an offer here last week on an asset, and they came back with another number and I just said: "We'll, just give this a little time". I know. In the next 12 to 18 months, we'll probably have a deal, but we're gonna have to give this a little time. So that's just the way it goes. Vassi, thank you for taking the time to come on this show today. Speaking of time, if our listeners want to get in touch with you, what is the best way to do that? Vessi Kapoulian 17:31 The easiest ways to connect with me through my website, dbacapitalgroup.com. D as in dream, B as in believe, A as in achieve. I have a ton of free content there to share with your listeners. And of course, there's my phone number, my email, as well as a link to my calendar um, should they want to continue the dialogue. Sam Wilson 17:52 Fantastic. Vessi, thank you again. Have a great rest of your day. Vessi Kapoulian 17:55 Thank you so much, Sam. Have a wonderful day and week ahead. Outro 17:59 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So, appreciate you listening. Thanks so much and hope to catch you on the next episode.

Why RV Resorts are an uninvested, undervalued asset that has great untapped potential? Today, Sam Wilson will tell us why. In this episode, the How to Scale Commercial Real Estate host shares his experiences on why he has invested in these spaces, how to make this investment scalable, and the things to look out for when we're acquiring these assets.   Sam Wilson is an active investor in self-storage, multi-family apartments, RV parks, and single-family homes, bringing vast industry knowledge from a diverse background to the show. Sam is the Founder of Bricken Investment Group, where he helps clients find commercial real estate syndication investments that align with their investing and lifestyle goals. Unlike other established real estate investors, Sam is in the middle of his growth journey. He invites you to rise alongside him and his team members as, with each conversation, he's learning too!     [00:01 - 07:11] An Investment of Possibilities   Sam shares with us, in a solo episode, about what he has invested in. Explains to us the difference between RV Resorts and RV Parks, who usually own these spaces, and the possibilities of expansion. Why Dynamic Pricing is a great opportunity to diversify your earnings and make your investment scalable.   [07:12 - 10:42] Uninvested and Undervalued   The potential of investing in an underrated and fragmented industry. Who are the demands of the customers and how to keep up with them Why RV rentals have the best tenants of all real estate investments.   [10:43 - 12:03] The Compelling Reasons for Investment in RV Resorts   A summary of the reasons why RV Resorts are a must-invest asset right now [12:04 – 12:36] Closing Segment   Final words     Tweetable Quote   “We've got expansion opportunities. We've got opportunities for storage on a lot of these properties. There's, again, I talked about utility build back. It's something we're working on right now where you can build back your utilities.” - Sam Wilson   -----------------------------------------------------------------------------   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.    Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:     Sam Wilson 00:00 Financing is good for it. The industry is fragmented. There are loads of room for operational improvement. We can buy the assets, right? And we're just really excited about where this is taking us. We've acquired one, two. Going on our third acquisition this year in the RV resort space, and really ramping that up here moving forward. But that's just kind of a cool asset class that nobody's talking a lot about and where we're just seeing blue ocean. Intro 00:27 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 00:54  How to Scale Commercial Real Estate listeners today you get me. I don't know what episode number this will be, but I'm sure we're pushing 700 or more. And up to this point, I've never done a solo episode. So here you get me today, where I'm gonna tell you a little bit about what we are investing in. This was a comment that I've received someone recently that said: "Hey, one. I've never heard from you on the podcast. And then secondly, I really don't know what it is you're investing in". I said: "Man, I felt like I communicate that pretty well". Obviously not.   01:23 So here we go. Today's episode we are going to talk about: Where We. Me. I guess it's just me standing here. I am gonna talk. About where I'm finding opportunity in the commercial real estate space right now, and that is in RV resorts. Those of you don't know anything about RV resorts. I'm gonna break down the difference between an RV resort and an RV park to start. An RV Park is gonna be something like a um, think Kansas, I think Interstate 70 in Kansas. It's gonna be a one-night stop. You're gonna pull in, you're gonna, you're going to stay there for the night as you finish your, or carry on your drive across the country.     02:01 You're looking for a place to plug in your RV, a place to dump your sewer, a place to get water and just spend the night and then you're gonna keep moving. I have no interest in buying RV parks. Those are fuel price sensitive. They are not places that retain customers. They are just a layover. I have stayed at plenty of RV parks in my time. And that's just not something that we have an interest in acquiring. An RV resort, however, is the destination. RV resorts are a place where people want to go and they wanna stay for three to four days at a time. There're loads of amenities on site. Think about things like pickle ball, tennis courts, game rooms, fishing, dog parks, swimming pools, water features, you name it. There's an endless array of things that we can be considered amenities at an RV resort. We want people, a camp store where you can get firewood, rent, golf carts, get your propane, you name it. We want to have those at our RV resorts. And it's something where people go with their family and they'll stay for two, three, sometimes four days at a time depending on what the suite of amenities may or may not be. That's what I want to acquire, and that's also where we are finding it just almost completely unmet demand. 03:18 Let's get into who owns RV resorts right now? It's largely a mom-and-pop owned operation. It's fragmented. Usually, it's a single asset. It's a couple that owns it. Again, said that's the only asset that they own. And the why we're finding opportunity on that front is because they don't generally possess the sophistication that maybe you would find across a institutional owner or you know, a more sophisticated owner such as ourselves, that own multiple resorts across the country. 03:48 That's the only thing they own. So, they haven't taken the time up to figure out the operational improvement opportunities. Especially because it's not scalable for them, cause it's their only asset they own. So they go: "Oh, it's not gonna make that big a difference here. It makes a huge difference for us if we figure out utility billback programs". Right? So, here's some of the things that we see for the operational improvement side of things in these mom-and-pop owned assets. One, many of them don't have a website. You just heard that. We have a property and a contract right now with no website. It has no online booking. It has enormous land opportunities attached to it, or we can expand the park. They may be a hundred percent full, but mom and pop don't wanna put the money into expanding the park because it's a big capital investment, understandably so. It's a lot of money. It costs money to expand a park. 04:35 So, we've got opportunities for expansion. We've got opportunities for storage on a lot of these properties. There's, again, I talked about utility build back. It's something we're working on right now where you can build back your utilities. Let's assume that somebody pulls in a big giant RV, a big 40, 40 something foot class A diesel pusher with three air conditioners attached to it, and they plug into your 50-amp service for the weekend and they run those air conditioners wide open all weekend long. 04:59 We as the owners go: "Oh my gosh, that's really expensive cuz we're paying utilities". Well, we're working on a program right now where we get to build those utilities back. Again, that's time and infrastructure or time and effort, put not into running the park, but into finding ways to creatively improve the bottom line on these assets that mom and pop just don't have the time to do because they're out fixing sewer lines, they're fixing water lines. They've got say frozen pedestals or whatever else is going on at the park. They're putting out fires, not thinking about ways to strategically improve the value of their park. We know what that brings when we improve the bottom line and what it brings to a future sale. So that said, there's just huge opportunities for operational improvement. I know I talked a little bit there about a website and online booking. Dynamic Pricing is something I haven't talked about, really at length with you yet. 05:45 Dynamic Pricing is something where we conservatively estimate that we can change the net operating income by 10% just by adding Dynamic Pricing. There's a park we bought earlier this year at the same price on April 4th that's on July 4th. July was the busiest weekend into the year. Why do mom and pop keep the prices the same throughout the year? Because they can remember it. Think about that for a second. "Oh, it's 49 bucks a night to stay." It should be 49 bucks a night maybe to stay on July, or excuse me, on April 4th. But on July 4th, when you have a waiting list and your resort is completely full, that probably needs to be a lot higher than that. So, implementing software solutions that dynamically priced the sites on a daily basis versus it's what it costs this year to stay here, no matter what day it is. That drives an enormous difference in revenue there at the end of the year. 06:34 So, we see huge opportunity for operational improvement. The next thing that we're seeing right now, and you probably heard a lot of what I've said here when I tell you this in the sense that these are operationally complex assets. That's probably the biggest detractor in this whole asset class is that it is operationally complex. You know, we just bought a resort that had the RV park, I'm gonna use the word park component to, it had a hundred sites. There is a marina on site with a couple hundred boat slips. There is a guide service. There're bait sales, there's a camp store, there's a restaurant, there's a 40-room motel. 07:12 On and on it goes, you go: "Wow, that's a lot of moving pieces". And it certainly is. And that's something that's part of the business that is both the blessing and the curse is that it is operationally complex. But the more complex it becomes, the less the competition is out there buying it. So that said, our going in cap rates right now, anywhere from nine to 13% and sometimes higher. Which is really just astounding. To think about that in the commercial real estate space, we can acquire a cash flowing asset at a 13 cap. That's our going in cap rate. That's not even our stabilized cap rate. 07:48 That's awesome. I mean, think about that, and then the number of levers that wehave to pull inside of these assets to drive revenue in a meaningful way. I know I mentioned a lot of 'em already, but just simple firewood delivery, golf cart rentals. You might think, Okay, that's a pain in the neck he's gotta manage that and run that and take care of the golf carts. Yes. That's what good systems and good people are for. But inside of that we can really change the trajectory of a property with 3, 4, 5 of those different items. And suddenly this property became way more valuable or the business became more valuable just based upon the operational improvements we were able to to pull off. So there you go. Going in cap eight, nine to 12%.     08:30 Talk about the demand side of things, so that gives you a little bit of color so we can buy, right? We have, this is an asset class that is largely underinvested in. It is undervalued, underinvested in loads of room for operational improvement. It's a fragmented industry, mostly mom and pop own. All of those things are great, but the real question is this an asset class that has legs to it? If you're listening to this, you're probably going: "Oh wait, yeah, this is great. But I mean, isn't all of this largely fueled by the pandemic? Isn't this largely fueled by the fact that, a couple years ago, everybody just wanted to get outside and be left alone, and isn't that gonna wane?" 09:05 This statistic will probably blow your mind a little bit. The largest group of RV owners in the United States right now is millennials with children. If you'd asked me that question three years ago, four years ago, I'd have said: "Now, you know, the largest group of RV owners would probably be somebody north of 60 on a national park tour, that's retired, going around to see the country and just having a good time. 09:29 That shift has been pretty dramatic and it's not really going anywhere. The people that own RVs there, it was KOA put out a survey here recently and they came back and said that 60% of the people that own RVs are looking for a bigger and newer RV. Wow. Okay. That tells you something about what people think about the RV industry. 09:48 Now, I mentioned, or maybe I did or maybe I didn't, but mention the fuel prices being one of the detractors to the RV space. And that's also one of the reasons that we love the RV resort idea. We're trying to buy assets that are within a couple hours of a major city. It's something where it's not gonna break the family bank to drive the RV to the destination, keep it parked there for the weekend. There is a a long-term component to the RV resort space that many people don't think about. A long-term component is this, is that 50 to 70% of the sites at most RV resorts are leased on a long-term basis. Think about that. It is a better tenant. It is someone that they don't live there all the time. That's the other thing is that it's just a space. This is their vacation home on wheels. So, they don't live there. They pay their site rate on an annual basis. And so, we get a better quality of tenant that pays on time, but isn't there very often. Great. 10:43 That's absolutely ideal for us in this space. Now we're gonna try to trim that back cuz there's a fine line. How many long-term tenants and how many short-term spaces to leave available. And that's a bit of guessing here as much as it is anything. And just looking at historical trends and figuring out where the right sweet spot is for that. But, that said, on the demand side, the people that are parking their RVs at these places and say: "All right, you know, I want to have my spot at XYZ resort cause I'm gonna take the family down there and we're gonna hang out every weekend and I'm gonna go fishing and the kids are gonna go, do whatever they do. Play in the swim in the pool and it's gonna be a great time". That demand just isn't gonna go anywhere once you get into that culture, if you will. We don't see that decreasing in any meaningful way in the near future. 11:28 So that said, there are a lot of compelling reasons as to why we are buying RV resorts right now. Financing is good for it. The industry is fragmented. There're loads of room for operational improvement. We can buy the assets, right? And we're just really excited about where this is taking us. We've acquired one, two. Going on our third acquisition this year in the RV resort space, and really ramping that up here moving forward. But that's just kind of a cool asset class that nobody's talking a lot about and where we're just seeing blue ocean. 12:04 So that's it. Thanks for listening in today. Certainly, appreciate you tuning in. That gives you an idea of what it is we're buying and why we're buying it. You know, if you need any insights on that or wanna talk further about. The opportunities that we see and where we're acquiring assets, feel free to reach out. But thank you again for tuning in here today. 12:24 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 Podcast, Spotify, Google Podcast, 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 hire on those directories. So, appreciate you listening. Thanks so much and hope to catch you on the next episode.    

This will be Sam Wilson's first solo episode. Listen in!   Sam Wilson grew up in Indianapolis, Indiana with a large family and lived there until he was 30. His family owned a flooring company and at the age of 25, he bought out a part of it. But his family sold the company and headed south, and got involved in real estate and invested in almost every asset class imaginable.     [00:01 - 05:36] RV Resorts as a Fragmented Industry Why they are considered as a mom and pop single asset business  The difference between RV resorts and RV parks Wanting people to spend all their money on site   [05:37 - 09:52] Room for Operational Improvement The cumbersome process of booking an RV resort Why it makes sense to expand the park and putting dynamic pricing Ways to add storage and to do utility build back programs on these facilities      Tweetable Quote   “We want to have what people need for an R.V. resort experience where they can take the whole family and they can stay there for three or four days and have a good time and not any, all the way, even down to restaurants.   We've got a resort we bought here recently as a restaurant. I mean, that's fantastic. That's exactly what you want.” - Sam Wilson   -----------------------------------------------------------------------------  Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com       Want to read the full show notes of the episode? Check it out below:     Sam Wilson 00:00 Usually a fragmented industry means that it's a single asset owned by a mom and pop owner. That usually is their only asset that they own, and they don't, generally not saying that they're dumb people or the people that aren't educated cause they can be really smart people. But they don't possess the sophistication to really take their business to the next level.   Intro 00:21 Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.    00:33 Hey, thanks again for tuning in here to the How to Scale Commercial Real Estate Podcast. I certainly appreciate it for those of you who listen to the show on a regular basis. Yeah, grateful for you. Thank you. Certainly appreciate it. This is the first time that I'll be doing a solo episode, which means it's just me.That's all you get today. I'm sorry about that. When this goes live, we'll be north of 700 episodes. And somebody told me this the other day. They said, Hey, Sam, you've never done a solo episode where it's just you talking to us and telling us what you're investing in and how you're investing. And I just don't know that much about you.I'd love to hear directly from you on a show. So I can do a couple things here today, and I think this will be. Kind of the format that we're gonna go with today, which is, first off, I'm gonna tell you a little bit about my background, which I'll keep pretty short. You can probably hear that story on a lot of other shows before we get into that. And then secondly, I'm gonna tell you what we're investing in.So part one here, I'm gonna go and hopefully this'll be short for you so you don't have to endure too much of it. Part one is that I grew up in Indianapolis, Indiana. I've got a very large family up there, Lived there till I was 30. My family was involved in the trades. We owned a flooring company and I bought out part of that when I was 25, and then sold that part of the business when I was 30 and I headed south. I hate the cold, actually. I like the cold. It just didn't like Indiana. Midwest weather in the winter. It seems like it drags on for about eight months of the year with about 40 degrees in gray in the occasional snowstorm, which makes just kind of for a miserable winter experience. So we sold that company and headed south. I didn't know what to do next. Got involved in real estate and many iterations later. I've invested in every asset class imaginable, at least I think almost every asset class imaginable and many iterations later of investing solely. RV resorts, which is what I wanna talk to you about today.      02:35 The opportunity that we're seeing in RV resorts right now is pretty astounding. So let's talk about why investing in RV Resorts is a good idea right now. Let me give you a couple quick highlights and see if it makes sense for you first, and for. RV resorts are a fragmented industry. Anytime you see in real estate or business or otherwise, whether it's a fragmented industry, meaning that there's no major one player or player yours, it's ripe for consolidation. Usually a fragmented industry means that it's a single asset owned by a mom and pop owner. That usually is their only asset that they own, and they don't, generally not saying that they're dumb people or the people that aren't educated cause they can be really smart people. But they don't possess the sophistication to really take their business to the next level. Hey, this is an income producing asset. They're enjoying it. It's fine. They're working hard at it, but they don't have that broader kind of picture of going, Gosh, we can take this bigger and make it so much better. So, RV resorts certainly fit that bill for a fragmented industry. I wanna differentiate for you real quick, the difference between RV parks and RV resorts. An RV park is something that you're gonna find roadside, middle of the country. You know, one stop, you know you're gonna stay there overnight, maybe you're crossing the country. My wife and I have done plenty of traveling in our RV and certainly have stayed at our fair share of RV parks, which is I'm driving across Oklahoma, Kansas. Nebraska, wherever it is, you need to stop for the night, plug in, empty your tanks, whatever, and then get up the next morning and keep riding down the highway. That is not something we are interested in buying, and there's a lot of reasons for that. But an RV resort on the other hand, has amenities to it. Think swimming pool, pickle ball courts, tennis courts, fishing. Game rooms, you know, events on the weekends. There's golf cart rentals, there's dog runs, there's dog parks, there's all sorts. The number of amenities that you can find at an RV resort is practically unlimited. So that said, we are buying RV resorts. We want something that is a destination. We want people to show up there and stay there for 2, 3, 4 days at a time and not feel like they need to leave for anything really at all. All the way down to having a really robust camp store, alcohol, sales on site, you name it. We want to have what people need for an RV resort experience where they can take the whole family and they can stay there for three or four days and have a good time and not any, all the way, even down to restaurants. We've got a resort we bought here recently as a restaurant. I mean, that's fantastic. That's exactly what you want. You want people to come and stay and spend all their money, kinda like a casino. You want 'em to come and stay and spend all their money right there on site and have no need to leave the grounds. That said, that's exactly what we're looking for is RV resorts.       05:36 Let's go back to the comment that we started off early as to why a fragmented industry is so important, because it's fragmented, because there's a lack of sophistication, there's loads of room for operations. For example, a resort we have under contract right now, if it has a website and I even need to look, I don't think it does, but I know they don't do online booking. They have enormous potential for expansion. They are by and large, almost a hundred percent occupied. One of the things that we'll find is that these RV resorts have loads of room for operational improvement. This goes back to the fragmented industry, mom and pop owned. Think about things like a. Or online booking. You take those for granted in Airbnb or in the airlines or in the hotel industry? The RV resort industry, not so much. I acquired a park earlier this year that literally had a Hotmail email address. You had to email someone at whatever it was, 1, 2, 3, at hotmail dot. To request a site, you know how cumbersome that is, that booking process is, That means there's somebody else on the back end checking their email going, Oh, hey, yeah, we have a site of, I mean, the back and forth on that's maddening should even just, just give 'em a phone number. I mean, that's even better. But one step better than a phone number of course is online booking. And then one step better than online booking is online booking on your website. That's driven by dynamic pricing. Something that the rates fluctuate based on occupancy in demand. This same resort had the same price on April 4th as it did on July 4th. Now, July 4th, I wanna remind you, is the busiest weekend of the year. That is the chief money maker in most RV resort scenarios, and they had the same price April 4th as July 4th. Like why? Cuz they could remember. That way when somebody calls or someone gets checks, the Hotmail address and they say, Hey, what's the price this day here? They're like, Oh, well it's, you know, it's $49 a night. Well, that doesn't make any sense. That doesn't make any sense to me, and I'm sure it doesn't make any sense to you as the listener going, Well, shouldn't prices change based upon demand? Yes, they should, is the short answer. But this goes back to the fragmented industry being mom and pop owned and why there's so much opportunity there. Ad dynamic pricing at online, booking at a website, capital expenditures, Here's. Is that because mom and pop own this and we need to put a million dollars say into expanding a park, which is a lot of money. Don't get me wrong. A million dollars is a lot of money. But if we can bring in the capital partners, if we can arrange the debt such that it comes in, and we can say, All right, we can expand the park, and we have the finances to do so, that's great. We understand that. But if it's your only asset that you. And you go, Gosh, man, a million dollars, and let's say that we put a million dollars into this and it throws off another 130,000 bucks a year and gross revenues, Man, the payoff just isn't there. For someone that's looking to retire in five years, they just don't see it. Well, for us, again, going back to expansion or capital expenditures, expansion, being part of capital expenditures is that we look at that and go, Okay, wait, you're a hundred percent full. Like one of the resorts we acquired this year is a hundred percent full in the rv. Part of the RV park, part of the business. And we go, It only makes sense to expand the park. You're completely full. You have a wait list, you've gotta expand the park. And secondly, you need to up the prices. And thirdly, you need to put in dynamic pricing. Cause you know that already covered the why on that. So that said, lots of room for operational improvement. There's ways that we can add storage to some of these facilities. There's ways to do utility build. Programs where your longer term tenants, yes, I shouldn't say tenants, but longer term stays are getting billed back for utilities on a per site basis.      09:27 Hey, thanks for listening to the How to Scale Commercial Real EstatePodcast 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.

Jon Dwoskin was interviewed by Sam Wilson, host of the How to Scale Commercial Real Estate Podcast. In this episode, they discuss being stuck in your business and how to use customized coaching to get unstuck and grow your business. Jon reveals the common challenges most business owners encounter and mistakes they need to remedy.   Connect with Jon Dwoskin: Twitter: @jdwoskin  Facebook: https://www.facebook.com/jonathan.dwoskin  Instagram: https://www.instagram.com/thejondwoskinexperience/  Website: https://jondwoskin.com/  LinkedIn: https://www.linkedin.com/in/jondwoskin/ Email: jon@jondwoskin.com  Get Jon's Book: The Think Big Movement: Grow your business big. Very Big!

Sam is an active investor in self storage, parking, retail, multi-family apartments, RV parks and single family homes. He hosts the How to Scale Commercial Real Estate Podcast and participated in over 30mm in acquisitions in 2021.Main Points:Invest in fragmented industriesBuy Boring businessesBuy for Cashflow, forget the IRR or equity multipleDon't follow the herd, use them as your canary in the coalmineContactwww.brickeninvestmentgroup.com/checklistsam@brickeninvestmentgroup.comwww.linkedin.com/in/brickeninvestmentgroup/

More on YouTube? Check the video version on YoutubeWho is the Guest?Samuel Wilson is an active investor in RV parks and RV and boat storage, with experience in multifamily, self-storage, parking, and land. He hosts the Daily How to Scale Commercial Real Estate Podcast and participated in over 30mm acquisitions in 2021.Sam holds his bachelor's degree in business finance from the University of Memphis and holds his real estate license in Tennessee. In addition to his years of real estate experience, he also has a diverse background in business ownership, building construction, and management.Visit him at https://www.linkedin.com/in/samwilsonhowtoscalecre/  & https://brickeninvestmentgroup.com/ Start taking action right NOW!Goal-setting the right way! Hesitant to make the first step towards real estate investing? Axel learned the hard way- but you DON'T have to start that way. Feel free to talk to him :)Connect with us through social! We'd love to build a community of like-minded people like YOU!

