Real Estate Co-Investing with Brian Davis

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When it's a good time to buy is when no one thinks it's a good time to buy, right?

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It's when all the headlines are doom and gloom and the sky is falling, and the world is ending, that's actually usually the best time to buy, right?

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Welcome to the Wayfinder Show with Louis Hernandez, where guests discussed the why and how of making changes that led them down a more authentic path or allowed them to level up in some areas of their life.

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Our goal is to dig deep and provide not only knowledge, but actionable advice to help you get from where you are to where you want to be.

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Come join us and find a way to your dream life.

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Welcome back to the Wayfinder Show.

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I'm your host, Louis Hernandez.

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Yeah, that's my name, Louis Hernandez.

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And today's guest is Brian Davis.

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He is a recovering landlord, turned passive investor and co-founder of Spark Rental.

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With over two decades in real estate and finance, Brian now invests$5,000 at a time into fractional property deals, owning shares in over 3000 units.

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He's also a sought after writer featured on BiggerPockets.

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Inman and go banking rates.

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And he's here to share how anyone can design their ideal life through smart real estate investing in a bit of contrarian thinking.

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Brian, welcome to the Wayfinder Show.

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Louise, thank you so much for having me here.

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I'm excited, man.

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You got a great life.

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Maybe, I know when you're in it it may not seem that way, but from the outside looking in, you have lived a pretty idealistic life that what we can all aspire to.

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So I'm really excited to learn about how you designed that, which is pretty interesting.

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But before we get into it, tell us about, how you got to where you are, which I didn't even talk about where you are yet, but.

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Yeah.

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So Luis is alluding to the fact that I'm an expat, my wife and daughter and I live in Lima, Peru, at least for the moment.

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We're about to move back to the US in a couple months.

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But we've been abroad for 10 years now.

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My wife is a school counselor and for the last 10 years she's been working at American schools around the world.

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Most of'em were embassy schools as a college counselor, helping.

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Juniors, seniors get into college.

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And I have an online business in the US and I also do some freelance writing on the side, and that's all done remotely.

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I've been able to work remotely around the world.

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We started for four years in Abu Dhabi was our first little jaunt overseas.

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And then we moved to Brasilia for four years.

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And we've been in Lima for the last two years.

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So it's been a lot of fun.

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It's been a ride.

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That is so cool.

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Did you did your destination, was that something you guys got to choose or was it chosen for you?

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Yeah, so what happened was this, so back in 2015, my, my wife, I.

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Had or she knew that I had some wanderlust.

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So she, unbeknownst to me as a surprise, she went out and she talked to a friend of mine who worked for an overseas school about how that works.

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How you end up working for international schools around the world.

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So she signed up for this recruiting service and then surprised me with it.

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And she said, Hey, there's a job fair up in Boston.

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Do you want to go up there?

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And I.

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I'll interview four jobs around the world and they wanna meet you too.

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And, if one comes along that looks awesome, we can take it.

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So we did, we went up to Boston and within 24 hours of getting there we, she had a job offer in Abu Dhabi and we took it.

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But yeah, she interviewed with a bunch of different schools around the world.

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Got a handful of job offers.

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That was the one that we felt most drawn to.

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Our lives.

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Changed, they changed trajectory pretty quickly in that moment.

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And we thought we were just gonna have this little two year adventure overseas and then just step right back into our previous life.

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And we rented out our house furnished with all of our stuff in it, and we thought we were just gonna move right back into our house with all of our furniture.

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And but that's not what happened.

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That was 10 years ago and we're still abroad.

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It's been a lot of fun being an expat.

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Yeah.

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That's interesting.

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So let's talk about your side of it though, how you were a landlord, right?

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I was I hated it.

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I absolutely hated it.

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Yeah the short version of that story is I graduated college in 2003, which sounds like a really long time ago.

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And I guess it was, but I didn't know what I wanted to do.

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Yeah.

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Thank you.

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It made me feel a little bit better there, but yeah, I didn't know what I wanted to do with my life.

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Like a lot of college grads.

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I ended up just falling into a job working for a mortgage company where the owner, one of the two owners was friends with my stepdad, so just fell into a summer internship by accident with them, and at the end of the summer they said, hey, we don't need another loan officer.

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What we do need is we need someone to manage our personal hard money loans because the two owners.

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On the side of their conventional mortgage business, they lent out hard money loans.

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And I said I don't know anything about that, but sure, why not?

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So I started working with real estate investors, flippers, people doing burr deals.

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And I'm watching these guys make money hand over fists back in the mid aughts, right?

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'cause it was a big party and in real estate back then, and everybody's making lots of money.

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So I was like, oh, I can do this too.

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And if I buy enough properties, I can just, retire at 30 or whatever.

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And, that's of course in the real world, it's a little bit more complicated than that.

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It, that was the premise of fire before fire was a thing.

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And so I went out and put all my money into rental properties and I didn't know what I was doing.

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And I was this young, cocky, arrogant 20 something who thought that he could just figure it all out on his own.

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And way over purchased, way overbought for these properties.

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Got in way over my head and then 2008 hit and just totally cut.

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Me off at the knees.

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Not only with my investments, but also my work as a loan officer for a hard money lender, that all dried up too overnight.

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'cause no one's flipping houses anymore in 2008.

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Anyway I went off and I took a totally new job for an e-commerce company that specialized in landlord forms, legal forms for landlords.

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And the only reason I got that job was because I was a landlord myself.

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I didn't know anything about.

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E-commerce or digital marketing or any of that stuff.

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But I got the job because I was a landlord and that just, it goes to show that.

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A door closes, a window opens, that just is how the universe works, and you have to be open-minded about that stuff.

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Even when you're going through something that feels like a big crisis there are opportunities.

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And that's how it was for me.

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So yeah, in 2015 I moved abroad.

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I was still working for that e-commerce company actually when I moved abroad, but within six months or so after moving abroad a coworker of mine from that company, she and I, we split off when we started Spark Rental and, and we've been doing it for over nine years since but I've, yeah, I wanted to have income that I could.

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Have some control over and I wanted to be able to earn money from anywhere in the world working any hours that I wanted to work because at that point, I was living in Abu Dhabi, which was nine hours ahead of Eastern time and 12 hours ahead of Pacific time.

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Yeah, it was very much about trying to design a life around what I wanted to do, which was travel a lot and, live overseas and have some control over my income.

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Yeah, very interesting.

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I think a lot of us have that, right?

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I like how you used the term wanderlust.

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I hadn't heard that one in a while.

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Actually stayed in a really cool hostile one.

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It's called Wanderlust and that was where, at an exposure to in Gunison, Colorado.

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Okay.

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All right.

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The but the so tell us about the business.

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This is really interesting.

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Tell us what Spark Rental does.

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So there's gonna be a slight wandering here, but I promise it'll come back around.

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Sure.

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So when we first started our business we thought that we were gonna start a software company and create landlord software for mom and pop landlords.

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'cause at the time, there wasn't really a good solution out there for people that just had a handful of properties.

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And one of the lessons that I learned.

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Early on as an entrepreneur, is that the business that you think you're in, or the business you think you should be in, not necessarily the business that the market thinks you should be in or what your customers think you should be doing, and you have to listen to the market and listen to your customers or, and listen to your.

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Prospective customers.

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My partner and I, we spent a lot of money and time, chasing down this rabbit hole of trying to create software.

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And meanwhile, neither she nor I are technical founders, we don't know how to code.

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So we just, we wasted all this time and effort on that.

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And.

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What we were doing in the meantime to make money while we were trying to build out this software was we just had an educational blog and we started selling online courses and and just teaching people about real estate investing and property management and, some of these principles and financial independence and lifestyle design.

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And our course students kept asking us, Hey, I'm not ready to buy a property by myself just yet, but can I just invest a little bit of money with you guys in a project that you're doing?

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We kept saying no, we must have said no 50 times to people who asked that question.

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And finally my partner and I looked at each other and we were like maybe we should actually pay attention to what people are asking us for.

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And at the time I was not buying rental properties anymore from Abu Dhabi, but I was starting to invest passively in real estate.

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I was, it started with real estate crowdfunding platforms, and then I got into syndications and.

