#1201 Build Wealth with Real Estate: Strategies for 2023 | Build or Die Real Estate Conference

Welcome to the Real Estate | Build Or Die Conference. It’s going to be a day of learning from some of the top minds in the real estate world. We have a lineup of speakers that all have specialization and expertise across the real estate industry. ================== Thank you to our event partners: Investment.com: http://investment.com/ Investment.com specializes in real estate franchises and income strategies, all while putting the customer in focus. They prioritize equitable and inclusive investment practices to generate passive income and build diverse portfolios -- all while lowering the cost of entry to these asset classes. Click here (http://investment.com/) to see more of what Investment.com has to offer. RE Cost Seg: https://www.recostseg.com/ RE Cost Seg helps real estate investors unlock massive tax savings through bonus depreciation. Our expert team delivered over 600 fully engineered cost segregation studies with $60 million in tax deductions over the last 12 months - from single family rentals to massive commercial portfolios. We offer virtual site visits which means we can deliver a study at a fraction of the cost and turnaround time of our competitors. Click here (https://www.recostseg.com/) for a free proposal to see your potential tax savings. ================== Chris Powers is the founder and executive chairman at Fort Capital. They are a Texas based real estate private equity firm that specializes in Class B industrial real estate. Nick Huber is the co-founder of Bolt Storage. Nick has previously built a number of businesses that he considers “sweaty startups.” He has now acquired over $100 million of storage facilities across the United States. Keith Wasserman from Gelt Inc. Keith has built a massive portfolio of multi-family units all across the western part of the United States. Adam Littlefield is the Chief Real Estate Officer at Investment.com. They are doing something brand new when it comes to short-term rentals. Omar Morales from Berkadia. He has helped process over $3 billion of transactions in the South Florida market. Mitchell Baldridge is the owner of Baldridge Financial. He is also the managing partner of RE Cost Seg, which is a brand new business that has done innovation around how they deliver cost segregation studies. Jake Wurzak is the founder and CEO of Dovehill Capital Management. They specialize in all sorts of hospitality, and they are pursuing excellence in everything that they do.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:25Anthony Pompliano?

  Hello everyone. Welcome to the Build or Die Real Estate Investment Conference. I'm very thankful that you're here today. It's going to be a day full of learning from some of the top minds in the real estate world. We've put together a lineup of speakers that all have specialization and expertise across the real estate industry. I hope today that you'll get a peek behind the curtain into some of the conversations that are happening in boardrooms, LP meetings, and at the conference table for the top real estate investors in the world. This lineup not only will be entertaining and informative, but I also hope that they inspire you. If you want to learn how to invest in real estate, if you want to build a big real estate investment firm, or you simply want to figure out how to do your first deal, these people, they're all over Twitter, they're all over the internet.

• 1:09Anthony Pompliano?

  But in these conversations, I hope to be able to pull out insights that you'll be able to put into action, starting immediately. Our first guest today is Chris Powers. He's the founder and executive chairman of Fort Capital. They're a Texas-based real estate private equity firm that specializes in Class B industrial real estate. Chris has constantly shared his knowledge and insights all over Twitter, across his podcast, and with his newsletter. I constantly look to Chris for all sorts of insights in the real estate industry, and I'm super excited to have him join us today. Let's get Chris Powers onto the stage.

• 1:53Anthony Pompliano?

  Alright guys, I've got Chris here with me. Chris, I thought a great place to start is I know that the mission of the business that you're building is to be one of the best real estate operators in the world. And I figured that maybe you could just explain, what exactly does that entail? How do you define best real estate operator in the world? And what goes into actually achieving a goal like that?

• 2:13Speaker 01

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• 2:41Speaker 02

  Yeah, I think, well, one, thank you for having me on. I think that should be the mission of anybody in any industry. And in an era of cheap money and where assets went up, we lost focus on the ability to operate. And when you own real estate, especially at scale, buying is one thing, but then we have 1,700 tenants. We're working with tenants every day. We're maintaining buildings every day. We're fighting property taxes every day. We're signing new leases every day. We are adding CapEx, fixing roofs, identifying new opportunities, talking at City Hall to figure out if there's, you know, something we can do as cities. There's all these things that go into operating. And so when we think about being the best, it's really the best to ourselves.

• 3:26Speaker 02

  Like, we always know we can get better. When I look at the people in the industry that have survived over the long term, they all have one thing in common. They're incredible operators, which is, comes in handy in a down market when things become rougher. And so for real estate particularly, interest rates have been cheap for a long time. And this isn't discrediting anybody, but you could buy something reasonably, manage it and still make a profit. Interest rates went down or the market was hot. There was a lot of capital. And so for us, it's the rally cry that everything we're about is how do we get better at operating? That ultimately lowers costs. It creates economies of scale. It creates ways to seek edges and how you can create additional returns.

• 4:09Speaker 02

  It keeps you in the market. You know, pricing, not only of deals, but of costs. And you build great relationships. And so for us, as I would say in any industry, like if you look at Apple or just name an industry, what they all share in Common is this incredible ability to execute and operate at a level that even if I taught somebody my entire playbook and told them every little thing we did, you still have to build a culture around it of people that wake up every day thinking about it. And so for us, to be the best real estate operator in the world, we know it can carry us through cycles. We know it can create additional returns that maybe other folks can't. Look, real estate's not a super complicated game in the long run. So operating at the highest level is of utmost

• 4:52Speaker 02

  importance if you're gonna, you know, beat your competitive set. And so that's how we like to think. And trust me, like in real estate, there are thousands of ways to operate better.

• 5:01Anthony Pompliano?

  I read your 2022 annual letter in preparation for this conversation. One of the things I took away was this idea of the mission being to be the best real estate operator in the world. But the way that you accomplish what appears to be an external kind of achievement, right? To be recognized as the best is actually by focusing internally. And you talk a lot about your internal operations and kind of, hey, we control, we can control. We're not really focused on things that are external. What goes into building a very operationally efficient team? How do you think about operational excellence? And are there one or two examples, maybe inside of the organization that you all think that you're doing where maybe other people have areas of improvement? Or if they were able to replicate it, they could actually increase the operational efficiency of their own organizations?

• 5:43Speaker 02

  Yeah, like I'll give like a example. One, I think, again, it's, it has to be baked into the culture. And that does, that's not just going to your team and saying, we're going to be operationally excellent. It's a, it's a demonstrated act over years and years and years and really beating on that drum. If people are listening to this, they're in the real estate industry, there's, there's lots of things and I can talk at the property level, but at the organization level, when you generate an OM, one, I can't go too much into it. We talk about the whole time. We've developed software over the last five years proprietary to us that helps us run our business. And so when you think in a lot of companies, they have, they will have their accounting software, they might have their property management software, their investor

• 6:26Speaker 02

  management software, they have deals they're underwriting, they have all these things. So you might have one property. But it lives in like six different uh um uh softwares that don't really communicate with each other. We built a, we built software that it's one source of truth and everything happens in that software. So one like tiny example that might not seem huge, but to anybody that's, that's generated an OM or an operating, operating memorandum, usually like analysts underwrite it. There's a team that puts together a deck. It goes to marketing who makes it look nice. It goes back to the team and it's just like passed around and it can take weeks and people are waiting on people. And it lives in different places.

• 7:08Speaker 02

  Nobody knows which the latest model was because you've updated it five times. We have created a system where we can generate OMs in 24 hours. And while that might not seem like a whole lot, that saves us what was taking two weeks now down to 24 hours. It's done super efficiently. I don't think I can go into how we do it all for the sake of today, but it saves us two weeks a time. The second thing that might be a rally cry is something we call core, which is cost reduction, overhead management, revenue generation. Every person on the team is responsible for core. So in a lot of poorly run businesses, it's the ownership or management that's in charge of finding ways to save costs or generate revenue.