In this episode, we welcome Bradley Kirschbaum. He started focusing on the stock market and understanding how it worked. He then realized that real estate was a more attractive investment because it is more stable and has the potential for more cash flow. Instead of hanging on to dollars, Bradley emphasizes the need for people to start investing in assets that will yield better returns in the long run. He also expresses his opinions on the current market conditions and shares why they are interested in holding properties for a decade more.   Bradley's experience as a naval officer established the bedrock of his capabilities as a Co-Principal of Symphony Capital Group. He's a former naval aviator with a well-demonstrated history of planning and executing in demanding management positions. Bradley is well versed in creating real-time solutions within complex environments. He embraces the challenge of finding and managing assets that will perform well for Symphony's investors.     [00:01 - 04:02] Making Money Work For You Why Bradley started investing Discovering the stable and solid cash flow from real estate Their goal to be one of the biggest brands in the industry   [04:03 - 17:08] Navigating the Fast-changing Economy There is a lot of opportunity in the market, but things are changing in the blink of an eye Issue of supply and demand There's not enough inventory Bradley on the Federal Reserve People need to own assets  Even if investors don't desire the property, the tenants still desire the property The advantage of longer asset holds   [17:09 - 19:09] Closing Segment Reach out to Bradley!  Links Below Final Words Tweetable Quotes   “It's not just about growing some bank account into a certain number you think you need to hit. It's about being able to cover down and cover your life expenses, your business expenses, and the unexpected next month.” - Bradley Kirschbaum “Human beings are going to need units. And if there's more human beings and not an increase in units, that supply-demand issue still favors the investor who's accumulating real estate.” - Bradley Kirschbaum -----------------------------------------------------------------------------   Connect with Bradley! Email him at bradley@symphonycapitalgroup.com and head over to the Symphony Capital Group website.   Resources Mentioned: Ken McElroy  Neal Bawa   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Bradley Kirschbaum  00:00 Cash flow is important because while people might not pay that premium price for my unit, I'll still be making money because if a physical or economic asteroid hits the United States, tenants still need somewhere to live. And if the dollar rapidly starts changing up or down, that rent roll is going to reflect where the dollar went, and that cash flow is more important than what price people are paying today for the property so long as we know we can keep paying our expenses, keep paying our debt, and maintain the asset.   Intro  00:29 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  00:41 Bradley Kirschbaum has been investing since 2012. He's personally grown to love real estate over the last decade. Right now he's transitioning to a full-time general partner role after being 10 years as a helicopter pilot. Bradley, welcome to the show.   Bradley Kirschbaum  00:55 Hey, thanks, Sam. I'm glad we could catch up after meeting at Best Ever Conference.   Sam Wilson  00:59 Absolutely. Had a blast meeting you then as well. That, of course, is a great conference to go to, for that one, as always, every year. Tell us, 90 seconds or less, where did you start? Where are you now? And how did you get there?   Bradley Kirschbaum  01:10 2012, I graduated, started making my first real paycheck and immediately knew I wanted to be investing my money so it would work for me. And long story short, I really started focusing on the stock market, started focusing on things that were fairly easy to get into, and got to know equities and understand that side of investing fairly well. And the more I understood it, the more real estate looked attractive to me, that's really the long of the short of it. You do have to realize that there are a lot of things out of your control when you buy equities, limited amount of stocks have cash flow. And once you look at why you're investing, and what you're trying to get out of that, you really have to focus on the fact that it's not just about growing your nest egg, it's not just about growing some bank account into a certain number you think you need to hit. It's about being able to cover down and cover your life expenses, your business expenses, and the unexpected next month. If you can't do that next month, what does 25 years down the road matter? It really doesn't. And that's one of the aspects that I find attractive about real estate is that you can find very solid cash flow or dividends, if you will, from your rental income, which when you look at the different products people invest in, rental income, it's not a sure thing, but a lot of your customers want to pay that check, right? Compared to buying into an Apple product or the next software product, whatever it is, people know every month, they're going to be writing that check. And that's how I start measuring the stability and kind of the risk evaluation of why I'm buying into one product or another. So I've got a million analogies and a lot of things to say on that. But when you talk about growing wealth, I like the stability, the scale and the cash flow of real estate.    Sam Wilson  02:51 You've been a limited partner, would you say now for six, seven years? Is that right?    Bradley Kirschbaum  02:55 I think my first investment as an LP in a real estate investment was seven years ago? Yep.   Sam Wilson  03:02 What's your goal long term? Is it to be a general partner, not be a general partner but to have a giant active portfolio? Or is your ultimate goal to be a passive investor?   Bradley Kirschbaum  03:12 Oh, that's a good question. Sometimes I question that myself. You know, life ebbs and flows. And some days you want to build the dominating brand of the industry and other days, you're like, Man, why don't I just treat myself to you know, sitting back, picking out deals from my laptop and drinking cocktails on the beach, right? But for the next 10 years, I'm dead set and my group Symphony Capital Group, we're focused on building a brand that's synonymous with some of the biggest in the industry. And we enjoy and we like getting into the weeds on all of these things. And being an LP is eventually the end goal. And I think, you know, down the road, when I've got a little less energy, and I want a little more time to myself, I'll enjoy looking for great groups and other people to invest with. But for now, I enjoy bringing my capabilities and my understanding of this business and this market to other people and being able to run a business model off of it is just the cherry on top.   Sam Wilson  04:02 What are you looking at right now on the active side of things? Like where do you guys see opportunity?   Bradley Kirschbaum  04:09 So there's a lot going on in the market, a lot of aspects are shifting, all the prices are different than you would have seen two years ago. And in the course of real estate, that's basically things changing in the blink of an eye, right? We're not, I'm in favor of a few things. Fundamentally, I'm in favor of anything that has heavy cash flow, because, you know, all returns are really theoretical until they're in your wallet. And as you receive your cash flow, you're really taking risk off the table. And of course, as I alluded to, before talking with you, you know, if you're not getting paid that investment is just a rock and it's not really doing anything for you. I'm a fan of that. But in some of these hot markets, there's things that can't be ignored either. I mean, people are, you know, using this large delta between the previous rent roll or I should say going rent rate of a market that was seen a year or two ago to what people are paying Today, because of the large delta, how quickly that's changing, you know, syndicators and groups are able to do some, some interesting number manipulation and get into a property and get out of it in just two or three years, and make some serious equity for investors. And I'm not going to ignore that opportunity either. And right now Symphony has seen that throughout Texas in particular, in the DFW Dallas Metropolitan Area.   Sam Wilson  05:23 We're seeing that. Obviously, we're all seeing that, is there any concern that you know, the musical stop, and maybe that same two to three year turnaround that we've seen in so many properties, I've been a recipient of that myself, it's been great. But what if the winds shift? Then what do you do?   Bradley Kirschbaum  05:39 I'm not sure that the window will last, right? This rapid of change would basically annihilate most of the population of the United States. I mean, if we keep having rent increases of 10 to 15%, or greater in the major metros, it'll very quickly not work, right? There are huge growth in the populations that we've been hunting around. So it's not just about rent growth, it's about more foot traffic, more individuals needing units, that's huge and critical. But at the surface level of our underwriting, we're really ensuring that should the rapid rise stop, whatever number it stops at, we don't need an increase, right. So we're we're buying today, our numbers on a five-year plan worked out with very minimal increase of bottom-line cash flow that the property is currently creating. We don't really need the markets rise. But that's a huge cherry on top and enables those very quick transitions in two or three years. You know, being able to do that and get a property off your hands and provide people a substantial return in two or three years, is the icing on the cake. But realistically, we're prepared for much longer holds. And that's what we underwrite to being able to condense everything into a quicker timeline is just a bonus when it's achievable.   Sam Wilson  06:54 Right. Tell me about your expectations on cap rates. And maybe we'll compare that to rising interest rates. Do you think there's a correlation there? I hear this both ways on the show all the time, one's like No, there's not. Yes, there is. What's your take?   Bradley Kirschbaum  07:09 So I've read so many articles and listen to so many people. Ken McElroy is great. I love his data. Neal Bawa has some interesting data. And I'm starting to fall into the camp and I think I've been falling into the camp of they're just simply isn't enough inventory. And that's probably a greater factor on cap rates than interest rates have been, even if interest rates go up another 100 dips, they're starting to trickle up there. And the Fed has finally established that they're officially raising them this year through a series of events. But even if it jumps back up to two years prior, the current rate two years prior, right, we've pushed another $24 trillion into the economy, right? Like that money's going somewhere that's spreading out. And that money's pouring into all different types of assets, including commercial real estate, combine that inflow, which is the simple fact that another 100,000 people moved to Dallas last year. And by the way, how many units were created? I don't believe it's even 112 of the amount of foot traffic that came to Dallas, like that's a huge, huge supply-demand issue. And it's not going to be alleviated quickly. So there are great fundamentals here at play. And one note that I want to attach to this Federal Reserve conversation, and I think everyone should consider it is that most of the individuals I talked to who are 65 and older, and I'm talking to them, because for some advice, or one or two of the specific people I'm thinking of, they are mentors to our group, more efficiently or so. And they never ever considered the Federal Reserve rate prior to about 2009, right? Like, that was not in their daily conversations. That's something that we've become fixated on. That's something that's become powerful. That's something that's become a part of public policy. Modern monetary theory has become a dominant conversation and course of action in Washington, DC, but interest rates existed in the 70s. And in the 70s, they were not concerned with where the interest rates were moving. Of course, they cared about what their debt was, of course, they cared about what the rate would be. But the general conversation over what the Federal Reserve's actions and activities would be for the rest of the year was not being discussed. And why? Because at the end of the day, regardless of what the Federal Reserve does, human beings are going to need units. And if there's more human beings, and not an increase in units, that supply-demand issue still favors the investor who's accumulating real estate. If I can add another 30 seconds to this, with a slight shift of gears, it would be that, at the end of the day, even if you are paying a premium and we do not do this, but when I do see teams beat us at best and final and there are individuals that are paying a price per unit that seems absurd, or people wonder how you could ever make money, right? The real key right now, and the fact of the matter is that people need to be getting out of cash and getting into assets. And the only way to create more money than what you currently have today is to own an asset. That is more fundamentally important to your value and your ability to create more money than what price you purchase that. You cannot expect. Let's say real easy example, if you hang on to dollars, you're probably going to lose somewhere between five and 10% on that dollar over the next year, at least. If you purchase a piece of real estate, and you pay an extra 5%, more than the next guy, you've already, you know, shielded yourself from inflation, because now you own an asset is going to appreciate with whatever that inflation is on your dollar. And the next year, you're quite simply going to recoup that overpayment, right? It's there a lot of fundamentals here that people are ignoring. And think it's just very important to realize how many people and how much cash is really flooding this space right now. And I think that will continue out for the next two or three years.   Sam Wilson  11:05 Oh, for sure. There's two different, you know, people, schools of thought, someone, I'm not going to name names right now with a pretty prominent advocate of a potential short window of deflation coming. And I'm like, I just don't see it. Like, maybe I'm wrong, and they cite some pretty historical stuff. And I'm like, Oh, that's interesting. But we've never printed this much money. So you know, finding things that that you can reprice with inflation, as you're saying, you know, you buy it today. Okay, so you pay 5% more for it. Can you reprice it with inflation? I hope so. You know, that's the question that we asked commonly on this show is, at what point in time, can the rent increases? I know you guys aren't necessarily underwriting, rent rate increases to be critical part of your business plan. But at what point in time, does the end user not the tenant not able to keep up? You know, if they at some point, they just can't pay anymore. It doesn't matter what the demand how much they need it, if they just can't afford it. I don't know, it'd be an interesting thing to see out shake.   Bradley Kirschbaum  12:06 This is what's important too. And I know you have a certain flow to your show, Sam, but I want to throw another 30 seconds in here. Because this point I made to a potential investor the other day really summarizes my train of thought right now in this hot, hot market, right? Let's imagine an economic asteroid hits the United States, okay, you know what will happen? People probably won't continue to flood into real estate as investors, a lot of people have to change their decisions, a lot of thought processes will change, a lot of people hit hold. And that's why the cashflow is important, because while people might not pay that premium price for my unit, I'll still be making money because if a physical or economic asteroid hits the United States, tenants still need somewhere to live. And if the dollar rapidly starts changing up or down, that rent roll is going to reflect where the dollar went. And that cash flow is more important than what price people are paying today for the property. So long as we know, we can keep paying our expenses, keep paying our debt, and maintain the asset. I can wait 5, 10, 15 years theoretically to outlast whatever is keeping people from wanting to purchase multifamily real estate. And in the meantime, I've got that delta I have that cash flow coming in from the tenants who pay us for what is currently something they desire, a place to live for walls and a roof. Even if investors don't desire the property, the tenants still desire the property. That is what protects you with those short-term hiccups and the potential for something crazy to go down in 2022. I'm not too concerned what happens in the next six or 12 months? I'm concerned with whether or not I could theoretically hold this asset for decades.   Sam Wilson  13:43 Right, when you guys underwrite, are you underwriting an exit in five to seven years? I mean, because that's a lot of times what people I think are wanting. That's just, all right, yeah, we'd like to, you know, double our money in five years if we can. And obviously, it's all projection, like you said, I think the word you used earlier was, it's theoretical until you have the money in your wallet. Well, it's some guy named Bradley on my show, that what you guys are doing is underwriting five to seven years with that asterisk, they and hey, you know what, that's if, and otherwise, we're just gonna hold it and collect the coupon along the way if we need to,   Bradley Kirschbaum  14:14 We are doing it to five years on every property we've entered into. And here comes the big caveat, because I find interest in holding for decades. It's hard to convince investors to continue to hold when you know, today, we could give them to extra money. And we could do it at a very nominal, if any tax liability, right? They're like, What are you talking about? Give me my money. And then my question always is, what are you going to put that into? And when you're 2x in something in a couple of years, that's a substantial change in your portfolio. I mean, that's great. Whether it's a large piece or small piece of your portfolio to 2x just naturally makes you want to receive that income and take your gains. But, you know, again, we're going to be around not just for two to five years. But we as people are going to be around for hopefully another 30, 40, 50 years. And that's what I'm worried about. And when you go back to what could happen in the environment, I want to keep holding, so the tenants pay down our debt service coverage ratio, because that's true wealth, doubling up your money, that's fantastic. You're getting rich, having an asset that has a larger and larger delta, between, you know, remaining your asset, or needing to be sold. That's so critical to outlast, seeing those economic events that are eventually going to happen, eventually going to happen as the money makes its way through the economy and other factors come up, there will be issues one day, and I want my delta between covering my expenses, and having been forced to sell the property to get larger and larger so that I sleep better at night. Sure, that means holding off on taking that sweet equity increase that we're doing through forced appreciation. But that means my cash flow will continue to go up, and my investment will get safer. And when you go back to why am I investing, it's so that I can be 67,70 years old, with a very stable portfolio with a very stable income. And guess what, waiting that long coincides with paying off that assets, it coincides with making these assets safer. So we are pursuing and I think as time goes on, myself, and the symphony crew will pursue working with more investors who have that long-term vision. And there are interesting things where you could even hand off and kind of sell yourself, your short term flip, if you will, that was a three to five year business plan and sell that to your capital that's interested in longer hold, you create some efficiencies there becomes less expensive for everyone. But really, we are interested in decade plus holds in the long run, I think that will continue to be more attractive, as the ability to quickly flip becomes harder and more and more difficult.   Sam Wilson  16:50 Right? Yeah, I love that. And that's where I'm starting to see that shift in the investor conversations. I'm hearing that more and more people are like, you know, I love the equity multiple, but it's also really nice, just to have a set it and forget it never have to find. I mean, that's another problem. I'm sitting on Capitol myself right now. And I talked to at least seven people a week, you know, deal sponsors, I could put, you know, passive income out there, you know, with and it's like, I'm not even sure where to put it. And I think other people run into that to where they're like, alright, so much opportunity but what makes sense right now? Where do we as bad to investors want to put money that it makes sense? You double your money, it's cool, and then they're back to square one going, okay? Now what I do with this, and again, that's a good problem to have. It's a great problem to have. But it's also just another one of the kinks in that equation where people go, okay, maybe we do hold it for a decade or longer. What does that look like? Can we harvest the equity through refinance and continue to hold the asset? Man, that becomes a very, very attractive thesis. So love you breaking that down. Thanks for doing that with us, Bradley. And thanks for coming on the show today. Certainly appreciate it. Last question for you is this if our listeners want to get in touch with you or learn more about you, what is the best way to do that?   Bradley Kirschbaum  18:00 bradley@symphonycapitalgroup.com. symphonycapitalgroup.com is obviously our website. I'm very easy to find on social media, right here, this side. There's the info right there as well for those of you who are watching this, but I'd love to talk to anyone about anything in this industry, both as a GP and an LP I think it's a great setup and as the syndication industry grows, I think only become a more and more refined situation with more and more people aware of, there is something else out there besides Wall Street to invest in, and a way to do it without needing to put a whole lot of time or effort into it via the traditional methods of investing by yourself in real estate. There is a great and a better way.   Sam Wilson  18:39 Awesome, Bradley, thanks so much for your time. Do appreciate it.    Bradley Kirschbaum  18:42 Thanks, Sam.   Sam Wilson  18:43 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.

Do you want to work only because you want to and not because you have to?   Rachel Richards has built a real estate portfolio of 38 units by the age of 26 and is now passively earning $20,000 per month. In this episode, she tells us how she stopped trading time for money by investing and opening up passive income streams other than real estate. She also shares why she continues to work and find ways to challenge herself even after “retiring” and achieving financial independence.   Rachel Richards is the best-selling author of “Money Honey” and “Passive Income, Aggressive Retirement.” Listen in to know more about her journey!   [00:01 - 07:54] Living off of $20,000 in Passive Income Monthly Rachel on being a finance nerd and on her experience in the industry Why people should look for off-market deals This is how she found their first duplex From self-managing to hiring property managers to self-managing again The biggest mistake they made so far Don't be cheap! Owning real estate out of state   [07:55 - 14:15] Passive Income Strategies You don't have to own a rental property to generate passive income Self-publishing and making $4,000-$10,000 a month  Rachel's goal to make income more and more passive Being a limited partner Setting boundaries and being more intentional  Looking at opportunities in mobile home parks and self-storage Screening syndications and doing due diligence   [14:16 - 17:55] Creating Impact Through Her Work Living freely and having time for things that fulfill them Writing to inspire others, especially women Doing what serves them and the people around them   [17:56 - 19:06] Closing Segment Reach out to Rachel!  Step into the path of financial freedom with Rachel's FREE Passive Income Starter Kit! Links Below Final Words Tweetable Quotes   “Being cheap can cost you a lot more money in the long run. This is not the place to cut corners when you hire people like contractors and property managers.” - Rachel Richards “Don't be afraid to invest out of state. It really forces you to be an efficient property manager and owner of real estate.” - Rachel Richards “I want to make a big impact and help as many people as I can. That's what I'm passionate about, especially helping women.” - Rachel Richards -----------------------------------------------------------------------------   Connect with Rachel! Follow her on Instagram and visit her website, Money Honey Rachel. Get her FREE Passive Income Starter Kit, and check out her books, Money Honey and Passive Retirement, Aggressive Income, to know more about money management, personal finance, and investing!   Resources Mentioned: Rich Dad Poor Dad by Robert Kiyosaki HOLD by Steve Chader The Hands-off Investor by Brian Burke Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Rachel Richards  00:00 The great thing about moving away is that we've been forced to streamline, and systematize all of our processes and doing that has made self-managing so much easier. I was so afraid to move away. But owning real estate in another state is so freeing and it's a lot easier than I thought. So if that's anyone's hang-ups if you're listening, to don't be afraid to invest out of state, it really forces you to be an efficient property manager and owner of real estate.   Intro  00:27 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  00:39 Rachel is the best-selling author of Money Honey and Passive Income, Aggressive Retirement. She built a real estate portfolio of 38 units by the age of 26. Rachel, welcome to the show.   Rachel Richards  00:50 Hey, Sam. Thanks for having me.   Sam Wilson  00:52 Hey, pleasure's mine. Three questions I ask every guest that comes on the show: 90 seconds or less, where did you start? Where are you now? How'd you get there?   Rachel Richards  00:58 I started my real estate investing journey in 2017. My husband and I purchased our first duplex that year. And within two years, we scaled our real estate portfolio from zero to 38 units. When people hear that they make some assumptions. So I'll get those out of the way. I'm not a trust fund baby. And I never made six figures from a job or career. So let's see, where am I? Now I am now investing in syndications. I've invested in eight syndications as LP as a passive investor, and I'm now financially independent and living off $20,000 per month in passive income.   Sam Wilson  01:35 Wow, that is really cool. Congratulations and a job well done. Zero to 38 units in over how many months was that?    Rachel Richards  01:43 24.   Sam Wilson  01:44 24 months. Okay, so you're buying a property? We're actually more than one and a half properties a month.   Rachel Richards  01:50 It was six buildings. 38 doors.   Sam Wilson  01:53 Six buildings. 38 doors. That helps. So you're not, one and a half transactions every single month. Got it? Six buildings. 38 doors. That's cool. Absolutely. Love it. Is this tell me? Is this all you're based in Denver, Colorado? Is this all in Denver?    Rachel Richards  02:06 This was all in Kentucky where I lived for 20 years.   Sam Wilson  02:10 Okay, cool. So you had some experience, obviously, in the local market there? What did you do? I mean, to identify that many assets and that short of a time, what were you doing to do that?   Rachel Richards  02:21 So I've always been a finance nerd. And my whole life proud of it. And I read Rich Dad, Poor Dad in high school. I, after college, I was a financial advisor. I also took a couple of jobs, working with a real estate investor and learning from him, and then working under a realtor. So I did have some experience in the industry. And I read every book I could get my hands on. One of my favorite ones is this book called Hold by Steve Chader. That one was really helpful in learning how to analyze properties. One of the important things I think, for people to do right now is look for off-market deals because the market is so intense. The MLS is saturated and competitive. And it's really difficult to find good deals if all you're doing is looking at the MLS. One of the ways we found our first duplex was pretty much an off-market deal. So we looked at the withdrawn and cancelled and expired listings on the MLS. And I was reaching out to those list agents to find out what happened. You know, why did the seller take it off the market? Did they change their mind? Are they is it going to come back up? And I remember feeling like I was pestering this one list agent about this duplex for months. But really, I was just trying to be polite and stay top of mind. And when the seller was going to relist it, she reached out to me first and she said, Hey, this is about to come back on the market. Would you like to make an offer, which was really beneficial because I could make my offer before anyone else did. And that is how we got that first duplex.   Sam Wilson  03:45 Wow, that's cool. Now, did you self-manage these? Or do you self-manage these? Are these be plugged in the property management company? How do you handle that?   Rachel Richards  03:54 We self-managed until we got to about 26 units, I think. And here's the thing, my husband and I were working full time. So we were working 40 to 50 hours a week, I was writing my book in the evening. And we were acquiring and managing our rental properties on our own on the weekends and everything. So once we got to 26 units, we were like we definitely need a property manager. And we've made our share of mistakes, hiring property managers as well. But now to this day, we're back to self-managing.   Sam Wilson  04:20 Okay, that's really Yeah, that's interesting, because you at some point, you're right. You need that outside help. But it sounds like there were some mistakes made along the way where that help wasn't so very helpful.   Rachel Richards  04:30 Absolutely. This is our biggest mistake to date. So my mistake is that I tend to be too cheap and being cheap can cost you a lot more money in the long run. This is not the place to cut corners. When you hire people like contractors and property managers. You don't cut corners here. So what we did is we were looking for a property management company and we you know, they charge you anywhere from 10 to 12%. And we had this couple that was working for us doing things like maintenance lawn care, they were so hard working, some of the hardest working people we've met, and they always went above and beyond. So we figured let's make them employees of our company, and they can be our property managers. We can save some money and be a little more hands-on in the way that we are training them and managing them to manage our properties, felt like a win-win, right? It was not, it was not a win-win. It was a win-lose. So everything started off great. And then about six months in my husband went to pick up rent from the onsite lockbox is one weekend, and he noticed a lot of rent was missing. And it was not just the normal tenant or to paying late, it was a significant amount. So come to find out this couple had stolen $6,000 in rent that weekend. And we found out they had been squatting in vacant rooms and units in our properties for almost a year. Devastating. Yeah, it was one of those occurrences where I was like, we should quit. This is not meant for us. This is awful. And that lasted for a few days. And I got over it, but it was devastating and such a violation of trust. And the moral of the story is that, again, this is not the place to be cheap. You need to hire a licensed, insured, properly-permitted, you know, everything reputable property management company, because if we had done that, and one of their employees had stolen rent from us, they would have been liable for the damages, not us. So it's embarrassing to share. Because in retrospect, it seems so obvious. It's so naive of us to have done that, but I share it in the hopes that others will learn from my mistake.   Sam Wilson  06:24 Yeah, no, thank you for taking the time to share that that is painful. I mean, I'm curious, you said your husband had gone to pick up rent from the on-site lock boxes. Now you live in Denver, and these properties are in Kentucky. So were you flying back to go pick up rent monthly?   Rachel Richards  06:39 No, we were still living there at the time. So we only moved to Denver a couple years ago.   Sam Wilson  06:43 Got it. Okay, cool. Wow, that's really intense.   Rachel Richards  06:46 Yeah. Now, we're not quite that dedicated. But the great thing about moving away is that we've been forced to streamline, and systematize all of our processes. And doing that has made self-managing so much easier. I was so afraid to move away. But owning real estate in another state is so freeing, and it's a lot easier than I thought. So if that's anyone's hang-ups if you're listening, that don't be afraid to invest out of state, it really forces you to be an efficient property manager and owner of real estate.   Sam Wilson  07:16 You know, I've heard that and I, let's see, do I own anything? I own stuff that's four hours away. So it's, you know, I guess that's, I mean, obviously involved as a general partner on deals that are much further away than that. So I get it. Yes, I'm trying to remember what that state where you're mentioning, we're allowed to and maybe hearing this and going, Gosh, I can't quite wrap my head around it. But you does all the things you just mentioned, where it's like, oh, you know what, I've got to find a way to solve this without going to the property. Got a way, to find a way to solve this, we're now taking all electronic payments, there's no checks, there's no cash being dropped off, like this is the way we do business. That's, in fact, a very freeing, freeing thing to get in place. I think once you've done that, tell me about your self-publishing journey. I know you've written the book. And I know I read the title out here and we kick this off, and I can't remember what it was now. But tell me about the title of that book. And then tell me about what's in the book and why you wrote it.   Rachel Richards  08:08 Yeah, so one of the great things about passive income is that you don't have to own rental property to create passive income. And so a lot of the things that I hear from people is like, well, I don't want to be a landlord, Rachel, I want to create passive income, but I don't want to be a landlord. And the great thing is, you don't have to be a landlord to generate passive income. There's a lot of other ways to do it besides investing in real estate. I have found self-publishing to be an amazing way to generate passive income. So in 2017, I self-published my first book Money Honey and it was the thing I did because I used to be a financial advisor. All my family friends came to me for financial advice, which I loved. At the same time, I thought, Well, why aren't they learning on their own? You know, why aren't they reading books, listening to podcasts? And I had this aha moment where I realized, oh, yeah, personal finance is boring, right? It's overwhelming. It's complicated. It's intimidatin for most people. No wonder people don't like to learn about it. So I thought to myself, How can I make this topic sassy and fun and simple? And that's where the idea for Money Honey came from. So I wrote it. I was really excited. Something I felt very compelled to do. I didn't really think I was gonna make money to be honest. I was so hesitant to invest in it. So I spent like $560 on the book launch thinking I would never make that money back. It was just a passion project. But I published it in September 2017. And to my surprise, to this day, it just took off. It resonated with female millennials, it started selling, spread by word of mouth. I was making $1,000 a month in profit for the first year. And I launched another book. And last year, I believe I made about $99,600, or something and profit from my two books. I was like, so close to becoming a six figure author, but it's still really amazing to think you know, these books now bring in anywhere from four to $10,000 a month in passive profit and it's just an example of you know, you don't have to invest in real estate to create passive income streams.   Sam Wilson  10:05 Right. No, that's absolutely true. I mean, it can be books, it can be other businesses. It can be, you know, a variety of things that you do. Tell me on, since we're talking about the money side of things. I know you said you're making about 20,000 bucks a month off your rental property off a 38 units. That's over 500 bucks per month profit per unit.   Rachel Richards  10:26 Yeah, and it's not that's including all my passive income streams. Okay. Yeah. So at one point, when we had 38 units, we were making 10 grand a month from those 38 units. It was about $260 per door.    Sam Wilson  10:26 Got it. Okay. Yeah, I was gonna say that's, it sounds pretty incredible. 500 bucks a door in profit every single month. So that's really, really awesome. Now, you're a limited partner in eight syndications, why are you going this direction, and not buying more active real estate?   Rachel Richards  10:55 So great question, real estate investing for my husband and I was always a means to an end, we never wanted to build this huge empire. And our goal was to get to 10k a month in profit from our rentals. And once we did that we wanted to stop, that was sort of our fat fire number. We could become financially independent and not have to work anymore once we got that number. So in 2018, we achieved that, and we stopped acquiring real estate and it shocked some people, you know, they were like, Well, why not build an empire of 200 doors or 250 doors? And we were like, well, that's not what we want to do. So we stopped. And I'm proud that we were able to do that, because you can really get caught up in you know, enough is never enough. And sort of always moving that goalposts further, but we were able to stop and be intentional about what we wanted to do with real estate. So that was why we stopped acquiring. Now why we've transitioned things is because the goal is to always make the income streams more and more passive. And back then when we were building up this empire, we had a lot more time than money. We started off pretty broke, in my opinion. Again, we didn't have, like I wasn't a trust fund baby. I wasn't making six figures, we were just scraping the money together to get 20% down payments, right? We did have time and we were willing to hustle to make cash flow. Now that we have a lot more money, we would rather invest in syndications, which are a lot more passive. So last year, we sold three of our big multifamily buildings. And we've transitioned that money into syndications. And it's a much more passive way to directly own and invest in real estate. So that's why we sort of change strategies.   Sam Wilson  12:31 Gotcha. Let's talk about what you are investing in right now. Are there certain asset classes you're favoring? Where do you see opportunity as a passive investor?   Rachel Richards  12:42 So I favor multifamily, just because I'm so familiar with it. And I can easily analyze those syndications. So that's my comfort. However, I really want to invest more in self-storage and mobile home parks. Because I think there's a supply-demand thing with self-storage right now. And definitely with mobile home parks, because it's a scarcity thing. It's a limited resource. And there's only so many and you're not allowed to build any more mobile home parks. So I'm really wanting to invest in more mobile home parks.   Sam Wilson  13:07 Right, you obviously talk about mobile home parks, you know, commonly on this show, and you've hit a lot of the highlights that kind of go into why that's still a great asset class, a great asset class to be involved in how have you gone about picking the sponsors that you are working with?   Rachel Richards  13:24 Great question, because picking the sponsor is almost more important than picking which syndication you're investing in. Because really, when you're deciding to invest in a syndication, you're placing your money with the person, you're trusting the person, and you need to find somebody that has enough knowledge, who's done this before successfully, who has the experience, and who's trustworthy. I've heard horror stories of syndicators running off with you know, 50k of somebody's money. And yeah, they'll eventually get caught and get thrown in jail, but someone's not gonna get their money back. So I definitely want to find good trustworthy people. I was making the mistake at first to try to go on Facebook groups and LinkedIn and reaching out to people. But the problem with cold contacting somebody is that no one can speak for them. No one can vouch for them for me. So the best way in my opinion, to find good sponsors or syndicators is to be connected to them through a mutual contact or friend who knows them and trust them and has already invested with them. So that is what I now do. I have a good network. And a book that I really recommend is the Hands-off Investor by Brian Burke. It is so good. It's very dry. It's very technical, even for me, and I'm a finance nerd. But it's something if you read it, like have everything you need to know to screen syndicators and to do due diligence on a syndication.   Sam Wilson  14:43 Righ. Yeah, I think I've read that book before. It's been a while, but I'll put that back on the list. And we'll certainly make sure we reference that. And also the whole book by Steve Chader. Yeah, we'll reference both of those there in the show notes. Questions for you. You said earlier when you guys had hit you or number that you said, Hey, we had units, X number of dollars in passive income. And we don't want to grow any bigger. That's not what we want to do is go bigger. What did you want to do?    Rachel Richards  15:11 We wanted to just live a free lifestyle, we wanted to work when where and if we want, a lot of people get bothered by my use of the word retire, because I still work. I still work on my business, I teach women how to invest in real estate, I have books, I have courses, I have programs. But the thing is, I work now because I want to not because I have to. And we now spend a lot of our time hiking and traveling. And we have free time. And we work again, because we have the choice to work. And that's because we want to do so it's about having the time to do what is fulfilling to us and not have to trade our time for money anymore.   Sam Wilson  15:52 Right. Absolutely. So what does the next five to 10 years look like for you? Because let's presume I mean, at some point, forgive me for my projects, you might be like, I hate this guy. You know, at some point, you know, the book sales may drop off that income stream may dissipate. And then if you're doing courses or some other stuff along the way, do you just keep building some other things that are generating passive income along the way? Is that really the plan? Or is there something there that you guys are shooting big for?   Rachel Richards  16:18 There's I have a lot of ideas, I have a lot of ideas and not enough time to implement them all. But one thing I know about myself is if I'm not building and creating something, I'm bored, so I don't see myself ever stopping or slowing down from that regard, I want to make an impact. And I want to make a big impact and help as many people as I can. That's what I'm passionate about, especially helping women. So I want to write more books, that's for sure. One of my dreams is to write a fiction book, actually, I've thought about becoming a general partner and being a syndicator myself or helping to raise capital. So that's a thought that I have, I definitely want to continue finding ways to invest in real estate, maybe as a silent partner, hard money lender, just continue to find ways to just do more things and challenge myself.   Sam Wilson  17:02 Got it. I love that. I think that's the fun part about it. And I really appreciate how you guys have defined what it is that you want. I think a lot of people, you know, they keep doing like you said they keep adding on to keep moving the goalposts because they see, well, that guy has a billion dollars in assets under management, why shouldn't I? Like, you know, why should I go out and do this or do that. But in the end, it was not what it is that it serves you or the people around you, it's probably not that fulfilling. So you got to do what it is that's in your heart and in your goal list of things to do. So I really admire you and your husband's ability to set limits on it and say, This is what we're building. And then we're done. At least with the real estate, you know, portfolio part. Yeah, obviously, like you said, you're either building or you're bored. You're always gonna be building something.   Rachel Richards  17:47 I think that's my new tagline. I like that I'm either building or I'm bored...   Sam Wilson  17:52 Guys, that's me. I wrote, building or be bored. So yeah. So that's really, really cool. Rachel, I've certainly enjoyed this. Thank you for taking the time, really to come on today and share with us your story of what you have done, are doing in real estate, publishing and everything else. I think it's a really cool story. It's certainly inspiring to the rest of us. If our listeners want to get in touch with you, or learn more about you what is the best way to do that?   Rachel Richards  18:15 Yeah, thank you, Sam, you all can follow me on Instagram @moneyhoneyrachel. And what I'd love to do for your listeners is if anyone wants to download my passive income starter kit, I will give that for free so they can go to moneyhoneyrachel.com/passiveincome to download that.   Sam Wilson  18:33 Awesome. And we'll make sure of course that we put that also in the show notes. Rachel, thank you again. Appreciate it.    Rachel Richards  18:40 Thank you.    Sam Wilson  18:41 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.  