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We did a couple pilot deals with some of our core students on rental properties.

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It was way too much work.

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We weren't making any money off of doing that other than just the returns that we were earning as partial owners from those.

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But we liked the premise of co-investing with other people.

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In some of these big real estate projects.

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So we did a pilot deal for our real estate syndication where we all went in on a syndication together.

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'cause syndications have a high minimum investment, 50 grand, a hundred grand, sometimes more, sometimes 250 grand or even a million dollars.

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So that makes it.

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Really prohibitive to diversify if you have to park a hundred grand at a time in each investment.

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And the same applies to rentals.

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If you're going out and buying a rental by yourself, you're gonna put 50 grand or a hundred grand in between the down payment and closing costs and cash reserves and whatnot.

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So anyway we went in on a syndication deal with some of our course students.

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It went well and people liked it.

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So we thought what if we started an investment club around this and, opened it up to the public and, we could all vet deals together and we could go in on them together financially, so each person could invest small amounts.

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And, so we spoke with an attorney of course, to make sure that was legal.

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And and we did, we launched the co-investing club as just a passive real estate investment club for people to go in on investments together and vet them together and have 50 sets of eyeballs all on the same deal.

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And talking over the pros, cons, risks, returns, and it's been a lot of fun.

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That was three years ago, four years ago that we started doing that.

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And it's, we've been doing it ever since.

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Every single month we get together and we vet a new deal together as an investment club.

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Yeah, that.

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When I first heard this concept I just thought it was really interesting'cause like for our listeners who don't know a lot of times, like you mess mentioned to invest in these big syndications.

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Yeah.

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Some of them require big lump sums of money.

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Some of them, depending on the structure, you also have to be an accredited investor.

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Not all of us are.

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So we have to meet certain income thresholds or net worth thresholds and that can be prohibitive.

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So with your co-investing club, is this somebody that anybody could anybody.

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Could join something that anybody could join.

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Yeah.

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Yes.

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Is the answer to that question.

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And that is one of our core values as an investment club is inclusivity to everybody because it's pretty easy for accredited investors to find these deals and to find reputable operators.

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It's a lot harder for non-accredited investors because the SEC makes it.

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Difficult for them.

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Yeah.

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The SEC doesn't want non-accredited investors investing in private equity real estate.

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They just don't, they don't think that they are sophisticated enough to do it.

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So when an operator goes to offer a syndication they typically have two options.

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They can file it as a 5 0 6 B syndication, which does allow up to 35 non-accredited investors, but.

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This, the operator is not allowed to advertise it at all to the public.

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So those 35 non-accredited investors, that's really supposed to be like friends and family or an operator, can file it as a 5 0 6 C syndication and make it only available to accredited investors.

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And when they, if they do that, then they are allowed to advertise it to the public so that if you're a non-accredited investor, that creates a cash 22.

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Where you can't.

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No one's allowed to market these investments, so how are you supposed to know about them?

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Again it's really designed for just friends and family of operators.

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So that's one of the things that we do as an investment club is we look at non or investments that allow non-accredited investors and we.

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So my partner and I, we do a lot of networking with operators and that's part of the service that we offer.

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We get on all their email lists and we talk to'em about what they're doing.

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And so every day we have deals coming across our plate and we just try to pick the one each month that we think is the best fit for our investment club.

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But yeah, so they, part of the club is that deal flow of having constant access to new deals as a non-accredited investor because it's so hard to find those deals otherwise.

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Yeah, but so you.

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You put together your fund your a group of investors that each puts in.

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So you have a minimum of$5,000, right?

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Correct.

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Everybody has to put in So they pay to no one has to put in anything.

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E every deal is to put totally optional.

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Sure.

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But if they do, it's a$5,000 minimum, right?

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Yeah.

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Yeah.

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$5,000 or more if you wanna participate in that month's deal.

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Again, everyone's optional.

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So collectively we'll be investing a lot more, nowadays we're investing between 400 and$800,000 a month as an investment club.

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But yeah, each person can invest five grand.

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A lot of times these funds, when they want investors, they want bigger lump sums because it becomes administratively easier to manage.

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They have to, issue like there's more compliance and they have to issue more K nines and other tax forms and such into this.

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But so they don't like to receive little, payment or, investment to 5,000'cause it's almost not worth it for them.

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But you are actually are you taking all of that and you're doing that work pretty much for them?

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Yeah, so we form a new LLC for each deal that we do.

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And, and everyone who participates in that deal, they get listed as an owner of the LLC proportionate to whatever they invested.

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And then that LLC is a singular investor in the broader deal, whether it's a syndication or a node or a private partnership.

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So the operator only has to deal with one investor, one entity investor, right?

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And they only really have to communicate with.

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One person, me or my partner Denny.

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And then, we will forward all those communications on to everyone who participated in that deal.

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But yeah, it makes it way easier for the operator to deal with one entity that's writing a half million dollar check, for example.

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That's right.

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Yeah.

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As opposed to, a hundred people writing 500,$5,000 checks.

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Yeah.

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But on, on the flip side, that's making it more complicated for you, right?

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Because you're taking on all of that.

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You could have more investors in your investment, your one investment to that investment than they could theoretically, right?

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Yeah.

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No, absolutely.

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So we have a lot of administrative burden.

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Yeah.

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Yeah.

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That's an investment club.

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And that's why we charge money, right?

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You, so we.

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People, if you want to invest a smaller amount in these deals you can do that through our investment club.

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And there's a cost to do it because it does require more of that administrative burden as opposed to just going out and investing directly.

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Yeah.

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So to be a part of your club, there's also a membership to that.

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So you do get access to all of these investments this way, right?

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Yeah.

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So we're a flat fee investment club.

00:16:12.433 --> 00:16:15.374
It's$59 a month or 4 97 a year.

00:16:15.759 --> 00:16:25.219
And then if someone does participate in a deal, we form that joint LLC, like I said, that LLC does have its own accounting and administrative charges or costs involved in it.

00:16:25.318 --> 00:16:33.219
That's$75 per person, per year just to handle things like the tax return for the LLC and splitting up all the K ones to everybody.

00:16:33.649 --> 00:16:35.849
But yeah, it's way cheaper than.

00:16:36.629 --> 00:16:38.908
Any other way of going in on these investments.

00:16:39.058 --> 00:16:39.448
Yeah.

00:16:39.448 --> 00:16:41.038
And are there any other fees there?

00:16:41.038 --> 00:16:45.994
Like when you get into a fee, is there a management fee or any, anything else when you get in?

00:16:46.604 --> 00:16:47.533
Not from our end.

00:16:47.624 --> 00:16:59.063
So yeah, we charge a membership fee and then and$75 and then yeah, if you're, and that's it for any deals you're participating in you know that we have to, we all chip in money just to cover the LLCs operating costs.

00:16:59.274 --> 00:16:59.573
Sure.

00:16:59.604 --> 00:17:02.303
But the operator, they charge their own sets of fees, of course.

00:17:02.403 --> 00:17:02.974
That's amazing.

00:17:02.974 --> 00:17:10.663
And yeah you've pretty much democratized, investing into these big deals for people like this is fantastic.

00:17:11.144 --> 00:17:11.953
That's the idea.

00:17:12.023 --> 00:17:12.443
Yeah.

00:17:12.443 --> 00:17:16.104
We want to keep it very transparent, very democratic.

00:17:16.153 --> 00:17:24.534
If there is our goal with this is that there is never any involvement or activity, we want to keep this all completely passive for all of us.

00:17:24.693 --> 00:17:29.544
But if there is a decision that has to be made, we just take a vote in the LLC everyone gets.

00:17:29.808 --> 00:17:35.898
Joint, or everyone gets view access to the joint bank account so they can see every transaction that's taking place.

00:17:35.949 --> 00:17:38.284
'cause it's a joint LLC, it's a joint bank account.

00:17:38.284 --> 00:17:44.503
We all can see it, we can see when distributions come in, we can see when everyone's distributions get divvied up and sent out to everybody.

00:17:44.554 --> 00:17:45.544
Yeah, it's very democratic.

00:17:46.263 --> 00:17:46.834
That's amazing.