• 7:51Speaker 02

  Our team knows that during their reviews, they're asked what they did for core. And so like one example, we used to uh, a recent example, we bought a deal. We knew it had to be fire sprinklered. We got a $250,000 deduct on the purchase price. Once we bought the deal, there was um, there was, the city came and inspected. And not only did we have to do the fire sprinkler, but they said we had to do $250,000 worth of other stuff. If you're not operating right or you're, you're outsourcing operations, the owner might just say like, well, that's what they said. We're going to do that. Our team got three expert bids. We realized we didn't have to do it. We provided proposal to the city. They acknowledged we didn't have to do it.

• 8:33Speaker 02

  So not only did we have to spend the 250, we then were able to negotiate down on the fire sprinkler. So we ended up with a net savings of 50 grand when a lot of companies would have spent the 500. Years ago, when we outsourced property management, which is the nitty gritty operational, you know, stuff that's happening at the property. We probably would have just said, well, it's 500 and like, that's what it is. And so. Those are like two examples, but basically every single thing can be done better. And as the team gets better and you have more resources, you should just be focusing daily on like, how do we do this a little bit better each day? And it doesn't have to be these giant leaps. It's just that, that constant turn of how do we get better? How do we get more operationally excellent?

• 9:16Speaker 02

  And ultimately that ends in one thing, which is a better return for the investors.

• 9:21Anthony Pompliano?

  Mentioning kind of taking things in-house and not outsourcing it, kind of vertically integrating in this way. It reminds me a lot of maybe what SpaceX or Tesla, they do very similar things, right? They'll be like, oh, we need to get some sort of battery built. Then they'll go try to figure out how they could actually build it themselves or take over manufacturing of an item. Now, obviously that's in the tech industry, but in real estate, talk about maybe the advantages and disadvantages of actually bringing that stuff in-house. Cause I think that the traditional model is to outsource it all. But what have you seen as those advantages or disadvantages of bringing it?

• 9:53Speaker 02

  Yeah. So one, I always tell people you should get to a scale where you can do it profitably. So a lot of folks will try, it's, it's, it's a tough business to achieve. It's typically low margin. And what you find is people that start with a business and a portfolio not large enough, they're subsidizing the properties through property management. They're not, they're not getting enough recurring fees to actually pay the people doing the work. The disadvantages of, the advantages of doing it in-house are that one, you have day by day data. So we know which tenants are in the market. We know what things cost in different markets. It costs more to do a roof in Florida than it does in Texas. You're talking to brokers daily. You're talking to your tenants daily.

• 10:34Speaker 02

  So you know what's making them happy, what's not, what needs to be done to the building to retain them. So you have this like constant flow of data. You're seeing rental rates. Every time we sign a lease, we, we know where rental rates are in the market. Well, all that data flows through to the investment team. So we don't like have to guess what we're buying. We don't have to guess.

• 10:55Speaker 02

  You know, we just don't have to guess. It's data. The second part is, again, managing costs, like that you always hear manage it like you own it. I'm not discount. There's some great third-party managers out there, but I can say, and I think a lot of people would say, you give things a lot more attention and care that you own and manage. And so what you're forced to do is you either hire this really expensive property manager that you're paying a ton, which diminishes returns. There's a lack of communication. Communication can be delayed. There could be turnover at the other companies. So you don't really know who knew what.

• 11:30Speaker 02

  Data's flowing in from the property management company that you have to ingest at the operating company and there can be, you have to normalize that data. And so there's a lot of inefficiencies, or you go the cheaper route and hire a cheaper property manager and they don't have the resources to manage it appropriately. And so by doing it in-house, one, we can manage it like we own it. Two, we can build them into our culture like we would anybody else. And three, like I said, it's just a direct insight into the assets by the, not by the day, by the hour. Well, you just know what's going on and you can just generate insights that I don't think you can generate when you're third-party managing.

• 12:06Anthony Pompliano?

  You're very focused on Class B industrial properties. Talk a little bit as to what you're seeing there in the market, how have interest rates impacted that? I know that in your annual letter, you called out that there's really no new supply kind of coming online. In fact, there actually may be a depletion of supply. Just talk through some of the market dynamics you're seeing in Class B industrial.

• 12:24Speaker 02

  Yeah, so it's a tale of two worlds right now. At the property level, I call it on the ground. Leasing has never been better. We've, the last 60 days have been our best leasing we've ever had as a company. And that means higher rental rates, less vacancies are on the market for less, more tours. And so from, if you just looked at that, you would say Class B industrial is flourishing right now. But you mentioned interest rates. Interest rates have obviously risen faster than almost any time in history. It's put a pause on the capital markets. And so while you have assets that are performing, the capital markets are not there right now. Not to say you can't get a deal done. Deals are starting to get done again, but debt's more expensive.

• 13:06Speaker 02

  Seller expectations haven't necessarily met where, where interest rates are. Capital might be a little skittish. You know, some people might say, yeah, it's a great industrial deal. We'd love to do it. But the opportunity cost of waiting six more months to go maybe buy a distressed. Office building or something might be high. And so

• 13:27Speaker 02

  interest rates have impacted the capital markets across all real estate. Industrial is not bulletproof from that. I would say that in talking with equity, industrial and multifamily are still the safest flight to safety. They're still looked at as the ones that'll probably, capital will flow into fastest. But it's been a slow year. It was a slow end to last year. We think that Powell's starting to normalize and the market's starting to get comfortable about entering again. But at the property level, especially in the markets we're in, which is Texas, Florida, and throughout the Sun Belt, assets continue to perform as well as they ever have.

• 14:05Anthony Pompliano?

  Talk about the specifics around this depletion of supply. I thought that was really interesting where it's not only not new supply coming online, but also you may be losing some in the market. How's that happening?

• 14:14Speaker 02

  Yeah, so Class B industrial is when it was built, seventies to the nineties. You got to think, these are one-story buildings on big plots of land. And so when you think of quote unquote, like inside the loop of these major cities, you either are seeing these buildings being repositioned into like hybrid retail, creative office, showroom, entertainment uses, or they're being torn down altogether. And you're seeing high rises go up. So where you are in Miami, the Wynwood District, that was an old industrial park. A lot of that is starting to be converted and that supply is not being replaced anywhere. The industrial that you see getting built is Class A industrial, which are the big million square foot facilities that Amazon goes in.

• 14:59Speaker 02

  That's a totally different function of a business than like, say, a 20,000 foot tenant that needs an office and some warehouse space. And so in the major cities in Dallas, you see it in the Design District and Uptown and Fort Worth, you see it in West 7th. Those buildings, because they're just square rectangular boxes on large pieces of land with a lot of parking, can easily be converted to different uses. Or they're just torn down altogether because again, you could buy one industrial building on call it four acres, tear it down and build a multifamily complex, a retail center.

• 15:32Speaker 02

  There's a lot of higher and better uses and I'll end it by saying you go to most of these cities. Assuming you could find a 10 acre piece of flat land that's zoned industrial with a city that would rather see industrial go in rather than a higher and better use, which is higher tax value. And where construction costs, construction costs are, you could build it for a price that's reasonable.

• 15:58Speaker 02

  Those are so far and few between that anything that could be built. It's counterbalanced by what's coming out of stock and the tenant demand continues to grow. And so you have this depleting supply class and this growing tenant demand and it sets up really well.

• 16:12Anthony Pompliano?

  What are the types of tenants that you guys are seeing go into these types of class B facilities?

• 16:18Speaker 02

  I call it like blue blood America. So you see a lot of the service providers and the contractors that help these cities grow. The companies that need to be around no matter what cycle you're in that keep our built world and infrastructure moving and going and growing and building, you see material providers. But you're also seeing this emergence of this whole new class over the last decade that didn't exist before, which are what I'd call more econ businesses. Not every econ business is in a huge warehouse. You're seeing these small econ businesses move in, you know, pick a, pick whatever they're selling, but they need a small office in a warehouse. You're seeing even Amazon start to niche down into these 20,000 foot spaces.