Looking to invest in a new lucrative opportunity? Whitney Elkins-Hutten is here to talk about how car washes can be a  low-maintenance, high-yield investment. She discusses the different types of car washes, their potential profits, and how to scale this type of asset. This is a niche investment that is worth considering for those with a real estate background and an interest in commercial properties. Whitney is the Director of Investor Education at Passiveinvesting.com. She is a real estate maven who, after purchasing her first rental in 2002, and hitting a home run, then nearly losing it all on her second deal, took control and figured out how to invest in real estate the right way. She realized that success must leave clues. So, she studied and replicated the very personal finance and wealth creation strategies the wealthy use to create financial freedom. Today, Whitney is a partner in $700M+ of real estate —including over 5000+ residential units (MF, MHP, SFR, and assisted living) and more than 1400+ self-storage units across 7 states—and experience flipping over $3.0M in residential real estate.   [00:01 - 04:16] Buying the Business and the Real Estate Listen to our previous conversation with Whitney! Why Whitney and her team are jumping into the car washing space The different types of car washes Converting self-serve and full-service car washes to an express car wash service Controlling the asset's full potential   [04:17 - 15:19] Getting into the Car Wash Business Why institutional players are not getting into the car wash business The problem that passiveinvesting.com solves Opportunities in the acquisition space Building a management company to work with vendors Having both the business and the real estate in the portfolio Choosing not to do a blind fund The price range of a car wash business and the potential return Leveraging loan funds   [15:20 - 18:13] Creating Value for the Business and the Customers Optimizing the operations Consider perks and subscription plans Whitney on the car wash business in a recession environment   [18:12 - 19:15] Closing Segment Reach out to Whitney!  Links Below Final Words Tweetable Quotes   “If you just buy the business and you don't have the real estate, you're not controlling the actual full potential of asset.” - Whitney Elkins-Hutten “This is really a space that's ripe for disruption. If you think about it, the carwash space, you know, it's estimated to be I think the number is like $27.8 billion of revenue a year and it's growing just shy of 4% annually.” - Whitney Elkins-Hutten -----------------------------------------------------------------------------   Connect with Whitney and visit passiveinvesting.com if you want to know more about the car wash space! Email her at whitney@passive investing.com or check out her calendar!    Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Whitney Elkins-Hutten  00:00 It's worthwhile to note that there's other groups that are starting to kind of come up with carwashes. And what makes this really unique, what we're doing here at passiveinvesting.com, is that we're actually buying the business and the underlying real estate. And I think an investor has to be really careful about that. Because if you just buy the business and you don't have real estate, you're not controlling the actual full potential of the asset.   Intro  00:22 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  00:34 Whitney Elkins-Hutten is the Director of Investor Education at passiveinvesting.com and Partner at $700 million in real estate including over 5000 residential units, and more than 1400, and it cut off there for some reason that truncated your bio here, Whitney, I'm butchering it. 1400 what? Self-storage units. Fantastic. And you know what we're gonna talk about none of those things today, you've come on the show before, I don't know what maybe four, six months ago, I don't have the episode right in front of me, which was a great time just chatting about really your experience in real estate up until that point in time. So if you want to look back in the show, you can find Whitney's previous interview. But the thing we're going to talk about today, and really highlight and focus on is a really nuanced and niche investment you guys have taken on. Can you tell us about it, Whitney?   Whitney Elkins-Hutten  01:17 Well, yeah, I guess I actually, now you've pointed out to me, I need to update my bio, because now we've started partnering on carwashes. And so right, who would have thunk it? We're so proud to bring on this investment class for investors, a lot of people you know, don't think of car washes as their first, you know, piece of real estate they might invest in. The unique thing about car washes is that you can actually invest in the business and the real estate at the same time and achieve a nice yield, especially in this like cap rate compressed environment.   Sam Wilson  01:48 Tell me the nuances of the car wash. Is there, I mean, when I think of a car wash, I think of the ones where you like you know, you get in, you put it in neutral. And that drags you through and you come out the other side. And then I think of the ones where you know, they have the big signs like don't wash all the mud off your ATVs here in our carwash where you pull in and spray it off with a little wand and you put your quarters in the slot. Which one are you buying? Are you buying both? Give us the breakdown.   Whitney Elkins-Hutten  02:12 Yeah, so there's really three different types of car washes, and you've hit on two. So the coin-operated carwash or the self serve-type of car washes. Number one, I think a lot of us might have grown up with that, where you pull a car into a bay, stick of quarters and you've got the brush and you know, pumps up, then you've got your water one, you know, your child is like chasing around the bay trying to get you wet, right, then you've got full-service carwashes think of these more of the type of single bay, maybe double bass that are attached to like a gas station, or something like that. Again, not very scalable model, but they definitely can be a little, you know, some moneymakers, we're actually investing in what we call a car express carwash. So these are the, think of the ones like you were talking about the long bay, where you have the long tunnel. And you know, you pull up your car, somebody grabs it from you, they like backing it out, and then they flip it around the back, they loaded in the bay. We're not even doing that. I mean, this is all self-serve. And you know, you can, you know, back in my car, and then you can put it in the bay, and it's driven by how long that tunnel is, and how quickly can you move the cars through and still do a great job for the customer. Right? You can whip a car through an express tunnel. But if you're not doing a great job of getting that car clean, guess what? Customers not coming back. So there's a fine balance here. You know, really the express tunnel carwash is or, you know, have the, you know the most potential for profit, because there's really a lot of low maintenance to them, and very low payroll burden on these types of assets. And there's even the opportunity to take some of these other type of car washes, the self-serve carwash and the full-service car washes, and convert them into more of an express carwash. But, you know, it's worthwhile to note that there's other groups that are starting to kind of come up with carwashes. And what makes us really unique, what we're doing here at passiveinvesting.com is that we're actually buying the business and the underlying real estate. And I think an investor has to be really careful about that. Because if you just buy the business and you don't have the real estate, you're not controlling the actual full potential of asset.   Sam Wilson  04:16 Yeah, and that was going to be one of my next questions for you on this. But before we get to really the nuance of splitting of the business and the land that goes with it, let's talk a little bit about branding. And is there a national chain that you guys are branding under? Are you starting your own brand? Is there, what's the word I'm looking for, like a franchise that you guys are working through? What is that?   Whitney Elkins-Hutten  04:39 You know, this is really a space that's ripe for disruption. If you think about it, the carwash space, you know, it's estimated to be I think, you know, the number is like $27.8 billion of revenue a year and it's growing just shy of 4% annually, and a large majority of that growth is actually occurring in the express car wash business. Now, if you depending on where you live you might have seen like brands like Zippos, or Mister Car Wash, but majority of these types of car washes are still owned by mom and pop operators. And why is that? Well, if you think about it, the large players, institutional players aren't getting into the space, because they can't make it passive. There's not a management company that can take on this type of asset. So what we're doing that's very unique is that we're actually solving that problem by building our own vertical management company within the business. So what that's going to allow us to do is actually, you know, create tons of operational efficiencies for the business as well as for investors but be able to scale the business to about 100 to 150 locations, and then wrap this all up together for a nice exit.   Sam Wilson  05:47 That is cool. I like that. And then would you guys retain the management company, when you and then just do third party means that part of the plan?    Whitney Elkins-Hutten  05:56 Anything is possible at this point in time. So we are, you know, we're definitely in the build phase, the growth phase of this portfolio. So you know, really focused on operationalize, how many operational efficiencies, can we create, you know, on the labor front, just even like thinking about the chemical front? How do we standardize training across all the locations? How do we standardize the service across all the locations? And, you know, once we kind of have that nailed down, then we'll be able to really fully assess what we do the management company.   Sam Wilson  06:29 Yeah, no, that's really interesting. How are you finding opportunity in this space?   Whitney Elkins-Hutten  06:33 Well, that has led to our acquisitions team. But again, remember, a majority of these locations are actually mom and pop locations. So they've might have bought into like a small franchise or tried to, you know, take over a property on their own, you know, they struggled, you know, a lot of times what we're finding is these locations that we're buying, they're struggling with the actual optimization of the business. One, they're trying to run the business themselves, and never hired themselves out of the business. They actually did bring on a team, they don't have standardization and training. And then even if they achieve that, they're relying on their distributors to help them optimize the actual tunnel, and the chemicals within the tunnel. Now, what's wrong with relying on a vendor to do that? The vendor, you got a conflict of interest going on there. So you know, again, when we're building out this management company, we're really trying to, we're still gonna work very, very closely with our vendors, to you know, work on pricing and optimization, but we actually, as a management company, get to control end and end product of that tunnel.   Sam Wilson  07:36 That makes a heck of a lot of sense. Let's talk then about your finding your see your funding opportunity. Presently run already mom and pop owned car washes. Have you guys, are you considering building ground up?   Whitney Elkins-Hutten  07:50 Again, you know, right now, there's still just enough opportunity in the acquisition space for us to build a large part of the portfolio scale it up very quickly in this arena, we've already brought on nine this year. So yeah, it's there. They're there, right. They're already built-in primo locations. So without having to take on that build risk   Sam Wilson  08:10 that valuing needs, Is this, I mean, obviously a bunch of that operating income, but there's got to be a way to underwrite and say, hey, it's here, we can do X, Y, and Z to make it worth that. How do you do that?   Whitney Elkins-Hutten  08:22 Right, yeah, so typically, what we're doing with a multifamily unit, self-storage, you know, mobile home parks, you're underwriting net operating income. When you have a business you're underwriting EBITDA, Earnings Before Interest Depreciation, Taxes, and Insurance and Amortization. So we are actually, and I'm sorry, you know, amortization not insurance piece that's actually an under a line item in the expenses. So when you take the EBITDA, essentially your profit, your gross profit, you know, we're paying a multiple on top of that and so we're looking for car washes, probably valuing the car wash it like eight maybe 10% EBITDA. But it goes even a little bit deeper than that because we're looking to be in at 51 to 53% of the expected gross income on the property even though we're putting these guys into like, you know, 2,3,7 portfolios, small portfolios together, we have underwriting each property to stand on its own. That really just helps mitigate more risk for the investor, right? Because you know, our intentions is to do a large exit, potentially IPO roll up to REIT you know, those are a couple of different you know, exits there but things just totally you know, business totally tanks and we can't figure it out which just the wealth of knowledge we have in our team, I don't see that happening. Each carwash can stand on its own and a very attractive return number.   Sam Wilson  09:45 Right.I like that. And that is interesting. Let's talk then about this splitting the business and the land or maybe there's, you know, two things going on. There's a real estate play and then there's the business play. When you guys buy these are you holding title to the business and of the land all in one, or is it that the business then leases the real estate back from, I mean, how are you guys doing that? I guess if I can get the words out of my mouth.   Whitney Elkins-Hutten  10:12 That's an amazing question. And I really want to dig in further on that. Because I, you know, on where I'm at with working in with the investor, I don't know that and I haven't been asked that yet. But that's an amazing question. But I can tell you, what I can tell you is that we actually have both within the portfolio. Right? So you know, I would imagine it's all wrapped up into the same LLC.    Sam Wilson  10:34 That's interesting. Yeah. Because I would have thought and again, I know, this is pure conjecture on both of our parts, not like neither of us have the solid answer. Because this is one of the businesses, you know, that I'm involved in is the laundry business. And in that, we've got both the actually, I don't have it right now, we are just on a lease for the one we own, but looking to build, the next few we do, we're going to be new builds, and I go, Gosh, when I do that, I'm gonna split them. One company is going to own the land and lease it back from the company that owns the actual business, because then someday, if I want to sell off the business, I may still retain rights to the land and just be a landlord, I wouldn't have that option. I didn't know how you guys were doing that. So and then, of course, then you have to profitable companies and they have their own split on the whole deal to a different equation altogether. But then I guess the last question for you, your underwriting these is up to take a stand on their own, but it sounds like you're also taking them down inside of a fund. Is that right?   Whitney Elkins-Hutten  11:23 We're doing mini portfolios, you know, as we can group acquisitions together, you know, our first acquisition pool was two units or next acquisition pool was seven units. So we're looking to group those together. And it operates like a fund in a few different ways in that you get diversification, multiple assets with one investment. So if you're investing in, say, you know, $200,000, it's split over two assets or seven assets, you know, so there's that. The cool thing, rather than doing this fund is that it's not blind. So you actually get to see the assets at the beginning, rather than sometimes when you a lot of times when you invest in fund, if you're coming in early. You're not able to see the actual assets that are being required, you're having to invest on a hypothesis that the operator is making, you know, we choose not to do that with this type of acquisition. And lastly, you know, because of that, because the investor can actually see the assets, you know, inquire about individual metrics on each asset, if they choose to, there's more of an immediacy to invest. I know for me, this is getting down to investor behavior. I know for me, like when I'm investing my own dollars, I might be really excited by that investor bonus at the beginning for a blind fund. But you know, I'm very conservative, and I want to all let the fun acquire like a few assets before I actually go into invest. That's just me.    Sam Wilson  12:41 Love it. Yeah, that's sage and hard-earned advice coming right there. Tell me about pricing. Like, what's a typical range of a cost per express tunnel carwash? Is it like 5 million bucks? Is it 10 million is at one, I have no idea. Where are you finding the range of pricing is for these?   Whitney Elkins-Hutten  13:00 It depends on the location. So you know, the land, since we're acquiring the land, the land is also can be a large factor in the pricing. So you've got the actual, you know, again, what we talked about eight to 10x gross. And then we also have like the price in the land. So our first acquisition, you know, that one is since close, you know, that one was an $8 million acquisition. So that two of them, yep. Yeah. As we grow the NOI, just think about that, you know, we're looking to optimize the NOI on that property and, you know, exit at a 10x EBITDA. Know, when we go for an IPO. So there's just a, you know, a nice ability to create some exponential growth for investors.   Sam Wilson  13:40 Yeah, absolutely. When you look at businesses like this, they typically have a higher cash on cash, return, maybe than, say, a multifamily project or even a self-storage, for that matter. I mean, what and again, I know, you probably can't say exactly what it is on the air, but like, what's, what's an expected range? You guys are looking at, you would say, hey, if it falls in this range, it looks good for us.   Whitney Elkins-Hutten  14:02 Our first couple of acquisitions, first 8 acquisitions, you know, pulled together, you know, cash on cash, you know, first year might be like, again, we always aren't underwritten very conservatively, you know, because we're, you know, having to optimize the asset, first year might be somewhere between four and a half to 8% cash on cash, as we stabilize all the units together, and then we're ramping up as quickly as we can to 8%, 9%, 10%. We are looking to hit 15% cash on cash by the end of five years.   Sam Wilson  14:32 Got it. Okay. Okay. Cool. That is absolutely. You know, fascinating last question for you on this, leverage. What sort of debts are available for this?   Whitney Elkins-Hutten 14:42 Yeah, so we're using private lending, we're looking very attractive. 60% loan to value are, you know, on the last acquisition that we did, I'm just looking at the number. We did a 4.15% interest rate fixed for five years with a 20 year amortization. So it's very competitive private business funding.   Sam Wilson  15:02 No, that makes all the difference in the world. That's a lot. Those are a lot better terms that I would have thought on the private lending side, so that's absolutely awesome. Whitney, thank you for taking the time to break down the carwash base, why do you guys see opportunity there? And then how you're acquiring assets and then running them. I think it's brilliant. Is there any question I should have asked or any other last piece of information that you'd like to share?   Whitney Elkins-Hutten  15:23 Well, I think you know, one thing you know, as an investor, when you're looking to invest in a project like this, that definitely has a value add component, what is the value add that you can create on a carwash? So, you know, we've talked about, you know, the actual tunnel, and a lot of everything occurs within that tunnel, and you know, can you optimize the chemicals in the tunnel, some of the chemicals on a carwash are extremely expensive, but mom and pop operators might actually put that chemical on the car, every single time that comes through, we can actually optimize for that based on the membership and only apply it like one every four times that the car comes through. So we have a lot of optimization with the chemicals in the tunnel, we have an optimization with the payroll, it can be run with, you know, maybe four to six full-time employees, you know, annually to very low overhead and cost that way. And there's just a wealth of things that we can do, you know, with the vacuum housings, you know, perks that we can add subscription packages to the property or to the business. And so, you know, I know one thing that investors ask me, and they're like, What happens if somebody comes every single day to wash their car, you're like, Okay, if the subscription package the low switching costs $35 a month, that average carwash, a person, washing a car uses 80 cents of water and chemicals on the car, we've got a nice healthy margin there. So they would literally have to wash their car, probably twice a day for the full month, we started losing money on that subscription agreement.   Sam Wilson  16:51 And that's a lot of commitment for somebody to wash their car twice. Now, I'll be honest, I used to live in Indianapolis and on snow days. Man, I love my carwash subscription, because you get all that black, gray, brown, muddy saltwater. Man, I go through four or five times in a day, because I'm on the road all day long. But of course, that was only you know, three or four days of the year. So they still got their money for me.   Whitney Elkins-Hutten  17:15 Well, and you brought you tapped on a really kind of a great point here. And that is, you know, we're talking a very interesting time in our economy. Right. So you know, a lot of people, a lot of investors are going what happens in a recession? How recession resilient are these assets? And so we've talked about the optimization, we've talked about the subscription packages, but you know, investors asked me and they're like, well, wouldn't somebody just cancel their subscription? First of all, you know, science or statistics, or a tell us when somebody actually establishes the behavior of washing their car, they don't break it, right. And especially at $35 a month, that's a pretty low-hanging fruit compared to other expenses. I love it. But when you have a recession environment, right, and last point here, is people actually take better care of their cars because they don't have to repair the car, right? Just like what you're talking about. We live in Colorado, you've got that mag chloride like I don't want to have to like deal with the pain here in a couple of years. I'm gonna spend a couple of bucks and wash my car.   Sam Wilson  18:12 You got it. I love it, Whitney. I know we're out of time. Thank you for coming on the show today and breaking this down. It's been tons of fun. If our listeners want to get in touch with you, what is the best way to do that?   Whitney Elkins-Hutten  18:21 Yeah, a couple of places. You can reach out to me directly at passiveinvestingwithwhitney.com. If you just follow the little form on the page and you'll land directly on my calendar. You can also email at whiteney@passiveinvesting.com   Sam Wilson  18:40 @passiveinvesting.com. Got it. We'll make sure we get that corrected and in the show notes properly. Whitney, thank you again for your time was great to reconnect.   Whitney Elkins-Hutten  18:48 Yeah, it's you too. Thanks, Sam.   Sam Wilson  18:49 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, we welcome Zach Roesinger, a commercial real estate broker, syndicator, and CEO of CRE Pro Course. Zach is also involved in a lot of obscure deals which he discusses in this episode. With all of these things on his plate, he's able to make it work by building scalable systems and delegating effectively. He also shares the value of actively going out, taking whatever opportunity is out there, and putting yourself in front of people.   Zach specializes in Opportunity Zone real estate acquisition, entitlement, and zoning, as well as construction management of new build projects. Specializing in 1031-Exchange consulting and third-party capital placement in QSRs (Quick Service Restaurant) and franchised businesses by providing risk-adjusted returns to investors.    He has traveled to over 100 countries and worked on 5 continents for companies like LVMH, Newmark Knight, Cloudera, and Montegra Capital. As a sales leader for Trulia and Zillow, Zach “cut his teeth” outbound cold calling [ >250 calls/day] closing large deals with some of the largest brokerages and real estate teams in the US. A polyglot (fluent in Spanish and Portuguese), Zach has built sales teams that leveraged automation and proven sales techniques, teaching Heavy Hitters to focus their efforts on out-of-the-box solutions to complex commercial real estate deals to provide their customers and clients with unparalleled sales experiences.     [00:01 - 10:01] What Keeps You Going? Zach shares his background, CRE Pro Course, and his other ventures How he's able to focus on his multiple businesses Identifying tasks that you're uniquely skilled to do Standardizing procedures Having the right people in the right places Why Zach prefers to personally go out and do listings Picking up new properties and projects Meeting and talking to people, especially the workers onsite The way that you advertise is by doing a good job   [10:02 - 19:55] Be The Master of Your Domain Zach discusses his racetrack business and targeting buyers for nuanced properties Exemplifying that you are the expert in the space Make it easy for your clients and contact to complete the task you want them to do Eliminate steps Zach's recommended app   [19:56 - 21:55] Closing Segment Reach out to Zach!  Avoid pitch slapping Links Below Final Words Tweetable Quotes    “Put the right people in the right places, and make sure that they're happy and well-compensated for doing what they do, and that they're held to the certain standard that you know, a winning team is going to be held at.” - Zach Roesinger “It's really just going to be what is exciting and appealing to you, and what keeps you keeps you going and gets you going every day.” - Zach Roesinger “One of the most fun parts about brokerage and actually selling something is going out, hanging out with the dudes with the welders that are just in overalls. Those are the best people to actually get some insight from.” - Zach Roesinger -----------------------------------------------------------------------------   Connect with Zach! Follow him on LinkedIn. Visit the CRE Pro Course website if you want to know more about the work they do. Check out his podcast, Coffee with CRE Closers.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below: Zach Roesinger  00:00If you had considered selling your racetrack, but you had never told anybody about it, but you didn't want to be the guy out there waving his hand saying, Oh, I'm selling my racetrack. I'm selling my, if you want somebody else to be out there marketing it for you, it just brings a prestige to your market. It allows somebody else to actively go out and get those while you run your race track, and it creates this buffer.   Intro  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.     Sam Wilson  00:33 Zach Roesinger is a commercial real estate broker. He's the CEO of creprocourse.com. And also a real estate syndicator. Zach, welcome to the show.   Zach Roesinger  00:43 Sam, good to be here. My man very much appreciative of you and thanks for having me on.   Sam Wilson  00:48 Absolutely, pleasure's mine. Three questions I ask every guest who come to the show. In 90 seconds or less, where did you start? Where are you now? How'd you get there?   Zach Roesinger  00:55 Great questions. I'll start now. Clock go. I came from Denver, Colorado. My father is a real estate broker did land and big deals throughout my childhood. So I was brought into commercial real estate early, understand the cyclical flow of it, and how some days can be really great and other days can't. You have to come back to your family every day with a positive smile on your face when things are great, when things are not. I've traveled to over 100 countries around the world. Live now in Austin, Texas. And as you mentioned, I am the CEO of CRE Pro Course and CRE PRro Course is an online course that allows or teaches new agents who have yet to close their first deal to get their first listing and the first closing in the first six months so that they can bridge that gap and between coming over from residential real estate maybe or, or they're getting into it from another field altogether. So sometimes it's hard to get into commercial real estate because the closing time for your first closing is so long, most people can't last that long. But we teach you how to do it in your first six months. Some people do it in two months. So I also work in syndication, and I work in brokerage as well. So I sell warehouses, very obscure things a race track I have on a car dealership, a recycling center. So I really liked the obscure deals, and I'm always looking for more. So Sam, let's get together and do a deal soon, man.   Sam Wilson  02:14 Sounds like a winner, man. That's a lot of fun. And also a lot of different moving parts. How do you choose which one to focus on?   Zach Roesinger  02:22 Great question. It's funny because I have employees, and I work for people in each of these companies. And they say, you know, it's just mind blowing, Zach, I can barely keep one job straight, you know, throwing all the balls in the air and keep throwing them up. And it's just time attention to a particular task and importance, right? I attach a beta to every task that I'm doing. Is it really important? Do I need to do it now? And can somebody else help me do this? So as we talk about a scaling real estate venture, it's really important to be able to identify those tasks which you're uniquely skilled to do. that your company relies on you for and then make sure that you can, that you could probably do most tasks in your company, Sam, it's really helpful to be able to standardize those tasks, and then create a procedure around them and then have somebody who's maybe better apt to doing them actually follow through with it. So a good example is real estate flyers, right? When we get a new listing, you and I could probably sit down to InDesign or Paint program and come up with a really good-looking flyer, but is that the best use of six hours of our time? For me, it's probably not there are other people, my team that are really good at it. But they need to know what goes on there. Because they're really good at design, but they're not in the day to day, right, they don't understand the intrinsic value behind what I'm trying to sell in the commercial property. So it's really important to be able to scale out a business. And the way you do that is by standardizing, creating procedures, and then replicating yourself and really focusing on the things that you're good at. And more so on my teams. I know that there's some like I call them whale hunters, right? Some of the brokers that work for me, they are really, really good at closing deals opening, they're really good at relationship management. They're terrible at paperwork. So I don't want them doing paperwork, it's a bad use of their time, it's bad use of our resources. There are people on our team that are really good at it, right, you know, they're wizards at CoStar, they're wizards at Crexi, they can draft again, they can draft a flyer that makes just like, it's mind-blowing. But for them to do that, we have to have people going out, we have to have team members going out and actually getting the business without the whale hunters out there finding new deals, there's nothing for the rest of the team to do. So it's my goal as a manager or as a teammate, or anywhere in the organization is to put the right people in the right places, and make sure that they're happy doing and well-compensated for doing what they do, and that they're held to the certain standard that you know, a winning team is going to be held at. And if there's a breakdown, if there's an issue, if there's a bottleneck, we as managers, Sam, it's really important to be able to identify those and clear the bottleneck. So a lot of my time is spent addressing what works, what doesn't and how to standardize and scale those things which do work.   Sam Wilson  05:05 What about your current mix of of businesses, keeps you going out and still actively doing listings? It seems like that would be one of those things. As you're talking that you would say, Hey, wait, just from an efficiency standpoint. If you have a team of brokers, you guys take this you guys go list it. Why are you still involved in that side of it?   Zach Roesinger  05:22 I was asked my father this same thing to why does he not become a director or sales manager. I just think it's a really fun, I can be a little bit more selective on what I take now. But I tell all of our newer guys like take whatever is out there. Somebody that you used to go to college with, we run into them at a restaurant, they say, oh, yeah, I own this restaurant, thinking about selling it great. Let's figure out how to, you know, get you in the door and show you how to list that. Now if you decide you don't like restaurants listing restaurants, well, then we'll try it one time. If you don't like it, we'll move on to something else. But always be willing to say yes, in fact, earn the right to say no. And I know that Steve Jobs and there's others that say Warren Buffett that it's more important, the things you say no to than those that you say yes. However, when you're first starting out, I mean, you want to try, this really pertains to listing, I have oftentimes a listing agent or a newer agent that says, Well, you know, if I can't sell it, what happens? And I said, Well, okay, then you spent some time learning about a new field of study, you practice something new, you met a new potential client who is going to exude your praises, because the property didn't sell that's part of your fault. But also there's a lot of other factors that are out there. And I was referencing before the economy right or just you know, the hot topic of the hour. Here in Austin, we're starting to see a lot of resurgence back to an altered office. So and I say that by I come from Denver, Colorado, and I worked on this project called The Taxi Project, which is taking old warehouses and refurbishing them making them cool offices. Well, I just saw yesterday that I'm now big on TikTok, I'm @cre_pro_network on TikTok. When I saw on TikTok, this guy was highlighting an office building or a new office I called them warehouse, I think warehouse office buildings that were going for top dollar. And I think that that's going to be one of those things where historically, it has been a office building, everybody gets in an elevator and goes up. And now people are saying, you know, I kind of want a hybrid office. These cool, chic new buildings are pretty cool. So to answer your question, it's really just going to be what is exciting and appealing to you. And what keeps you keeps you going and gets you going every day. For me, it's not repetition. And it's not necessarily the money I don't really like when it becomes repetitive. You could sell the same, you know, warehouse over and over again. But is that really that exciting? So picking up new properties, picking up new projects, meeting new clients, one of the most fun part about brokerage and actually selling something is going out hanging out with the dudes with the welders that are just in overalls. And I'm an Italian leather suit. And they're there's this guy over here and I'm like No guys, like I really want to know, what do you, tell me more about this property, tell me more about what you like, and what you don't like, and what you would change. And so there's sometimes that's like those are the best people to actually get some insight from are people that are working and living there every day, not just the expenses and the NOI and the cap rate of it, but actually saying, Hey, I don't know if you know, to a new, let's just say a prospective buyer. I don't know if you saw this over here. But this is a unique feature that you won't find anywhere else. And I wouldn't have noticed it unless I talked to the guys who were on the shop floor. So that's what I really liked about brokerage is actually meeting and talking to people, getting outside of the spreadsheets and delivering, delivering value above and beyond. And I know it's cliche to say but that's how our business I think really scales out is that the way that you advertise is by doing a good job. If you're in residential real estate, you have a big billboard or you know you're on the side of a bus or something like that. But in commercial real estate it's completely reputation when somebody goes to sell their recycling facility and they're like, I don't know anybody in commercial real estate in their their country club or their you know the baseball game and they say oh yeah, Zach Roesinger, I know that guy. He sells just about everything and he was really good. Ge got us top dollar or he did a great job marketing. So all of the above and it feeds into itself Sam I would say that it's just much like your businesses that as I do CRE Pro Course and I have had a chance to launch our television show and we have Coffee with CRE Closers, my clients and some of my best clients today actually were guests on my show just much like this. I had them come on, talk about what they did they got to ask questions about commercial real estate. People gave me social proof by being the, you know, leading this TV show and so when they went to go sell their building, they said you know there's only one guy I can think of the guy keep seeing on YouTube and you know Facebook Live and LinkedIn live, that Zach guy. He sells real estate so they cross pollinate.   Sam Wilson  09:57 Man, love it. I love it. A lot of moving pieces there. Let's talk about these nuanced properties. How are, I mean it's one thing to find okay, you know, I'm beat on multifamily quite a bit because I'm kind of bored with it, to be honest, talking about getting bored, but it's like ever. You could find a million buyers for multifamily. I mean, you could be the worst broker in the world. Nothing you could move a multifamily property right now. I think it's a lot easier to move something such as a multifamily property. I'm presuming here. Over something much more nuanced, like a race track?    Zach Roesinger  10:30 Absolutely.   Sam Wilson  10:31 How in the world are you even finding are targeting the right buyers? Because not like, it's not like people are just hanging out on on LoopNet or Crexi. What are you...   Zach Roesinger  10:41 Well, I often think the same thing. And then I think to myself, well, it's a niche product, right? It's much easier, I believe, than selling a multifamily property, because there are only so many ferrous and non ferrous metal reproducers in this planet, and they all know where my client is located, like they do business with this person. And so it makes it very easy that no one's going to get out of a completely different business and just try their hand at a $25 million operation. No, no, they do it right now they're just looking to expand their operations. Yes, identifying the right one, that's a little bit more difficult. And because of that, we enter into a pretty ironclad agreement with the seller, because oftentimes, I say this sort of ingest, but a lot of our job in brokerage, I believe is to come in as a third party and well market a property which you may have thought was for sale or not. But I'm the one who validates that. So if you had considered selling your race track, but you had never told anybody about it, but you didn't want to be the guy out there, waving his hand saying, Oh, I'm selling my racetrack, I'm selling my, if you want somebody else to be out there marketing it for you, it just brings a prestige to your market, it allows somebody else to actively go out and get those while you run your race track. And it creates this buffer. So if you didn't want to sell to somebody, for example, you don't have to address them directly. Because I'm sure in the race track world, for example, it's pretty small, you're going to see that person again at the next race track owner meet up or whatever. So that's what's the great part about having a broker. And I think the other part of it is that as the marketing, I really think that for us, and in order to scale, it's always been an issue with, you know, you don't just stick a sign in the yard anymore when you're trying to sell commercial real estate, you actually have to be pretty dialed in in terms of the ability to replicate and scale. And I think that's much a testament to your show here, Sam, and I come out of commercial or I come out of computer and software sales. And those guys really have it dialed in. I moved from Brazil, up here to Austin to go through an IPO with a company called Cloudera. And the company's they've taken a billion dollars in investment at that point, a company that has a billion dollars in their only objective is to get on as many companies, fortune 500 companies as possible. They're going to spend whatever it takes in terms of software and scaling and, and replication and automation, in order to make sure that their salespeople are utilizing their time the best so that they get the most orders so they get the highest stock price when they do go public. So I just take a page out of the book from the software salespeople in that you want to be, just like you're doing here, Sam, which is a one-to-many approach, allowing people to engage with you when they're ready. But exemplifying that you are a master of your domain or what you're trying to put out there into the world to say, here's who Zach Roesinger is, here's who Sam Wilson is. And if you want to do one of these things, if you want to buy or sell a race track, I know the guy but I'm not calling the people that are selling and buying racetracks. They're calling me because I've talked about it or because somebody said, Hey, do you think this thing is ever gonna go up for sale, or maybe I just got it out there with my marketing team to some degree, and somebody says, Oh, I saw this on Facebook the other day, or I saw this on a Google ad the other day, or I saw a video on this the other day, we may want to buy this asset or we may want to talk to the guy who's trying to sell it. And there's only one of me out there. So I think that's a lot of what it required which is the one-to-many philosophy and then allow people to engage with you but make it very, very easy. I want to highlight one of these things that are might be embarrassing you but you do the same thing on your podcast as I do on mine, which is make it really really easy for your guests, make it really, really easy for your clients and your contacts to complete the task that your objective or your goal is. And I reminded of that this morning when somebody asked me can you write a recommendation for me on LinkedIn because I'm trying to get a job at this brokerage and I said I would love to. I first of all don't have the bandwidth to think that hard through it and look through like what you've been doing over the last few years but I liked you and I'll do it for you, make it really easy for me. Tell me who it is, provide me an email of what that looks like and what you would like me to do. I am more than happy to. I'll edit it. I wouldn't say anything that I don't mean. But it's going to be the same, it's going to be, hey, this guy, Johnny is a great guy, have a conversation with him, Bobby, if it works out great. And if it doesn't, that, you know, it's just another connection for you, but do it as a favor to me, right. And the only way that you know he's going to get that meeting maybe is if I write that letter, but I'm not going to remember to do that after the 97 things that I have to do. So make it really easy for somebody. The same thing on on an email, make it a clickable link, right? If I put up six listings on Friday, and I created or I had my marketing team create six different bullets, six different web pages with six different information sheets on it, so that if I had to give it to somebody, or if I had to give it to, you know, send it out to a few brokers I thought might be interested, I could just send them this, they could click on it, it has a way a call to action at the bottom, makes it really, really easy. But don't make somebody work harder than they need to because they won't, right.    Sam Wilson  15:56 That's absolutely spot on. That goes for reviews, LinkedIn recommendations, man, and everybody asked me for something like that I say you write it, send it to me, I'll make my tweaks. I will, it'll come, it'll be from Sam Wilson, but you're gonna write it and I'm gonna just edit a few little words here and there, make it authentic. Because again, as you said, I'm not gonna say anything. I don't mean, and I'll delete it if I don't mean it. But make it easy for me. And that goes for listings, that goes for onboarding clients in you know, investors, I'm dealing with a thing today. And I'm like, Oh, wait, that link is gonna take them here. And then they got to know we're not doing three steps. This is one step. One step, give me your money.   Zach Roesinger  16:31 I believe it's Occam's razor as well, right? Make the path of least resistance, the most apt choice and why I say that is at the end of Coffee with CRE Closers, my podcast, I say how can people get in touch with you, but I pre warn them and say, hey, look, have something loaded up. But make sure it's not temporary, right? Don't give me your Clubhouse username, or whatever it is, you know, like, it's something that might not last the test of time, or may not even last as long as this you know, as this podcast or my podcast or whatever. But do something that like is where you're heavily followed. So if it's LinkedIn is where you do a lot of business, but you're trying to grow your TikTok, and I'm speaking personally, because I'm trying to do this right now. I'm big on LinkedIn live, but I'm really small on TikTok live. Yeah, so I tempt myself to say, oh, I can build my audience by sending them to my TikTok channel. Well, if tick tock doesn't work out for me, I know LinkedIn will long term like that's just where business gets done, but don't sacrifice in the short term. Really, you can build your audience organically on tick tock, and you can mention it may be but stay with the channel where you're going to deliver the most value. And then once they get there, once they're on LinkedIn, which you know, has 20,000 People that follow you sure mentioned it on there as well, right? Then they can redirect and go to TikTok. But when there's too many steps, Sam, if you ask somebody to endorse you, here, here, here, here, here, I get like one or two maybe, and then I'm like, okay, like I'm endorsed out, I want to do this for you. And if there was one button, I could push that would syndicate across all of them, I would do it. I wish it would post to all of them. And it there may be something out there where people are going to email in to your program here and say, Oh, well, Zach, you should use this really great plugin, which, you know, that's, that is one of your questions on your sheet here. And I want to I think that knowledge is power. And the more resources we can get out there, the better my number one tool for commercial real estate or real estate in general. And I think everybody should look into this because it's not that expensive. It's maybe $100 A year is one called LandGlide. It's really just the shortcut way. It's available on iPhone, and maybe Android as well. It's in the Apple Store. So maybe it's just anyways, what it allows or what it does is it systematically organizes on a map all of the CAD data so the Central Appraisal District data, it's also kind of a cool parlor trick, right? If you're driving down the street and someone says, Hey, what do you think that house is the value of that house is well, sometimes it's hard on Zillow and Trulia or Redfin or something to like, dial in on that then it's like speculative. It's the Zillow price or Zestimate. This one is actually just the appraisal district and how much of the land is used for agriculture and how much is you know, for the residential, how big is the house square footage? It's all the stuff that's in the Central Appraisal District, but it's just in a very easy to read format. So it's one of the few apps that I pay for, and I relish try to offer that as much as possible to someone who, particularly if you're driving in a neighborhood, you're like, Oh, I really like this neighborhood. I really would love to purchase his building. How do I get in touch with the owner? The owner is written right there, right like it maybe it's an LLC, or maybe it's a business entity, but that's really, you know, go to open corporate.org or calm. You can find out what the phone number is who the head of who the board directors are. It's one more step but it's also like if you really want something you're gonna have to put in some effort. This just eliminates about 10 of the steps going with LandGlide, so I heavily endorsed them outside of my own software which is creprocourse.com. Plug it.   Sam Wilson  19:56 On that note, Zach, what is the best way to get a hold of you?   Zach Roesinger  19:59 I am Z-R-O-E-S-I-N-G-E-R on LinkedIn. So I'm Zach Roesinger. Find me on LinkedIn and what I was asked him and encourage you to do the same. It's hard for me to always put together exactly who is the best contact for you. So tell me who that is. If we connect today, and you say, hey, great to connect, do not, we call it pitch slap. Don't pitch slap me. Don't tell me how I need auto insurance or, you know, we should jump on a call to find out whatever my car warranty or something. Yeah, let me know how I can help you out. And that's not necessarily going to be buying your product today. But if it's an introduction, I'm more than happy to do that, even if we just connect, because that's what LinkedIn, I believe should be used for. It shouldn't be used for selling, it should be used for connecting, providing connections is what we do, Sam, it's one of the biggest things in commercial real estate, we've connect a and b and we get paid handsomely for that, or at least we solve the connection problem between A and B. LinkedIn helps me do that because it shows me what your skillset is. And it also shows me where it allows me to connect you directly to your next big investment or your next client.    Sam Wilson  21:09 Love it. Zach, thank you for coming on the show today. I certainly appreciate it.   Zach Roesinger  21:12 I really appreciate it. Please come on Coffee with CRE Closers or follow everything. We're doing it creprocourse.com. I really appreciate your time today, Sam.   Sam Wilson  21:21 Thank you. Yeah, we'll certainly make sure put that in the show notes creprocourse.com. Thank you, Zach. Appreciate it.   Zach Roesinger  21:27 Yeah, man. Thank you. Thank you to audience.   Sam Wilson  21:55 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.