00:17:47.263 --> 00:17:49.814
All right, so your job is the manager of the club.

00:17:50.193 --> 00:17:52.534
Essentially is throughout the month.

00:17:52.564 --> 00:17:54.423
So you got one that goes up every month.

00:17:55.144 --> 00:18:00.723
You guys review it as a club, and then whoever chooses to invest says, I'm in.

00:18:01.144 --> 00:18:03.604
Here's how much I'm investing, here's$75.

00:18:04.163 --> 00:18:05.273
And that's it.

00:18:05.273 --> 00:18:09.933
And then they get access to the financials and voting if there's any votes to be had.

00:18:10.243 --> 00:18:10.483
Yeah.

00:18:11.054 --> 00:18:15.064
So you're dur during the month, you're vetting.

00:18:15.874 --> 00:18:18.513
Which investment you're gonna bring to the club, I'm assuming.

00:18:18.564 --> 00:18:20.304
What kind of deals do you look at?

00:18:20.933 --> 00:18:21.503
Oh man.

00:18:21.564 --> 00:18:23.903
So that's one of the fun things about this club is that.

00:18:24.324 --> 00:18:28.314
There's just a huge diversification of deals, and that's part, that's by design.

00:18:28.314 --> 00:18:38.003
That's really our other core value as a club, is diversifying across geography, across operators, across types of real estate investments.

00:18:38.334 --> 00:18:39.743
So it's real estate investment.

00:18:39.743 --> 00:18:40.134
I'm sorry.

00:18:40.554 --> 00:18:41.538
So yeah, so just real.

00:18:41.558 --> 00:18:44.243
So we do passive, yeah, we do passive real estate investments.

00:18:44.394 --> 00:18:55.584
But that can include syndications, it can include private notes, it can include private partnerships debt funds, equity funds but it's all passive real estate investments.

00:18:56.034 --> 00:18:58.203
Now these, we do deals.

00:18:58.659 --> 00:19:02.288
All across the US we do deals with different types of operators.

00:19:02.348 --> 00:19:05.798
We do deals at different investment timelines.

00:19:06.038 --> 00:19:12.439
So we've invested in investments as short as nine months and as long as indefinite.

00:19:12.929 --> 00:19:14.699
Because that is part of diversification, right?

00:19:14.749 --> 00:19:16.729
Is, the length of time commitment for the investment.

00:19:17.384 --> 00:19:19.814
Yeah, diversification is our other core value.

00:19:19.913 --> 00:19:23.723
And we do, it's every month it's super different, which is fun.

00:19:23.723 --> 00:19:26.483
This month it's a syndication that is.

00:19:27.249 --> 00:19:31.269
It's aiming for that, that infinite returns strategy, if you're familiar with that.

00:19:31.838 --> 00:19:38.588
But the idea is that the operator goes out, they buy an apartment complex, they renovate it to create value, and then they refinance it.

00:19:39.128 --> 00:19:46.989
And this operator is planning to refinance within the next three and a half to four years in return a hundred percent of our capital.

00:19:47.179 --> 00:19:52.888
So we'll get our money back but we will retain our ownership interests in the property.

00:19:52.979 --> 00:19:53.578
So we'll keep.

00:19:54.209 --> 00:19:57.598
Collecting distributions from the property even after we've gotten our money back.

00:19:57.999 --> 00:20:05.259
And when the property sells in 7, 8, 9, 10 years from now our ownership interest will have kept appreciating, of course.

00:20:05.259 --> 00:20:07.598
And we'll get our share of the profits when the property sells.

00:20:07.788 --> 00:20:14.409
Again, even though we've already gotten our money back, three and a half years into the deal, so we can go out and reinvest that money elsewhere.

00:20:14.693 --> 00:20:17.963
But we'll keep collecting cash flow from the this property.

00:20:18.054 --> 00:20:21.233
And then when it sells, eventually we'll get a nice big check from the profits.

00:20:21.534 --> 00:20:22.703
So it's a fun model.

00:20:22.854 --> 00:20:24.773
And then last month it was something completely different.

00:20:24.773 --> 00:20:26.663
It was a partnership with a land flipping company.

00:20:26.933 --> 00:20:32.003
So they're basically going out and they're flipping as many parcels of land as they can between now and the end of 2025.

00:20:32.423 --> 00:20:34.433
And every time they sell one of those parcels.

00:20:34.794 --> 00:20:39.864
Our portion of the profits come over to us and they keep reinvesting our capital to flip parcels of land.

00:20:40.233 --> 00:20:45.884
The month before that it was a note with a company that buys starter homes.

00:20:45.884 --> 00:20:54.368
Basically they'll buy a starter home and then they'll sell it to a first time home buyer as a purchase a lease purchase agreement, basically, or actually, no it's an installment contract technically.

00:20:54.548 --> 00:20:58.338
But anyway every one of these deals is completely different, and that's part of what makes this fun.

00:20:59.179 --> 00:20:59.419
Yeah.

00:20:59.419 --> 00:21:08.949
Do you do you, from seeing so many different types of asset classes and investment deals, have you developed a bias towards any that you like more than another?

00:21:10.028 --> 00:21:12.398
Yeah, I probably do have a couple biases.

00:21:12.499 --> 00:21:19.038
And I say that, we still, diversification is our first priority again, we're gonna keep bringing in.

00:21:19.699 --> 00:21:21.769
Every different type of deal that we possibly can.

00:21:21.769 --> 00:21:22.249
Of course.

00:21:22.249 --> 00:21:24.048
But there are a couple that I really like.

00:21:24.078 --> 00:21:25.909
I really like raw land.

00:21:25.909 --> 00:21:25.939
Okay.

00:21:26.298 --> 00:21:30.348
Because there are so many fewer things that can go wrong with raw land.

00:21:30.798 --> 00:21:34.429
So I'll give you just a quick example there.

00:21:34.729 --> 00:21:40.308
So the deal that we did last month with that land flipping company, so they have two different business models and I really like.

00:21:40.669 --> 00:21:46.449
This because the big risk with raw land is market risk, right?

00:21:46.453 --> 00:21:46.773
That's right.

00:21:46.773 --> 00:21:58.898
It's the risk that a recession hits and then all of a sudden no one wants, no, no one has the extra money to go out and buy a parcel of land for hunting or camping or, whatever it is that they bought this extra parcel of land for.

00:21:59.138 --> 00:21:59.378
That's right.

00:21:59.459 --> 00:22:05.753
So the only real risk there,'cause this, I don't know how familiar you are with the land flipping model I sell, but for anyone who's not.

00:22:05.933 --> 00:22:06.263
Yeah.

00:22:06.624 --> 00:22:06.923
Yeah.

00:22:06.923 --> 00:22:09.534
So for anyone who's not familiar with it company goes out.

00:22:09.864 --> 00:22:13.673
They buy a pro, a parcel of land for pennies on the dollar.

00:22:13.804 --> 00:22:16.413
Somewhere between 30 and 60 cents on the dollar.

00:22:16.953 --> 00:22:22.683
And then they'll turn around, maybe they'll add a little bit of value to it, maybe they'll subdivide it into a couple of lots.

00:22:22.953 --> 00:22:27.483
Or maybe they'll add like dirt road access or something like that, but they're not building on it or anything like that.

00:22:27.733 --> 00:22:29.534
And then they'll turn around, they'll sell it for retail.

00:22:29.574 --> 00:22:30.054
Price.

00:22:30.534 --> 00:22:37.344
So there's no property management risk, there's no construction risk, there's no risk of a roof caving in or anything like that.

00:22:37.624 --> 00:22:40.743
It's a pretty simple and straightforward deal with minimal risk.

00:22:41.223 --> 00:22:42.693
So it's really just market risk.

00:22:42.943 --> 00:22:46.423
The risk of a major recession hitting and the demand for this stuff drying up.

00:22:46.844 --> 00:23:02.203
What was unique about this company that we partnered with last month was they have a secondary strategy, which is buying parcels of land and installing manufactured homes on them, and then selling them as residential properties to first time home buyers.

00:23:02.384 --> 00:23:02.503
Yeah.

00:23:02.503 --> 00:23:10.144
Because even in a recession, there is still going to be demand for, affordable housing starter homes.