• 16:59Speaker 02

  Because the best thing that class B has inside the loop is because when it was built, it has mature infrastructure all around it, highway systems, rail systems, maybe it's close to airports, neighborhoods, hospitals, commercial. So it's already, you have all the demand around it. Whereas the only places these kind of shallow base, smaller industrial buildings can really be built are on the outskirts of town. You know, out in the fields. Well, that might be great. A tenant that I have, they usually service a tenant or customer base of one to three miles from that building. They can't just pick up and move out. And secondly, our tenants don't care about a brand new building. Industrial is

• 17:42Speaker 02

  A function of your business. So when the pandemic happened, you could go work from home. Even in retail, you could drive by and pick it up or order online. You can't tell a business in an industrial space to say, hey, everybody go grab some stuff out of the warehouse. Take it to your garage and we'll ship it from your house. You can't actually run your business without the space. So it's a function. Your business can't run without it. And so these tenants tend to be a lot stickier. They don't really care about new product. They just need it to service what they what they have.

• 18:13Anthony Pompliano?

  I've heard you talk in the past that when you guys were first getting started, you would go and you were looking at all kinds of different deals, class B industrial, but also, you know, across the spectrum. And you kept hearing over and over again in fundraising meetings, kind of specialization, right? Like, what is the thing that you all are great at? Or what is the thing that you're focused on? Once you started to specialize on class B industrial, it seems like things really kind of took off. You were able to raise capital much easier. Talk a little bit about that experience and kind of if you could go back, would you still specialize? Or would you have stayed more generalist?

• 18:43Speaker 02

  Hyper focusing has been the best thing we ever did for our business. So to rehash the story you kind of just told. Back in 2014, 2015, we were a jack of all trades, master of none. We were building student housing, townhouses, multifamily, developing land. And while we were successful and we're putting up returns, when we started going to professional investors, they'd say, while you're, while we like you and we think you're great, if we're going to give you, call it a $5 million check or $10 million check, we want to invest in the guy that wakes up the next day, thinking about the same thing every day. One, they're compounding knowledge on something. They're building better relationships in that niche. Great talent wants to be recruited and come to a team where they know what they're working on. They don't like being whiplashed every day with some new idea that comes into the business.

• 19:28Speaker 02

  And real estate is a broad category. So you can see people that buy an office building and a hotel and land. But so it helped us with fundraising. Obviously, it helped us recruiting. It helped us build a knowledge base and continue to compound knowledge. And we were known for something. You want to be the first in any investment business, you want to be the first call. You're in the crypto world. You've built a hyper focus on Bitcoin and you're one of the first calls in the country. When there's a Bitcoin deal or something of that nature, there's nothing more valuable than being the first call. And when people go, well, Chris is successful, but hell, we don't know if he's doing office today or multi, they're just going to call the next guy. And so, one of it's being known for something. Two, it's building a culture

• 20:10Speaker 02

  and a team that knows what they're doing. Capital wants to see it. And the truth is, you look at all the great companies in the world, most of them started with a hyper focus, and they're still hyper focused. Now, maybe they've grown to a size where they can, like, maybe one day I could get into multifamily, but I would have such an infrastructure and scale that it would not even come close to taking the focus away from our industrial team. Whereas at a small company with 10 people, you don't want people that are working on industrial one day, multi the next day, and going back and forth. And so, there's just a lot of power and focus.

• 20:43Anthony Pompliano?

  One of the things that I really appreciate about you is that you've figured out a lot of the stuff along the way, and you don't hoard the information. You share it openly on Twitter and other places, on your podcast, email, etc. And one of the pieces of advice that I saw you give recently that I thought was really great is you said, GP should always have their historical track record and a list of deals they're interested in or currently underwriting handy at all times. Like, almost, you know, if somebody comes to you and says, hey, what's your track record? What deals are you looking at now? The faster that you can produce quality answers to those questions is a competitive advantage. Talk a little bit as to why you think that. And then, how do you all do it? Do you have like a data room set up? Is it some sort of, you know, like a PPM that's just sitting there in PDF form, ready to go? Just talk about, you know, kind of what you guys have figured out is best for you.

• 21:25Speaker 02

  The answer is yes. We have a data room that's like a perpetual data room. Our team updates our track record at any time. It's basically to not waste time. So, in the investment world, when people are giving you investor dollars, there's a lot to learn about a company. But that first tier sheet of like, here's our track record, here's our returns, like, that's the first checkbox of like, okay, we can see how long they've been doing it. We've seen the returns they've generated over that period. We've seen where they've done it, the size of deals they've done it, how they've done it. And that is just, you know, it's a spreadsheet or it's a, you know, a couple pages and it's just line by line. Deal one, this is how it went. Deal two, this is how it went. A lot of the investment world also wants to see deals that is called full cycle. You bought it and

• 22:07Speaker 02

  you sold it. And so it's important early on to buy and sell because you can kind of quote unquote post that skin on the wall. So it's a way to immediately not waste time where you, you could spend days with an investor. They think it's great. Then you show them your track record or lack thereof, and they could come back and say, you know, spend a few more years on this, come back to me. There's no more proof in the pudding that you're successful at you do than showing a track record. And so it should be the most handy document you have when meeting new investors.

• 22:35Anthony Pompliano?

  That's fantastic. The last question I have for you is around long-term thinking. You all are very, very long-term focused. And I know that there's a lot of advantages and maybe you can call out some of the advantages that you've seen specifically for your business by implementing that long-term thinking. But are there any disadvantages or kind of potholes in the road that you guys have learned to avoid with that long-term thinking and the way that it changes how you allocate capital, maybe the investors you talk to, or the types of deals that you look at?

• 22:59Speaker 02

  Yeah, I think it's a good question on the disadvantages. So we're very long-term thinking in our thesis. That doesn't mean that we buy things and say we're going to hold them forever. So we're constantly checking ourselves. There are certain assets and different investors want different things. Some want to hold permanently, some want to see a return in three years. But the big vision, and this is all of real estate and why it can be broken down so easily. Real estate is just a byproduct of what people are up to. So as long as people like being by the beach in cool towns like Miami is going to be great. Lake houses will be great. As long as products are made in an industrial building, stored in an industrial

• 23:40Speaker 02

  building, distributed in an industrial building, industrial will do well. If you, if you're going to bet that last mile is going to keep mattering more and more, getting closer to the customer, that's a reason to bet. So the long-term thinking is testing your thesis, you know, almost daily, like which of the things that make it successful today, we're showing signs that it's not going to work, like office, for example. It is really hard to make a clear determination of how Office will do. Now, it's bifurcated. All the really nice stuff is full with waitlists and all the shitty Office is empty. It's hard to make a long-term view on will tenants want to come back into this? How you're going to reposition it if you turn it into multi?

• 24:23Speaker 02

  And so for us, the long-term view is we believe in our thesis. We continue to believe in our thesis. We believe in the markets that we're investing in, the Sun Belt. We believe there's no signs of it not growing and continuing to grow. And so that's the long-term mindset. But then on the operational level, you know, I started the company 18 years ago. I never dreamed of selling it and I still don't dream of selling it. So when you're able to make decisions like that, I'm not trying to make a decision like maybe a VC-backed company would, that they're trying to get growth this year. I've got another 50 years. And so you can play long-term games and just make long-term decisions and you're not worried about kind of the quarterly, the next quarter's results or, you know, going to some board and showing them how you grew 100% in three months.

• 25:09Anthony Pompliano?

  I think that's a great place for us to end. Where can we send people to find you on Twitter or find out more about the business?

• 25:15Speaker 02

  Yep, our website, www.fortcapitallp.com. You can follow me on Twitter at Fort Worth Chris or I have a podcast, The Fort.

• 25:23Anthony Pompliano?

  Awesome, Chris. Thank you so much for taking the time to do this and we'll definitely do it again in the future. Now let's get on to the next guest.

• 25:30Speaker 02

  Thanks, Paul.

• 25:38Anthony Pompliano?

  All right, everyone. That was an incredible conversation with Chris. I hope you guys enjoyed that one. My next guest is Nick Huber, who is the co-founder of Bolt Storage. Nick has previously built a number of businesses that he would consider sweaty startups. And now he has acquired over $100 million of storage facilities across the United States. Nick is super unique in that he's been able to build out a firm not only quickly, but very efficiently, using both US and internationally-based talent. Let's bring Nick Huber up to the stage and let's talk all about self-storage.