Having more than one source of income is the best way to build and secure wealth.   Kay Kay Singh is a Microsoft-certified systems engineer turned real estate investor and entrepreneur. He's a GP in 5500 multifamily units, and the owner of several gas stations and ground-up laundromat builds. From doing proper due diligence to leveraging technology, Kay Kay shares the secrets to his success in these different spaces.    [00:01 - 08:16] Buying 40 Single-family Homes All At Once Kay Kay on his background and experience working with an old school owner Going on his own and incorporating technology into his process Why he transitioned to being a passive investor His plans for his gas station business   [08:17 - 13:28] Proper Due Diligence in Loans The importance of catering to investors  Investing with his own money Why they do non-recourse loans Doing everything from putting the risk money down to the asset management   [13:29 - 17:56] Using Automation in Business Seeing the need for a laundromat in his neighborhood Creating a card system to solve a problem Incentivizing customers to adapt How his customers are in a way working for him for free   [17:57 - 19:18] Closing Segment Reach out to Kay Kay!  Links Below Final Words Tweetable Quotes  “I'm very good at communication. When somebody texts me, emails me, calls me, I try to answer their calls as soon as possible. So I'm trying to do my best to cater to my investors, and that way, I can raise capital easily for my deals.” - Kay Kay Singh “I don't have my investors in the deal if I can't invest my own money because my investors are my net worth. So I have to be very careful. I'm not deal-hungry, so I'm not getting on every deal that that comes across my desk. ” - Kay Kay Singh “I looked at everything and I tried to do my best to get everything in and make the customers happy and also provide something different.” - Kay Kay Singh ----------------------------------------------------------------------------- Connect with Kay Kay Singh through the Grow Rich Capital website.   Resource Mentioned: Think and Grow Rich by Napoleon Hill Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below: Kay Kay Singh  00:00 I wanted to give something good back to the community as well. So I bought that lot and built it from ground up. And it's a card system and bigger machines. And I did one year of research before building it. So I had looked at every aspect, every equipment that is needed, and even 15 years from now.   Intro  00:24 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  00:36 Kay Kay Singh is a Microsoft-certified Systems Engineer turn successful multi-business owner and a real estate investor. Kay Kay, welcome to the show.    Kay Kay Singh  00:45 Thank you so much for having me on your show, Sam.   Sam Wilson  00:48 Pleasure's mind. Three questions I ask every guest who comes on the show in 90 seconds or less. Can you tell me where did you start? Where are you now? And how did you get there?   Kay Kay Singh  00:56 I started in real estate in 2015 by buying a portfolio of 40 single-family houses now. I'm a partner in 5500 multifamily units. And to get there, I started investing passively when I bought this portfolio, I started investing passively with the other partner, other syndicators and then learn from there and transition to the GP-side back about four years ago.   Sam Wilson  01:26 That is a heck of a leap into real estate. Most people don't buy 40 single-family homes all at once, what gave you the confidence to say, Hey, this is this is something I think I can execute on.   Kay Kay Singh  01:40 The guy who sold us is from our community, very respected guy and is a senior citizen, and he wanted to return, he promised me so many things that I can decline.    Sam Wilson  01:52 He promised you so many things. What does that mean?    Kay Kay Singh  01:55 That means he gave me a good deal, number one. And the second thing, he promised that I don't have to spend a penny to get down the portfolio. So kind of self-financing. And the third thing, he said, I will train you for a year.    Sam Wilson  02:11 Wow.    Kay Kay Singh  02:12 Not all things happened. He changed his mind about the seller financing. And we had to go to the bank to get a seller financing. But in trade of that I got a one house free. And also when he started training me, he was old school. So he was doing everything with a pen and pencil. I didn't like doing that. Being a Microsoft-certified System Engineer. I wanted to use the technology available these days to manage my properties. So I let him go after 10 days of ownership.   Sam Wilson  02:49 So the year deal didn't really matter if he was there. You said hey, I figured it out pretty fast and said I can do this better after 10 days.    Kay Kay Singh  02:58 Yes.   Sam Wilson  02:59 What were some of the things you implemented? Obviously getting off pen and paper was one of them. But what were some other things that you looked at and said, Man, I can do that better.    Kay Kay Singh  03:06 Most of it was technology. So I read online and bought us property software, property management software and a lot of other technology. Everything was paperless. So I made everything paperless and convenient. I didn't have to sit in the office. Also with by signing the property management software, everybody was paying online. Or I had a lockbox, they could drop a money order check over the lockbox too, so I didn't have to be there. First thing I made myself independent because at that time, I was managing a gas station and a laundromat. So I didn't have time to sit there in the hours and wait for the tenants to come and pay the rent and tell me all the stories they have.   Sam Wilson  03:51 Right. Yeah. Were there any other surprises when you took that portfolio over?    Kay Kay Singh  03:56 Not really, because he was very honest and telling us everything he had. And I did work some of the properties. I didn't work all the properties. And he was very transparent.    Sam Wilson  04:09 Wow, that's unusual. Good for you.   Kay Kay Singh  04:12 There weren't any deferred maintenance either.    Sam Wilson  04:14 Wow. That's fantastic. You quickly transitioned though, to being a passive investor in multifamily. What was the thinking or what was the impetus to do that?    Kay Kay Singh  04:26 When I started the real estate, I thought, Okay, now at that time, I had eight gas stations and a couple of laundromats and I thought okay, now we won't have to pay any income tax because we are in the real estate business, but we ended up paying more tax. And then I thought okay, I thought we can be in the real estate business and not pay any tax but I'm ending up paying more tax. So I checked up with my account and I started researching myself. And then I came through the word syndication and passive investment I've never thought of before. But then I immediately invested with one of the syndicators in Indianapolis, where you are from. So that was my first investment. And I started learning from there. And then I invested heavily passively.    Sam Wilson  05:18 What caused your taxes to go up when you acquired 40? Houses? I mean, those are no depreciation, no...    Kay Kay Singh  05:25 Because there was no, we didn't get any costs. Actually, I didn't even know there is any cost segregation or anything at that time. So my taxes went up, because we've made a lot of income from those properties.    Sam Wilson  05:40 Right. Interesting. Okay, yikes. Yeah. And so then you said, Alright, so I can figure this passive investment thing out, what's your long term, what's your long term plan in real estate investing, like, you go fat 10 years from now, where do you want to be?   Kay Kay Singh  05:55 I still partner with other people and do deals, and I want to do my own deals at some point. I have sold for gas stations last year, I'm trying to get little stuff off my plate before I jump in by myself. I have been partnering with other good operators and doing deals for the last four years.   Sam Wilson  06:17 You sold four gas stations, gas stations seemed like one of those things that especially in a time, you know, in a high inflationary environment, that would be a very nice asset to own because your product gets repriced daily, is that not a fair assumption? Or am I missing something there?   Kay Kay Singh  06:34 I don't think so. Because there is a labor problem too. So you can keep up to date with the rising prices, sometimes you end up selling cheaper, the wholesalers have a lot of more infrastructure than we do at the gas station level. So they can raise the prices with one click of a button but we have to bring all the stuff into the office, scan them and change the pricer and all that. So we don't have that kind of technology. And we cannot afford that kind of technology to keep up. So sometimes we end up selling cheaper stuff, we don't get time to update the pricing on daily basis.   Sam Wilson  07:12 Interesting. So that sounds like one thing maybe you didn't like about the gas station business. What were some other things in it that are maybe given you like, Hey, I think there's more opportunity elsewhere?   Kay Kay Singh  07:23 No that I didn't like I have been in the gas station business for 22 years. I still own several gas stations. But I think it's time to get out of it because I'm getting old. And gas station needs a lot of daily work. So I think real estate is much better, where you can work from anywhere. I mean, gas stations, I've really done work during the last 22 years in the gas station business. I'm not saying anything about the gas station. That's all we knew about seven years back, I'm trying to get some stuff off my plate so that I can focus more on multifamily only.    Sam Wilson  08:03 That is really cool. I love when people have multiple income streams when you're in, you know, obviously multiple businesses, things that generate revenue, because it gives you a perspective other people maybe don't have. So you love real estate, you love what it does for you. But you've come in on the passive investment side, and then you've come in on other 5500 units on the general partner side. It sounds like you'd like you said your long term goal then is to be the active sponsor. What are things you're doing right now as part of the general partnership where it's a good relationship for you and your other partners?   Kay Kay Singh  08:38 I focus on capital raising, and I do have the network to sign loans, etc. So I'm on KP on a lot of deals as well. But I kind of I have a passion. I'm a people person I have built trust over these 22 years I've been here in United States, I'm very good at communication. When somebody has they text me email me call me. I try to answer their calls as soon as possible, etc. So I'm trying to do my best to cater to my investors. And that way I can raise capital easily for my deals.    Sam Wilson  09:16 Talk to us about the loan guarantor side that's not something we spend a lot of time talking about, what are things that you are seeing on the loan guarantor side you'd like and what are things that concern you about it?    Kay Kay Singh  09:28 Of course, there is a liability, there's a risk, but I do my proper due diligence before I sign the loan, I don't want to put my net worth and that gives me confidence and I invest my own money in every deal. And that gives a less, I don't have my investors in the deal if I can't invest my own money, because that is, my investors are my net worth. So I have to be very careful. I'm not deal-hungry, so I'm not getting on every deal that comes across my desk. I do my own due diligence, I do underwrite by myself. If I like the deal, if I like the market, if I like the sponsors, then only I do the deal.   Sam Wilson  10:11 When you're a loan guarantor, are you doing non-recourse loans only?    Kay Kay Singh  10:17 Yes, because we do larger properties. So those are always non-recourse loans. And also, by signing the loan, you are on the right side of the law. And also I'm because legally, you cannot only raise capital, right? So I'm signing the loans, putting the earnest money in doing going to the due diligence and attending the asset management calls and everything. So to be a part and that way, I have more confidence on the property, because I'm on their weekly calls every week and know a lot what's going on the property, etc, that I can communicate with my investors.    Sam Wilson  10:57 Yeah, I mean, I think it's interesting, obviously, on the loan guarantor side, because the lender wants to make sure that even if the property doesn't perform that there is a balance sheet, that or balance sheet partner, obviously can come on and cover that debt if for some reason the loan, or the property isn't producing enough income to cover the debt. I think it's also intriguing when you get into these situations where it's non-recourse, so even if you decide yourself, you're not going to pay it, they can't necessarily come after you. So it's kind of an interesting mix of like, why do they even need a loan guarantor, right?    Kay Kay Singh  11:30 Well, if something goes wrong, there are cards in those recourse loans, too. So if something goes wrong, they can still come after you. And they're gonna have you send your quarterly, your bank balances and all that quarterly. They want to make sure that the backup is good enough.   Sam Wilson  11:49 Right. Right. No. Understood. Understood. Yeah. I mean, there's always the bad boy, we call the bad boy carve out. Yeah. Right. So if you guys do something not supposed to do, which, I mean, obviously, that puts a lot of that means you have to have a lot of trust in your other partners, that they're gonna behave ethically, morally take care of everyone in the process, and not things they shouldn't be doing. What is a typical structure? I've heard all sorts of different structures on a loan guarantor side tell us, maybe you know what you see the typical structure for a loan guarantor when you come on as a general partner.   Kay Kay Singh  12:23 So I do not go as a KP only, right. So I can talk much about the structure for KP, because I do everything from putting the risk money down to the asset management. So I don't just go and sign loans for other people and then get a piece of the pie. But I have heard it, it's like 10% to 15%. I have heard other people and they're looking for KPS, they're offering 10 to 15. And I have been offered several times, but I just don't sign the loans.    Sam Wilson  12:58 Right. Right. That answers I think that answered that question very well, thanks for taking the time to kind of break that little nuance to this business down because I think people when they're scaling, they often have that question. They're like, well, you know, we could take this deal down, we understand it well enough, but maybe they're not far enough along in the business where they have that balance sheet to back it up. So go find bringing on a balance sheet partner a loan guarantor is, you know, an excellent way to take down some of these larger assets, especially early on, let's talk a little bit about the laundromat business. You and I are have this in common. And I think it's a fun again, it's a fun diversification outside of potentially real estate, but you guys have done because I know you've built some ground up. Is that right?    Kay Kay Singh  13:44 Yes.    Sam Wilson  13:45 Okay, can you tell us a little bit about the business, what you like about it, and where you see it going to backup back in 2012? When it was so I had an empty lot sitting by my gas station, somebody owned, so I decided there was a laundromat down the street, a block away. And they used to come and get quarters from us. And they were always complaining about the laundromat. Right then it took their quarters and all that stuff. So it stuck to my mind that we need a laundromat in this neighborhood and I had been in this neighborhood for 12 years where that gas station that was my first gas station. So I wanted to give something good back to the community as well. So I bought that lot and built it from ground up. And it's a card system and bigger machines. And I did one year of research before building it. So I had looked at every aspect, every equipment that is needed, and even 15 years from now. So I looked at everything and I tried to do my best to get everything in and make the customers happy and and also provide something different than what other laundromats in Fort Wayne provided. And I did that.   Sam Wilson  15:05 When you say you went to a card system, you know most people think of laundromats or putting quarters in the machines is yours only card?   Kay Kay Singh  15:13 Only card.   Sam Wilson  15:14 Interesting. So you've eliminated the need to go in and collect quarters out of all these machines every week. If you found any, we're gonna get nuanced here. But if you found any potential loss of revenue, because people come in and they want to spend quarters in the machines, are they expect to have a coin laundry?    Kay Kay Singh  15:34 No, we haven't. And I was a little skeptical in the beginning that people might not like just the court system. And it happened, a lot of people would walk to the laundromat, and then when they see all we have to have a card, they would go away. So for the very first year, I had the employees. So I trained my employees, because it was by our gas station. So I spent some time there to, to educate the customers, right, we gave them $5 for registration of the card. So if somebody walked into the store with a bunch of quarters and say, hey, oh, I have only borders and machine doesn't take orders, those machines don't take orders, they take bills, or they take credit card, our slightly take them to the gas station, I'm not saying that money into bills, and then would buy them a card and then have them register and the machine-like throws flowers and says, Hey, you have one $5 And they would be happy. And at the end of the day, they would be happy customers when they walk out of the laundromat.   Sam Wilson  16:42 Right. And that goes back to the automation thing of getting tenants to pay either digitally, or just eliminating some of those typical, you know, things that you're finding with the old school pen and paper guy you bought your first set of single-family houses from and I think that's the name of the game in this business is constantly finding innovations and inefficiencies. So when you bought some multifamily complex user management and efficiencies or 40 houses, you know, what are the inefficiencies that in problems we can solve. The other cool thing I think on those in it's the same way with the card system, it cuts out a lot of labor and risk. You know, there's cash and card games. The other thing it does, obviously, I think it gives you it gives you float, the whole gift card, you know business is a racket, people are always leaving 1, 2, 3 $4 on a card and then throwing it away. And that's just free revenue.    Kay Kay Singh  17:30 And then on top of that, you have your customer working for you for free. So they are the ones training the new customers, right? So when they walk in, they don't know what to do. So the customers will take them to the extender and show them how to get a card and everything. So they're working for you while they're there for free.    Sam Wilson  17:52 It's beautiful. It's a beautiful thing. Kay Kay, I love it. I appreciate you coming on the show today. This has been a lot of fun just hearing about your vast business experience. You know owning 40 single-family homes now being a general partner in 5500 units, owning eight gas stations, several ground-up laundromat builds I mean, you've got your hands on a lot of things and I love just the entrepreneurial spirit and the hustle that you bring to the table, certainly appreciate you coming on. If our listeners want to get in touch with you or learn more about you what is the best way to do that?   Kay Kay Singh  18:21 We have a website, the name is growtichcapital.com The name I got from here. Grow Rich Capital and I would advise your audience to read, definitely read this book. This will change your life.    Sam Wilson  18:37 I love it. Yeah, that's Think and Grow Rich. If you're listening to this, he's showing us Think and Grow Rich by Napoleon Hill. Love the fact you just borrowed the name and called it Grow Rich Capital.    Sam Wilson  18:46 Kay Kay, thank you for your time today. I do appreciate it. Look forward in here soon.    Kay Kay Singh  18:50 Thank you so much for having me, Sam.   Sam Wilson  18:52 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.

Sometimes, being the best asset on the market is not the best option. Listen to this episode's guest to know why!   Alex Moore is the Founder and Principal at Greywhale Capital, a private equity firm focused on commercial multifamily. Graduate of University of Pennsylvania, Alex has over 10 years of experience in medicine and has taken her keen attention to detail to her full-time focus on commercial multifamily. Alex is a seasoned multifamily investor and is head of acquisitions and asset management at Greywhale Capital, which has doubled in AUM year over year since its inception in 2019. She works with close partners nationwide to secure assets that are tax-advantaged, stable, and will bring consistent returns for Greywhale Capital's investors. Her number one focus is acquiring assets that are the best opportunities to meet the investment goals of Greywhale Capital's investors.   Alex shares her journey into real estate investing, starting with one duplex and now owning and managing large multifamily properties. She emphasizes the importance of niche selection when starting out in real estate and the importance of understanding your investor base and cash flow play. More than being the best, Alex aims to be the affordable option in the market.     [00:01 - 06:52] Niching Down Alex on how she started on real estate Finding a niche in Multifamily Class B assets Why Class B is the most recession-resistant  Looking for opportunities in markets within markets Focusing on a certain tenant class that could sustain additional amenities   [06:53 - 16:15] Their Keys to Success Always ask more questions Don't over-renovate Improve turnaround time Make sure the rent comps are correct Hire team members who are aligned with the company's mission Shift your mindset when it comes to raising capital   [16:16 - 17:06] Closing Segment Reach out to Alex! Links Below Final Words Tweetable Quotes   “One of the keys to success has been improving our turnaround time on underwriting and getting really responsive with brokers. Because I think that's the thing that is the easiest to let slip, but it is one of the key differentiators to when you're putting in offers.” - Alex Moore “Don't get the best product on the market. I think you need to get something that's a little bit under that… But don't be the best thing on the block. Because we don't shoot for those tenants. They totally exist. But when the market gets harder to pay for things, they're going to look for a more affordable option. And I want to be that affordable option.” - Alex Moore “I think you don't realize how powerful that is until you start reaching out. I think also shifting from the mindset of ‘I'm asking for money' to ‘give me an opportunity for an investment' is very helpful.” - Alex Moore -----------------------------------------------------------------------------   Connect with Alex! Visit the Greywhale Capital website or email her at alex@greywhalecapital.com. Follow her on LinkedIn and Instagram.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below: Alex Moore  00:00 One of the keys to success has been improving our turnaround time on underwriting and getting really responsive with brokers. Because I think that's the thing that is the easiest to let slip, but it is one of the key differentiators to when you're putting in offers.   Intro  00:15 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  00:27 Alex Moore is the founder of Greywhale Capital, a real estate private equity investment firm in San Francisco. She was a nurse practitioner, though I think she's still licensed. But she started investing in real estate while working full time and now runs Greywhale Capital. They acquire tax-advantaged multifamily assets in landlord-friendly states and help accredited investors place capital in those assets. Alex, that's a mouthful. Welcome to the show.   Alex Moore  00:50 Thank you so much for having me. I really appreciate it. And yes, that was a mouthful. You did very well. And I am still licensed but I do not currently practice.   Sam Wilson  00:59 Gotcha. Three questions I ask every guest who comes to the show: in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?   Alex Moore  01:06 So I started with one duplex and got there by just starting in my hometown, was remote investing at that time, but I knew it really well. And I wanted to get something for a future college fund. So I decided hey, I'm gonna get and get this duplex. I didn't have any kids at the time, but I was like it'll be a great investment and, you know, some stability outside of the stock market. And then now I do large multifamily. So I just made my most recent close, was on a 330-unit in Houston. So big progress from there.   Sam Wilson  01:34 So wow, that is a lot of progress. What were some of the key iterations of your business along the way?   Alex Moore  01:41 Yeah, took me a little bit to choose multifamily and niche down into it. So I think this happens for a lot of people who like real estate and get into it, you try a little bit of everything, like a little potpourri. So it took a little bit of time for me to find the thing that I liked the best. So we did short-term rentals for a little bit, I did a triple net industrial space. And I also did retail for like a retail center where you have fun to triple net leases. So we learned the ins and outs of that explored mobile home park storage units, but realize my risk tolerance really fits with multifamily. And I also realized that what type of multifamily is my favorite. That also takes a little bit to niche down on as well.   Sam Wilson  02:17 Type of multifamily?   Alex Moore  02:18 Yeah, you think a lot of people think okay, apartment buildings, you know, you can get an apartment building and that crosses the box. But when you start digging in there, there are a bunch of different vantages. There's a bunch of different business plans you do on those and the returns look different based on what your plans are. And is this a cash flow play? Or is this something where you're just making huge alpha and then gonna go into the next asset? So you track different investors for each play. And you find that there's advantages to some and disadvantages to others. And so that's what took some time to find that as well. My focus primarily on Class B, the reason why I do Class B rather than Class C or Class A, is because that has, I think, the most recession-resistant tenant base because they can afford rent they can afford their payments are good at doing both of those, and they will pay for the extras. So when you do a value add program, that's the tenant class that really will pay for those.   Sam Wilson  03:13 Now Class B multifamily is like plain vanilla for the real estate, multifamily investor. Everybody, there's no disagreements on, everybody can handle it. Everybody wants it. How are you finding opportunity in that?   Alex Moore  03:29 Yes. I think when you hear people, they're like, this is what I want Class B, I want it to be an..   Sam Wilson  03:34 Plus value add multifamily more than 150 doors. I'm like you and the rest of America. So how are you finding deals?   Alex Moore  03:43 So submarkets, so I get really specific on what my market is within the market. So a lot of people say general areas, or they say I will buy anywhere in the Sunbelt, or I'll buy anywhere in Texas. You're not gonna get deal flow that way. And you're not going to be able to get really competitive on your pricing or on your rent projections. So find the submarket within your market, and really know that zip code and then know your supply chain. One of the big things is folks will purchase and not realize where new developments coming in. I'm finding new development, I actually think it's really helpful if it's already in place. But if you're going to be supplied ou,t if there's going to be a bunch of new build coming in, and you're putting in a value add program and there's Class A coming in... the market and then you're not gonna be able to hit your mark projections.   Sam Wilson  04:28 Right. That's a really valuable point there. Tell me about the term resiliency. What does that mean to you?   Alex Moore  04:35 For an asset or for myself?    Sam Wilson  04:38 Whatever.    Alex Moore  04:39 Yeah, I think when we're talking about an asset, I think it's important that your asset is resilient to the market changes because especially right now, and we're dealing with debt going up, we're dealing with inflation, and we're not sure if wages are going to keep up with that. Your asset needs to be not the best thing. Don't get the best product on the market. I think you need to get something that's a little bit under that. I mean, it's been performing as well as it could have. Maybe it's an operational issue, maybe it's management on site. And then you look at where can I get that asset to be better and perform better, but not be the best thing on the block. Because we don't shoot for those tenants. They totally exist. But when the market gets harder to pay for things, they're gonna look for a more affordable option. And I want to be that affordable option.   Sam Wilson  05:25 Right, absolutely. We've talked about all the time here on this show is when wage growth does not keep up with inflation. And even maybe, if there's a market correction, and people start doubling up, and then you know, rent projections can't be met. And all those things start to compound, what are you doing to protect yourself and your investments right now?   Alex Moore  05:46 Yep, exactly. One of the things that I focus on is, is it a tenant class that could sustain some additional amenities. So when you're in class C, they're not going to really sustain additional amenities like valet trash type packages, or adding an A backslash, they'd like it. But it's really not something they're going to pay for, it's going to be something that is assumed to be lumped in with your rent. So you can pull in those extra things because you're in a good market, where that is a demand, it's not always a given. But if you provide that that would be an extra lever. What I love about that is you can add those in, but it doesn't have to be part of your normal project plan. You're gonna go in have your interior next year upgrade plan, we have these additional things, you can also add in that provide you more levers to pull. Another one that I really love, which I think is discounted, people don't really think about it, but as a tenant storage is always an issue. And so if you provide competitive storage on-site, that's a huge thing. If you don't have to go down the street and pay $90 a unit, and you can offer something on site for 50 to $60. That's awesome. And then I've got another revenue stream for really an affordable build cost.   Sam Wilson  06:52 Yeah, absolutely. Tell us about when I say to you that messing up is okay. What does that mean to you?   Alex Moore  06:58 So, I think I'm leaning towards, I'm an analyst, and I also lean towards perfectionist. So if I don't have the answer, or if I don't have a plan for it, it makes me very uncomfortable. So I create a plan that's A, B, and C. And that gives you a way where if plan A doesn't work, you got Plan B and C. So it's okay if plan A doesn't work out because you got it back up. And also, you know, real estate in general is pretty resilient as an asset to invest in, because we've got ideally, so many ways that you can make it profitable. And you can hold longer if you need to, if you've got good financing terms. So you know, there's ways to mitigate it, you have to have a good plan and a good operator who's made sure that those contingencies are in place. But I think a lot of folks say I'm not gonna invest in real estate because there's too many unknowns. And I'm too concerned about X, Y, & Z things. And I think it's better to jump in and do it than to avoid it as an entire thing. So one of the best things to mitigate that anxiety is to, like, ask more questions, and more knowledge that you know, but then at some point, you got to jump in and do it.   Sam Wilson  08:03 What are some things you feel like you have messed up? But yeah, it turned out all right, in the end.   Alex Moore  08:09 Yeah, one of the things that and that's part of why I chose Class B as I started in class C, and I found it so easy to over-renovate, so you can spend more on these assets because they need it. And there's a lot of skeletons in the closet for deferred maintenance. And that goes very quickly when it comes to CapEx, and then on top of it, then you need to get your interiors updated so that you can get better rents, but it's very easy to over-renovate those units, and then you won't get those rents there.   Sam Wilson  08:38 Right, yeah, no, that's absolutely true. It's very easy to over-renovate. And it's also very easy to blow your budget, just bringing them up to something habitable.   Alex Moore  08:47 Exactly, something that meets good.   Sam Wilson  08:50 Right. It's not even maybe that you're putting in granite countertops and stainless steel appliances, it just gonna take you more money than what you budgeted for. That's a really good point. And how many of those Class C properties did you buy before you said, maybe I'm in the wrong spot?   Alex Moore  09:04 One.    Sam Wilson  09:08 Good for you. Yeah, you stuck strictly, you've done a whole bunch of different, you said you've done short term rentals, you've done triple net leases. But now you're solely multifamily. Is that right?   Alex Moore  09:18 That's correct. Yep. And part of the reason for that is, I think industrial has a great play there. If you're in the market, you know, you're leasing brokers, because it's all about those leases, getting the right tenants in. And when you're locked into a lease, it's a five to 10-year term. So you need to make sure that your rent bumps are in there, and if they don't pay, your values down, so I think there's a little bit for me more concern. If you get an anchor tenant and you're dealing with a national tenant, certainly they have, you know, they're accredited so they will pay, but they also are really competitive on the lease renewals. So you're not going to make as much on your returns. So that's one of the reasons why I pivoted out of industrial. I know a lot of people are playing in that space, more power to the, because I think it is a good space, if you can be the person who can take a building and lease it up to market. And you know, the people on you know the tenants to put in there.   Sam Wilson  10:08 What has been one of the keys to success for you and for your team?   Alex Moore  10:12 So one of the keys to success has been improving our turnaround time on underwriting and getting really responsive with brokers, because I think that's the thing that is the easiest to let slip, but it is one of the key differentiators to when you're putting an offer. So we do a turnaround time and we're getting faster at it or doing a turnaround time in under a week. And I think you can get there, the big guys are doing it in a day. That's where my goal is, is that we'll get there in a day. But I think if you're able to say you put in a verbal and then you put in an LOI within that week timeframe, that's a big differentiator.   Sam Wilson  10:47 When you think about that, you're compressing timeline, what do you think some of the things you guys are gonna have to implement that will make that possible?   Alex Moore  10:56 The biggest linchpin is making sure your rent comps are correct, because I think it all comes down to that. Everything else is gravy, it's great that you need to make sure that your rents are 100% accurate. So having a really good property management partner who can verify your rents and turn that around quickly is important. And then also having enough people to be able to call and verify rents on the ground. And it's just manpower, and it's just getting it done. So picking up the phone, making sure that your rents are accurate. I mean, you can use Yardi and CoStar as well. But I want to make sure that mine is the best for right now what's happening.   Sam Wilson  11:30 Right so it sounds like you use, you already in CoStar initially as a kind of a soft pass. But then yeah, you're gonna actually get out there, boots on the ground and hit the phones and find out what other rent comps are in the area.   Alex Moore  11:42 That's correct. Yep. And so that time spent is valuable. But that is, you know, sometimes people don't pick X, sometimes you don't need an answering machine. And those are actually good indicators to have how well are those managed in the area. So I like it as a soft check to for Hey, what's the competition? You're here? Alright, hey, folks that are hungry to get people into units or are they fall and it doesn't really matter. So maybe they're not pushing rent, or maybe the demands in that area are so high that the all area buildings, they don't have anything available? These are all great things to pick up while you're doing that calls.   Sam Wilson  12:12 Right. Yeah, getting your rent comps figured out in a shorter fashion. You feel like otherwise, you could get this turned around in the day yourself. No big deal.    Alex Moore  12:21 Yes, if we can get the rent comps verified that night, usually that's like, you know, 24 or 48 hour and then making sure our PM does a pass on it too. So then it turns into like three days. And that part is like oh, man would love to speed that up.   Sam Wilson  12:35 Right. Tell me about your team. What is it been like to build a team? And then also tell me about your experience raising money.   Alex Moore  12:44 Yeah, so building a team takes time, I think it's easy to hire quickly. But what I've learned is to hire slow, do multiple phases of interviews. And then to have an onboarding process. I think a lot of folks, you know, as an entrepreneur, you expect folks to just pick it up and learn it. But you do need to have an onboarding process need to have regular check-ins, regular meetings, and we do three rounds for the interview. So we've got a first initial screen, a lot of folks drop off after that. And then we have basically a first pass assessment. So you do whatever the task is, or whatever the job is, you do like homework, and then we have a real interview. And then after that, we make a final decision. And that really helps because you're not gonna have to do a lot of interviews. Because a lot of people don't make it through those first couple of hoops. And then with building a team, it's creating a culture of who want to show up and are excited to be here. So people who are eager to learn folks who are not just there to clock in and clock out, but people who are there for the mission of the firm. And I think that's a real big thing. So communicating that making sure folks are excited about that. And people will join in when they excited about something challenging and something they also believe in.   Sam Wilson  13:49 Right. Yeah, that's been one of the interesting shifts. I think that we've seen the workplace environment as a whole, not that I've ever really been very active in it. I guess I kind of read it. You know, I hear they're talking about it is just defining that mission and getting team members like people more now more than ever want mission behind what they do as much as they want, you know, a good steady job and a good paycheck. So I think that's really intriguing. Tell me about capital raising, getting capital raise for your deals. Yeah. walk us throught that journey.   Alex Moore  14:17 Yeah. So for capital raising, it's all been through family, friends and extended network. I think you don't realize how powerful that is until you start reaching out. I think also shifting from the mindset of I'm asking for money to give me an opportunity for an investment is very helpful. Because then it reframes for me and it also reframes for the folks that we have as investors. We're providing them an awesome opportunity. I mean, they don't get access to this on last year, a multi-millionaire or billionaire family that can direct buy apartment buildings like that's pretty bonkers. The barrier to entry for that is huge. So me, myself, do I you know, love the capital raising part? Probably not. I love finding the deals and sourcing them and I love going to market and walking properties like those are my favorite things to do. But I can always talk to an investor and explain all the metrics, because that's what I'm doing all the time. And I think that's, I love those calls. Like if someone has a bunch of questions about it hit me up. I got it.   Sam Wilson  15:19 That's awesome. Yeah. And I think that's a great mindset shift that a lot of us would do well, myself included, to commonly remember. That it is amazing opportunity. I'm bringing double-digit sometimes in returns to people, you can get lucky, you can find it. But it's not every day that you get such a stable opportunity to get returns on a risk-adjusted basis. It's like, Wait, this is bonkers. Use your word. So yeah, that's really cool. I love it. Alex, thank you for taking the time today to come on the show. You can kind of pull back the curtains on what it is you guys are doing submarkets within the market specializing in that knowing your supply chain talking a little bit about debt and inflation just talking a little bit but also you know how messing up is okay in this business, because generally it's fairly resilient. There are mistakes you can make that are probably pretty bad ones. But by and large, it's a pretty forgiving industry. So thank you for taking the time to come on. If our listeners want to get in touch with you or learn more about you what is the best way to do that?   Alex Moore  16:18 Best way is through my website or email so great. greywhalecapital.com. so grey spelled with an E and then alex@greywhalecapital.com. Or I am on Instagram though I am not a great Instagrammer Alex more in bass would love to connect with anyone who wants to touch base.   Sam Wilson  16:36 Awesome. Thanks, Alex. Appreciate your time. Have a great rest of your day.    Alex Moore  16:39 You too. Thanks so much for having me.   Sam Wilson  16:40 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.  