00:23:10.324 --> 00:23:10.564
Yeah.

00:23:10.594 --> 00:23:13.673
And in the market where they operate, for example in North Carolina.

00:23:14.558 --> 00:23:19.118
The median home price, where they're doing business is$460,000.

00:23:19.659 --> 00:23:24.578
They are selling these manufactured homes for 230,000, so literally half.

00:23:24.729 --> 00:23:24.939
Wow.

00:23:24.969 --> 00:23:26.108
What the median home price is.

00:23:26.108 --> 00:23:29.259
So even in a recession, there's going to be demand for.

00:23:29.618 --> 00:23:32.078
Starter homes at that level of affordability.

00:23:32.179 --> 00:23:45.638
So it's, they, what's nice about them is that they've got this two-pronged investing strategy, one of which, the only real risk to it is recession, and the other of which is pretty recession proof.

00:23:45.999 --> 00:23:56.548
So it's a, yeah, it was a fun, it was a fun investment and it was actually a record amount of participation we had in that particular month's investment, are they keeping the land and just settling the homes, kind like the space?

00:23:56.548 --> 00:23:58.398
No, they're selling the entire thing.

00:23:58.403 --> 00:24:00.544
The whole, the land, the homeowner improve the land.

00:24:01.068 --> 00:24:01.398
Yeah.

00:24:01.398 --> 00:24:01.909
It's a, it's a.

00:24:02.148 --> 00:24:03.409
With a, through a real estate agent.

00:24:03.409 --> 00:24:06.108
It's a traditional residential home sale at that point.

00:24:06.378 --> 00:24:06.739
Yeah.

00:24:06.798 --> 00:24:07.189
Okay.

00:24:07.669 --> 00:24:11.163
Yeah it's amazing to me the manufactured home space right now.

00:24:11.564 --> 00:24:12.403
What's happening there?

00:24:12.703 --> 00:24:14.713
It's it's really disrupting home building.

00:24:14.713 --> 00:24:19.219
'cause it, some of these products are better than stick-built homes and they're making affordable.

00:24:19.364 --> 00:24:19.903
It's amazing.

00:24:20.814 --> 00:24:21.144
Yeah.

00:24:21.144 --> 00:24:31.644
And even like modular homes, one of my closest friends back in Baltimore he bought this very high end home that ended up needing to be torn down because of the way the water table.

00:24:31.733 --> 00:24:38.693
Anyway, but he repre, he built a new home from scratch that was a modular home, and you would never know.

00:24:38.693 --> 00:24:39.653
This is a, this is a.

00:24:40.898 --> 00:24:43.449
Seven figure, multi, seven figure home that he has.

00:24:43.449 --> 00:24:43.509
Yeah.

00:24:43.818 --> 00:24:47.269
But it was a modular home that was basically like a Lego home.

00:24:47.324 --> 00:24:47.614
Yeah.

00:24:47.669 --> 00:24:48.538
And you'd never know.

00:24:48.538 --> 00:24:49.078
It's a, yeah.

00:24:49.078 --> 00:24:54.409
A stunning, gorgeous, 3000 square foot home in a very upscale area.

00:24:54.888 --> 00:25:03.999
And he was telling me that the the energy efficiency in modular homes is actually so good that they have to intentionally reduce it.

00:25:05.259 --> 00:25:13.308
So for safety reasons, because otherwise if there were like a gas leak or something the houses are so airtight Yeah.

00:25:13.338 --> 00:25:14.719
That, it would be a health risk.

00:25:14.749 --> 00:25:14.808
Wow.

00:25:14.808 --> 00:25:17.568
So they actually have to intentionally make them less energy efficient.

00:25:17.929 --> 00:25:18.229
Amazing.

00:25:18.259 --> 00:25:21.259
For safety reasons, because modular homes have gotten so good.

00:25:22.159 --> 00:25:22.368
Wow.

00:25:22.368 --> 00:25:22.818
What else?

00:25:22.818 --> 00:25:22.848
Okay.

00:25:23.088 --> 00:25:26.088
So is there another particular type that you like.

00:25:26.568 --> 00:25:29.749
Yeah, so I really like mobile home parks.

00:25:29.749 --> 00:25:29.808
Yeah.

00:25:29.838 --> 00:25:33.019
And in particular with tenant owned homes.

00:25:33.138 --> 00:25:33.409
Yes.

00:25:33.409 --> 00:25:37.068
Because they're the ultimate recession resilient investment.

00:25:37.398 --> 00:25:37.699
Yes.

00:25:37.759 --> 00:25:39.493
And I'll just explain how that works really quickly.

00:25:39.493 --> 00:25:41.473
A lot of people who've never invested in mobile homes.

00:25:41.659 --> 00:25:43.419
Aren't familiar with the two different models.

00:25:43.419 --> 00:25:51.558
So you've got park owned homes where the, tenants are moving in and they're renting a house or a mobile home that is owned by the park.

00:25:51.898 --> 00:26:06.308
Or you have tenant owned homes where they're just renting the lot and they're bringing their own mobile home in the tenant owned home model is great as a recession resilient investment because it costs a lot of money to move your mobile home.

00:26:06.759 --> 00:26:09.513
And I was actually I actually have the fresh numbers on this.

00:26:09.513 --> 00:26:13.183
I was just doing research on this a couple weeks ago for an article that I was writing.

00:26:13.604 --> 00:26:19.304
So the average cost to move us a single wide mobile home in the US is$6,500.

00:26:19.693 --> 00:26:24.284
The average cost to move a double wide mo mobile home is$11,500.

00:26:25.568 --> 00:26:31.048
Meanwhile, lot rents are typically like 500 bucks, in, in that, 600 bucks in that range.

00:26:31.469 --> 00:26:46.469
So if you have a choice, let's say a recession hits, you're feeling a little bit pinched and you have a choice between paying your$500 lot rent to keep your home where it is, or$6,500 to move your mobile home to another park to save.

00:26:46.874 --> 00:26:47.894
What, 50 bucks a month?

00:26:47.894 --> 00:26:48.554
A hundred bucks a month.

00:26:48.763 --> 00:26:49.753
Like it's a no brainer.

00:26:49.784 --> 00:26:51.193
You're just gonna stay where you are.

00:26:51.653 --> 00:26:56.923
And you don't want to be, you don't wanna stop paying your lot rent'cause your entire mobile home will be kicked off the park.

00:26:57.403 --> 00:27:00.554
So anyway it's a really recession resilient investment.

00:27:00.604 --> 00:27:01.834
Mobile home parks with.

00:27:02.104 --> 00:27:03.183
Tenant owned homes.

00:27:03.483 --> 00:27:05.673
Now, park owned homes is a different story.

00:27:06.003 --> 00:27:09.733
Those still do have some recession risk tenants defaulting and that sort of thing.

00:27:10.193 --> 00:27:11.554
So yeah, I love raw land.

00:27:11.554 --> 00:27:14.223
I love mobile home parks, especially with tenant owned homes.

00:27:14.554 --> 00:27:18.183
Certain types of industrial properties I like a lot.

00:27:18.574 --> 00:27:21.364
Some industrial real estate is recession resilient.

00:27:21.364 --> 00:27:22.203
Some of it is not.

00:27:22.743 --> 00:27:24.483
You have to be somewhat careful there.

00:27:24.844 --> 00:27:27.334
We did an industrial deal in January.

00:27:27.763 --> 00:27:29.804
That was, it was quite recession resilient.

00:27:30.044 --> 00:27:32.703
Let's say I don't know how much you wanna get in the weeds with these things.

00:27:33.193 --> 00:27:34.814
I'm a real estate geek myself.

00:27:35.354 --> 00:27:35.894
I love stuff.

00:27:35.894 --> 00:27:36.884
I find it.

00:27:36.884 --> 00:27:37.003
Me too.

00:27:37.003 --> 00:27:37.483
Okay, there you go.

00:27:38.503 --> 00:27:39.703
Yeah, it's okay.

00:27:39.703 --> 00:27:39.913
I love it.

00:27:39.913 --> 00:27:40.903
This particular investment.