• 26:16Anthony Pompliano?

  All right. So Nick, I thought a great place for us to start would be on the storage side. So self-storage, there's all these different pieces or segments of the real estate market you could go invest in, but you really, really like self-storage. Give us kind of the bullish case for self-storage and why are you so focused on that segment?

• 26:31Speaker 03

  Self-storage is interesting because there are anywhere from 100 to 700 tenants in one property. So it's a lot more operational heavy. You have a lot more leasing. You have a lot more collections. You have auctions. You have sweeping out units, cutting off units, cutting off locks on units that you need to auction. You got to keep a property clean. So it's very operational intensive and I'm an operator. So we found an advantage where we can go in, we can run this. What I call, you know, self-storage is a small business disguised as real estate. You can get loans on it like it's real estate. You can raise equity like it's real estate. You can make it more valuable like typical real estate. But it is a small business. So when you run it well, when you market well, when you lease well, and when you can build a team, when you can build a firm,

• 27:16Speaker 03

  amazing things happen. And I'm an operator. So I was naturally drawn that direction.

• 27:20Anthony Pompliano?

  Talk about actually finding these locations, right? So like, how do you know what is good and what is bad? Are you looking for what I would call like the value investor approach? So you're looking for something that's in pretty bad shape and you can go in and fix it? Are you looking for things that are already cash flowing and really attractive? And you're just like, hey, we'll pay a fair price for a great asset? What's kind of the strategy?

• 27:38Speaker 03

  I'll tell you that the jig is up on self-storage. If we were talking in 2020, it was as simple as I got an acquisitions team, three or four individuals that are going to cold call owners. We have a CFO, operator, I mean, a controller who's going to reach out to brokers. We're going to underwrite a lot of deals. And they were good deals. We could go in, we could raise rents, we could market better, we could bring in more tenants, we could just increase income, also decrease expenses, which we can talk about kind of my model. But we can make properties a lot more valuable. We're going to buy them at a seven cap, turn them into 10 caps. And a lot of money can be created when that happens. Over the last year, so I guess fast forward 2020, we bought a lot of storage.

• 28:20Speaker 03

  2021, we bought a lot more storage, $50 million for the storage we bought in 2021. I thought 2022 was going to be a big year. Interest rates started to go up. It started to be really hard to find deals. Also, a lot of firms who do exactly what I do came to market. And now you're kind of forced to pay for that upside that you can create. They're going to, the seller, if he has a good location, he or she has a good location. They know they can, you know, market rent is X. They're going to kind of get paid for that off the bat. So it's been really hard to find deals over the past 12 months.

• 28:51Anthony Pompliano?

  So what's interesting about this is you share a lot on Twitter and on the internet. Do you think that by sharing so much, you actually maybe kind of incentivize people to go and compete with you? And like, maybe they helped arbitrage away the advantage that you had, but you wouldn't be able to do it at the size and speed that you did it without the internet? Like, how do you think about sharing versus not sharing?

• 29:10Speaker 03

  It is a double edged sword. When I started sharing and reaching out to investors and, you know, building our firm on the back of Twitter. My partner was like, Nick, what do we have to gain from this? Right? Because we're just going to educate a bunch of competitors. But in general, the big buyers in our markets are not new. I mean, there's private equity firms that have been doing this for five, 10 years. They're the buyers that are competing against the same deals we are. I mean, sure, we might have bid against or lost a deal or two to folks that maybe found out about storage through me. But I think there's a lot of storage in this world. There's 50,000 self-storage facilities in America. A lot of groups doing just what I was doing. But yeah, it's just, it's hot market. I mean, real estate, every asset class is a similar story over the past three years.

• 29:54Anthony Pompliano?

  When you start looking at the self-storage market, you said that you can raise rents or you can decrease costs. Raising rents are pretty self-explanatory. What are you doing on the decreasing cost side?

• 30:06Speaker 03

  Well, I think raising rents is not as explanatory as you might think because occupancy and you know, you might think you might want to be 100% occupied, meaning I got 100 units. I want all 100 of them rented and that's the way that mom and pop operators work. They're gonna go out, they're gonna lease their facility all the way up and they're gonna just sit there and they're gonna cash flow every single month. Well, what happens is they're missing out on what we call like true potential of a self-storage facility because we want to be about 90% occupied, even 85% occupied. We want to have some empty units. If we're full, we know we're not charging enough money. So we raising rents, we're raising rents, we're raising rents until we have some of each unit type available. That's a lot of our value add. We can increase revenue 15 to 30% year one, just by finding true market rent in that manner.

• 30:51Speaker 03

  On the expense side, we operate remotely. We have 20 employees in the Philippines. I can start to talk about our team, how we built our firm. We've hired them through Support Shepherd. It's a headhunting firm over in the Philippines. We have 20 folks there. We have another eight that we've hired through Shepherd on down in Latin America and Colombia and Brazil. And then we have a fully remote team in America, so we're not paying for a big office building. And somebody pulls up to our storage facility and there's a web address on the gate that says, go to this web address, rent a unit. They can either call us and we can rent a unit for them in five minutes, or they can go through on their phone and rent a unit remotely. Boom, they get texted as soon as they rent and pay for the unit, they get a text message with their gate code with a video that shows them how to get to their unit.

• 31:35Speaker 03

  There's a free lock waiting for them inside the unit. So a great example of this is upstate New York. We have a big property. It's 51,000 rentable square feet. Down the street, there's a traditional Class A office, not a self-storage facility with an office and a full-time manager onsite. They have two full-time employees working 40 hours a week, you know, $70,000, $80,000 a year in labor. In our facility down the street, we spend about five grand a year and onsite, you know, sweeping, cleaning, changing over units and taking care of the property.

• 32:11Anthony Pompliano?

  When you look at self-storage, I think people, they see the dream, right? It's like, hey, I'm gonna buy it. I don't really have to do that much. When you start talking about cleaning, sweeping, changing over units, how bad is that? Like, what's like the downside to the self-storage, right? In terms of every single one, whether it's the Class B industrial, whether it's multifamily, whether it's even office, right? Like, everyone's got the kind of bad stories. What is that, or what are the risks maybe in the self-storage space?

• 32:37Speaker 03

  Yeah, this is not all roses. And I make it seem sexy and fun on Twitter, but I mean, just a couple of months ago, we bought a property in Asheville, North Carolina. And when we bought it, it was an extreme turnaround value-add deal. It was not in good shape. There were three homeless people living inside of the individual units. They were using our electricity. They were having campfires each night in our parking lots. It took us about a month to get them out of the property. We do heavy remodels, we're painting, we're changing outdoors, replacing gates, new fences, new signage. And then you have, you know, at any given property, you might have 10 to 20 phone calls a day. You might be leasing three or four units.

• 33:22Speaker 03

  People are moving out. Some people stop paying. You have to bug them to collect their rent. Then you have to eventually cut the lock off their unit, take a picture of it. You can't go inside of it. You take a picture of it. You have an online auction. And then you gotta go in and give that person who won the auction access to the unit and hopefully get it, you know, able to be re-rented. But yeah, we have a team of 45 people doing this. We have 1.9 million square feet, 62 properties, and a large team. That doesn't count any of our on-the-ground vendors, our contractors who are doing snow removal, cleaning. You know, these are just our corporate-level employees to run, which we kind of have two companies. One is the private equity company that raises the money

• 34:06Speaker 03

  and it deploys the investor dollars. The second is the management company, which is hired by each facility to run the business and deal with all these logistics.

• 34:14Anthony Pompliano?

  Talk a little bit about that relationship there, right? And kind of the business model. So, many people know, you know, McDonald's is selling burgers and fries, but they also own the real estate. And so, there's kind of this advantage to being in the real estate game while also getting a percentage of kind of the profit from the operating business itself. You guys have something similar here. How do you think about the pros and cons of owning and controlling both versus you be a real estate investor and just hire out a management company, or vice versa?