Do you want to bulletproof your wealth?   Today's guest is Tom Laune. As a music industry professional who lost part of his hearing due to an accident, he realized that if he didn't have some form of long-term disability insurance, he would have been in a lot of trouble. He created the Bulletproof Wealth Strategy to help others protect their income and grow their wealth. Key to his strategy is saving your capital in a place where there is compounding growth.   Tom solves the problem of low returns and increased taxes when storing money in a traditional bank. By creating a line of credit using specially designed whole life insurance, they help real estate investors across the country. The cash value of the policy is guaranteed to grow, creditor-protected, and tax-advantaged. Real estate investors love that there are zero loan origination fees or required interest payments!     [00:01 - 05:40] Learning About Long-Term Disability Policy Losing his hearing after 29 years as an audio engineer Why it is uncommon for people to have a standalone disability policy Helping other people be aware of this coverage   [05:41 - 11:12] The Bulletproof Wealth Strategy Tom on the best place to save your money: collaterals Everything can be collateralized Bulletproof wealth plan vs home equity line of credit Convertible term insurance and whole life insurance   [11:13 - 17:45] Optimizing Collateralization Alternative to a savings account but with a better rate of return Using insurance money to fund your real estate investing A capital with uninterrupted compounding growth plus an actual asset It's not a get-rich-quick scheme   [17:46 - 18:59] Closing Segment Reach out to Tom!  Links Below Final Words Tweetable Quotes   “I have searched high and low trying to find the most tax-advantaged, and the best place to store long-term capital that allows you to collateralize it. One of the big things I talk about is collateral.” - Tom Laune “Creating like a line of credit inside of a specially designed life insurance policy, that is what I teach people, I think it's the safest place to store long-term capital because you have compound growth.” - Tom Laune -----------------------------------------------------------------------------   Connect with Tom! Follow him on LinkedIn. Visit their website and schedule a call with Tom to know more about The Bulletproof Wealth Strategy.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Tom Laune  00:00 The best way to do that is to protect yourself with what's called convertible term insurance which I'm telling you nobody understands how that works either. It's a really misunderstood product. And there's huge advantages to it.    Intro  00:19 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  00:27 Tom Laune created the Bulletproof Wealth Strategy to help others protect their income and grow their wealth. The secret to his strategy is teaching people to use money like banks do to earn much higher rates of return than the average investor. Tom, welcome to the show.   Tom Laune  00:42 Thank you, Sam. I really appreciate it. I'm so glad to be on your show. And I'm looking forward to spending some time with you today.   Sam Wilson  00:48 Absolutely. Three questions I ask every guest who comes on the show in 90 seconds or less? Can you tell me where did you start? Where are you now? And how did you get there?   Tom Laune  00:55 Okay, I started in the music industry. And I was a professional recording engineer and mix engineer who started to lose hearing in one ear after 29 years. And I realized that if I hadn't had some protection on my ability to earn a living through some special type of insurance, I would have been in huge trouble. So I got this really great long-term disability policy that I had enforced for over 20 years, and then transitioned and went back to school and got three financial designations. And now I'm teaching people, especially real estate investors, how to make their wealth as bulletproof as possible. So I've created a strategy called the Bulletproof Wealth Strategy.   Sam Wilson  01:43 That is really unfortunate. You were in the music industry for 29 years?   Tom Laune  01:48 Yes, sir. Yeah, I worked with like Bruce Springsteen and REM and Amy Grant and a bunch of, you know, The Fabulous Thunderbirds, a bunch of great artists. But of course, I used my hearing that whole time to do it. And if I didn't have the protection that somebody put in place for me, I would have been really in trouble. So that's what I decided to do is to help other people learn the same strategies that I had was fortunate enough to be able to learn.   Sam Wilson  02:17 Outside of a long-term disability policy, what was the other protection that you had in place?   Tom Laune  02:23 So that when I was doing this, for me, personally, that was the main thing that I had, then. And that is a part of my strategy. Now, I will tell you this, very few people have that I'm telling you right now out of 1000 people, there might be 15, that have a long-term standalone disability policy, unless it's been given to him free from work, which those aren't interesting. The work ones are okay, they cover about 60% of your income, but it is taxable. So that's not the main thing that I do now. But it is a part of my strategy for sure.   Sam Wilson  02:57 Yeah, that's really interesting. I mean, I'm not one of your 15 and 1000. I mean, it's so uncommon, you hear so few people talk about it.   Tom Laune  03:04 It's very uncommon. The reason it's so uncommon is because it's not a lucrative thing for advisors to talk about it. It's very difficult to get somebody covered, oftentimes, their coverage is reduced. And the thing does not really pay. You know, it's just not advantageous financially for people to talk about it for the most part, but because I was helped so much by it, I'm willing to, you know, help people get it because I know, super important for me to have.   Sam Wilson  03:34 What do you think is not a profit center for insurance companies? And so that's why...   Tom Laune  03:41 They're dropping like, there's a huge amount of liability on that type of coverage. Because if somebody goes on claim, they can be on claim for 40 years, right? And the payout is tax-free. It's just unbelievable, the advantages that you have with that, and that's why they're very, very picky about who they let have it.   Sam Wilson  04:04 Yeah, that sounds really challenging, I guess, on that side of things, you know, if they're really picky about who they actually give insurance to how can you go out to the masses and say, Hey, here's a product of things you'd have.   Tom Laune  04:18 So yeah, I can go out to the masses and say that because there are people that can get it, and I was one of them that could get it. You know, I can't guarantee I can get it for everybody, but I can sure try. You know, that's all I can tell you is that most people don't aren't even aware that they need it.   Sam Wilson  04:35 Right. No, it certainly not. I mean, your ability to earn if you become severely impacted. And I think this even falls in the Dave Ramsey camp. And, you know, everybody's got their own opinion on Dave Ramsey, but I think even Dave Ramsey said, you know, have a sound financial plan. This needs to be part of it.   Tom Laune  04:51 100% I mean, this is one of the things that Dave and I agree on, and we don't agree on much. But this is definitely one of them. I mean, I don't have any problem with Dave, he lives is right near where I live. I used to go to church with him. It's just that his speaking to a certain audience and that certain audience is very, very middle class, you know, scenario. And I'm most my mostly my client base is real estate investors, and I'm a real estate investor. And that's who I speak to primarily.   Sam Wilson  05:20 Right? Yeah. Again, like you said, there's a certain segment of our society that needs to hear what Dave Ramsey has to say. And they need to totally, and they need to implement it without questioning get it done. Yeah, exactly. Another segment where it's like, well, we can take that and and kind of mix in a little bit, a few other ideas in here, because this isn't going to work for everybody. So write that in. We're not here to discuss Dave, we're here to discuss what the bulletproof wealth plan looks like. Can you tell us what are some other components to it?   Tom Laune  05:47 Absolutely, well, the main thing I do is help people figure out where is the best place to save money, right, because traditional banks have one advantage, and that is liquidity. That means if you put $100,000 into a traditional bank, the only advantage you have is that you can pull that $100,000 out the next day, if you need it for something, right. That's basically it. Other than that, you're losing money to inflation by leaving money in a bank number one. And number two, there is no other advantage to it, because the money that you earn in a bank is piddly diddly, almost nothing. And it's taxable at your ordinary income rates. So the interest that they pay on traditional savings accounts is terrible. So I have searched high and low trying to find the most tax-advantaged, and the best place to store long-term capital that allows you to collateralize it, one of the big things I talk about is collateral. And I know your audience probably understands collateral, but that's really just having an asset the bank can use to pledge to be able to borrow against it. Really, that's what collateral is and everything can be collateralized to one degree or another so you can collateralize stocks and bonds, you can collateralize diamonds and, you know precious metals, you can collateralize cryptocurrency, you can collateralize real estate. But those all have a lower collateral capacity in terms of how much you can collateralize them versus what I do, which is creating like a line of credit inside of a specially designed life insurance policy. That is what I teach people, I think it's the safest place to store long-term capital because you have compound growth, that means the money is growing year over year on in a compounding way. And you're able to collateralize it at 90 to 100% depending on the account value. And you're able to have all of these other amazing benefits like asset protection, it works very similar to what I teach people to a home equity line of credit, the big difference between a home equity line credit and a bulletproof wealth plan is that on a home equity line of credit, when you take a loan against it, it dings your credit score, your FICO score, it's reported on your debt to income ratio, when you take a loan from the place where I have my clients storing capital, it does not. And of course, a home equity line of credit does not pay a dividend. So it's another huge differentiator is that you've got to be looking at where are you saving capital so that you can take advantage of deals when they come along.   Sam Wilson  08:35 Right. Yeah, that's a very, very interesting point. So you've got you've hit on two key parts of this, one is the long term disability. The second one is the whole life insurance, upset whole life, there's probably some nuance there that I'm getting completely wrong, you can clarify.   Tom Laune  08:50 That's fine. The whole life is the traditional the thing Dave Ramsey has, right, is that you can design whole life to be terrible, or you can design it to be great. And he only talks about the terrible kind, you know, so going back to that it's frustrating is that he's only getting a tiny little sliver of the picture out to the world. And basically everybody thinks it's awful. Well, you can design it just right here. I'm here to tell you, you can design it to be phenomenal to pay very low commissions and to have a lot of cash value. You just have to work with somebody who understands how to do this. And that's what I specialize in. So that's the second component of the three components of the bulletproof wealth strategy.    Sam Wilson  09:34 What's number three?   Tom Laune  09:35 So number three is that there is an option strategy that I employ. And it is a special type of long is a special type of term life insurance that allows you to convert later to a whole life policy. Because everybody asks me, hey, what happens if I start saving $25,000 a year now but then two years from now I want to start saving 75,000 Because I've got a big raise, or I have a financial windfall. And the best way to do that is to protect yourself with what's called convertible term insurance, which I'm telling you, nobody understands how that works, either. It's a really misunderstood product. And there's huge advantages to it.   Sam Wilson  10:20 What are… would you ever put someone in a whole life and a convertible term at the same time?   Tom Laune  10:27 I do that all the time. So they start with a whole life to hold whatever amount of money that they want to initially put into it. And then they have a convertible policy that allows them to convert to another whole life policy later, when they're ready. So it is very, very frequent that I do too. In fact, I usually set somebody up with three things I long term disability policy, a term convertible policy and a whole life policy. That way, they can have all the optionality and they can move money into these things as they're ready. And I always look out for making sure that their maximum insurable interest is protected, and that their wealth as bulletproof as humanly possible.   Sam Wilson  11:12 How much of a, what you're gonna call it, a properly structured whole life policy is insurance for you in your eyes, and how much of it is actually just more of an investment vehicle with some really cool benefits?   Tom Laune  11:28 Okay, so zero of it is an investment vehicle, none. And what it is, is that there's a huge percentage of it, that's a savings vehicle. So it's like an alternative to a savings account, but you're getting a much better rate of return than a savings account. So I'll give you some numbers on a $130,000 deposit, which I have a lot of people, that's just kind of a magic number, because you can create a line of credit for usually depending on your health and your age around 100,000. So if you put in 130, you can get a loan for around 100, after 30 days, so it's not tied up for a long time, you know, a large amount of your capital is able to come back to you to then put into an investment. The difference is, is that you're not actually putting your own money in, now you're doing this collateralization, where you're using the insurance companies money to find your real estate investing, does that make sense?   Sam Wilson  12:29 Sort of if I put 130 in bucket, and I can get it out?   Tom Laune  12:35 Yep, so you're down 30. But now all of a sudden, you also have about 3 million or so in life insurance. And then every year you put more money in, the amount of money you have available grows relative to the amount you put in until around year eight, you have more money available in your life insurance than you've put in all for the previous seven years. And then it keeps compounding to where by the time you're ready to retire, you have saved double what you put in, and you've been able to make your investments as well. So if you put in a million, you might have 2 million in your cash value. That's just an example over your lifetime, I'm talking. And then you would be able to use that 2 million to put into your real estate investments. And as long as you're earning more on your real estate investments than you're paying the insurance company, you're employing arbitrage to be able to pay down that balance quicker. And the whole thing works out in an unbelievably advantageous way. It's just it's incredible.   Sam Wilson  13:41 Yeah, I kind of you know, it was not the sharpest pencil in the drawer. So I'm trying to run the numbers here and I go, Gosh, why not just take the 130 Grand, put it in a real syndication have your money doubled in five years, and now I got 260 grand I can go and do something else with?   Tom Laune  13:58 Right. So in this case, you would be taking 130, taking 100 out and putting it into a real estate investment. But this is the thing is that the 100 continues to work for you and earn dividends and grow. And your money is also in the real estate investment. So at the end of the day, you're going to have this huge pool of capital that you've been building for your whole life with uninterrupted compound growth. And you're going to have the real estate investment as well. And your wealth is protected because what happens if two years into this plan, you get hit by a truck. Now all of a sudden your family is going to have millions of dollars that they otherwise wouldn't have had. So you have this layer of protection as well. And depending on what state you live in, you have asset protection that is incredible as well. So you have creditor and creditor protection up to 100% for most of the states I work in California does not have it But Texas, Florida, a lot of the big states do have 100% creditor, creditor protection. Where are you based out of again?   Sam Wilson  15:08 I'm right here with you, man. I'm just down the road Memphis.   Tom Laune  15:12 No way, okay, that's amazing. So Tennessee 100%.   Sam Wilson  15:16 Yeah, I know the 931. It's my wife's from so.  Absolutely. That's really so if I understand this, right, the 100,000 that you pull out, is still treated as if it never left your policy?   Tom Laune  15:30 Or because you're not pulling your own money out. You're doing a collateralization. Right. So you aren't...   Sam Wilson  15:36 That policy or that insurance company? Some form of interest?    Tom Laune  15:41 Yep. It's 4% currently. So if you were putting $100,000 into a real estate investment, earning 8%, that would be $8,000. Right? Your cost of capital would be $4,000. Right? So you're just paying the interest. So rather than making, let's just say, a percent total return, now, you're only investing 4000? Because your 100,000 is still earning money for you. Right, right. And so you're actually converting an 8% return into 100% return by thinking and acting like a bank does. You remember, when a bank lends money, they're not lending their own money, they're lending their depositors money out, right? That's exactly what I'm teaching people. And I'm telling you, it sounds a little bit difficult to uncover right at first. But once you start digging into this, it is a mind-blower. What actually happens as these things mature, and they get into them a little bit. It's not a get-rich-quick scheme. It's more like a get wealthy, slow scheme.   Sam Wilson  16:47 Yes. And I know plenty of very savvy people that use this strategy. I think the key here, and I've talked to I don't know, probably three other people on this show before, you know, maybe obviously, you guys all do very different things. But one of these components is the same. And this is it. Yeah. But the thing that I think is the key here is that it takes until about I think you said year eight, here are my notes. Yeah, you're right. Yeah, is when your the money you've put in and the available money to borrow is the same.   Tom Laune  17:16 Yep, it's very close, though. year four, usually your year on year cash is the same meaning if you put in, let's just call it $50,000, you have 50, mew $1,000 to be able to borrow against so you can get a collateralized loan for the same amount you deposited, which believe me that is the magic here when you're not down at all in liquidity or even and then it starts compounding from there, you know, so it really is amazing.   Sam Wilson  17:46 Tom, thank you for taking the time to come on today. This is a blast. If our listeners want to get in touch with you learn more about the strategies. And again, you know, even just talking I know disability insurance probably isn't the most thrilling Yes, we'll talk about but these are important components of a financial strategy, what's the best way to reach out to you and learn more about you?   Tom Laune  18:05 So I've got free educational videos that is really breaks this all down at bulletproofwealth.info, bulletproofwealth.I-N-F-O. Just go put your name and email address in, watch some of these great videos that I've produced. And then if you want to do something, just click the schedule a call with Tom and I'll be happy to go through and show you what you can do.   Sam Wilson  18:29 Thank you for your time today. I certainly appreciate it.   Tom Laune  18:31 You're welcome. It's great to be here. Thank you, Sam.   Sam Wilson  18:34 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.

Is it possible to be in four companies and still have time for important things in life?   Edwin Carrion's expertise in all aspects of managing operations of startups, from development, design, organization, legal, financial, marketing, capital financing, and strategic negotiations with client and vendor partners, has made him the key player in growing four of his most notable companies from start-up to annual revenues exceeding $15,000,000.   With all of these, he's still able to focus on making himself and his loved ones happy. In this episode, he talks about how creating a replicable business model and finding the right partner and team helped him to achieve success while still living his best life. [00:01 - 05:19] Living Life to the Fullest Having an early head start in business The secret to diversifying Making a model of success Creating a team   [05:20 - 08:04] Bringing in a Technical Partner Why you need a technical partner The value you can offer as the business-side partner Growth mindset Capital resources   [08:05 - 15:19]  Important Lessons for Business Owners Edwin on why he's not interested in service-type businesses Instead of reinventing the wheel, perfect the wheel Building the way he wants to Managing risks Learn from your mistakes   [15:20 - 16:16] Closing Segment Reach out to Edwin!  Links Below Final Words Tweetable Quotes    “Once you create a model of success, that model can be duplicated into whatever you do. And as long as you follow the same business model that got you to success, everything else is going to work the same way.” - Edwin Carrion “I will not change one thing because I know that today I will change one thing in my life. My life wouldn't be the way it is right now. And I don't regret anything that I have done in my life and I'm happy for those mistakes.” - Edwin Carrion -----------------------------------------------------------------------------   Connect with Edwin through his website. Follow him on Facebook, Instagram, and LinkedIn.    Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Edwin Carrion  00:00 Once you create a model of success, that model can be duplicated into whatever you do. And as long as you follow the same business model that got you to success, everything else is going to work the same way. And I have created that so I don't go crazy and I start four things at once. What I do is I focus on one of them, become really good at that one. Once I create a team that is able to sustain a step back, and then I'm able to go into the next investment, on to the next thing that I want to create.   Intro  00:27 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  00:39 Edwin Carrion is an entrepreneur, a businessman, and deal maker with more than 20 years of successful experience in multiple industries. Edwin, welcome to the show.    Edwin Carrion  00:48 Hey, Sam, thank you for having me. Appreciate it. How are you?   Sam Wilson  00:51 Hey, I'm great. The pleasure is mine. Three questions I ask every guest who comes on the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there?   Edwin Carrion  00:59 I started in real estate in 2002. I started enterpreneurship when I was 14 years old. Where am I now? I'm living life to the fullest. And you probably wonder what that means is having a balance of my life, enjoying all aspects of my life, working 20 hours a week and spending a lot of time and creating a lot of memories with my family.   Sam Wilson  01:20 That is fantastic. And that was gonna be my next question is what is life to the fullest mean to you?   Edwin Carrion  01:26 It means having a balanced life, as entrepreneurs, as business owners, you know, at the beginning, we've focused into making a big, you know, and we put aside and that becomes our number one priority. And we forget about everything else, we forget about our health, we forget about being happy. We forget about spending time with our family being present for our kids, be present for our wife if you have one and we lose sight of all of that. It comes to the point that yeah, we get the success, but success is not fulfilling, you know, at a very early age, I was fortunate enough to go bankrupt and realize that when I went back about 27 years old when the real estate market crash, and from there on I've been living, you know, the YOLO life when you only live once meaning that I've been making myself happy. And through that of making myself happy, I'm able to make my family, my kids, my employees, my business and just the growth is continuously going.   Sam Wilson  02:18 That is interesting. You said you've been involved in multiple businesses. What were some of those businesses outside of real estate?   Edwin Carrion  02:25 Started when I was 14 years old. Like I mentioned, my first company was a DJ company. I was a DJ. I played throughout South Florida radio stations, clubs, had an entertainment company. So that was my first company. Carwash prior to that, actually I started doing washing cars when I was 13 years old. And 14 my DJ company. When I was in the military in the United States Marines, I used to sell calling cards because without cell phones back in the day, so I will sell calling cards to the marine so they could go home, especially because I was stationed in Japan. From there left the Marine Corps, started real estate development. Before real estate development, I went into the jewelry business, built a massive company, sold that company in 2014. Back into real estate development, from there on, I bought a transportation company. With a transportation company, we got into the InC 5000. As you can see back here behind me, we are in the Inc 5000 in the transportation company. Opened up an investment firm into the forex market. And that's what I do. So today nowadays are four things transportation, real estate development, forex investment and business consulting and education.   Sam Wilson  03:31 That's a lot of moving pieces. And going back to your idea here that you want to live life to the fullest. It sounds like you've kind of like the lots of variety and a lot of things going on. And that's part of your living life to the fullest. Is that right?   Edwin Carrion  03:45 It's not gonna like there's a lot... It is in everything in life. And you learn a lot, even the financial planners tell you you have to diversify, right can't put all eggs into one basket. So what I learned with me is that once you create a model of success, that matter could be duplicated into whatever you do. And as long as you follow the same business model that got you to success, everything else is going to work the same way. And I have created that. So I don't go crazy. And I start four things at once. What I do is I focus on one of them become really good at that one, the ones I create the team that is able to sustain I step back, and then I'm able to go into the next investment on to the next thing that I want to create.   Sam Wilson  04:25 When you talk about team, what does that mean to you and who is the first person when you're starting a new business that you always bring on?   Edwin Carrion  04:34 It all depends on the business that I'm starting. But let's talk about the transportation company because I did mention transportation. In the transportation company, I have no knowledge and I didn't have a lot of experience in transportation. So when I bought the transportation company, the first person that came in was my technical partner because I am the business partner. I have all the knowledge in business but I don't have the knowledge into like the Forex for example, my Forex investment partner. I am not a trader, I don't know anything about Forex trading. Now that I've been in business for two years, I have learned a lot. But I still cannot, you know, be responsible for other people's money and for my money into the business side. So what do I do is I bring in a technical partner. So that will be the first person that I'll bring into any business is a technical partner, if I don't have the experience on the technical side of the business,   Sam Wilson  05:19 How do you find a technical partner that wants to work with you that if they already possess the technical skills, what value do you offer them, maybe that they haven't already self-created in their own life?   Edwin Carrion  05:33 There's a lot of things that a business partner brings to the table, that a lot of times a technical partner doesn't see. And again, is not just partnering with somebody. It's finding the person that is looking for the growth. So on the transportation side of the business, my business partner, he grew his company to eight trucks. And that's all he was able to handle. He didn't know how to scale from a truck to 40 trucks or a trucks to 100 trucks, he didn't have the mindset. So when I talked to him, you know, when he explained to me the business model, I told him, why don't you have 50 trucks? Why don't you have 100 trucks? And his mind just went no, no, no, that could never happen we can ever get to that level is too much. So that's where I come in, and I bring the value in, number one, I've seen the value. And as far as being able to know how to scale a business and know how to sustain, how to create a team to sustain the scale of a business. That was number one. Number two, I could bring the capital, you know, I have earned the financial freedom and being successful at what I have done in the past. So I have capital resources that I'm able to raise capital, to bring the capital into the joint ventures and the businesses that are part of. What the other one is, how do I find that, besides me jumping in with anybody, I make sure that we do share the same values, because I only work with people that share my values, like my business partner in the Forex business. This is somebody that I mentored six years ago, and into business and real estate, actually, deciding real estate wasn't for him. He liked it. But it wasn't for him. It wasn't his passion. So he got into the Forex trading, he became really good at it, he got to the point where he was making good money. But again, he goes talking to him, if this is such a great business model, why haven't you taken it this far? And again, the mindset is not there. So once I partnered up with him, in less than two years, we grew that company really big. And just as again, because I know how to scale things. I know how to create a system. And I know how to bring the capital in for projects like that.   Sam Wilson  07:22 Right. You find the technical partner, when you bought the transportation company, had you already identified the technical partner? Or was it Hey, I'll buy it. And then I'm sure there's somebody out here that could find?   Edwin Carrion  07:33 Well, when I bought the transportation company, the person that I bought it from that became a business partner, he was the technical point. And the transportation company, you know, I could break it down into three components, logistics, maintenance, and administration. So I took over the administration part, he started with the logistic and maintenance. And that's how we grew.   Sam Wilson  07:53 Right. Yeah. Because you had the mindset on the administrative side, maybe how to bring in more business, how to grow the company, and he knew how to run it, and just was growth, growth-minded? That's really interesting. Is there any business right now that you would say, hey, that's too difficult, or has too many moving parts to just say, No, that's not of interest. Or is there anything on the table now as a possibility, because you know, how to grow and scale companies.   Edwin Carrion  08:18 I mean, the businesses that I personally don't like to get involved with are the service-type businesses, hair salons, nail salons, restaurants, because the profit margins are too small. So one of the things that I learned throughout being in business for over 20 years is that you need to learn what each customer is going to bring you. What is the average revenue per customer? And in the restaurant business, in the nail business, the average revenue per customer is very small. That's one of the things that I tend to stay away from. And I learned that when I had my jewelry business, again, I was the business partner. And I had a technical partner in the business. And we realized that our average client was around 100, to $1,000. And that's a good number to have, because that means that we don't have to have a lot of quantity. So with time you learn about that is better to have quality versus quantity. And it goes the same thing for my development. When I started in real estate development, I used to build so many houses, I was crazy, like all over the place, trying to find land. And I was doing like all these small little houses, which they were you know, $200 to $300,000. Nowadays, you know, I don't do that anymore. I built one house every year and a half, two years. But the house is a $3 to $5 million project. Like my next project I'm starting to work on right now. It's going to be a $10 million project. And it's only one house so I don't have to go crazy building 10-15 houses, I only do one project and it's going to need me the same amount of money as the other ones would. But at the same time I work a lot less because I do not like to work.   Sam Wilson  09:49 Right, that makes a heck of a lot of sense. On the development side, what have been some of your favorite developments and why?   Edwin Carrion  09:56 My favorite developments have been the first ones that I built. And I'm going to tell you why. Because I realized at the time I was building 1600 square foot houses, four bedrooms, two bathrooms with one car garage. And I didn't create the floor plan for those. What I did was, I always understood that you have to add value to everything that you doing life. So I used to go to these big developers, the Lennar, the Schumacher homes, the Better World Builders right now, which are some of the big ones, D. R. Horton's. I used to go to their developments. And I will pick a model that I like, and I will take the model, and instead of reinventing the wheel, I perfected the wheel. And what I mean by perfecting the wheel was I added things that didn't have, little things meaning like in their bedrooms, they used to put carpet. So instead of me putting carpet in the bedrooms, I used to put tile, so when somebody that was buying their first house, they would walk into this house and be like, Oh my god, he has tile on the bedrooms. He's like crazy, like this so much money, maybe it cost me an extra 1%. to add that, you know. In the closets, instead of putting the wires closets, I used to put the rod, the metal rod, which cost about the same amount of money. And people were like, oh my god, he has a cloth. He has a rod it has ever been the wire mesh. So those were my favorite projects, because I realized that I was building somebody's dream. And in America,to own your house or to buy your first house. It's like you accomplished the American dream, right? Especially because I'm coming from another country, coming here and buying your first house like wow, I made the American dream. So I was building and I was creating people's American dreams.   Sam Wilson  11:30 That's awesome. Absolutely awesome. never really think about it from that perspective. So you're building right now your $10 million home, that's your next project. If people just come to you and say, Hey, I've got this big, giant home I want to build will you build it for me?   Edwin Carrion  11:43 No, like I told you, I don't like to work. And one of the things that I do is I don't build for people. I build for myself. So every project that I do now is a spec project, meaning that I'm going to build it the way that I want to. And when it's 90% complete, that's when I put it for sale on the market. And the reason I put it for sale on the market when it's 90% complete, because there's very little changes that the new owner could make. Versus that me put it on our market, like a lot of developers do, you know, before it breaks ground or when it's the beginning stages, people come in, and they want to make all these changes. And it just prolongs the process. And it makes it more tedious. So to me, I said I have good taste. My wife has amazing taste as an interior designer, and we just build the way we like it. And if you build it, it will sell.   Sam Wilson  12:25 What are your risks in that? Let's say the economy takes it... What are your risks and building a high end luxury home?   Edwin Carrion  12:32 Risk is like anything else in business, there's always a risk, right? So as long as your key with your risk, and you know, for me, my risk tolerance could be 30%. For you, it could be 10%. So as long as I'm okay with my risk tolerance, I try to mitigate that risk. Since the beginning, I try to figure out what is going to be my risk. So in this case, my worst-case scenario could be that. Well, number one, let me explain a couple of things. I'm doing development, right. So I'm not flipping, I'm not wholesaling. Flippers or getting an old house, putting some paint here and there and making it look pretty, right. So the profit margins are very little right and you're a developer, you profit margins are larger than that. So we got about 30% profit margins from the total costs of construction. So my project profit margins are huge. So if  the market was to crash, which now everybody's talking about a real estate bubble coming up, which there might be a bubble, but I don't think it's going to crash like it did back in 2007, 2008. So let's say a crash 30%. I'm still at breakeven. And if the market crashes, that way, I can rent a house because high-end luxury homes, a lot of people I didn't know that before it started building higher luxury homes. But there's a huge rental market for that there's a lot of companies that bring their CEOs and CFOs to other states, and they pay for all these luxury homes, and they pay a lot more than you were to sell the house because they don't want to have the liability on their books. So they rather rent, right. So there's two parts to this. The third part is you can always rent it for movie shoots, video shoots, all those things. Because I have done that in the past with one of the houses that I used to own. We film a couple of music videos in there and everything else, there's multiple options on the high end luxury market. And the last one that I always tell everyone is that even though let's say we're in a bad economy, there's a lot of people making a lot of money when there's a bad economy, just like when there's a good economy, right? I made millions of dollars from 2008 to 2012. When everybody was suffering, we had, of course, the economy, the United States, you know, I made millions of dollars in the jewelry industry during that economy and I was buying real estate I was buying properties and taking advantage of the fire that there were out there.   Sam Wilson  14:33 If you could look back and your business career and there was one mistake that you would rather not repeat again, what was it? And then how can you help our listeners avoid that?   Edwin Carrion  14:42 I love this question. And I don't know why everybody likes asking this question. And my answer is nothing. I will not change one thing because I know that today I will change one thing in my life. My life wouldn't be the way it is right now. And I don't regret anything that I have done in my life and I'm happy for those mistakes. But the one thing you have to remember is that as long as you learn from that mistake, you're going to be better off. But if you do not learn from that mistake and you keep making the same mistakes over and over again, you're not going to get anywhere. So it's not about changing or doing something different is about learning from that mistake and make sure you don't commit and you don't make the same mistake again.   Sam Wilson  15:19 Absolutely. Edwin, if our listeners want to get in touch with you or learn more about you, what is the best way to do that?   Edwin Carrion  15:25 The best way to do that is join me on my social media, Facebook, Instagram, LinkedIn @edwincarrion78. Or you could just go to my website, Edwin Carrion and send me a message and you could connect to me. If you have any questions about real estate, live business, relationship, marriage, kids, anything, send me a message I'm very easy to get in contact with. I love to help people out.    Sam Wilson  15:45 Edwin, thank you so much for your time. Certainly appreciate it.   Edwin Carrion  15:48 Oh, thank you for having me. Have a great day.    Sam Wilson  15:50 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.