00:27:41.983 --> 00:27:45.614
Yeah, so this was a seller leaseback deal where it was an industrial company.

00:27:45.673 --> 00:27:53.334
They owned the real estate around their factory, their manufacturing plants, and they wanted capital to expand.

00:27:53.394 --> 00:27:56.153
So they were selling off the real estate.

00:27:56.374 --> 00:27:58.638
While retaining, obviously their ownership of their business.

00:27:59.088 --> 00:28:01.278
So the investment we made was.

00:28:01.594 --> 00:28:05.834
Buying their land, their real estate, and then leasing it back to them.

00:28:06.284 --> 00:28:09.804
And, with an option for them to buy it back, with a certain premium and so forth.

00:28:10.134 --> 00:28:12.114
But this had a couple protections in place.

00:28:12.163 --> 00:28:22.453
One of those protections is just making sure that if they did default and if we did have to evict them, that we could re-rent that property.

00:28:22.844 --> 00:28:24.284
For more than what they were paying.

00:28:24.413 --> 00:28:27.653
And having, some market protection in that sense.

00:28:27.874 --> 00:28:33.903
But also this company was booked out more than three years in advance with backlogged orders.

00:28:34.203 --> 00:28:37.594
So they were booked through the end of 2028 with a backlog of orders.

00:28:37.864 --> 00:28:44.703
And OA huge percentage of their customer base was actually the US government was the, in the Navy in particular.

00:28:44.733 --> 00:28:47.763
So they served a, they, it was a weldman company for.

00:28:48.263 --> 00:28:54.463
Large steel products and, so they're like building ships and like other sort of stuff for the Navy.

00:28:54.834 --> 00:28:56.423
Again, the US Navy's not going anywhere.

00:28:56.423 --> 00:29:01.554
Obviously there's been some, there's been more disruption than anyone expected in the US government.

00:29:01.854 --> 00:29:01.973
Yeah.

00:29:01.973 --> 00:29:04.473
But the US Navy is still.

00:29:04.798 --> 00:29:05.578
Gonna be around.

00:29:05.949 --> 00:29:06.298
Yeah.

00:29:06.348 --> 00:29:07.578
Even in three years from now.

00:29:07.838 --> 00:29:12.858
But yeah they're pre-booked out with prepaid orders for years into the future.

00:29:13.249 --> 00:29:17.118
It's a very stable company, so very recession resilient.

00:29:17.578 --> 00:29:19.553
So yeah, like I like deals like that.

00:29:19.823 --> 00:29:23.923
So yeah those are a few examples of more niche stuff that we like.

00:29:23.923 --> 00:29:27.163
And of course we do the more mainstream multifamily syndications as well.

00:29:27.292 --> 00:29:34.133
It's multifamily has had a bear market for the last few years, so now is actually a pretty good time to invest in multifamily.

00:29:34.313 --> 00:29:34.432
Yeah.

00:29:34.432 --> 00:29:39.893
Even though all of the news headlines are awful and have been awful for the last couple years, that's good to buy.

00:29:39.893 --> 00:29:40.708
What makes it a.

00:29:41.028 --> 00:29:43.038
Yeah, that makes now a good time to buy.

00:29:43.087 --> 00:29:43.627
So yeah.

00:29:43.688 --> 00:29:54.958
A few weeks ago I wrote an article for BiggerPockets about how multifamily valuations now look very similar to how single family valuations looked in 2012.

00:29:55.238 --> 00:29:55.688
If, yeah.

00:29:55.688 --> 00:29:58.417
So anyone who was in real estate back then remembers.

00:29:58.903 --> 00:30:01.712
How low single family home prices got.

00:30:01.742 --> 00:30:06.782
They crashed 25 to 30% nationwide from 2008 to down to 2012.

00:30:07.173 --> 00:30:11.282
And then of course, they turned around and had just a stellar, decade plus since then.

00:30:11.883 --> 00:30:15.393
But that's where multifamily investments are right now.

00:30:15.452 --> 00:30:18.752
They've fallen between 25 and 30% since 2022.

00:30:19.682 --> 00:30:22.073
And and they're poised for a rebound and.

00:30:22.913 --> 00:30:28.893
There's a graph that's that I included in that article for BiggerPockets, but if you can imagine the long term trend line.

00:30:29.883 --> 00:30:38.042
So in like in the pandemic in 20 20, 20 21, multifamily valuations jumped way high up above that trend line.

00:30:38.343 --> 00:30:43.563
And then in 2022, they crashed way down below that trend line and have just started.

00:30:44.133 --> 00:30:44.163
I.

00:30:44.163 --> 00:30:46.682
Trending back upward toward the long-term trend line.

00:30:47.042 --> 00:30:47.163
Yeah.

00:30:47.192 --> 00:30:59.353
So yeah, I actually think that now is a good time to invest in multifamily not despite of the bad headlines, but because of the bad headlines and, now is actually around that bottom, at least in my personal opinion for that.

00:30:59.353 --> 00:31:01.512
Yeah, we like the mainstream multifamily syndication stuff.

00:31:01.512 --> 00:31:06.292
We also like the weird stuff, the land flipping stuff and the industrial and the mobile home parks and all that.

00:31:06.413 --> 00:31:10.222
Do you look for stabilized properties or value add?

00:31:11.782 --> 00:31:12.532
Both.

00:31:12.532 --> 00:31:16.373
Again, core value is diversification, so we do some of both.

00:31:16.583 --> 00:31:22.182
And a lot of the deals that we do we like to see income somewhat.

00:31:22.887 --> 00:31:31.897
Post to when we invest, it makes everyone just feel a little bit more reassured about the investment, if it starts paying income, within a few quarters of investing.

00:31:32.327 --> 00:31:38.028
But that being said, some of the best returns out there are the stuff where there is some heavier lift, of course.

00:31:38.107 --> 00:31:45.228
So here's a quick example of a kind of different deal that we did where there's a longer delay on the income.

00:31:45.768 --> 00:31:51.288
This company specializes in this very niche strategy called the Section eight Overhang Strategy.

00:31:51.337 --> 00:31:56.587
So they go out and they buy litech properties, the low income housing tax credit properties.

00:31:56.718 --> 00:32:05.758
So you go to these tax benefits with those, but they come with, the big downside of, they're capped at how much out of pocket tenants can pay each month.

00:32:06.238 --> 00:32:09.968
So what they do is they have a loophole that they use for that, where.

00:32:10.163 --> 00:32:26.823
As their cash tenants leases end, they non-renew them and then they refill those units with Section eight tenants because the cap on Litech is how much the tenant is paying out of their own pockets, not how much you as the owner is collecting in rents.

00:32:27.272 --> 00:32:30.542
So you, they can earn full market rents.

00:32:30.972 --> 00:32:32.982
By renting to Section eight tenants.

00:32:33.103 --> 00:32:33.432
That's right.

00:32:33.542 --> 00:32:36.063
While retaining their litech, their tax credit.

00:32:36.722 --> 00:32:40.292
So they're able to add a huge amount of value to these properties.

00:32:40.413 --> 00:32:45.212
By boosting the revenue and earning full market rents while keeping the tax credit.

00:32:45.512 --> 00:32:50.343
So it's a super niche and fun and unique strategy, but it takes time to implement that, right?

00:32:50.343 --> 00:32:50.432
Sure.

00:32:50.432 --> 00:32:55.653
It takes a couple years to fully turn over all of those cash tenants to section eight tenants.

00:32:55.962 --> 00:32:59.157
So that one has not started paying distributions yet, but we still like it.

00:32:59.538 --> 00:33:01.817
As a niche and unique value add strategy.

00:33:02.538 --> 00:33:08.938
Yeah, that's inter I've done a lot of work in the multifamily affordable housing space and I, I never thought about that strategy.

00:33:08.938 --> 00:33:18.508
That's an interesting one because oftentimes the deed restrictions require that they maintain some kind of affordable component, whether it be Litech or hud, section eight or what have you.

00:33:18.508 --> 00:33:22.167
And by doing that, you still maintain that.

00:33:22.617 --> 00:33:27.468
But are able,'cause oftentimes section eight is higher rent and it's usually the government who pays it, not the people.