• 34:41Speaker 03

  Yeah, I mean, there's, there's, there's a lot of ways to do this. You'll especially in multifamily, there's a lot of really good third-party property management companies that you can hire. In self-storage, we looked at the options to go out and hire somebody else to run our assets. And we, we, you know, boiled down the conclusion that we can run these assets better than anybody. So we are going to do the work to build that team. But yeah, there's two sides. On one side of the coin, I have 10 employees over in the real estate, private equity arm. They're the ones who are doing acquisitions. They're doing due diligence. They're doing underwriting. They're dealing with all of our banks and all of our lending. We have eight different bank relationships, 62 properties, all of them have debt on them of some kind or another. And so, you know, that, that arm of the, of the company is what's, you know, funding and providing

• 35:26Speaker 03

  the capital and the structure to get these buildings bought. We're raising, we raised $40 million of outside capital from LP's Limited Partners, Silent Investors. On the other side of it, once we buy the property, it transitions to our property management company. And that's 35 more people where we have a customer service team with eight people who answer the phone 24/7 for customers that collect payments. Then we have a property improvement team where we got to do a lot of capital improvements on a building that we buy, whether it's paint, gravel, new signage, new doors, all this work that we were discussing. You know, then we have a small HR department, you know, as the company grows, it becomes bigger and bigger than you would think, just to manage a couple of storage units.

• 36:10Anthony Pompliano?

  One of the things that we talked earlier in one of the sessions about is bringing things in-house versus going ahead and delegating to external third-party vendors. Every real estate investor and every kind of asset management company treats this differently. How are you guys doing this? You sound like you have a big team, so I'm assuming you're bringing this stuff in-house?

• 36:28Speaker 03

  Yeah, there's, there's a couple of different things that you can delegate, I mean, in our business. You can delegate the capital raising. You can have a group like JLL come in and they'll provide the debt and the equity for your deals. If you're a development company, you can have, have a general contractor, a GC, run the development for you. And then, once you buy the asset, you can out- Source a third party manager to come in and collect your rent and run your leasing and do all of your, you know, on the ground, small business stuff when it comes to running your property. We do all of it in-house, including construction. We're actually under construction on $3 million of expansion on properties that we currently own to put about 700 more

• 37:08Speaker 03

  units on our, in our portfolio at different properties that have room for expansion. So, yeah, we raise our own money. We source our own debt. We manage our own properties and we do our own property improvements and construction. So we are fully integrated all in-house.

• 37:26Anthony Pompliano?

  Let's talk about the capital markets. I was reading an article today that was basically saying, hey, shit, right? There's a lot of chaos and maybe not just chaos, but a lot of uncertainty, right? People are trying to figure it out. Recently, we saw that interest rates got raised for a 10th straight time. Talk about what you're seeing in the debt market. And then what are you seeing in the equity market? Are investors still pretty excited about putting money into real estate? Are they a little bit cautious because of the economy? You've been doing this now in bull and bear times. And so what's been the similarities and the differences?

• 37:56Speaker 01

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• 38:24Speaker 03

  Yeah, 2021, you could go to a bank, any bank, and get a loan under 4%. Couple of years of interest only. And investors were lining up to stroke money into our deals, frankly. We aren't doing enough deals now. We bought $38 million last year, so significantly less than the year before. This year's on pace to be even slower just because the deals are not penciling. But yeah, equity is harder to get right now, period. The cash to buy the deals from our investors is harder to get. And the banks are way, way more weary and cautious.

• 39:00Speaker 03

  And you know, more likely to turn you down when it comes to getting a loan. And the interesting thing about real estate, people think about houses where everybody's on a 30 year fixed loan. Commercial real estate, all of our loans are on three year, five year, or 10 year term. That's the term of the loan. Like, okay, we'll still have amortization schedules out at, you know, 20, 25 years. But every three, five, or 10 years, you need to, the loan is basically called from that bank and you need to find new debt. So that's one of the reasons why it takes real estate a long time to correct because it's slow motion train wreck. Okay, first, your operational, you know, the drivers, the economic drivers that, you know, drive your revenue and your profit.

• 39:44Speaker 03

  Those start to suffer first, then you struggle with your cash flow, then your building's worth a little bit less. Then you're going to your banker, oh, we got 12 months until we need to, you know, renew this mortgage and find a new place for it. And the bank doesn't want to take your property. There's a lot of stress going on in the background right now among people who do my job. Nobody is having fun in the real estate business.

• 40:05Anthony Pompliano?

  How does it get resolved? Like, what do you think is the kind of solution here? Is it just, it's all macro and Fed has to drop interest rates and we get back to a situation that is more friendly for people like you? Or is there something else that could potentially happen and kind of resolve this issue?

• 40:19Speaker 03

  The folks who bought real estate with not very much equity and a lot of debt. And who don't necessarily know how to operate in their asset class and they're not that good at doing business in what they do. They might get washed out. I mean, they might lose everything and they might have to sell their assets. And, and look, it's, it's a tale as old as time that every 10 to 20 years, real estate takes a big dip. And the folks who are over levered and aren't that good of operators get washed out. So I think, you know, 30% chance that the interest rates start to slowly drop. Maybe economic forces help us rent more units, houses start selling again. We really need homes to sell in the storage business because there's, you know, 20% of our market at any given time is people who are between homes.

• 41:02Speaker 03

  And there's nobody selling houses right now. In general, transactions are way down. That's hurting us. But I think the most likely 70% scenario is that these properties become worth less money. And folks have to sell them at a loss and it's gonna, it could get ugly here and that's what we're preparing for. I mean, look. I am an optimistic person. Sometimes I look at these deals and I'm like, hey, you know, let's just not use very much debt and let's just buy, buy, buy, buy, buy. But now that we have a lot to lose, now that we have 1.9 million square feet, we've raised 40 million, we bought 100 and some million dollars for the storage. I'm kind of worried, I spend my time worrying about how to protect the downside. My investors don't pay me the big bucks in fees and promotes to be bullish. They're paying me to not lose their money.

• 41:45Anthony Pompliano?

  That makes a lot of sense. When you talk about people having to sell homes and kind of move, is there a difference between maybe what I'll call like self-storage near residential neighborhoods and kind of urban areas versus maybe places near colleges and kind of folks that have more predictable change of address or they go home for the summer, then they come back, they need a place to store their stuff. Like, do you see any kind of differences in maybe segments or certain geographies within self-storage?

• 42:12Speaker 03

  Absolutely. I mean, we have a property up in some college towns in New York and this May, right now, it's very busy. We're getting 20 calls a day and we're renting 10 storage units a day. And other towns, you know, without a college, it's just standard. It's the busy season now. As school gets out, people sell more homes and people move into more storage units. But what people don't realize about storage is that there's many types of this. There's rural properties, there's smaller markets, there's big Class A facilities where you see the three-story drive, you know, all climate-controlled buildings. Those are generally in major metros where they can collect higher rent. Most of our facilities, about 90% of it, is non-climate-controlled and it's row buildings, meaning you see rows of storage

• 42:55Speaker 03

  facilities, the old-school style. But there's operators who operate the Class A facilities as well. So yeah, it's a lot of different types of storage and it's all behaving differently. I mean, we own two properties in Virginia, 10 miles apart, and one of them is sitting almost 90% renting units and the rates are, we're raising rates. And the other one is sitting at 60% and we can't rent a unit to save our life. So it's all depends on very localized market factors.

• 43:19Anthony Pompliano?

  Yeah, it's fascinating. One of the last things I want to talk to you about is a lot of the marketing that you have been doing. I love the fact that you've recently been publishing the details of deals. You're saying, hey, we bought a property for X dollars, here's the things that we did and we were able to refinance it at Y dollars. And this was the kind of impact of the decisions that we made. Why share that stuff? What is the benefit? And are there any downsides?

• 43:42Speaker 03

  You know, we, we know that it's going to get hard to raise money. I mean, any, in any recession, the folks, the groups, the private equity funds who can raise money are the ones who are able to buy deals. Period. So we are starting to put our name back out there of, hey, these are how we operate deals. These are some of the successes that we've had with the goal of raising our investor list. But also it's just education. I mean, sharing these deals over time educates a lot of people about how real estate works, how to think about real estate and how to think about risk. I think there's a big problem out there in general on social media of the folks who say, you know, wholesaling real estate or buy, buy real estate with no money down or the get rich quick method of real estate.