Real estate has many moving parts and it takes a lot to make sure everything's going smoothly. In this episode, Justin Brennan of The Brennan Pohle Group joins us to discuss how he and his team are running a tight ship and successfully scaling their business. He goes in-depth on doing proper due diligence and managing worksites and contractors.      [00:01 - 05:59] Don't Go Big Too Soon Justin's background and his team's measured approach to investing Setting up operations and logistics in advance Careful due diligence before doing deals   [06:00 - 14:29] Properly Managing Contractors  Spending time talking to contractors and visiting their worksites Understanding their software, billing, and supply chain The importance of having a foreman on site Don't hire cheap contractors Considerations before paying contractors in advance   [14:30 - 15:22] Closing Segment Reach out to Justin!  Links Below Final Words Tweetable Quotes   “Don't go big too soon despite what you know. Some people say you're going to make mistakes, just don't make big ones.” - Justin Brennan   “Nobody's going to watch your money like you're going to watch your money. You can't expect people to watch your money like you're going to watch it because they're not getting paid your money.”  - Justin Brennan -----------------------------------------------------------------------------   Connect with Justin! Head over to The Brennan Pohle Group website or follow him on LinkedIn. Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Justin Brennan  00:00 Nobody's gonna watch your money like you're gonna watch your money and you can't expect people to watch your money like you're gonna watch it. Because they're not getting paid your money. So for you to say, Oh, I expect them to like work harder do this well, okay, well then give them a piece of the equity and maybe they will. But yeah, no one's gonna work the way you're gonna work. No one's gonna protect your money or your investors' money the way that you are either.    Intro  00:18 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  00:30 Justin Brennan is the CEO and multifamily investor of the Brennan Pohle Group. They own over 500 units. He's also a real estate broker. Justin, welcome to the show.   Justin Brennan  00:39 Thanks for having me on, man. I appreciate it.   Sam Wilson  00:41 Hey, man, the pleasure is mine. There's three questions I ask every guest who comes on the show: in 90 seconds or less, can you tell me where did you start? Where are you now? How did you get there?   Justin Brennan  00:50 Well, we started in 2010 was the first investment we bought in that was $100,000 condo in the midst of the financial crisis in Murrieta, California, of all places, which is actually the heart of the financial crisis, right in Riverside County. The irony in that, and then that kind of grew from a single condo investment rental property into two to four-unit deals, then we got into five to 10, then 20 to 50. And then now we're into the 90 plus 100 plus unit space, and then you're starting to hit those 200 unit deals.   Sam Wilson  01:21 Got it. I love that it sounds like you guys have taken a very measured approach to your investing. What have been some of the things you feel like you've done really well?   Justin Brennan  01:30 The logistics of setting up operations, especially from going in state to out of state investing, you know, we kind of mastered the different size of deals, not getting too big, too fast. You know, you hear from some syndicators and guys saying, I'll just go big, go big, and, you know, I get it, I get the thought, in theory, they're accurate. But the thing they're missing is that first of all, they never started big. So I don't know how they say that. Number two, there's more zeros in the big stuff and more big mistakes you're gonna make because you're gonna make mistakes. And so I'd rather make mistakes with smaller zeros where you can recoup that versus making a mistake that's 100 to 200 to a million-dollar mistake. And so managing those mistakes to where they were minimized and learning about along the process to where, you know, now we're at a point where you learn as you go is a part of that too. And now I feel like okay, we've gotten through some of those pains to where I'm not going to make the same mistakes twice. I mean, we're dealing with larger numbers, now you're dealing with $30, $40, $50 million deals or not 2 million, right? Or 500,000. So big difference.    Sam Wilson  02:37 Big, big difference there. When you say you got the logistics of operations figured out. What does that mean to you?   Justin Brennan  02:43 Yeah, so when you're going out of state because it was the big thing for us in 2017-18 said, okay, you know, we're in California, it's not the cheapest place to live, we want to grow. So we had to set up operations outside and my business partner Christopher Pohle had ended up purchasing a ranch outside of Austin. So that was kind of now second headquarters was outside of Austin's now we had Midwest and then west coast. And then going into each market, we were interested in primarily Midwest being Kansas City in Missouri, we got Oklahoma, Texas, Alabama, stuff like that, Tennessee, in setting up operations about six to nine months in advance, actually pulling in deals. And when I say operations, I mean property management companies, construction crews, logistics, legal accounting, all those things that you're going to deal with from kind of the back office side of things, lay of the land, good neighborhoods, bad neighborhoods, where's the development? Where's pat the progress? Where's the city planning on putting in money? Are there railways and other light rail systems, all these details that go into where's the market for the market, so we don't just go in and start finding deals and then kind of catch tail later. It's six to nine months in advance, get the lay of the land operations set up so that way when deals start flowing, we can execute quickly.   Sam Wilson  03:57 That sounds very time intensive. What is the practical way that you guys have decided to do that without you, Justin moving to Nashville, Tennessee and going okay, let me go spend nine months here and figure out what the city is doing?   Justin Brennan  04:12 I am flying in there consistently during that six to nine months. And spending three, four days of time meetings, driving neighborhoods, learning it. So yeah, it is time-intensive. But it's also avoided us from making really dumb mistakes and getting put into a neighborhood and we're like, we shouldn't have bought here. Right? Right. I mean, so perfect examples. You know, every time we're looking at a deal, I'll go sit at the property at different times in different days of the week. So I'll go in the morning. I'll go midday, and I'll go in the evening and wait for people to come home from work. I'll go on a weekday and weekend, typically a Sunday and I say Monday or Tuesday because I just want to see the flow of the area flow the neighborhood when you're getting past normal due diligence and things like that, right. So you need to understand what you're getting yourself into otherwise, you deal with horror stories like I heard recently from a first-time syndicator, who bought a property had money backing, it was his first bigger deal, didn't do proper due diligence, got into it thought they were getting a great deal because they had a great basis. And on paper, the cap rate looks great cash on cash, everything looks good on paper, then come to find out because of the lack of due diligence, there was a lot of deferred maintenance, a lot of issues with that property neighborhood not being the best setup. And they inherited a lot of delinquencies, bad tenants issues, and it just turned into a complete... And now they've lost well over a million dollars. Well, and the guys, he'll never do another syndication because he'll never get money again. He was backed by good money, good people. But because he operated so poorly, he's basically blackballed. No, right. I say, don't go big too soon, right. Despite what you know, some people say you're gonna make mistakes, just don't make big ones.   Sam Wilson  06:00 When you're setting up your back office, talking about attorneys, title companies, all of those, you know, other than calling your contractors and maybe even going and seeing their work like, what else, what other due diligence is there really to do until you're ready to send them a deal? I mean, there's only so many conversations you can have with a contractor like, Hey, you guys, yeah, we've done these three projects. Okay, cool. Well, and I get one together, I'll call you.   Justin Brennan  06:24 Yeah, exactly. You can certainly go and see some of their work. That's definitely something you want to take a look at. Understanding, you know, there are foremen who run the jobs. What kind of software do they use? How do they do billing? Who does their supply chain? Who's going to order the supplies? Is it going to be you as the owner? Is it going to be them? Yeah. How's their labor force? We're talking about labor shortages, especially these days. Right? So we're dealing with that, you know, in foreman on-site, you know, because a lot of times they're running multiple jobs. So okay, great. So the foreman is going to be here once a day in the mornings in the evenings, who's opening up who's locking units? Is it our job, is it your job, is it our maintenance staff? Logistically, how are we dealing with that? Yeah, what software are you guys using? Are we corresponding through that for just… because when you're doing renovations on value add? It's an assembly line. Right? Right. And so you have to really manage that correctly. So you don't have too many vacancies at a time. Too many not available at a time. It's like this seesaw assembly line battle between your kind of rental guys and your leasing staff. Right. And that blending those two together to where you Okay, five units a month come vacant? How long does it take you to turn those things? How long does it take you to market them? How long does it take people to get in there where you're collecting checks? And I kind of calculate check to check meaning person moves out, you're not getting any money once next person give you a check? Is it 30 days, 60 days, fortify like, what does that look like? Right? In timing that up and then layering over-layering. Because it's a dance, it's not easy to manage that process. And it's not a perfect science. So having a construction crew that gets that in can help you manage that isn't just all over the place is really, really, really important.   Sam Wilson  08:02 Yeah, absolutely. What about that, I guess that the management side of it, is there a certain size of construction company? You guys always look for where you say, Man, you've got to have X number of employees, you got to do X number of dollars in volume a year? Is there anything like that, that goes into that equation on your kind of due diligence?   Justin Brennan  08:20 Yeah, so you should definitely have at least one foreman on-site or an assistant foreman every day. And if you're going to run the jobs, and if they're leaving for a little bit, but they need to pretty much be there constantly in and out every day, touching the job site every day. And then you're typically going to have two workers per unit is kind of what I've seen the best flow from a labor force standpoint. So if you're going into renting a unit, depending on what you're doing to but let's… presuming you're doing a pretty good Reno, and you're adding washer dryers and some electrical work. So there's some rough stuff that has to get done. That usually happens first. See those guys going in and doing the rough electrical, rough plumbing, and then that gets done. So now coming in behind that as some drywall painting cabinet, guys, countertops, fixtures, plumbing, electrical fixture type stuff. Flooring is usually one of the last items going and stuff like that. And then appliances if you're bringing those in. So the two guys per unit. So if you're doing five units at a time, per month, right, that's 10 dudes on-site every day. Yeah. Plus your foreman, right? So Mister contractor, can you supply that? Yes, we can. Okay, what happens if you don't? Right? So just working through some of that logistical stuff? Because we've dealt with it, right. We're the contractor says x. And then there's five guys on site. And then you start falling behind, right? Because now you're not catching up to the rental schedule, right? And then you got to backtrack and all this other stuff. So it's not a perfect science.   Sam Wilson  09:49 No, it's not even like you said, if they say yeah, we can get 10 guys on-site plus a foreman. I mean, if you're not there, when the cat's away, the mice will play, especially in the   Justin Brennan  09:59 And that's where our staff comes on top of that. That's why it's so key. That's why we don't do any deals under 90 units anymore, right? Because 90 units is where the economies of scale come in, where you have on-site management, on-site leasing, on-site maintenance on-site, everybody. And so they're my eyes and ears on it. Plus, we have cameras, right? Plus, we have me, and I'm on-site every other week, and I'll just show up randomly. on purpose, right, and you just have to listen, nobody's gonna watch your money, like you're gonna watch your money and you can't expect people to watch your money like you're gonna watch it. Because they're not getting paid your money, right? So for you say, Oh, I expect them to like work harder. Do this well, okay, well, then give them a piece of the equity and maybe they will write that's maybe, oh, maybe but yeah, no one's gonna work the way you're gonna work. No one's gonna protect your money or your investors' money the way that you are either.   Sam Wilson  10:49 Have you ever made a bad by?   Justin Brennan  10:51 Not yet? Not knock on wood, man. No, not yet. We could have you know, we ended up last year having to pull out of a deal that in hindsight, was kind of it was weird as a blessing because we were finding things out. And then but we had money hard. And there was really wasn't there wasn't an out force legally at that point. But just so happened, there was a fire on one of the properties during escrow, which ended up giving us an out legally. And then hindsight 2020, you're like, gosh, that was actually a good decision. Because it may have ended up being a bad buy for us at the time, you know, kind of looking forward now, six months later, like we got, you know, a lot going on with this other property at the moment. So it would have been put us in a tough spot. So that was a little bit of luck. But I'd say there's no accidents, things happen for a reason. And there are no accidents. The craziest things happen in life.   Sam Wilson  11:46 But what's a lesson or a mistake you've made that you feel like you could help someone else not make?   Justin Brennan  11:52 Don't hire the cheapest contractor. I made that mistake once even though I did my due diligence on them, right? We checked them all out. I even tested them, like on a small portion of the job first to see if they could execute. And they did. And I was like, okay, so you got you got a little $3,000 portion of the job you executed. Okay, now we're gonna graduate you up to the next stage, and then come to find out, they're just full of hot air. And they took about $17,000. And, you know, so I mean, it wasn't a massive mistake that we couldn't recuperate from it, it was a $17,000 mistake. But imagine if that was another contractor on a much and that was only on a 30 unit deal. I say the mistakes are made. Imagine that was a 200-unit deal. And that was a $200,000 mistake, right? Do not ever, people know this intuitively, but just stick with this. Don't ever pay the contractors in advance. I mean, progress payments, you can do a deposit, typically, maybe 25%. But a lot of times, you'll get bids come in and they'll say 50% up front and then 50% Upon completion. Yeah, kiss my you know what, right? I will pay you a 20 to 25% deposit upfront, then we will do progress payments, right, depending on the length of your job, and then you will get the final payment within 30 days of completion.   Sam Wilson  13:12 Yeah, that 25% Upfront is largely contingent upon what they're bringing, if they're not bringing any materials, and it's all straight labor. Correct. If it's straight labor, I would be really hard-pressed to give them anything. Well, sure.   Justin Brennan  13:24 Yeah. So the usually the deposits are typically based on materials they're bringing on site roofing or fencing or, you know, basic stuff, then you're typically paying a 25% deposit, because there's an on site move for materials.   Sam Wilson  13:41 Right, yeah, I get it. I was a contractor for way too long. I completely understand it.   Justin Brennan  13:46  And I'm a licensed GC. So but yeah, I would never, we just learned that battle. And you'd have to fight it a bit because they want some more payment up front. Because they're either, with all due respect, not all of them. So I don't want to aggregate but a lot of really bad money management. So they're floating a job here for job there and money moving here for that here. And they can't really manage their money correctly. So they're taking money from here to pay some guys over here. And you see how that flows. And you're not going to use our job as your cash flow or so.   Sam Wilson  14:15 Right. Not only that, but also just the risk of them. Like you said, backing up and walk and you go oh, okay, well, thanks. Well, that was enjoyable writing you…   Justin Brennan  14:23 I paid you 50% upfront, right? Yeah, you go deposit, but that's specific, usually for materials.   Sam Wilson  14:29 Right. Yep, that makes a heck of a lot of sense. Justin, if our listeners want to get in touch with you, what's the best way to do that?   Justin Brennan  14:35 Google me, man, Justin Brennan on Google. That's probably the easiest way to have some stuff pop up or you can go to our website, which is brennanpohle.com. That's B-R-E-N-N-A-N-P-O-H-L-E.com. And, yeah, read whatever you want.   Sam Wilson  14:53 Great. Sounds good, man. Justin, thanks for your time today. Certainly appreciate it.   Justin Brennan  14:55 You bet. Thank you.   Sam Wilson  14:56 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.   

Is tokenization the future of real estate investing?   Vernon J., the founder and CEO of EquityCoin, discusses the potential of blockchain technology in the real estate industry. He emphasizes the importance of community, explaining that a token is similar to stock and that before launching a token, it is important to have credibility and a track record of success. He goes on to say that this is the next frontier in blockchain technology, and regular companies will be able to tokenize their assets and share the profits with their shareholders. He also mentions that tokenization provides the infrastructure for quick transactions, just like with stocks on the stock market.     [00:01 - 04:42] Behind EquityCoin Combating two issues in the commercial real estate market Lack of funding available to underserved communities High cost of traditional financing Removing the bureaucracy and the middlemen [04:43 - 14:06] Blockchain Technology and Tokenization of Assets Blockchain begins and ends with community Creating empowerment ecosystems Building trust and having a good track record Security tokens are actually backed by a company and by assets and are bound by SEC rules and regulations Soon, every company is going to have a tokenized component of their business Build things in a place of credibility and not hype   [14:07 - 17:04] The Tokenization Movement Vernon on what they are working on right now Being a missing link between the developer and the community Empowering and helping developers and leaders to tokenize through EquityShare   [17:05 - 18:51] Closing Segment Think about blockchain technology as the internet of accounting Reach out to Vernon!  Links Below Final Words Tweetable Quotes   “I think blockchain technology is providing a solution where you're kind of removing the middleman. You can remove lawyers, you can remove different people in that ecosystem or in that cycle that is kind of like superfluous.”  - Vernon J.   “I would say, before all of that, it's a track record. It's making sure that you have credibility in the game and skin in the game.” - Vernon J.    “When you think about blockchain technology, it's the basis of cryptocurrency. It's the basis of security token. It's the basis of NFTs. It is the underlying technology behind it.”  - Vernon J. -----------------------------------------------------------------------------   Connect with Vernon! Follow him and EquityCoin on Instagram! Visit the EquityCoin website to know more about blockchain and real estate.   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Vernon J.  00:00 I want to be able to delineate between a cryptocurrency and a security token, because when people hear blockchain they go right to Bitcoin. Oh, you're talking about that Bitcoin thing right? But that's the wrong way to think about it. You know, when you think about blockchain technology, it's the basis of cryptocurrency. It's the basis of security token is the basis of NFTs. It is the underlying technology behind it.    Intro  00:25 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  00:37 Vernon J. is the founder and CEO of EquityCoin, the first digital token backed by affordable housing. Since 2006, Vernon has facilitated over $160 million in commercial real estate transactions. And I actually think that number is probably closer to 200. At this point, Vernon, welcome to the show.   Vernon J.  00:54 Sam, thank you so much for having me. I'm excited. I'm thrilled to be here to talk about, you know, not only EquityCoin, but also giving general pointers in general gems about how to scale commercial real estate, which is near and dear to my heart so...   Sam Wilson  01:08 I love it. Man, I love it 90 seconds or less? Where do you start? Where are you now how'd you get there,   Vernon J.  01:12 Started in Brooklyn, went to Massachusetts for high school and college. Then I came to LA, now I'm in LA area, had my grassroots, had my teeth in New York, you know, like they say, you know, you start in New York, you can go anywhere. And I truly believe that. And now I'm on the West Coast, you know, doing the same thing, just trying to create more opportunities.    Sam Wilson  01:32 You've spent a lot of time in commercial real estate scaling commercial real estate, but you've kind of taken a left turn, or shall we say, a spin on what you saw in the market? What need did you see in the marketplace? And then how are you solving it?   Vernon J.  01:46 So you know, Sam, I've been blessed man. And I've been blessed to work with family offices throughout my career, you know, wealthy individuals, you know, developers, and what I've noticed, I've actually noticed two things. Throughout my journey. And throughout my career, I've noticed that there's a handful of families and people and individuals and companies that own the lion's share, the most of the real estate in these large cities. Second thing that I've noticed is that when I get financing for my clients, they're doing workforce housing, maybe it's 200 units, or, you know, they're doing a new development, it's actually exponentially easier to get funding for those types of projects than it is to go to a community that may be in blight, or maybe underserved, that really needs the funding. It's exponentially harder to get financing for projects in those neighborhoods and in those communities. So I created EquityCoin, as a way to combat both of those scenarios. So that one, I can create, use the blockchain as a mechanism to allow thousands of people within the communities that we own properties to own the assets, but not only that, be able to, you know, combat or kind of replace the bank in the sense where they're not really providing funding in those communities. So I'm saying you know what, I can come in, I can create this infrastructure, where the community can come together and replace the bank, and actually be another component of the capital stack if we can't completely replace the bank. So that's EquityCoin. In a nutshell, we started in the East New York section of Brooklyn with portfolio of assets over there. And we're expanding to North Miami and South Los Angeles.   Sam Wilson  03:25 So if you had your way, it sounds like you'd like to just replace the bank entirely. And you guys would just come in as a pure equity partner in these deals.    Vernon J.  03:33 That's right. That's the big idea. You know, where we are right now, I think there will be a need for a mixture within the capital stack to have some financing. But I think, you know, for all intents and purposes, the grand vision is to be able to replace, you know, those centralized organizations that they're convoluted with so much bureaucracy, you when you get your funding, you've ended up paying so much more than I think you need to pay. And I think blockchain technology is providing a solution, where you're kind of removing the middleman, you can remove lawyers, you can remove different people in that ecosystem or in that cycle that is kind of like superfluous.   Sam Wilson  04:12 Yeah. I love the idea of blockchain. I love the potentials it has for a lot of industries, especially the real estate industry. It's which is just I don't think I'm telling you anything new, so disjointed in the way that deals get packaged up and done. I mean, title searches alone will just tell you that there's a lot of room for improvement. Are we actually reading a scanned document that was handwritten in 1895? We are reading, okay, great. Just want to make sure it's illegible. I mean, that's the type of stuff we're dealing with. And this will help solve that. But talk to me more practically about the nuances of launching a coin, of getting investors to trust that coin, then having that money then get deployed into the right projects. That's a lot of moving steps. Can you break that down for us?   Vernon J.  04:57 Yeah, for sure. It is in everything on the back. blockchain begins and ends with community, right? So if it weren't for the fact that I've been building a community of stakeholders within the East New York section of Brooklyn, and, you know, 2014, I purchased eastnewyork.com, with my family. And that is the go-to place for everything dealing with East New York, the community, it doesn't matter if you're running for office, local office, if you're building a new development, you're opening up a new store, opening up a new business, whatever it is, all roads lead through eastnewyork.com. And we have over 30,000 members who are stakeholders within the community. So we've spent years developing and harnessing the trust within the community so that they trust who we are, they trust know what we're about. And the idea behind it is to create empowerment ecosystems, right, so where we not only own the media aspect of it, but then we also own the real estate. And we also are connected politically, we're also connected, you know, with all the stakeholders within the communities, I would say that's where it starts, because none of where we are today would have been possible without first building out the community. And then it's also credibility, right? I've got 16 years of experience in the real estate market as a CEO of EquityCoin. So I think when we think about blockchain, we think about this technology, it's not a way where you just come in and you're, all of a sudden, you can create this billion-dollar company or multi-million dollar industry, I think what is required is a credibility and kind of like the steps to take with any business, you know, that you have. So I use blockchain as a way to create more efficiencies in what we do. Right. And I think that's how we need to think about it. Because most of these companies that are coming today are doing really well with blockchain technology, they already have a track record of success. I would say before all of that it's a track record, it's making sure that you have credibility in the game and skin in the game.   Sam Wilson  06:56 Yeah, that makes a heck of a lot of sense. It is an add-on to your business. It is not the creation of a new business is what I'm hearing.   Vernon J.  07:03 That's right. And when you're creating a token, it's similar to creating stock, right? It's very similar in that I want to for the audience, say I want to be able to delineate between a cryptocurrency and a security token, because when people hear blockchain, they go right to Bitcoin. Oh, you're talking about that Bitcoin thing, right. But that's the wrong way to think about it. You know, when you think about blockchain technology, it's the basis of cryptocurrency, it's the basis of security token. It's the basis of NFTs. It is the underlying technology behind it. So a cryptocurrency similar to $1, right? Or the yen, or the euro is not an investment where you believe, don't get a promise of a return from a currency. And that's an important factor when you're dealing with the SEC. But when you have a security token, like EquityCoin, security token is actually backed by a company, it's actually backed by assets. And that's different components of blockchain technology. And that's where we feel is the next horizon, regular companies are going to be able to tokenize their assets, tokenize their company, and allow other people to come in and share the fruits of that labor. One more thing, Sam is like 20 years ago, when the internet was starting to bubble up, right? 20-25 years ago, if you had a website, as a company, you are hot stuff, even simply having a website kind of gave you a competitive advantage, you know, with your peers. But now today, you can go to GoDaddy, Squarespace, you can create your website within five minutes and a pretty comprehensive site, you know. And back then, in order to develop a site, you needed an HTML guy, you needed a PHP guy, it was costly. But again, today, it has become commoditized. So I think we're in that same space with tokenization. Tokenization, today, EquityCoin is a tokenized company. It's a hot-button topic. And I think it's cool. But in 20 years, it's going to be commoditized, you're going to be able, every company is going to be using Blockchain or having a tokenized component of their business, it's no longer going to be a novelty, but more of like a necessity, and more like what you need to do in the business. So I think right now, if you're tokenizing your company, it better have a utility, it better have some sort of advantage. You know, you're not just tokenizing for the sake of tokenization. That's an important piece to interject it.   Sam Wilson  09:26 Appreciate you taking the time to really give some clarity around the difference between crypto security tokens, NFT's, all of that. So you took the step you created EquityCoin, right? You did that, and then I know you said you kind of piggyback that on eastnewyork.com. So you said hey, you started go out to your network. What do people do? Do they just trade their dollars for EquityCoin? How does that work? That's right,   Vernon J.  09:49 So you're trading your fiat currency or it could be a cryptocurrency that you might have, Etherium for example. You can trade that into EquityCoin, and now as EquityCoin holder, you're entitled to quarterly dividends that are paid out from the income from the real estate. But the beauty of tokenization of a company or a real estate or an asset is that it gives you the ability to liquidate quickly. In a normal real estate transaction, if I have 1000 investors in this investment, normally, you can't get out of your position until we sell the entire asset. Or if you find somebody who might want to purchase your shares, then we got to have to get a lawyer involved.   Sam Wilson  10:27 200 pages later, we've traded money.   Vernon J.  10:29 Later, now we finally transferred, but with blockchain and with tokenization, it provides the infrastructure for you to be able to transact as if you were on the NASDAQ or the Russell but you can be a company that maybe only has $10 million in assets or $20 million in assets. But now you can trade as if you were, you know, publicly-traded or similar to a REIT.   Sam Wilson  10:50 What are the securities considerations around this? I mean, this seems like it's an ever-evolving landscape where it's like, oh, one day you can do this. And oh, the next day yo, is 10 million bucks. Because you made a mistake, buddy. I mean, you see this stuff in the news all the time. How are you navigating that landscape?   Vernon J.  11:06 Right. So here's the things, Sam, when you have increased freedom, you have increased responsibility, right. And when you're talking about cryptocurrency, if you own your crypto, and again, there's a difference between cryptocurrency and security tokens, right. But if you own your cryptocurrency, and you have it on an exchange, or you have it on your hard wallet, which I like to use ledger for the audience if they're interested, but you own that, and you are in full control of that. So if somebody steals your keys, your wallet, keys or somehow hacks you, there's no, you know, authority you can go to because that is kind of like the essence of the cryptocurrency world that you don't have ownership, right. But on the flip side, you've got security tokens. And since security tokens are bound by SEC rules and regulations, I'll give you an example one of my token holders lost their keys to their wallet. So we had to replenish, we had to burn their previous tokens, and then replenish their new tokens. This is something that's required with the SEC. This is again, Sam, why I believe that the tokenization of companies and security tokens as a whole is on the horizon is on the cusp of something big because I think people are looking for that balance. They want some security, but then they also want some freedom, and they want it in the middle at this moment. And I think security tokens brings those dynamics to the table.   Sam Wilson  12:31 Yeah, and I think that is an interesting difference between a cryptocurrency and a security token, and that you as the sponsor can issue those security tokens. What have you found on the implementation side of it? Like I know, it's touted as, Hey, these are things that make it easy, we can have 10,000 investors each put in $1. And it's no more work than if I had one investor for $10,000. It's all the same. So I've been told, I don't know, because I don't do this. Is that true?   Vernon J.  12:58 Again, Sam, it all comes back to community, right? Have you created that trust within your community or are you just creating this token out of thin air with no credibility and saying, hey, I want to do this big idea. And now people are investing in that idea. But then they don't have the complete trust. So if they don't have the trust in you, or in the project, it becomes a lot more cloud. And I've seen projects kind of falter, because they've kind of built things from a place of hype. When you build something from a place of hype, it's easy to crumble, it's easy to come down. Everybody listening to this, you know, if you're thinking about tokenization, if you're thinking about, you know, using blockchain technology, you know, tap into your credibility of what makes you great, and what makes you unique, because that combined with blockchain technology is super powerful.   Sam Wilson  13:47 Right. And I think one of the takeaways from this is to demystify some of it is that it isn't the recreation of a new business, it's a different way of doing business. Same thing we were doing before, it's a different way of doing it. That brings just some new communication, some new potential ease of implementation to the operator to the investors, but it's not, it's still the same actual business. Last question for you, I think I might have more, is on the how you guys are selecting projects. I know you're one of your big pushes the affordable housing side, I'm assuming you guys put the money together and then go out and find quality operators to work with or are you guys as well doing the projects yourself?   Vernon J.  14:27 So for EquityCoin, we are doing the projects ourselves. We actually have a call this afternoon with a developer in Brooklyn who's doing a $250 million development, and they're looking to equity coin to be a part of their capital stack so that we can bring the community in so they can own a piece of the asset. They own a piece of this new development because they're getting a lot of pushback from the community because the community said hey, you guys are coming into our neck of the woods from outside and you're not even giving an opportunity for people within the community to own a piece of this right? So now you know EquityCoin can come in and be that missing link from, you know, that bridge between the community and the developer. That's one component. The other. Another big thing that we're working on right now is a system called EquityShare. And what we envision an equity share to be is sort of like the coin base for real estate tokens. And we want to empower other community developers and leaders, you know, like myself all over the country who are looking to tokenize and create a token for their movement. So we can actually help them with the infrastructure of legal compliance, you know, the smart contract, you know, all the SEC, FINRA, making sure that they are breeding a holistic approach to tokenization. And now on equity share, you know, we'll have 100 different tokens that are backed by other assets. It can be a student housing token, it could be a retail token, it could be Amazon warehouse token, Airbnb token, you know, the options are endless. But I think what's important is having the right infrastructure. And again, like I said, before, when the internet started, it was hard to create a website, it was costly. Now you do it in five minutes. And right now, if you want to create a token, it's pretty costly. If you want to create a comprehensive token that has rate network, bring working in the smart contract, but in five to 10 years, you're going to be able to do that, in a snap of a finger. And for EquityShare. Our goal is to get there pretty quickly. So we can, yeah.   Sam Wilson  14:41 If you were taking a stab at what the cost is right now to develop a quality token, what do you think that is?   Vernon J.  16:32 I would say a minimum of 100,000, minimum of 100,000. Because if you look at our balance sheet, most of our capital goes towards compliance, right? So making sure that the token is created in a way that is congruent and consistent with SEC rules and regulations. You know, that's one piece of it. But then also, you've got to make sure that you have the KYC AML. So know your customer, anti-money laundering, these are all things that need to be baked in so that you can avoid fraudsters on your system. It all comes together, I would say about 100 G's.   Sam Wilson  17:03 Right. Got it. Man, Vernon, I love what you're doing. I love your mission. And I love the way you're taking it down. That's absolutely awesome. I mean, and just the idea of you building eastnewyork.com and then coming in and just augmenting that with obviously, blockchain technology, security tokens, all that stuff. And thanks for taking the time to really explain that I think you explain in a very clear way that for a lot of us, myself included, it's commonly like I think I get it but not quite sure. So thank you.   Vernon J.  17:32 Let me leave you with this sample. When I explained blockchain technology, I tried to explain it as the internet of accounting, right? When you start thinking about it like that, it's like okay, you know, you've got it's simply a ledger, and it's a ledger that can't be disrupted, can't be you, know, messed with. And when you have that, you create this trustless society where you now can, every transaction that you make on the blockchain is recorded and recorded forever as long as you have an internet connection. Yeah.   Sam Wilson  17:59 That makes a heck of a lot of sense. Vernon, if our listeners want to get in touch with you what is the best way to do that?   Vernon J.  18:05 Best way is most likely Instagram. My Instagram is @vpeso and then also Instagram @equitycoin, follow our journey. We just did a filming for PBS. So we're going to be in their next segment for their Nova documentary series. Really cool. So look out for that in November.    Sam Wilson  18:22 Awesome, man. Vernon. Thank you again for your time. I do appreciate it.   Vernon J.  18:24 Sam. Thanks a lot, bro.   Sam Wilson  18:25 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.     