00:33:27.468 --> 00:33:29.117
So it's more dependable.

00:33:29.127 --> 00:33:29.367
Yeah.

00:33:29.367 --> 00:33:31.647
And there's some recession resilience there too.

00:33:31.678 --> 00:33:31.978
For sure.

00:33:32.077 --> 00:33:32.468
For sure.

00:33:32.528 --> 00:33:39.428
Because obviously the government's paying the bulk of the rent and Section eight tenants themselves, they don't wanna lose their vouchers by defaulting.

00:33:39.432 --> 00:33:39.623
That's right.

00:33:39.728 --> 00:33:39.998
That's right.

00:33:40.028 --> 00:33:42.488
So there's some good recession resilience there as well.

00:33:43.327 --> 00:33:43.837
I like that.

00:33:44.077 --> 00:33:47.107
Do you do project-based buildings in that or no.

00:33:48.228 --> 00:33:57.143
We never have we never have just individual section eights so that, that property, they're just, they're renting to, individual section eight tenants.

00:33:57.563 --> 00:34:00.413
Yeah, no, we've never done any project based buildings.

00:34:00.522 --> 00:34:06.042
One other kind of interesting and unique affordable housing investment that we made last year.

00:34:06.282 --> 00:34:15.503
The operator, when they bought a property, they partnered with the local municipality to set aside half of the units for affordable housing.

00:34:15.952 --> 00:34:16.282
Yeah.

00:34:16.373 --> 00:34:19.583
In exchange for getting a huge discount on their property tax bill.

00:34:20.152 --> 00:34:24.563
So from day one, they added to the NOI of the property.

00:34:25.387 --> 00:34:37.757
Excuse me, because the lost rent from the units that were designated for affordable housing was the income, the loss of income from that was way lower than the savings on the property tax bill.

00:34:38.447 --> 00:34:42.657
So right away they got a boost in NOI just from that alone.

00:34:43.027 --> 00:34:43.807
And they are.

00:34:44.168 --> 00:34:51.327
So they're going through and they are renovating the market based rent units, but they're leaving the affordable units untouched.

00:34:51.748 --> 00:34:54.927
But that too is a recession resilient investment.

00:34:54.927 --> 00:35:00.117
Because there's a waiting list for those units that are marked for affordable housing.

00:35:00.117 --> 00:35:01.947
'cause they're a little bit under market rents.

00:35:02.097 --> 00:35:02.277
Yeah.

00:35:02.338 --> 00:35:05.907
Even in a healthy economy, there was a waiting list for those units in a recession.

00:35:06.327 --> 00:35:07.648
Those units have become even more.

00:35:08.503 --> 00:35:09.402
Coveted, right?

00:35:09.402 --> 00:35:09.672
Yeah.

00:35:09.882 --> 00:35:14.983
Yeah, we like that kind of stuff where there's some kind of recession resilient component to it.

00:35:15.762 --> 00:35:16.333
I love that.

00:35:17.322 --> 00:35:21.143
We're in real danger of going too far into the weeds here because you, I know, right?

00:35:21.322 --> 00:35:26.152
You triggered my real estate geek mind and I could go, but we'll stay higher level.

00:35:26.543 --> 00:35:33.733
How about, I'm wondering you mentioned you, you pretty much believe in dollar cost averaging real estate investment.

00:35:33.733 --> 00:35:36.652
That's what your program allows you to do, right?

00:35:36.652 --> 00:35:38.902
So is that how people treat it?

00:35:38.902 --> 00:35:42.802
They just set up a fund within yours and just dump money in there every paycheck or?

00:35:44.168 --> 00:35:44.378
Yeah.

00:35:44.378 --> 00:35:47.858
So real quick, I just wanna specify that we don't operate a fund.

00:35:47.907 --> 00:35:49.858
It's, we're not selling securities ourselves.

00:35:49.867 --> 00:35:50.137
Sorry.

00:35:50.168 --> 00:35:50.498
Yeah.

00:35:50.807 --> 00:35:55.128
We're just organizing an investment club for people to vet deals on their own.

00:35:55.188 --> 00:36:02.617
We, we get together and we vet deals together, but but yeah, that is how I approach my own investments on the stock side.

00:36:02.648 --> 00:36:07.487
I just set up my RoboAdvisor to pull money outta my checking account every week on the real estate side.

00:36:07.907 --> 00:36:11.447
Every month I'm putting five grand into a new real estate investment, into an investment.

00:36:11.447 --> 00:36:23.757
Regardless of what the market is doing, regardless of, whether everyone is freaking out about something or whether everyone thinks it's a giant party in real estate I just keep investing every single month because I.

00:36:24.492 --> 00:36:33.233
I'm not smart enough to time the market and every time that I thought that I was gonna get really clever in, in time in the market or doing something like that, I've gotten burned.

00:36:33.393 --> 00:36:38.733
And of course I'm totally contradicting the thing that I just said five minutes ago about how now is a good time to invest in multifamily.

00:36:38.733 --> 00:36:38.882
Yeah.

00:36:39.182 --> 00:36:45.583
But but no I truly believe in dollar cost averaging, putting relatively small amounts.

00:36:46.137 --> 00:36:50.458
Into investments every week, every month.

00:36:50.487 --> 00:36:56.068
Whether that's stocks, whether that's real estate, whatever your strategy is, just put, keep investing every month.

00:36:56.288 --> 00:36:57.338
Steady amounts.

00:36:57.728 --> 00:37:01.418
Don't try to get cute or clever timing the market because.

00:37:02.527 --> 00:37:06.608
When it's a good time to buy is when no one thinks it's a good time to buy, right?

00:37:06.608 --> 00:37:13.648
It's when all the headlines are doom and gloom and the sky is falling, and the world is ending, that's actually usually the best time to buy, right?

00:37:13.648 --> 00:37:13.918
That's right.

00:37:13.978 --> 00:37:15.927
When there's blood in the streets, as they say.

00:37:16.108 --> 00:37:16.257
Yeah.

00:37:16.288 --> 00:37:17.818
But it doesn't feel like a good time to buy.

00:37:17.818 --> 00:37:18.657
It feels horrible.

00:37:18.688 --> 00:37:23.617
You're laying awake at night, chewing on your fingernails, worrying about what's going on worrying that the world's about to end.

00:37:23.827 --> 00:37:28.197
Yeah don't invest based on what you think is going on in the market.

00:37:28.617 --> 00:37:33.788
Just invest steadily month in, month out, as they say, time in the market.

00:37:34.057 --> 00:37:37.748
Way more important and valuable than timing the market.

00:37:38.057 --> 00:37:38.358
Yeah.

00:37:38.777 --> 00:37:39.257
Very good.

00:37:39.867 --> 00:37:46.077
I'm curious with all of the deals that you see, I know you only bring one a month, but you're spending the rest of the month vetting other deals.

00:37:46.077 --> 00:37:48.327
You probably see dozens if not hundreds every month.

00:37:48.818 --> 00:37:49.268
You see a lot.

00:37:49.568 --> 00:37:49.867
Yeah.

00:37:49.867 --> 00:38:01.887
So with that, you probably develop a really good radar for who's, what's gonna be a good investment, who's gonna be a good operator, what's gonna be a lower risk, a higher return kind of thing, I would imagine.

00:38:01.938 --> 00:38:09.547
Tell us a few of the things that we can look for in, maximizing return and minimizing risk.

00:38:10.927 --> 00:38:19.538
Yeah, so first things first, high level, the operator risk is the most important thing to, to focus on.

00:38:19.757 --> 00:38:27.722
And I've had people push back against me for saying that I 100% stand by that I have seen.

00:38:28.313 --> 00:38:35.273
Bad operators ruin perfectly good deals, and I've seen good operators salvage deals that have gone sideways.

00:38:35.552 --> 00:38:37.802
Always focus on the operator first.

00:38:38.103 --> 00:38:39.873
Vet them heavily first.

00:38:40.052 --> 00:38:42.402
Look for, a lot of experience.

00:38:43.117 --> 00:38:51.577
Not just in real estate in general, but in that specific market, in that specific asset type in that particular in investing strategy.

00:38:52.157 --> 00:38:54.288
Make sure that they have done a lot of those.