• 44:24Speaker 03

  And that's really not how it works. You talk to Chris, who just went on, you talked to Keith, some of these other folks. I mean, this is, this is a science and an art, and you really need to bring a lot of cash to the table. There's no get rich quick scheme. I mean, nobody's a, a more forward looking, long-term thinker than my, my friend and mentor, Chris Powers. I mean, this is a long game. You get rich in real estate over 10 years, 20 years by buying good assets, holding onto them and managing them well for a really long time. So I, I kind of post these deal, these deal summaries and say, oh my gosh, Nick had to put, Nick had to raise three or $4 million for this deal. He didn't buy it with no money down. There was no, you know, special get rich quick scheme.

• 45:06Speaker 03

  I'm kind of trying to show them that, hey, the groups that are protecting downside and the groups that know what they're doing, you know, you're going to bring 40 to 50% cash to a deal now. I mean, you're going to buy a storage facility for $5 million, you better show up with two to two and a half million of cash to buy a deal. People don't realize how capital intensive real estate is. And a lot of people on social media, they'll say, you know, I want to get started in real estate. I want to get started in real estate. It's the most common question that I get. And my first question back to them is, how much cash do you have? How much cash do you have? And then some of them will say, oh, no, I got like 10 or 20 grand. And I'll be like, okay, well, do you have wealthy parents? And that's a pretty straightforward question. Like, do you have somebody who trusts you by blood? Who can invest money into your real estate deals? And they'll be like, I know, I, you know, I don't know. They're, they're middle class. And be like, okay, do you have wealthy friends?

• 45:50Speaker 03

  Like, are you at the country club where you have the investment bankers and the, and the entrepreneurs there who are willing to invest money in their, in, in your deals? And they'll say, no, you know, I don't really know where I would come up with it. And I'll say, okay, where would you come up with a million dollars to buy a property? Or a couple hundred thousand dollars to buy a half a million dollar property? He'd be like, I don't know. Okay, well, forget real estate and go focus on making some cash. Come to real estate. People think, oh, I'm going to get rich in real estate. I'm going to get rich in real estate. Turns out, real estate is a really bad way to get rich. Real estate is a great way to turn your lump of money that you already have, the wealth that you already have into a lot more. There's tax efficiency. There's the long-term tailwinds of owning real estate. But the people who want to get into it, you know, with no cash and no experience. I'm not saying it can't be done, but it's very tough.

• 46:35Anthony Pompliano?

  Yeah. When you look at some of the things that you guys have done on a fundraising standpoint, is there one or two things that you're like, man, I actually wish I had knew, I had known this when we first got started? Like, kind of, you know, you send the person to go find, hey, how to kind of get the money? You've done a great job of raising capital, right? You know, tens of millions of dollars. What are one or two of the things you wish you knew when you started?

• 46:55Speaker 03

  I think Chris Powers mentored me very early on when I was building my firm. When we were making our first hires, when we were raising, I, I remember back in very late 2020, we stumbled across a big deal for me, a $10 million storage acquisition. It was four properties in upstate New York. And I went to Chris and I was like, hey, here's, I'm, here's how I'm going to structure this deal. And he goes, where are your fees? Like, you're going to do all this work. Where are the fees that you're charging? And we're like, I'm like, well, you know, we're a new group. I don't, I don't necessarily want to charge fees on this deal. I just want to get in my promoter. I want to show people what I can do. And he goes, Nick. Bad way to think about it. No fees. That means if you don't do deals, you don't eat. You can't pay your people if you don't charge the right amount of management fees. So yeah, your acquisition fee is warranted.

• 47:40Speaker 03

  All over Twitter, all over social media, you see real estate folks, mostly from the investor's side. They just hammer sponsors about fees. This deal has too many fees. That deal has too many fees. Well, if it's too expensive, go do the deal yourself. Don't pay me to do the deal, right? If you want real estate exposure, I'm going to charge market fees because I want to build a really skilled team. I want to build and afford. I want to be able to afford a really good team for the long run. And he said, Nick, you need an acquisition fee. If you refinance debt, you need a debt financing fee. If you're going to, you know, manage a property, you better make sure your management company has a 20% margin and it can support and stand on its own as a healthy company.

• 48:22Speaker 03

  So that if times get tough and if you stop doing deals, you can afford to pay your good people. And it got tough and we stopped doing deals. And guess what? I have $1.3 million on the payroll right now. And, you know, if I, I have a lot of folks in Colombia and in the Philippines who literally make $5 to $6 an hour and they're phenomenal employees that we found through Sheppard. But if this was an American firm, we'd have $2.5 million of payroll to pay our 44 people. And guess what? We're slightly profitable. I mean, I'm not making mint on my management company, but we can pay our people and we're not losing money every single month. And that puts us in a really, really good spot to keep managing our assets well,

• 49:04Speaker 03

  to watch after the money that these investors gave us and to not do deals. We don't have to do bad deals to just keep the machine rolling. And that's the one thing that Chris Powers told me, that if there's a new, you know, somebody considering going out there and raising money right now, you're going to be very tempted to do these, do these deals on no fees or reduced fees or low management fees. It's a very unsustainable way to build an actual company. And I can afford really good people to work for me now because we charge market fees and our investors in the long run are going to make more money because of it too.

• 49:39Anthony Pompliano?

  I love that approach and I think being able to pay the best talent usually does pay you back. So that makes a ton of sense. Nick, I could literally talk to you for hours. We've got to go. But where can we send people to find you on the internet or find out more about Bolt?

• 49:53Speaker 03

  Yeah. So if you go to sweatystartup.com, there's a lot of articles on storage and I have a little newsletter where I send these deal breakdowns that people love. I have 55,000 people on my email newsletter and I'm going to send literally a profit and loss statement, how we founded a deal, how we bought a deal. I send those weekly and people love the email newsletter and you can follow me on Twitter at sweatystartup.

• 50:14Anthony Pompliano?

  55,000 on the way to 550,000 is what I heard. Nick, thank you so much for taking the time to do this. If you're not following Nick on Twitter, I highly suggest it to everyone and that will definitely do it again in the future.

• 50:25Speaker 03

  Pomp, really appreciate your work, man. Thanks for putting this on. Thanks for having me. You've been a big influence on my life. So really appreciate you.

• 50:38Anthony Pompliano?

  Okay. My next guest is Keith Wasserman from GELP. Keith has built a massive portfolio of multifamily units all across the western part of the United States. Keith continues to be one of the folks who has done a fantastic job at fundraising and also figuring out when to buy, when to sell, when to 1031 exchange, and when exactly he should continue to hold. Let's bring Keith Wasserman up on the stage.

• 51:08Anthony Pompliano?

  All right. So Keith, I thought a great place to start is multifamily. You guys have gone and you've started acquiring all sorts of assets. You started small. You now do very, very big deals. Talk about why multifamily is such a big focus for you all in the real estate market.

• 51:22Speaker 04

  Yeah, great question. So when we started the business, we were contemplating what kind of real estate we wanted to get into. Was it single family homes, which were getting decimated? This was in 2008. And we said, you know, that would be an interesting category, but it takes a lot of time and energy to buy one-off homes. Maybe it's easier to buy a single apartment community with, we started small with four units, but you know, five, 10, 20 units all in one place and has, you know, one roof to take care of, not multiple roofs and multiple assets in different locations. And we, for just ease of management, we thought apartments were a good place to be. And also, the way people were shopping was changing,

• 52:03Speaker 04

  With with internet commerce taking up more and more market share. People were starting to, you know, work more remotely. And I said, you know what, multifamily, I think we're becoming more of a renter nation. Home ownership was on its way down at the time. It's slowly peaked back up, but I thought apartments was just a great asset to be in. They weren't building enough of them in some certain supply constrained markets. And it's been a great category to be in over the last decade for sure.