There's big money on mobile home parks, and our guest today definitely made millions in the space.   Frank Rolfe is an investor in mobile home parks for almost 30 years. Along with his business partner, they are the fifth-largest mobile home park owners in the United States. In this episode, Frank examines the changes in the mobile home park industry over the last three decades, including the increasing demand for affordable housing. He also tackles the differences between the mobile home and RV industry, and the current opportunities and challenges in the market.     [00:01 - 08:24] Mobile Home Parks Then and Now Frank discusses his background and how he was at the right place at the right time The changes in the industry over time Financing is easier and interest rates are historically low Demand for affordable housing is higher Lower production of mobile homes   [08:25 - 13:46] Why Don't We See More Mobile Home Parks? It's harder to buy mobile homes vs stick build The stigma surrounding mobile home parks Challenges with zoning and legislation Frank on what killed mobile home parks in the 50s and 60s   [13:47 - 21:12] Comparing the Mobile Home Park and RV Park Industries How PR and marketing made the RV business more successful Cities are more amenable to RV park developments The appeal of RV parks to boomers and millennials The impact of COVID   [21:13 - 22:07] Closing Segment Reach out to Frank!  Links Below Final Words Tweetable Quotes   “It's a basic fact of life. The average American has a horrible stigma against mobile home parks around the residence. And nobody wants a park to go up near where they live, or even a business they own.” - Frank Rolfe   “If you wanted to build one today, what you would have to do is you'd have to go way out in the countryside where there are no people to complain, where there are no zoning laws, and then you have no municipal water, no municipal, sewer, and no customers. So what's the purpose of building that?” - Frank Rolfe   “If you wanted to destroy all mobile home parks, it's simple. Just bring back mass prosperity. And then no one needs mobile, home parks, they just all go buy custom homes wherever they can… But I don't see that happening.” - Frank Rolfe   -----------------------------------------------------------------------------   Connect with Frank! Head over to mhu.com for more mobile home info now!   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Frank Rolfe  00:00 I fully understand why as a homeowner, you know, it's a basic fact of life. The average American has a horrible stigma against mobile home parks around the residence. And nobody wants a park to go up near where they live, or even a business they are. If you simply go to Zillow and look at the single-family home price next to a park, it's about half of what it is a block away. Same home, right?   Intro  00:21 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  00:33 Frank Rolfe has been an investor in mobile home parks for almost 30 years and has owned and operated hundreds of mobile home parks during that time. He is currently ranked with his partner Dave Reynolds as the fifth largest mobile home park owner in the United States. Frank, welcome to the show.   Frank Rolfe  00:48 Hey, thanks for having me.   Sam Wilson  00:49 Pleasure is mine. Three questions I ask every guest who comes on the show: in 90 seconds or less, where did you start? Where are you now? How did you get there?   Frank Rolfe  00:55 Where did I start? I started off straight out of Stanford trying to do a business school application and back then you would start a business to have a good application. That's how I started my billboard company. So that was my early origins of being an entrepreneur. Where am I now? Well, I'm now I'm fifth-largest owner, with my partner, Dave Reynolds of mobile home parks in the United States. So you know, we've done a lot of scaling over the last 40 years of being in business for myself.   Sam Wilson  01:24 Yeah, that's absolutely fantastic. And the last question is, maybe we'll spend the rest of this episode talking about it. How did you get there?   Frank Rolfe  01:31 Basically, how I got there was working like an absolute maniac for most of the time. Obviously, having a good strategy, some businesses, you can expand and others you cannot. And then finally, just being outright lucky, because there's plenty of guys with more ability than I've got, who just were not in the right place at the right time.   Sam Wilson  01:50 Yeah, it's funny, I was talking, I was having dinner with some guys the other day, big finance guys. And somebody brought up that idea that some of it's just luck. It's just you beat in the right place at the right time. They're like, man, there's more truth to that than you realize that it's just you're desperate the right place the right time, and it worked out. So that's really interesting. The mobile home park and the RV park space has really changed here, I'd say in the last 10 to 15 years, it's gained a lot of attraction, a lot of attention from not just individual investors, but also, as you will know, from institutional investors, what have been the changes most dramatic and noticeable to you, and how has it impacted your business?   Frank Rolfe  02:31 Well, the biggest change, of course, has been financing, because when I got in at 25 years ago, in the mid-90s, you could not get back that. So every deal you tried to do the number one hurdle you had was getting financing. Banks hated that. Nobody liked it. And when normally you would end up with seller finance, you try to cobble together something with seller financing. And the sellers were amenable because they knew there was no bank debt. That's the one big shift today deals rarely go on bankable right back in the 90s. Everything was on bankable. So that's when Biggie the other one has been just the appetite for affordable housing. You know, we've said over the last nine quarters, each quarter, we broke the record of the prior quarter as far as sales. And what's going on is just the nation's housing industry has actually gotten nuts on pricing. And so we're producing houses at a price range of you know, in the 300,000s. And so there's so many people who cannot get into the housing market. It's insane. And while with our industry, you don't own both home and land, you do at least own home, and you have some land, unlike apartments. So we're kind of this crossover product between apartments, which don't give you that single-family home lifestyle at all. We're kind of like a step between that and actual normal, single-family.   Sam Wilson  03:44 What, so yeah, the bankability of things has changed. You know, the interest in the space too. I mean, cap rates in mobile home park, as far as I understand, I don't own any mobile home parks. From an outsider's view. It just looks like they just keep compressing. How are people finding value right now?   Frank Rolfe  04:00 Well, they're not really compressing, what they're doing is they're going down, but people are still having to buy a spread between the interest rate and the cap rate. Thanks for not nuts in our industry and office buildings, retail centers back in the day. People were doing crazy financing, right? Just 110%, LTV 1% interest. People have never on the lending side been that nutty. So you know, we have to get loans and to have loans, we have to have a 1.2x coverage ratio to the mortgage, a lot of bank stress test our mortgages, they'll say what happens if you lost 10% of your revenue? So what you're saying is interest rates are historically very low. Even today. They're at roughly 4% t many mobile home park deals. When I got into business they were at seven right so you know, it's not like in our industry that the cap rates are unsustainably whacked out, but the big difference has been that interest rates are low. Another factor is you know, in our industry, the big narrative is that our lot rents are crazy, stupid low. which when you even say that I get nothing but hate mail, but it's just a fact. And you know, our national mobile home park lot rent is 280 a month average apartments, I think it's 1600 a month, right? So our pricing is stupid. And institutional buyers are buying the stuff up, they're raising the rents up significantly because they're stupid. And because the rates cannot remain, I mean, most of these parks today at the current rates, you're better off just bulldozing them, there's a million uses for the land better than a mobile home park. So as institutional guys go in and drive the rents up, the banks and the appraisers have taken note how easy it would appear to be 100% occupied at 280 rent and still be 100% occupied at a 580 rent. So they're starting to factor in perhaps the first or second read increase into their appraised value. So that's the other phenomenon you're seeing. Because last time, when we buy a park, we're not even looking at mom and pops cap rate, because mom and pop is running that business so poorly. It's a joke, what the banks and the appraisers and sophisticated buyers are doing is looking at the raw material and what they can make out of it.   Sam Wilson  05:59 That's a really clear explanation. I think that makes a lot of sense, you know, that I hadn't really considered as How are you guys are seeing it through the bank, through the appraisers' eyes, versus, you know, maybe what mom and pop are putting together on it. Are you guys buying actively right now?   Frank Rolfe  06:14 Yes. We're always buying. We have periods in which we buy more than others. But we've never had a period in which we were not buying.   Sam Wilson  06:21 What does opportunity look like for you right now?   Frank Rolfe  06:24 Well, our tastes have changed significantly over the years, right? Both Dave and I, when we started out, we didn't start out together. We were actually competitors. In the old days, our deals were very, very rough and tumble what we'd call heavy-lift turnarounds. So I was buying parks that were often half-empty, totally screwed up, water leaks running down the streets, stuff like that. So as Dave. Today, because of our size, we're trying to do add on to our portfolio, what we call portfolio builders, which are nicer properties that help the overall value. But at the same time, we still do heavy lift turnarounds. Now the one style we're not as in tune with today, as you were before, are ones in which you have to do massive lot filling by bringing in homes. And that's because home prices have gone up nearly doubled during COVID. So while it was fun to fill lots and 30,000 homes, not as much fun at 60,000 a home.   Sam Wilson  07:13 Well, not only that, but I've also heard that finding homes is difficult.   Frank Rolfe  07:17 It's very, very hard right now, I don't think you'll ever go back to the old ways, to be honest with you. What happened was that, you know, manufacturing, it was 400,000 units back in the late 90s. Today, it's been about 100,000 units for, I don't know, the last 15 years. Nobody wants to step out and increase production. They easily could because the plants are only running one shift, and they could run three. So they typically produce seven floors a day, the average plant could produce 21 floors a day. But no one wants to take the gamble. Because half of all the mobile homes sold roughly it's estimated are park owners who are buying the homes to bring into their own parks. Right? And then the question is, how much longer will that go on before people get full? It's not like eating out where you might you have to eat out, you know, you eat daily, so maybe you'll eat out, you know, in perpetually a certain number of times a week. In our industry, once you fill a lot. That's it, it's over. So people just don't want to stick their neck out.   Sam Wilson  08:11 No, and I completely get that. That's very interesting. You would think, though, that there's still some old supply going offline at some point. I mean, obviously, there's gonna be some demand. But you're saying that there's going to be kind of a point where they've hit the wall and they can no longer keep up with runnings, three shifts a day.   Frank Rolfe  08:25 Yeah, well, right. Here's the problem, see, that the average American cannot buy a mobile home. If he walks right now into a mobile home dealership, you will find you have to have better credit and had worse or terms to buy a mobile home than the stick-built. Because the government stands behind and promotes the stick build industry. So they allow people to do these very, very low downpayment, all these different programs for first-time buyers and veterans and all this stuff. None of that exists in our space. So in our industry, you're looking at a high-interest rate a much larger percent down than single-family. And so you can't do it. And the only reason that homes get bought today, half of all home production is because the park owners backstop those loans, right. So if I bring in, you know, a $50,000 home, I don't cosign the note, but I guarantee the lender, if the person is foreclosed on, I won't charge lot rent, and I will go ahead and rehab the home at my own cost, and I will sell it at my own cost. And that's the only reason they will do it. And until the government wants to stand behind the industry and support it, which they've elected never to do, that will never change. If the government wanted to do that, which they easily could then you could see greater sales.   Sam Wilson  09:35 Right, that opens another can of worms, you probably won't go down that road. I'm thinking more along the lines of building new parks. Why aren't we seeing, I mean, maybe we'll ask that question differently. What is the challenge, outside of maybe the political challenge of building new parks, why don't we see other new parks coming online?   Frank Rolfe  09:52 Well, you never will. Okay. I mean, I've been in the business 25 years and I don't think in any given year you've seen more than 10 new parks ever build and about 100 torn down. So we've been depleting continuously. Here's the problem, and you can't blame the cities for it. I fully understand why as a homeowner, you know, it's a basic fact of life, the average American has a horrible stigma against mobile home parks around the residence. And nobody wants a park to go up near where they live, or even a business they own. If you simply go to Zillow and look at the single-family home price next to a park, it's about half of what it is a block away, same home, right? So the citizens go in an uproar if you try and build a new mobile home park, and of course, all their elected representatives on the city council, they're not wanting to get all the citizens to vote them all out over some stupid mobile home park. So they just will not grant the zoning, they haven't granted zoning in the United States from mobile home park in any significant amount since 1970. So it's been half a century now. And it's never going to change because it's a basic fundamental truth that you'd have to change the entire attitude of Americans towards trailer parks before you could achieve that. And that is never going to happen. No one is ever going to spend $100 billion in public relations money to achieve that. And that's why you won't see it. But even then, if you wanted to build one today, what you would have to do is you'd have to go way out in the countryside where there are no people to complain, where there are no zoning laws, and then you have no municipal water, no municipal, sewer, and no customers. So what's the purpose of building that? So that's the problem.   Sam Wilson  11:25 Yeah, absolutely. Are there any other headwinds that come to mind? I mean, in its own right depleting supply is good for you, as a park owner, that the value of the park goes up. It's bad for the end-user in the sense that we are once again losing more affordable housing, and not replacing it or building new. So that's bad for the end-user. Other headwinds in the mobile home park space that you can think of?   Frank Rolfe  11:50 Well, you know, what killed the mobile home parks before back in their heyday, which was in the 50s and 60s. What killed it was mass prosperity when people off suddenly got rich, and they all moved out, right? So you had that period in America, which is hard to even remember back that far, but I was alive during that period. When America was doing really well. And every year, people were making more money. And as people became more affluent, they were buying homes and subdivisions. And everything was great. When you were born, if you were ever back in the 60s, the atmosphere in America was very, very much different. We were really rolling at that time. And so the question is to defeat affordable housing, if you wanted to destroy all mobile, home parks, it's simple. Just bring back mass prosperity. And then no one needs mobile, home parks, they just all go buy custom homes wherever they can, build, you know, half a million, million whatever on the golf course, you know. But I don't see that happening. That would be the single biggest event that would kill the industry off. The only other items you have circulating around in some of the blue states, you have rent control. People talk about it frequently. Remember that in the entire United States, only one state has statewide rent control, and that's Oregon. So you know, the credit score is 49 no one yes, you've got four or five other states that allow it on a city by city basis. But you know, it's not a red state phenomenon. But if you have a mobile home park in a blue state, they seem to threaten that every year. They never pass it because they have no desire to ever pass it. Because the folks that run the government are all being subsidized by a whole lot of folks who do a lot of real estate ownership and development. So they're not really going to say, hey, I'll give you my big political contribution, despite the fact you screwed me over with rent control. I don't see that really happening. So no, you know, I don't really see any big headwinds to the industry. But then again, you know, America is so screwed up at this point. Every day is a new headwind. So who knows? Who knows where we'll be by the end of the day.   Sam Wilson  13:44 Right. Well said, Tell me about the RV parks because you guys are also well-known RV park owners. I know you kind of lump the two together for our listeners, maybe can you tell us why you lump them together? And then is there a difference?   Frank Rolfe  13:59 Yeah, sure. Well, you have to lump them together, because remember that they were all the same family up through the 1960s. So it was all called the trailer industry. You had trailer park, and you had a travel trailer? Yeah. And it was all trailer right. And what happened was a trailer manufacturer called Selby had a customer who wanted an even fancier, more expensive travel trailer. And they called up the state of Ohio and they said, Is there any way I could build this guy, an even bigger travel trailer? And the state said, Yeah, you know what, we'll let you go up to additional feet and width, but he can't pull it with his car, they'll have to pull it with a commercial vehicle. And that was the start of the industry splitting. Because what happened was people who wanted to not move their travel trailer frequently but wanted to have something bigger that became the mobile home whereas the traditional RV, person came to travel with shelter. The biggest difference in the industry be honest with you is the amazing job the RV industry has done with public relations, contrasted to the terrible job of mobile home park the industry has. So the Go RVing campaign is considered one of the most successful marketing campaigns in American history. The average American scores RV is very, very high in status and in satisfaction. So it's such a night and day difference. It's like you have two brothers one goes off to win the Heisman Trophy, be elected president and the other brother ends up you know, dropping out of junior college and becomes a sanitary engineer, even though they were the same industry at one time. So when you deal with RV, it's a luxury product, it's more of a classy customer. And it is something that everyone loves, right? Just as everyone hates trailer park, mobile home parks, they love RV parks. So it's a different kind of business. Now, the main problem you have is that RV is in fact a business. Whereas mobile home parks is very, very static. People never move around, they sit there, an average tendency is 14 years. They pay rent, you fix it when the utility pipes break. But an RV is like going into a restaurant, right? It's much more active. So you have to have customer service. And if you don't, they'll just go down the street to somebody who does. So that's the key difference. There's a risk profile difference between the two. A lot of lenders do offset that. They'll set the cap rate two points higher on RV than mobile home park because they want that extra comfort. And if you're lousy operator, even though you screw up, you can still cover the mortgage. Whereas mobile home park, you know, our managers or their worst manager ever, we probably won't lose any customers will probably have property condition issues, maybe a couple of collections problems. But an RV park with a bad manager can just wipe your RV park out.   Sam Wilson  16:38 Right? Absolutely. We've seen some incredible tailwinds in the RV space here just with deliveries in 2020, 2021. And then, you know, 2022, projected deliveries are just through the roof. Where do you see, and I think there's a unique thing that I've seen in the RV park industry is that people or cities are amenable to RV park development. So where do you see that going? Does this just peter out when people get tired of the pandemic and finally try to put that behind us? Or do we actually had, does that have runway?   Frank Rolfe  17:08 Well, you know, for a long time people thought RVs were not going to be a long-term thing because the majority of RV owners were baby boomers, my generation. And what they thought was going to spur it on the greatness would be a burst as you have the, you know, there's 10,000 boomers retiring today. I mean, I'm 61. So next year would technically be my where I would retire if I was at a normal job.So but what came out of nowhere that they did not anticipate was the millennials. Millennials are now as bigger bigger buyer of RVs than the Boomers were right. And that was a, I think you have to tie that to the phenomenal success of the Go RVing campaign. They were doing like, you know, all those Monster Energy extreme events, they were marketing it those way back then they had real foresight, whoever was running that marketing, they knew what they were doing. They didn't just focus on boomers, they could have just only promoted programs that appeal to boomers, right, like the Golden Girls or you know, golf tournaments. But no, they went after deliberately went after millennials and all of their most edgy millennial stuff. And as a result, they score very highly with them. And they are now half or more of all RV sales, right? So you have all these young people with RVs now and so that's what's given the industry a whole new life, because I didn't see that one coming, nor did anyone that was gift from the Gods. And then of course, the other part was COVID. I mean, let's be honest, COVID is one of the best things that ever happened to the RV industry, right? What happened was people now want to be outdoors. Some people have never been outdoors before. They never, they want to go somewhere without a mask. People said, Oh, well, you can walk around without a mask. They're like, Oh, holy smokes, man. I've never been outdoors before, what the heck, I like that. And also people now just don't like being around other people's nastiness. They don't want to go to hotels and stuff because they don't know who slept in the bed or who coughed on the remote. And so when they are in an RV, they feel like they have that safety from germs and strangers and all that. So I don't really see that going away. You know, the one part of the industry that someone will have to come to a conclusion with at some point is that, you know, a lot of people prefer retiring and living in RVs over mobile homes because of that stigma issue, which you'll never solve. So and I myself know, I know a college professor who recently sold his house, like a half a million-dollar house, and bought an RV. Okay, it's a single guy. And he just decided to sell everything and retire and bank the whole thing and just live in his RV. He would have never lived in a mobile home in a million years. He could never, culturally stigma, survive that but he can. The problem is a lot of cities, the RVs are not allowed to remain more than a certain number of days. Right? So those people end up in this nomadic existence. So what you need is kind of a hybrid, you need an RV park that you can retire in and live permanently. And that's going to be the real challenge. When cities grant these RV permits. Traditionally, they won't allow anyone to be there more than a certain number of days. And they do that live really because they are afraid if they do you know, there's an underworld RV of these kinds of nomadic freaky people who grew up around the river and they don't want them, right? Well, you don't want the guy that was living under the bridge down by the river, right? That's not your goal. So that's the real missing piece right now. And then the same goes with tiny homes, right? tiny homes can't go on traditional mobile home blocks, they don't have the HUD seal. So what happens is, you know, you see them on TV, but there's nowhere to put them right. And again, so that's the missing piece. And so I think at some point in the movie, maybe in the next five years, 10 years, 20 years, people will figure all this out, and maybe cities will allow what would be more of an upscale retirement kind of community that allows for tiny homes and things do not have HUD seal and yet don't have to move frequently. I think that's the only missing piece the industry has.    Sam Wilson  20:51 Yeah, that's really interesting. I had not even considered that side of the equation before. But yeah, that is really interesting. I mean, a lot of what we're seeing in the RV park space is in the long term tenant, though, when you get outside of those city regulations, of course, I mean, you have people that park their RV and leave them there for 12 months and come in every other weekend, have a good time. Really, really intriguing. Frank, thank you for taking the time to come on today and talk about mobile home parks and RV parks, certainly a blast. I've enjoyed it, learned a ton about both sides of the business. If our listeners want to get in touch with you or learn more about you and what you guys are doing, what is the best way to do that?   Frank Rolfe  21:27 Well, the best way to find my writings and all by different things just go to mhu.com just the letters M-H-U.com. You'll find so much more you can handle.   Sam Wilson  21:39 Frank, thank you again. I do appreciate it.    Frank Rolfe  21:41 You bet. Thanks a lot.    Sam Wilson  21:42 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 this episode of the How to Scale Commercial Real Estate Podcast, we welcome Anthony Scandariato back to the show. He shares what he's observing about the current housing market, the benefits of setting up a TIC and 1031, and how capital raising has become more efficient in recent years. All this and more!     Anthony Scandariato is a real estate entrepreneur & multifamily investor with a focus on in-place cash flow and forced value-add appreciation. He's the co-founder of Red Knight Properties, a privately held boutique multi-family and mixed-use real estate investment & property management company with a track record of building and managing portfolios that deliver dependable cash flow and equity upside.   Anthony is also the host of the popular podcast “Discovering Multifamily”, and teaches others how to become financially free through multifamily investing via tons of free content/events on RedKnightProperties.com and through his Facebook/Meetup Group Community - "Discovering Multifamily Investor Association."     [00:01 - 06:09] Welcoming Anthony Back  Catching up with Anthony and what he's been up to with Red Knight Properties  Listen to Anthony's first time on the show! Why he's selling early  Restrategizing and tapping into properties in the Southeast [06:09 - 14:24] The Real Estate Landscape   Anthony's thoughts on the  inflation to rent price ratio and its unsustainability The wage inflation's disparity with CPI inflation will cause greater supply and demand issues How Anthony is handling this next exit  Setting a 1031 and TIC initially How capital raising has changed in the last 4 years   [14:25 - 17:31] Closing Segment Advise Anthony has for those getting started in real estate  Figure out whether you want to be a passive or active investor  How to connect with Anthony  Tweetable Quotes   “It becomes complicated if you don't have a Tenancy in Common structure set up from the beginning because you could have one investor that just wants out, and just wants their money back,” -  Anthony Scandariato “So with the 1031 and the TIC, if we set it up from the beginning, they would actually all just move forward because it's not set up initially. If everybody was on board except one or two people, it blows up the TIC.” -  Anthony Scandariato  “Figure out if you really want to be active, or passive, figure out what you want.” - Anthony Scandariato  Resources Mentioned:  How to Scale Commercial Real Estate Podcast: Investing in Workforce Housing with Anthony Scandariato   ----------------------------------------------------------------------------- Connect with Anthony Scandariato Website: https://redknightproperties.com  LinkedIn: https://www.linkedin.com/in/anthonymscandariato  LinkedIn: https://www.linkedin.com/company/red-knight-properties/ IG: https://www.instagram.com/redknightproperties/  Twitter: https://twitter.com/redknightprop  Facebook: https://www.facebook.com/redknightproperties Youtube: https://www.youtube.com/channel/UChvn3ruK6_OAY0RG5Y8LgIQ  Podcast: https://podcasts.apple.com/us/podcast/discovering-multifamily/id1506820688  Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com   Want to read the full show notes of the episode? Check it out below:   HTSCRE #529 [00:00:00] Anthony Scandariato: Just figure out what your goals are, figure out what you want. You really want to be managing maintenance, technicians, leasing agents. It's really an operating company. So you really want to take on that or do you just want to partner with someone who's experienced like Sam or whoever the sponsor is and have your money work for you? [00:00:16] Do whatever you're doing as a hobby or passion or whatever, just really figure out what you want to do.  [00:00:21] Intro: Welcome to the How to Scale Commercial Real Estate show to Scale Commercial Real Estate. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.  [00:00:32] Sam Wilson: Anthony Scandariato auto is the co-founder of Red Knight Properties. [00:00:36] Red Knight currently has over a hundred million dollars in assets under management, 750 units in four different states on the east coast. Anthony, welcome to the show.  [00:00:45] Anthony Scandariato: Great to be back on Sam. Really appreciate you having me on again. Pleasure's mine.  [00:00:48] Sam Wilson: You came on episode number 72. So the show was just getting kicked off there. [00:00:53] I think you want to go back and listen to Anthony's story. We won't spend a lot of time on today's show, here. Previous the story that he shared with us on episode 72, that was on February 9th, 2021. By the time this goes live, this will probably somewhere close to June of 2022. So that's almost 16 months later in case somebody though they didn't get the chance to listen to it. [00:01:13] Can you give us a 92nd synopsis where you started, where you are now?  [00:01:18] Anthony Scandariato: Yeah. As Sam said, one of the co-founders of Red Knight Properties were a privately held boutique mixed use and multifamily investment management company for real estate, as well as a property management team. As Sam said, we have about a hundred million dollars under management. [00:01:32] I think when I came on Sam show, we were more like 60 million. So basically doubled from that your time period. We did quite a bit of deals in 2020. And over 750 units, I think we only had maybe 400 units give or take in three different states. Now we're in four different states. So pretty exciting. [00:01:49] I think we were just closing in our first Southeast state of this great state of Florida. We're actually starting to sell some assets now given the state. Where the market is and how quickly, especially the state of Florida has really grown from so many different standpoints. So we're starting to sell some of our assets that we weren't even considering selling for another three to four years from now. [00:02:13] We're actually selling early. So happy to talk about why we're starting to sell early. Yeah, deviating from our business plan a little bit.  [00:02:21] Sam Wilson: Love to hear that the floor is yours. Why are you selling early?  [00:02:25] Anthony Scandariato: Sure. So I started my company 2018. We can go back to the other episode and listen, but since basically 2018 acquired almost a thousand units at this point. [00:02:36] And once we're value added investors, we come in and find operational inefficiencies. From a management standpoint and mostly from a management standpoint and we're buying assets from motivated sellers long-term owners, when we're investing in CapEx that hasn't been put to a life and 10 to 15 years, and we're really bumping the rents up and for us to get 25% rent bump within the year with. [00:03:01] We're not just investing the dollars necessary in order to get that bump. We're not just going in and raising the rents like a lot of other operators. We just think at this point in the cycle and this is releasing in like mid Q2 in 2022, when interest rates are on the rise inflation is still going to be carried out in my opinion for the next couple of years, probably not going to be as elevated as it was 2021, but it's still going to be a problem. [00:03:25] Moving forward. Long-term depends what the fed decides to do probably by the time this is released, we'll probably raising another half a point. But with all those macroeconomic situations rates, aren't going to go down inflation is going to stay pretty high in which means rents are still going to go up. [00:03:42] We just think the value, it's almost like we front-loaded a lot of the appreciation over the past couple of years. And I feel like we're not going to just see that huge increase in spike and value that we saw. Once the fed basically did their QE and rates were at near zero for a couple of years, it's just, the values are going to start to slow down. [00:04:03] I'm not saying they're going to crash. They're going to slow down. And obviously in the commercial real estate and all it's all driven on NOI, right? So as quickly as you can get rents up for us and we see the value, there's a property in Florida we're selling for double what we pay for it a year ago. [00:04:19] And our projections weren't even assuming that five years. So we're looking at the returns and we're like if we can provide people basically double their money in a year, and then we could do some tax deferred strategies, reinvest the capital. If they decide to come back, reinvest the capital into another opportunity, that's maybe not in as hot of a market as far as, because there's a lot of capital. [00:04:42] We were talking about this on our show, which I'm planning to release as well. Sam was on my show, Discovering Multifamily and we were just talking about some of the pivots he's been making to his business. We're doing very similarly, but we're sticking with our asset class, multi-family we're going into other markets. [00:04:57] Now we're looking at Midwest markets that haven't really been tapped as much as the Southeast has been lately, even where I'm based in the Northeast. It's always been a little saturated. So we're pivoting. Where all the money's flowing. We want to come in early and then you kinda gotta know when it's right to get out. [00:05:14] And as of right now, we could refinance. Everybody can get the money back. We can roll that into another property. Great birth strategy for commercial real estate. And I think we touched on that in the previous session. You just got to do your numbers and see what makes sense and really just analyze all the risks in the economy and an informed and educated decision might not be the best decision, but at least you want to just have an opinion and you want to be able to come up with some logic behind, okay, why are we selling early? [00:05:41] Why are we selling four years early? The reason is X, Y, Z so it's very interesting and you're seeing it in the market as well. I'm sure. We'll see what happens. A lot of other operators I've talked to are experiencing the same type of feelings, starting to sell assets early. And they're doing well on them. [00:05:58] Sam Wilson: There's never a bad time to execute the entirety of the business plan in a shorter timeframe. It's oh, great. Lucky us. We said five years and now we're going to do it in one. That's okay. That's quite okay. I'm really curious when you think about the inflation to rent price ratio, right? [00:06:16] Like we've seen inflation the published seven ish percent and then we've seen rents again it's a very localized number, but let's just use. Arbitrary insights, 15% on a national average. I don't know what it is on a national average, but it's greater than what inflation has been at some point. [00:06:32] Do you feel like that is going to swap like positions there where the rents are not keeping up with where inflation is going? Just because people don't have the income to support it at some point.  [00:06:44] Anthony Scandariato: Do you think that okay, you're right. It depends upon wage growth. At the end of the day, you really should be looking at CPI that likes to quote PCE. [00:06:52] So PCE. They don't have. Really rent, like the real red figures in that number. So I think inflation is higher than what they're representing, to be honest with you. And I know a lot of other people do as well. At some point, yes, it's good. We like to look in markets where rent is maybe 25% to 33% on the high end of their wages of their income. [00:07:15] So if the wage inflation is not keeping up with rent or just regular CPI inflation, Yeah, it's going to be a problem. There's still a supply and demand issue. Over the past couple of years, I think the level of new homes and also new apartments are down 50%. It's only going to get worse because now with rates rising, there's gonna be a lot of builders that go belly up, unfortunately is going to be a lot of customers. [00:07:39] I think on the single family side, pulling out of deals on the apartment side, it's getting harder to build because costs are just higher. So they're going to have to pass that onto the consumer. I specialize in the class C space. So we're trying to buy deals below replacement costs in the first place. [00:07:55] So yeah, it's going to be a problem. I, again, like I said, I keep going back to, I think we front-loaded a lot of the appreciation. We're not going to see 20% year over year. It's just, it's stupid. And I get opportunities from other sponsors who will still believe that's going to happen. [00:08:10] Who knows if you're buying in the state of Florida, maybe it's going to happen. I don't want to see a projection where, you know, on a class C property where you're projecting $2,000 a month for a one bedroom apartment. Even if you renovate it, it's just something about that in a suburban area. It just doesn't seem right to me. [00:08:25] Like you said, Sam, you got to look. The employment drivers and it's all local employment drivers in the area. Where are the jobs? What type of wages are they paying? Is that industry experiencing wages, coalitions across the board? In my opinion unemployment's near time, all time low. [00:08:42] I actually think the unemployment rates probably in the short term, going to go down. Even further, but then probably by the end of the year and go back up a couple of points. We'll see. So it's a very interesting conundrum. The good thing about the commercial real estate world is if the rents still keep going up, let's say three to 4% a year. [00:08:58] Your NOI keeps going up. If interest rates rise, theoretically, it's not always one for one, but. Rise a little bit, maybe 10 basis points for every hundred basis points and interest rate move, which is weird. Cause it's not one-to-one correlation. And again, it's still a lot of money out there that we're just on the sidelines for two years, chasing multifamily, industrial self storage, those three hot asset classes concentrated in different areas. [00:09:24] Now, like I said, in the south and my opinion, it's just still a lot of cheap money out there. A lot of balance sheet lenders, a lot of bridge debt. I'm a little nervous for some of the sponsors who took on very high leverage bridge debt, and they think they're going to get out of it in two years and they're may be slow in their business plan. [00:09:39] And when they go to refi, they got to do a capital call because the value is not there. So I'm a little concerned with that. But for sponsors that have been experienced around there, that's good opportunity for them to start picking up some of those quote unquote distressed properties. But I still don't think we're going to see that for a couple of years, right? [00:09:56] Sam Wilson: No, couldn't agree more. Talk to us about your deal that you are exiting. Your role in that, or at least some of the proceeds of that into another deal. Are you doing one large, 1031 with your investors? And they're just going into the next deal or what's the process like on that?  [00:10:12] Anthony Scandariato: Yes, the sale hasn't been completed well, by the time this is released, it'll probably be completed. As a sponsor and just some pieces of advice, it's very difficult to do a 1031 in a syndication. Very difficult in my experience, if you don't have a TIC set up from the beginning, it's going to be very challenging for you to moving forward. [00:10:29] So what we're doing is. As if we sold the building and we were buying nothing else, however, we are fortunate to find another opportunity. And we do cost segregation studies and the ability to pick up bonus appreciation. This is 2022, I think is the last year for a hundred percent bonus depreciation. [00:10:47] So whatever capital gain my investors, including myself, cause I invest as well. I have to pay hopefully if they choose to reinvest most of it or all of it can be offset by another reinvestment. So it's not a 10 31 exchange, but there still is some tax benefits and deferrals, cause you still have to pay it at some point. [00:11:05] So that's what we're currently working on. But yeah, it's tough to do a 1031, if you don't have it set up for the beginning of the TIC,  [00:11:12] Sam Wilson: when you say set up from the beginning, can you explain that? You mean set up in the initial investment as a, so you're saying you're going to a Tenancy, which to those you're listing a Tenancy in Common deal, you're going to Tenancy in Common. [00:11:25] Then you go to your 1031 intermediary, you roll the money into the intermediary, and then you go to the next deal as a Tenancy in Common. Is that what. Correct.  [00:11:32] Anthony Scandariato: And it becomes complicated if you don't have Tenancy in Common structure set up from the beginning, because you could have one investor that just wants out. [00:11:39] Just wants their money back. And it happens. We've done deals where we've refinanced. We give everybody a money back and maybe one or two people, oh, I need the money because I'm buying a house or I'm doing this I'm going on vacation. So with the 1031 and the TIC, if we set it up from the beginning, they would actually all just move forward because it's not set up initially. [00:11:58] They and everybody was on board except one or two people. It blows up the TIC  [00:12:03] Sam Wilson: there's a way around that. Cause I was just involved in a deal and I was that investor yeah, I didn't want to roll over one cause I wasn't in love with the next opportunity. And then secondly, because I had invested with my IRA funds, so it didn't really matter to me if we were 10 and they didn't set it up as a 1031 in the beginning. [00:12:18] So I'm like, one, I don't like your deal. The second deal. And two, like I gain nothing by this is a self-directed IRA. So I gained nothing by 1031-ing this. So I want out, right? So I was that pain in the neck investor, sorry, Anthony. But there was a way around it and I don't know what they did in the deal. [00:12:35] They found a way, but it was paperwork heavy to your point. It was paperwork heavy and there was new LLCs created  [00:12:42] Anthony Scandariato: and neither of us are tax advisors or experts. So we're not the right people.  [00:12:46] Sam Wilson: Right. No, don't take anything. I say here's tax or legal advice. That's for sure. But just to note that there is a way around it, it's just messy. [00:12:53] So to your point, let's avoid all the mess. We can get 2018 to now, what have you seen change on the capital raising side of things? And are you guys doing anything differently than you were four years ago? Yeah,  [00:13:06] Anthony Scandariato: I think it's streamlined more, becoming easier to raise capital. And as we were talking, there's a lot of money still out there in the system. [00:13:13] And also a lot of we cater to individual investors. So we're usually talking to mostly high net worth individuals that putting in 50,000 or a hundred thousand into a deal and looking for income and also equity upside at the sale or the. It's really grown upon itself. I think once you've been around and I've been in the industry since 2014, so it's not 2018, I worked for somebody else. [00:13:40] But once you develop a reputation and you start producing case studies, you start selling, you start refining. The case may be, you'll be able to show those returns into find more investors and more partners. It becomes easier in that sense. And your network starts to grow. Obviously we both have podcasts, so both of our networks have grown from that. [00:13:59] I think you just have to have a system in place. We have investor portal, we have software that kind of manages relationships, CRM, and it grown upon itself. Most of our new investors come from existing investor referrals. There's always the one-off the founders on LinkedIn or our podcast. But it's probably similar to you. [00:14:18] 70% of referrals. Yeah.  [00:14:19] Sam Wilson: Awesome. And that's so true. You'll get one-offs. But a lot of it, it's a very referral based system. If someone were getting in the business today and they're launching out and they want to invest in multifamily, what is one piece of advice you would give?  [00:14:34] Anthony Scandariato: Just figure out if you really want to be active, or if you want to be passive, figure out what you want. [00:14:39] Cause they're both very different. I started out active. I'm obviously still active my ultimate goal. And we were talking about this on your show. Staff is I'm still young. So are you is to become fully limited partner and fully passive at some point. Just figure out what your goals are, figure out what you want. [00:14:54] You really want to be managing maintenance, technicians, leasing agents. It's really an operating company. So you really want to take on that or do you just want to partner with someone who's experienced like Sam or whoever the sponsor is and have your money work for you? To whatever you're doing as a hobby or passion or whatever, just really figure out what you want to do. [00:15:14] Cause I have people who have come to me that want to be active, and then I start telling them how much work it is and be like, you know what, let me just put my money in a deal and then let's see how you do it. And then if I think it's a lot of work, then I'm not going to do it moving forward. [00:15:26] So that's happened. It can count on one. Definitely multiple times happened,  [00:15:31] Sam Wilson: right? Yeah. That's so true. Absolutely so true. And that's a great point because a lot of people want to get involved in real estate. Then they get overwhelmed with the mechanics of it. Oh my gosh, there's so many terms. How do I do this? [00:15:42] How do I do that? And then it becomes confused. Mind says no. And they shut down the easiest way and the best way, at least for me, the same as you, I think is that become a passive investor. That's how I cut my teeth in this. It came in as a passive investor and I learned through. While investing. And it was like, oh, okay, now I understand it. [00:15:59] So that's an absolutely fantastic point, Anthony, thank you for coming on the show today. Pleasure to have you back. I've enjoyed our conversation. Learned certainly a lot more about what you guys are doing while you guys are exiting deals where you see the market going. And then also, you know how you guys are protecting yourselves. [00:16:14] Certainly enjoyed that. Thanks for sharing your wisdom with us. If our listeners want to get in touch with you or learn more about you, what is the best way to do.  [00:16:21] Anthony Scandariato: Sure we have a website and my company is redknightproperties.com. Just go there. We have a free e-book titled Leave Your Nine to Five Through Investing in Real Estate. [00:16:28] That will actually pop up. Just putting your name, your email. I can send that to you for free. All my contact information will be on there. Facebook, Instagram, Twitter, LinkedIn, either my name, Anthony Scandariato or a company Red Knight Properties where you know, we're on everything. Absolutely.  [00:16:42] Sam Wilson: Anthony, thank you again for your time. [00:16:44] All right, Sam. Thank you.  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 podcast, Spotify, Google podcast, 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.