00:38:54.318 --> 00:38:55.907
Make sure this is not their first rodeo.

00:38:56.268 --> 00:38:57.347
So that's really important.

00:38:57.347 --> 00:39:01.818
And of course you want to gauge their trustworthiness and that's harder to do.

00:39:01.867 --> 00:39:05.027
It's not as easily quantified but.

00:39:05.373 --> 00:39:11.313
Keep grilling an operator with questions until you feel satisfied that you can trust them with your money.

00:39:11.793 --> 00:39:15.722
On the deal level debt risk is one of the first things that we look at.

00:39:15.893 --> 00:39:17.003
What's the debt term?

00:39:17.032 --> 00:39:23.438
Is there enough runway for the operator to wait out a bad market for selling a bad market for refinancing?

00:39:23.777 --> 00:39:26.088
The longer the term on the debt.

00:39:26.878 --> 00:39:31.108
The more runway they have, if things go against them, market wise.

00:39:31.588 --> 00:39:32.668
Also look at interest rate.

00:39:32.728 --> 00:39:46.663
A lot of deals went belly up in 20 22, 20 23, and even now when interest rates shot through the roof in 2022, a lot of operators had variable interest loans and their payments just.

00:39:47.432 --> 00:39:52.592
Shot upward and all of a sudden they were had, they had negative cash flow every month.

00:39:52.623 --> 00:39:52.682
Yeah.

00:39:53.052 --> 00:39:54.072
Look at debt risk.

00:39:54.373 --> 00:39:55.992
Look at construction risk.

00:39:56.413 --> 00:40:07.503
So if there is some heavy value add, if they're going in and renovating properties how much experience do they have working with the people who are actually swinging the hammers?

00:40:07.932 --> 00:40:14.193
Whether they're outsourcing that or whether they have an in-house construction team, that's not really the big question.

00:40:14.402 --> 00:40:15.273
The big question is.

00:40:15.572 --> 00:40:20.882
How many deals has that construction team worked on with this operator?

00:40:21.523 --> 00:40:23.083
And the same thing goes with property management.

00:40:23.083 --> 00:40:24.972
Property management risk, another big one.

00:40:25.293 --> 00:40:32.583
It's less about whether the property management team is vertically integrated with the operator, whether they're owned together versus outsourced.

00:40:32.733 --> 00:40:34.563
That's not the really the big question.

00:40:34.563 --> 00:40:36.393
Big question is how many deals.

00:40:36.737 --> 00:40:40.668
Has this property management team worked on with this operator?

00:40:41.217 --> 00:40:43.588
If it's their first deal together, that's high risk.

00:40:43.797 --> 00:40:45.987
If it's their 20th, very low risk.

00:40:46.288 --> 00:40:48.268
Property management can make or break a deal.

00:40:48.297 --> 00:40:53.947
There, there is a deal where a lot went wrong in this deal.

00:40:54.427 --> 00:41:01.208
This was an operator who did get a variable interest loan and their payments, their monthly payments went really high.

00:41:02.498 --> 00:41:08.527
They were able to keep the deal alive and salvage it because the property management was so good.

00:41:08.588 --> 00:41:17.228
Like they were able to keep 94%, 95% occupancy in this property and just barely eke out, a positive cash flow in that deal.

00:41:17.568 --> 00:41:20.838
And stayed alive with it because they had really good property management.

00:41:21.018 --> 00:41:22.367
So property management matters.

00:41:22.427 --> 00:41:24.918
Regulatory risk is something that we also look at.

00:41:25.047 --> 00:41:32.318
We don't like to invest in residential investments in areas that have really tenant friendly laws.

00:41:32.447 --> 00:41:34.248
We'll invest in other types of real estate there.

00:41:34.407 --> 00:41:50.538
For example we have invested in a deal in Southern California that was it was a an Airbnb, it was like a cabin resort kind of property in an unincorporated town in the mountains a couple hours to the east of LA and San Diego.

00:41:50.958 --> 00:41:56.987
I would be very nervous buying or investing in multifamily properties in Southern California because it's so tenant friendly.

00:41:57.108 --> 00:41:57.438
That's right.

00:41:57.547 --> 00:42:02.768
But this property, was fine because it wasn't bound by those landlord tenant laws.

00:42:03.307 --> 00:42:08.827
We will make exceptions occasionally if there is a really good like mitigating factor.

00:42:08.887 --> 00:42:09.637
So for example.

00:42:10.123 --> 00:42:15.262
We invested in a it was an apartment complex in outside of Portland, Oregon.

00:42:15.512 --> 00:42:17.523
Very tenant friendly market.

00:42:17.813 --> 00:42:18.893
From a legal standpoint.

00:42:19.322 --> 00:42:25.123
But this operator they actually started 20 years ago as a property management company.

00:42:25.512 --> 00:42:29.003
So they have deep local experience in property management.

00:42:29.052 --> 00:42:31.333
They know the regulations inside and out.

00:42:31.693 --> 00:42:32.862
They have deep experience with it.

00:42:32.873 --> 00:42:38.572
They have obviously managed all their own properties over the decades, so we thought that was a mitigating factor.

00:42:38.887 --> 00:42:39.458
With that.

00:42:39.668 --> 00:42:43.878
But yeah, so regulation risk there's market risk is of course a thing.

00:42:44.057 --> 00:42:48.827
You don't wanna be putting yourself in a position where you're trying to predict the market in any sense.

00:42:49.188 --> 00:42:50.987
And then lastly, concentration risk.

00:42:51.347 --> 00:42:58.047
You don't want to have too much money in one asset class in one city with one operator, right?

00:42:58.047 --> 00:42:59.639
And that's part of why we do what we do.

00:42:59.913 --> 00:43:03.327
We wanna spread our money across all of these different axes, right?

00:43:03.398 --> 00:43:08.438
Different geographical markets, different operators, different asset types, different timelines, investment timelines.

00:43:08.768 --> 00:43:10.867
So yeah, watch out for concentration risk as well.

00:43:11.257 --> 00:43:11.557
Yeah.

00:43:11.768 --> 00:43:12.367
That's interesting.

00:43:13.208 --> 00:43:13.748
Very good.

00:43:13.797 --> 00:43:17.097
Brian, we're at that point where we'd like to go over our world.

00:43:17.097 --> 00:43:17.728
Famous.

00:43:17.728 --> 00:43:20.452
And since you're from Peru in Peru, there you go.

00:43:20.503 --> 00:43:21.432
We are now world.

00:43:21.463 --> 00:43:24.072
It's the way, world famous Wayfinder four.

00:43:24.132 --> 00:43:25.032
So are you ready?

00:43:25.393 --> 00:43:25.902
I'm ready.

00:43:25.902 --> 00:43:26.382
Let's do it.

00:43:26.592 --> 00:43:27.012
All right.

00:43:27.012 --> 00:43:30.132
Gimme a hack that you use, like a life hack you use all the time.

00:43:31.277 --> 00:43:35.163
So my favorite life hack is working out in the middle of the day.

00:43:35.492 --> 00:43:47.862
So I work out right before eating lunch, and that gives me a boost of energy and concentration for the afternoon, when otherwise I'd be lagging a little bit.

00:43:47.952 --> 00:43:49.657
And just not operating at full steam.

00:43:50.152 --> 00:43:53.878
But working out midday it gives you that, that recharge for the afternoon.

00:43:54.722 --> 00:43:55.293
I love that.

00:43:55.322 --> 00:43:58.083
I just moved into a new office and we have a gym downstairs.

00:43:58.083 --> 00:44:00.663
I'm about to join it because yeah, that's exactly what I'm gonna do.

00:44:00.693 --> 00:44:01.503
I love that.

00:44:01.893 --> 00:44:06.422
How about a favorite, this could be anything, an activity, a book, a child.

00:44:07.958 --> 00:44:09.998
I only one time only, so that one, that's an easy one.

00:44:10.518 --> 00:44:11.032
I knew you did.

00:44:11.032 --> 00:44:18.547
That's why I let you, because yeah, my, I'm very intentional about how I consume news.

00:44:18.938 --> 00:44:20.858
For daily business news.