• 52:28Anthony Pompliano?

  When you think about where to go and buy these assets, I think for a while you guys were just focused kind of LA. Then maybe like Southern California and now pretty much like the Western United States. Is that just a proximity thing? Hey, I can get there quickly and like get back home in a single day. Or is there something else going into why focus more West Coast than East Coast?

• 52:48Speaker 04

  Yeah, great question. So we started within Southern California, the Central Valley, something we could get to even really quickly by car. And then we branched out into markets. Yeah, like you said, we could do day trips on the plane. So the furthest east we were at is Denver. I miss eventually, and there's a ton of opportunity in the markets, all the markets we're in. And we could do that for the rest of our lives. But if we ever were to go east of Denver, we probably want to, you know, an office in the Southeast where you are, Florida, hit the Carolinas, Atlanta, Florida, or maybe the Northeast or, but for right now, yeah, we're a pretty small team and we're located in SoCal. So we're buying Denver and West. Yeah.

• 53:24Anthony Pompliano?

  Got it. And when you look at those other markets, like, how do you get familiar with what are the actual good properties? Right. It's easy. If you grew up in Southern California, you kind of know, hey, these are the good areas. These are areas maybe I want to avoid. Here's where it's growing. Here's where people are going shopping, things like that. How do you quickly get up to speed on a new market as you enter it?

• 53:42Speaker 04

  Yeah, great question. So the second market we entered was Phoenix and I had been going there my whole life because my grandparents were there. And we just spent a lot of time on the ground, meeting with local brokers, the economic development corporations, business leaders, just really getting to know the lay of the land, where the growth is in the city, what parts of the city are on the up and up. And essentially, you know, we started acquiring there. Whenever we target a market, we try to acquire at least a thousand units in each of those markets. So Phoenix was 2000. Ten when you know blood was in the street and I knew my heart it would come back. I didn't know how how how long it would take, but it was the fifth largest city in the United States. It was just reeling from the economic downturn with the housing bust.

• 54:25Speaker 04

  And we were buying stuff there when people were fearful and scared and we were buying things for buildings for forty fifty thousand a unit that are now like a quarter million a unit. It would be pretty crazy. But then we chose Denver next because we saw a lot of in migration, a lot of millennial growth, very job friendly, had a lot of economic drivers and it's been booming ever since. We bought in Denver maybe six, seven years ago. One of the contrarian markets was Albuquerque. People were like, why Albuquerque? And it was actually really tough for us to raise capital for that market. But that was one of our best performing deals when we bought in Albuquerque six, seven years ago and just sold like a year ago. And then we saw Lake City also was was maybe

• 55:06Speaker 04

  six, seven years ago before that became a market where a lot of the major players were in. It was a slow and sleepy kind of place, but we saw it as, you know, the youngest state in the nation and had just huge population growth and very educated workforce and business friendly. And we just we've been buying there, you know, ever since. So we try to target a market for different reasons. We were buying the last three years more in SoCal because those other markets like more boom and bust markets like Phoenix and Vegas were exploding. And we exited in Phoenix, for example, in 2017, a little early in the cycle, but we figured the valuations were actually better here in SoCal. So we started selling those properties and doing these 1031 tax deferred exchanges into

• 55:48Speaker 04

  Southern California where there's higher barrier to entry and the valuations were actually better.

• 55:53Anthony Pompliano?

  Talk a little bit as though, once you end up buying, how are you guys thinking about holding? When do you know to sell? And then why use the 1031 versus just return all the capital back to investors?

• 56:02Speaker 04

  Yeah, great question. So in the early years, we bought properties with 10 year horizons and we sold after one to five years because we were hitting those 10 year numbers so quickly. And we returned capital to investors in the early years on those sales to create a track record. Nowadays, when we sell, we always try to do a 1031 tax deferred exchange. We usually project, I'd say, seven to 10-year holds on these buildings. But if you look, the longest we've held buildings maybe now is seven, some are seven, eight years. And those buildings, we've already refinanced and we're going to hold longer. And eventually, when the loan is coming due, we either have to sell and pay it off or refinance.

• 56:43Speaker 04

  So I'd say sometimes we sell because the building is just sucking too much capital. When it's hard to hold older deals that are built in the 60s and 70s long-term, because all the major systems start getting really, really old. And you need to really spend a lot of money on that. So we were selling those older ones and exchanging it to newer buildings that are easier to hold long-term because of the, not the, it doesn't have the same capital needs. But I'd say, you know, would we sell like any building in the portfolio at the right price? Yeah, if someone gave like a crazy price, but there's transactional costs when selling something. And our goal is just to pull out money long-term on buildings, cash out refi, which are also tax-deferred if we are going to hold something long-term.

• 57:27Speaker 04

  And if we decide to pull the trigger and sell, it's a thoughtful process. It takes a long time to sell, which I like that in real estate. It's not, you can't be so impulsive, like if you have a click a button and you could sell a cryptocurrency or a stock or something. So it's, it really, you got to really make an effort and thoughtful decision if you're going to hold or sell before you make any moves.

• 57:47Anthony Pompliano?

  When you do the 1031 exchange, talk a little bit maybe about a specific one that you've done. And when did you start trying to identify the new property, right? Is it something where you sell and then go look for the new one? Are you already pretty much knowing, hey, when we pull the trigger on this sale, we already know what we're going to go buy? And how have you guys gotten better maybe at doing the 1031 exchange over time?

• 58:05Speaker 04

  Yeah, that's a great question because that's always an issue. Because when you close on your, you call it the down leg, the property you're selling, you have 45 days to identify up to three properties on a list that you have to put. And once that, your property that you sold closes, you only have 180 days to close on that transaction. So definitely, people are under the gun. What we try to do is once the buyer of the property we're selling goes non-refundable on their deposit. Like 99.9% of the time, it's going to go through because they've gone hard on a significant amount of money. Then we push really hard to go find a property to buy. We've had maybe a 90% success rate, but we're not going to force something to happen.

• 58:49Speaker 04

  So once or twice we've sold and not been able to exchange, so we'll just return the capital and people will pay the tax. But generally, we're successful in finding a trade property. Once, you know, we were able to be more aggressive in terms of larger deposits and quicker due diligence period. And just more aggressive because when that property that we're selling has non-refundable money, you know, we'll essentially say, okay, we're going hard at the next property. And the brokers know we're in a trade and we're in a time crunch. And, you know, we need this deal and we try to return the favor by, you know, selling the property with them. Or, you know, just, so we're a good buyer, a good seller. We don't make any mess with the brokers and usually it works and we were able to get it done.

• 59:33Speaker 04

  But sometimes, like I said, once or twice we haven't and we return capital and people pay the taxes and that's fine. They made a lot of money, so.

• 59:40Anthony Pompliano?

  I've heard you talk previously, kind of how you guys got started buying the fourplex and kind of moving up from there. But talk about how you've really professionalized the fundraising that you all do. I think you're one of the early people to understand, hey, the internet's got a lot of people on it. Those people have money and they're looking to invest potentially in real estate. And so you've started to really kind of lean into that over the last couple of years. But talk about kind of the evolution of your fundraising process.

• 1:00:03Speaker 04

  Yeah, so we started with our own capital, which was very limited. I was 24 and then we quickly went to friends and family. We quickly outgrew that. So today, we keep growing through referrals from those initial base of investors that were family friends, like clients of my dad who has a pretty, who had a pretty significant law firm. It's now strong because he's really focused on helping us grow. And then, yeah, my cousin said, you should check out, you know, Twitter. Like I didn't know how to use it or what, but I had a lot of fun on it the early years and still do. But I sort of grew an audience organically and it sort of compounded just like our properties. Like we started, I started with like a few. Hundred people for a long time, then I hit a thousand and it it really grew like this.