Do you know that you can earn extra income from your extra space?   STOW IT CEO Carmelo Mannino joins us to discuss how you can monetize your vacant real estate. He and his team provide parking solutions for people who are looking for an affordable and convenient way to store their vehicles while also giving passive income opportunities to hosts. There's a huge potential in this market, and, as they continue to grow the business, Carmelo anticipates being able to expand to other markets across the United States. Tune in if you're curious about vehicle storage!     [00:01 - 02:28] From Renting Out Backyards to Building a Business Carmelo shares how it started from a personal problem Realizing the big demand for vehicle storage   [02:29 - 11:49] Venturing into Vehicle Storage How they have scaled so far The challenge of getting both the renters and the hosts onboard Finding properties and building demand Carmelo on the greatest opportunity right now in the market What you need to have before start renting out your space People are always buying vehicles so there is always a demand The sales side of vehicle storage Being a resource and support to hosts Reaching out to the informal market How the company makes their money Their plan to expand 10x in the next two years Funding through angel investors and people who use and are satisfied with their product    [13:57 - 16:26] Self-storage Has A Supply Problem  Taking a huge advantage of the demand  Not owning real estate but earning through connecting renters and hosts Striving to become the largest provider in the industry    [16:27 - 18:12] Closing Segment Reach out to Carmelo!  Links Below Final Words Tweetable Quotes   “You got to think of these as like a business-to-business relationship. Even though it's one person and one truck, it's a bit different than storing your RV. That's their livelihood.” - Carmelo Mannino We like to say we handle all the headaches for our property owners, you know. If you're going to buy a piece of land, all you have to do is move them in and assign them their spot.  - Carmelo Mannino “Self-storage has a supply problem, especially when it comes to vehicles. And we have this huge advantage in that we don't have to purchase and develop real estate to gain supply in a city.” - Carmelo Mannino -----------------------------------------------------------------------------   Connect with Carmelo! Head over to the STOW IT website if you're interested in becoming a renter or a host! Email Carmelo directly at carmelo@stowit.com and follow him on LinkedIn!   Connect with me:   I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook   LinkedIn   Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on.  Thank you for tuning in!   Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below:   Carmelo Mannino  00:00 We want to become the largest provider of vehicle storage in the country. And with that comes the most robust set of data of anyone that we'll have in the country when it comes to supply and demand discrepancies and vehicle storage. So we believe there's absolutely an opportunity whether it's us or an outside investment group or some of our current investors that are self-storage owners and operators have expressed interest. You know, they want this data to know where should I buy my next yard?   Intro  00:24 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  00:33 Carmelo Mannino is the CEO and co-founder of STOW IT. STOW IT is a marketplace for vehicle storage. Carmelo's background is in digital marketing and consumer-facing applications. And he started STOW IT with two brothers in 2017. And they are growing rapidly. Carmelo, welcome to the show.   Carmelo Mannino  00:53 Thanks for having me, Sam. Great to be here.   Sam Wilson  00:54 Hey, man, the pleasure is mine. Three questions I ask every guest who comes on the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there?   Carmelo Mannino  01:01 Yep, we started by accident, personal problem finding self-storage. We started renting out basements, turned out to be a terrible idea. And then we pivoted to garages. So right now where we're at is stone is an online marketplace where we help individuals with barns, garages, land, driveways, anything that can store an item on wheels, that's RVs semis, cars, trucks. It's got wheels, we've probably stored it, where we're at right now is obviously a marketplace for vehicle storage and looking to expand. We've built a great business in Denver and starting to go beyond so the next few years is us expanding to more cities around the country with this kind of turnkey business model we've created.   Sam Wilson  01:41 Interesting. So what caused you to think of this business?   Carmelo Mannino  01:45 So one of the founders was moving, and it was two brothers, myself and Dylan and Devin Eldridge and Devin was moving in his house closed three days before his new house opened, and he had to pay $400 for three days of self-storage, and he thought there's got to be a better way. So he started opening up his basement to buddies and friends that he knew needed self-storage, and then that ended up with us opening up our backyards, and driveways, to vehicles. And from that, we found that self-storage was hard to do. It was, if you can imagine a buddy moves in, you're gonna help them, you're not going to make a lot of money. And it's only gonna be for short term. Whereas with a vehicle, an RV, it's much longer term, it's a higher dollar value, and it's less hassle for property owners.   Sam Wilson  02:28 What, so you guys have built a platform, you're the Uber of storage. That is really interesting. And you guys have built this out in Denver?   Carmelo Mannino  02:37 We've built it out in Denver and a bit beyond, too. We touch a few niches like long-term airport parking, semi storage, where we have a national reach with both of those. That includes 40 locations around the country most of your major metros and cities. Whereas in Denver, we focus a lot on what we call our peer-to-peer model. So that's individuals like yourself or myself renting out garages, driveways, barns, farmland. That's one of our big ones. You know, we're really a suburban business. People in the city that have the extra cars or have the RV, we help them go to find the spot in the suburbs to store their RV.   Sam Wilson  03:12 Right. No, I think that's absolutely brilliant. What has been some of your challenges, getting this scaled or even getting people to know about it?   Carmelo Mannino  03:21 We're really building two businesses at once, because we've got to get the property owners on board and establish trust with that community. And then we've got to get the renters on board as well. And, you know, we've built great technology, we've custom build everything ourselves to be a really good matchmaker in terms of finding what you need. While we're always looking for more on both sides, more properties, and more renters. You know, if you live, let's say you live in Memphis, you don't want to go 45 minutes to store your RV, you want something pretty close to you. So we're always looking for more property. So really, the challenge is just growing both sides of the market. It's really a chicken and egg problem. And we encounter that every time we go into a new market. So for example, we're expanding to Atlanta right now. And we've got some property owners and now we've got to build up the demand. And then once we fill those left to build up more property owners and more demand, eventually we get to a spot like where we're at in Denver, where it kind of becomes a flywheel and starts running itself a little bit where you know, we've got great SEO, we've got enough property owners to where we almost always have vacancies and we've got enough renters that are repeat renters looking to always rent with us in the Denver area.   Sam Wilson  04:29 But what's the greatest opportunity that you see because I'm certain that as you touch all of these different things from you know, regular just vehicle storage or boat storage or RV storage to you know, industrial to shipping, I mean, you see you're touching all of it. What's the greatest opportunity right now in the commercial sector?   Carmelo Mannino  04:50 Right now, it's the semi storage. It's the 75-foot truck and trailer you know, they go by big rig, tractor-trailer semi-truck trailer That's a huge missing piece in terms of the supply. There's just not enough supply for these guys, there's 1.5 million drivers on the road and any given night, 500,000 places for them to park. And that's why you see them on the side of highways, whenever you travel there, all the rest stops on all the highways, because there just isn't... The inventory wasn't built, you have these national large REITs that want to provide the highest return on investment, and kudos to them. And that's what they should be doing. But they're going to build five by fives and five by 10s. They're not building 75 by 15, which is what a semi-truck and trailer needs. So that's a huge opportunity. Right now we're working with multiple funds right now that are looking to get involved in the semi storage industry.   Sam Wilson  05:42 Yeah, that sounds I mean, easily adaptable in the sense that you by I mean, correct me here because I don't own any of this, obviously have a background at one point in the parking business. But I mean, you've got a fence, you've got a yard, security cameras, and then marked off spaces, controlled access, is there anything I'm missing there?   Carmelo Mannino  06:01 May be a person to move them in every once in a while. But once they do that they're fantastic renters, what it is is called over the road drivers. And these are individuals where 90% of this industry is I own one truck and one trailer. And that's how they make their livelihood. So once you move them in, you know, what we find is they're on a shift, they're on a schedule. So they'll be there Thursday through Saturday, and then they'll be on the road Sunday through Wednesday. And it's a very consistent month after month. But you're right, it's a really low development costs, especially if you can buy heavy industrial or even some cities and counties light industrial allow it as well. If you can find that land, if you can put down the gravel put up an automated fence some security cameras mark the spots, you know, you're in business.   Sam Wilson  06:45 That is really, really interesting. You know, I mean, at this day and age, like a lot of truckers are now becoming accredited investors. That's the thing, as well as that you have people that are making really good money driving a truck right now, and that are able to obviously pay good rent, what happens in economic downturn? How does this business get affected?   Carmelo Mannino  07:07 As we saw in COVID, actually, you know, when we hit a little bit of a downturn there, actually more people went to the trucking industry, they were able to hire some drivers. But you know, 90% of things that we own is on a semi-truck at any given point in time. So even if that number goes down, there's still a huge shortage. If consumerism slows down by a bit, there's still a shortage of semi-drivers. There's a drastic need right now for more drivers. So I don't think that industry slows down at all. I think what we've also seen a huge invest a huge opportunity on the not-so-commercial side, is you look at companies like Winnebago and Mastercraft boats, they've got billions and billions of dollars of backlogged inventory. You know, you can't buy a brand new RV until 2024. Right now, if you're getting it custom built. So what we've seen is an economic downturn, people are still buying these toys, you know, they're not buying so much stuff, they're buying bigger items. And that's these vehicles, the semi drivers, so that's their career. And that's their job. So, you know, if anything, they're going to try and expand and try and grow. You got to think of these as like a business-to-business relationship. Even though it's one person and one truck, it's a bit different than storing your RV. That's their livelihood.   Sam Wilson  08:18 When you guys go to a new city, in this case, it's Atlanta for you, right? How do you even approach penetrating that market?   Carmelo Mannino  08:25 It's a lot of sales. My theory on business is almost everything is sales. You're always selling. But, you know, we've got to get the property owners first and foremost, and that's how we think about it. We've got to have the inventory there to where when we attract the demand, they've got multiple options to store. You know, the big advantage of STOW IT in our marketplace over traditional storage is that we can offer the customers a wider variety of spaces. If you want a one-car private garage, we want to have that? If you want to share five spots in a bar and we want to have that. Traditional storage, we work with the traditional industry as well. We don't run from them, we try to integrate them onto our platform. So the first part we think about is let's get supply. In our market we call supply and demand for us our renters and hosts. We want to get our property owners there, start forming relationships with them. And then we worry about finding the demand and filling those spots.   Sam Wilson  09:17 Tell me that process. There's got to be a sales process or you know, how do you guys attract both sets? I guess both of them are customers. So how do you attract them?   Carmelo Mannino  09:26 Yeah, a lot of inbound marketing, well on our property owner side, you know. We write a lot about how do you safely rent out your garage or barn. We've got contracts you can find us stowit.com We've got a how should you price your space as stowit.com You know, a lot of great helpful tools. Most of the individuals we work with, we're not using their land or their barn in their garage for storage before us. So they're entering a new, really new business right so new income for them and a lot of our hosts pay their mortgage every month with us. So it can be serious income, and they need a company there to help them so we want to be a resource first and foremost, for our property owners providing great support. But it is reaching out to a lot of these what we call it the informal market. You know, Craigslist has a parking and storage section, Facebook marketplace, we will call warehouses that we know have, you know, additional storage, it can make additional revenue. But once you try it and you start making additional revenue, you realize it's not a lot of effort, it's very low risk. And the more energy you can get, the more income you can make. So you're just limited by the size of your property. So yeah, lots of sales calls to kind of kickstart a market, eventually, you start getting more referrals in a market, people start researching, seeing you on Google. And then for the demand side, we do we use virtual assistants that post on Craigslist, that post on Facebook on a daily basis. We use Google ads, we use SEO, we write blogs, we handle all the marketing. We like to say we handle all the headache for our property owners, you know. Iff you're going to buy a piece of land, all you have to do is move them in and assign them their spot. So you know, if you've got marked spots, you don't even have to be there. But you don't you know, if you've got a day job, you don't want to hassle with the marketing, the payment collections, the evictions. These are all things that STOW IT handles for you. So they're just on autopilot in the background.   Sam Wilson  11:11 What is the take for you guys? Is it on a per, you just have a flat, Hey, this is what we always charge? Or is it on a per deal basis? How does that work?   Carmelo Mannino  11:21 More of a flat, consistent rate. So whatever your list price is, so if you list a garage for $100, we're going to take 10% per month from you. And we're going to upcharge the renter about 10%. So each side of the platform pays a fee to us so that, you know we're not just raking our property owners over the coals taken 25-30% from them each month, we're taking 10% and then we're up charging the renter on that same side as well.   Sam Wilson  11:45 Got it. Yeah, that makes sense. You guys have to make money along the way. What's the projection for you guys? What's the next step in your business?   Carmelo Mannino  11:52 Yeah, we want to 10x within the next two years. So we're in a pretty critical stage right now where we've built a very turnkey business model in the Colorado area. We've got some niches in our business that are beyond Colorado that we've proven out, we want to take our peer model that we've built to a, you know, a million plus dollar business in Colorado, and build it out to 15 more markets around the country over the next two years. We think that this works in about 40 markets around the country. And it's not your major, it's not LA, it's not Chicago, it's not New York, it's more of an Omaha business, as we say Nashville, you know, these areas where they get rural really quickly outside of a city center, and they're growing markets. That's where our business will thrive. And that's where we want to expand it to.   Sam Wilson  12:35 Got it, man, that's absolutely awesome. I love the idea how have you guys funded 2017 until now. It's five years of, you know, blood, sweat and tears into building a platform that's just now about to take off. Have you done that?   Carmelo Mannino  12:49 You know, initially, we did have other part-time jobs. And we're doing some contracting work and other things, all of our backgrounds in technology and consulting or, you know, mine was in mobile app consulting, my development, my co-founder was in development, consulting. Angels have been a huge part of our business and where we've gotten the money has really been a testament to the product we built, because 80% of our funding has come from users of our product. So these are individuals like yourself that are somehow involved in real estate typically, but not in self-storage. And they might have a barn or garage they start using STOW IT, they start making money. And they say, Hey, you know, this is not exactly my wheelhouse. But I understand real estate, I understand what you're doing. I want to invest in STOW IT. We take a guy like, I won't give his last name, his name is Mark, and he's in Castle Rock. He's been a real estate developer for 30 years. And he has a huge barn. Well, he makes about $2,500 a month with us. So he's just rolled a year back into STOW IT, did to $25,000 investment because he said hey, I'm gonna make $30,000 with you all that I would not have made otherwise.   Sam Wilson  13:51 Right. That's absolutely awesome. And you guys are gonna, if you can talk about this or not. And if you can't, you can cut it. But you guys are in the middle of a funding round for your next kind of iteration of the business. Is that right?    Carmelo Mannino  14:02 We are. Yeah, this is going to be our true seed round. It's our first kind of large capital raise, you know, most of our funding to date has been, you know, Angels, smaller checks. Right now we're looking to raise 2.5 million at 7.5 million pre-money valuation. And that really funds us for the next 24 months. It gets us into those 15 markets. We believe it takes us from a $1.5-2 million business to around a $20 million business. So we think it can provide a great return. Like I said, it's a pretty easy, simple business to understand. Right? The hard part is getting the hosts and getting the renters but the demand is out there. Self-storage has a supply problem, especially when it comes to vehicles. And we have this huge advantage in that we don't have to purchase and develop real estate to gain supply in a city.   Sam Wilson  14:48 Right? I mean, again, going back to the Uber of storage, that's your value play, is that you don't have to build all of it. You just need to connect the two parties and then facilitate the transaction.   Carmelo Mannino  14:59 Exactly. Yeah, we don't own any real estate, but we make almost 20% on all the real estate we work with.   Sam Wilson  15:06 Right. Which is fantastic. I love the model. What are you guys doing? Because I'm certain that as you get further and further into this business, people are gonna start coming to you with assets to sell. They're gonna start coming to you with stuff that said, hey, you know, anybody that wants this? What are you guys doing with those, with that data right now?   Carmelo Mannino  15:23 Right now, we believe that could be a phase two of our business. We want to become the largest provider of vehicle storage in the country. And with that comes the most robust set of data of anyone that we'll have in the country when it comes to supply and demand discrepancies in vehicle storage. So we believe there's absolutely an opportunity, whether it's us, or an outside investment group, or some of our current investors that are self-storage owners and operators have expressed interest, you know, they want this data to know where should I buy my next yard. You know, we look at a market like Minneapolis, and it's a pretty frugal market when it comes to vehicle storage, semi storage, it's one of the most expensive markets in the country. And that's data that a traditional storage company would not be able to get because they are not involved in that aspect of storage. So examples like that are really big, we believe that there is an opportunity out there to buy and own part of our own yards, build a more robust management software. And really, we still want to help individuals. But we see an opportunity out there especially in the commercial industry for us to eventually get involved in yards.   Sam Wilson  16:25 Right Man, I love it. Carmelo, congrats to you guys, and the product you've built so far, best of luck to you in the next phase of your business and journey. And I think it's really intriguing, just like you talked about how you get to connect all the different pieces. And maybe someday you'll have more of an active part on the acquisition or, you know, partnering side of the physical real estate. But in this you know, what you guys doing right now you don't have to own it, and you still get to look at the profit along the way. So that's pretty cool. I think it's also pretty cool just to hear what you guys see happening on the real estate side of things. So loads of fun. Thanks for coming on today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?   Carmelo Mannino  17:01 Yeah, I am easy to contact my direct email is Carmelo, C-A-R-M-E-L-O, @stowit.com. You can email at info@stowit.com. Those are two great ways. You can sign up whether you're looking to rent a spot if you've got an RV and you're listening and you need space. Hopefully, we've got it in the city you're looking for. Or if you're a property owner, we're always looking for more property owners around the country. We work with large firms, we work with everybody from what we call grandma with a one-car garage to companies doing billions of dollars in the parking industry. So anywhere in between that we can work with you if you have real estate so we're always looking for more opportunities and ways to expand. So email me at carmelo@stowit.com We get the conversation started.   Sam Wilson  17:43 Awesome. Carmelo, thank you so much. Have a great day.    Carmelo Mannino  17:45 All right. Thanks, Sam.    Sam Wilson  17:46 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.