00:44:20.858 --> 00:44:23.108
I love Morning Brew as a newsletter.

00:44:23.347 --> 00:44:27.367
I also for a weekly political podcast, I like left and center.

00:44:27.847 --> 00:44:32.697
Which is hosted on NPR, but they the center, the political center is the host of the show.

00:44:32.992 --> 00:44:36.992
And there's a guest who represents the left and there's a guest who represents the right.

00:44:37.233 --> 00:44:42.452
And they just talk through, the, that week's news, that week's current events and so forth.

00:44:42.782 --> 00:44:46.083
And you get to hear the different perspectives all across the political spectrum.

00:44:46.083 --> 00:44:51.382
And it's a thoughtful and respectful conversation that they're having from people who actually represent.

00:44:51.893 --> 00:44:53.422
The philosophical Right.

00:44:53.422 --> 00:44:54.833
And the philosophical left.

00:44:55.152 --> 00:44:58.733
As opposed to just, whatever the parties happen, the party Yeah.

00:44:58.733 --> 00:45:04.793
To be doing in that moment, which don't necessarily align with philosophical conservatism or philosophical liberalism.

00:45:04.797 --> 00:45:05.157
That's right.

00:45:05.157 --> 00:45:05.273
That's right.

00:45:06.202 --> 00:45:06.443
Do, yeah.

00:45:06.443 --> 00:45:07.282
Check out left and center.

00:45:07.523 --> 00:45:07.793
I will.

00:45:07.793 --> 00:45:11.273
And if you're looking for a business book, check out, buy Back Your Time by Dan Martel.

00:45:12.893 --> 00:45:13.222
Okay.

00:45:14.393 --> 00:45:14.813
Thank you.

00:45:15.293 --> 00:45:17.632
What about a piece of advice for your younger self?

00:45:17.632 --> 00:45:17.663
I.

00:45:19.447 --> 00:45:32.467
I would tell my arrogant, younger self to go out and get help from mentors, coaches, join communities of people who are further ahead than I am.

00:45:32.867 --> 00:45:38.188
And don't, avoid that trap of hubris thinking that you can just figure it out all on your own.

00:45:38.398 --> 00:45:44.288
You can really compress your timeline by leveraging other people's mindsets.

00:45:44.813 --> 00:45:46.222
And other people's knowledge.

00:45:47.242 --> 00:45:50.842
What about either a big opportunity or a limiting belief?

00:45:52.402 --> 00:46:03.103
Yeah, so you know, some, one of it is, you can, that notion of compressing your timeline by, leveraging other people who have gone ahead of you and done whatever it is that you are trying to do.

00:46:03.103 --> 00:46:07.733
For example, I joined a mastermind group this past year for the first time ever.

00:46:08.123 --> 00:46:08.873
And it was not cheap.

00:46:08.932 --> 00:46:11.422
It was five grand to, to join it for a year.

00:46:11.753 --> 00:46:14.362
And I was pretty nervous about making that investment.

00:46:14.362 --> 00:46:19.603
It took me a few months to build my courage up to take that leap of faith, not knowing what I would actually get outta that.

00:46:19.963 --> 00:46:20.922
And it has been.

00:46:20.947 --> 00:46:21.788
Fantastic.

00:46:21.788 --> 00:46:22.807
It really has.

00:46:22.907 --> 00:46:31.128
I've have a coach through that now, and that, that coach has actually been working me for free as he's building up his book of business.

00:46:31.277 --> 00:46:41.318
I have I've had the courage to make a lot of changes in my business, based on, talking that through with my pod of people who I meet with every week.

00:46:41.418 --> 00:46:44.688
There's just all of these these.

00:46:44.992 --> 00:46:55.873
Not obvious benefits that you get by joining a community of people who share your ambitions and, share your goals and maybe are a little bit further down the path than you are.

00:46:56.182 --> 00:46:57.233
That's really useful.

00:46:57.262 --> 00:46:58.583
So I would highly recommend that.

00:46:58.882 --> 00:47:01.882
Because you don't, by definition, limiting beliefs.

00:47:02.063 --> 00:47:05.063
You think they're real, but they're not actually real.

00:47:05.182 --> 00:47:05.483
That's right.

00:47:05.483 --> 00:47:18.922
So you, we all have these blind spots and getting help from a community, from a coach or a mentor or a therapist or someone else, they can help you spot these blind spots that you can't see'cause you're just too close to it.

00:47:19.052 --> 00:47:23.972
You're trying to read the prescription from inside the bottle right in your own life, as they say.

00:47:24.032 --> 00:47:24.722
But you can't do it.

00:47:24.753 --> 00:47:27.992
You need some outside perspective to help you see those blind spots.

00:47:28.023 --> 00:47:31.893
So anyway, yeah that's what I would, that's what I would tell people or my younger self rather.

00:47:32.833 --> 00:47:33.612
Thank you Brian.

00:47:33.612 --> 00:47:39.893
If people wanna know a little bit more about you, maybe join the community, the investing club and such a, how can we find you?

00:47:40.927 --> 00:47:42.907
Check out spark rental.com.

00:47:42.958 --> 00:47:51.657
We're also on all the major social platforms, LinkedIn, Facebook at Spark Rental, and you can also email us support@sparkrental.com.

00:47:51.657 --> 00:47:58.347
We are very much a mom and pop company, so you know, my, my co-founder, her daughter is our only full-time employee.

00:47:58.458 --> 00:48:00.918
Yeah we are a small business, very much mom and pop.

00:48:01.132 --> 00:48:05.043
And, we're out there investing our own money in these deals every month.

00:48:05.092 --> 00:48:07.552
This is my own strategy for financial independence.

00:48:07.702 --> 00:48:07.762
Yeah.

00:48:07.822 --> 00:48:08.663
We're in the weeds with you.

00:48:09.527 --> 00:48:10.847
I love what you're doing, Brian.

00:48:10.847 --> 00:48:23.047
I thank you for it because I think a lot of people who wanna get involved in real estate investing on a bigger scale, with the big investments now have a chance to do it without having big investment.

00:48:23.077 --> 00:48:23.108
I.

00:48:23.108 --> 00:48:25.063
Money to do so it, it's great.

00:48:25.063 --> 00:48:31.733
And also that, that mind share that you have, I can only, I'm gonna join because I just wanna be there every month and review the deals and have that mind share.

00:48:31.733 --> 00:48:32.693
I just think it's amazing.

00:48:33.003 --> 00:48:33.753
Just that alone.

00:48:33.753 --> 00:48:35.478
I feel like even if I don't put in five grand.

00:48:36.103 --> 00:48:37.753
Sometimes I can do it, sometimes I can't.

00:48:37.753 --> 00:48:44.023
But that 59 bucks of, to have that mind share, I think will, alone would be worth it for me.

00:48:44.262 --> 00:48:45.492
It, it's a huge education.

00:48:45.672 --> 00:48:50.873
Being able to hear everyone else, vetting these deals totally alongside of you.

00:48:51.063 --> 00:48:53.552
I've mean, I've been in real estate investing for over 20 years.

00:48:53.672 --> 00:48:53.882
Yeah.

00:48:53.913 --> 00:48:57.273
And every month when we vet these deals together.

00:48:57.853 --> 00:49:01.452
Our club members are asking questions that would never have occurred to me, but they're really good questions.

00:49:01.483 --> 00:49:01.753
Yeah.

00:49:01.782 --> 00:49:10.193
So you know, that's the beauty of betting these deals together as a community and having 50 sets of eyeballs on these and then talking it all over together.

00:49:10.373 --> 00:49:11.003
I love it, man.

00:49:11.213 --> 00:49:11.603
Thank you.

00:49:12.413 --> 00:49:12.773
All right.

00:49:12.773 --> 00:49:13.672
Thank you very much, Brian.

00:49:14.123 --> 00:49:15.112
Luis, thank you so much for having me.

00:49:15.112 --> 00:49:15.893
This was a lot of fun.

00:49:20.762 --> 00:49:22.532
We hope you've enjoyed the Wayfinder Show.

00:49:22.623 --> 00:49:26.853
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00:49:27.152 --> 00:49:31.413
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00:49:32.103 --> 00:49:33.333
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