• 1:00:46Speaker 04

  And I think I'm just act acting my authentic self, just trying to educate, you know, retweet things I find interesting and try to find other like minded people. There's, you know, millions of real estate investors in in this country. And a lot of them want to invest in other markets. Maybe they don't have the same opportunities in their local market. Maybe they are in a 1031 exchange and we allow investors to 1031 into our deals. They become tenants in common, so we we help with that. And yeah, Twitter's just enlarged and and social media, LinkedIn, I'm very active on as well. It just enlarged my social circles to, you know, be top of mind and have a bigger audience. And in a non salesy way, just if someone's interested, they'll contact me. And it's allowed us to grow our investor base tremendously.

• 1:01:31Speaker 04

  You never know, like, so we're only working with accredited investors. And, you know, our minimum check size is 100K. But if someone's eager and wants to get going and they're, you know, younger, I'm like, okay, you can start with 50 or 75. And and then sometimes they've told investors that are a lot larger. And so we still raise money deal by deal, accredited investors. Like the last deal we bought, we raised 39 million and it was around 200 individuals. So the average check size is 200K. The most common check size was the 100K, but it was skewed up because we had one family office put in 5 million, registered investment advisor put in 5 million, and that sort of popped up the average. But yeah, I think it just broadens the audience. There's, you know, millions of accredited investors now.

• 1:02:15Speaker 04

  I think it has, you have to have like a million dollars of net worth excluding your personal residence or earn, I think it's either 250,000 or 250,000 annually. And yeah, there's a ton of people out there and they just, you know, don't have those opportunities in their media network. So it helps helps them expand their network too. It's a win win.

• 1:02:34Anthony Pompliano?

  Why do you guys raise deal by deal rather than actually raise an entire fund?

• 1:02:38Speaker 04

  So deal by deal, I like in real estate because it allows us to, when we sell exchange, generally a fund is 10 years and then you have to liquidate everything and return capital. And I think that goes against the point of real estate. That being said, I'm not against having a fund. It's confidentially in the works, actually. We're planning on doing our first fund, but to really focus on a different kind of investor base, more fiduciaries, so like people that are work for family offices or more of the registered investment advisors. And we're going to have a much higher minimum, most likely, on that fund. So that's in the works, but we're going to have a unique combination where we're going to buy a building with syndicate part of it and put the fund in for part.

• 1:03:20Speaker 04

  So no one, I haven't seen anyone really do it like that, but it allows us to have more firepower to go out and buy larger assets and more assets. Generally, when we have something in contract, all the engines stop and we really focus on that one deal and we don't really look at other things because it's, we have to really focus one at a time. But now, if we have more capital, we'll, you know, be able to do more, more deals. But we've stayed away from like institutional joint ventures, which is another way people have raised money for deals. And yes, it's been deal by deal, but we're exploring like a potential fund kind of scenario. It just makes it easier managerially. I always say it's like herding cats and we have 200 people and we have to have everyone sign the docs and send the funds in on time and you have a big IR staff to really help out with that. But there are benefits.

• 1:04:04Speaker 04

  I mean, people could get to see and see the deal, but their money's going. A lot of people like that and to pick and choose the deals and see where their money's going versus a blind pool fund. So there's, there's benefits and usually when groups go one way or the other. And so we'll, we'll, we'll see how this fund goes.

• 1:04:21Anthony Pompliano?

  You mentioned a large IR team. Talk a little bit about like the makeup of the team and how you've built that over time because, you know, you started you and your cousin was the team. Now, obviously you guys have grown and again, kind of professionalized and really structured things, I think, in a thoughtful way. So how did you kind of build the actual organization and what does it look like today?

• 1:04:41Speaker 04

  Yeah, so it was started with my cousin and I and Damian was more of the, I don't know if you want to call him the outside guy. So like dealing with the, the property and reconstructing and building and I wasn't never good at fixing things. And so he handled all the contractors and overseeing the actual reconstruction and upgrades. And I dealt with the investors and marketing and the attorneys and brokers and more of that. And we just started like hiring where we had needs. So we needed an analyst first to help underwrite deals. And so we hired someone like that. And then eventually we needed an asset manager to oversee the buildings that we did have. And eventually we needed a project manager to oversee more of the capital campaigns when we were fixing buildings.

• 1:05:22Speaker 04

  And so we've just hired one at a time where we have holes and where our time and energy wasn't the most, you know, valuable. So right now I've, I'm like 30,000 foot view, like I'm dealing with strategic vision and capital raising. And we have around 30 people in the, in the team. A lot of people are in accounting, investor relations, asset management, project management. We, we do some ground up construction. So some people that handle that, we have self-storage platform, some people handle that. So the team's expanded a lot where we needed, you know, more smarter people and people that were more specialized. And it allowed us to, you know, venture out into being more 30, 30,000 foot view.

• 1:06:06Anthony Pompliano?

  When you think back to getting started, you know, now what is probably almost 15 years ago, what do you wish that you knew? Like you were a young guy who was getting into real estate. As we've talked in the past, like you were very excited about it, right? And you thought, hey, this is, this is fun and a big opportunity. What do you wish that you knew then that people who are starting today, if they know, would be an advantage?

• 1:06:29Speaker 04

  Um, yeah, I'd say, looking back, um,

• 1:06:34Speaker 04

  I wish we didn't have to sell some of the early deals. I sold them to, you know, finally put a few bucks in our pocket and to create the track record. But all the buildings we sold in Phoenix have gone up tremendously in value. And I'm itching to get back into that market and eventually we will be back most likely. But yeah, I say, you know, try to build a firm where you have enough income coming in from other things so you could hold the assets long term. That's where the value creation is. So I'd say I wish I was able to hold all those original buildings a lot longer. Also, really, I had a really great partner who taught us a ton in the early years, but we were buddy heads a lot

• 1:07:18Speaker 04

  and stuff. So I'd say like partnerships are like marriages. You got to really spend a lot of time, you know, dating before jumping into something. So I'd say it's a people business, really, right? Like, so just, you know, building good relationships with early on partners and making sure it's a good chemistry and fit. Other than that, I mean, we've had a good track record so far. I mean, some of the worst deals were because, you know, we, you know, we tried to not focus. We jumped into mobile home parks, thinking the grass was greener and it did well, but it just wasn't really compounding on all the experience we did in multifamily. And we tried the VC stuff and that was sort of like a distraction. And it's doing well on paper, but it just wasn't a big part of what

• 1:08:02Speaker 04

  we're doing. And so I think I've learned focus is so a key and compounding relationships and expertise and relationships with partnerships and stuff. I think all those things are some of the lessons and try not to sell if you don't have to.

• 1:08:19Anthony Pompliano?

  My last question for you is just current environment. Obviously, everyone's paying attention to the Fed, paying attention to interest rates, kind of macro economy. What are you seeing? Or is any of that changing what you guys are doing?

• 1:08:31Speaker 04

  Yeah, so we usually buy around a deal a quarter on average pace. We hadn't bought a deal like in almost a year due to what's going on in the economy, but we finally are under contract now on a deal in Orange County that we're closing August 1st. And it's exciting because the valuations were coming in around 25% off of where the value was probably around 18 months ago at the last peak. So interest rates have gone up a lot, but they have already started been coming down. And the entry point, you know, on the investment is a lot is a lot lower. The basis we're coming in is a lot lower. And I think the cash flow is going to be a little lighter because the rates have gone up so much, but I'd rather have a much better entry point and

• 1:09:15Speaker 04

  a little lighter cash flow and eventually be able to refi if rates, you know, continue to come down, which I believe they are.

• 1:09:22Anthony Pompliano?

  Yeah, that makes a ton of sense. Keith, I love talking to you. Where can we send people to find you on the internet or find out more about Gelt?

• 1:09:27Speaker 04

  Yeah, man. So anyone could just shoot me an email. It's just [email protected]. You could go to LinkedIn and find me or Twitter. I think I'm Keith underscore Wasserman and just jump into the conversation, send me a direct message. Yeah, looking forward to talking to whoever has any interest and questions and appreciate you having me on the show, man. Always good talking.

• 1:09:47Anthony Pompliano?

  Absolutely. Thank you so much, Keith. I appreciate what we'll definitely do again in the future.

• 1:09:51Speaker 04

  Sounds good, man. Have a good day.

• 1:09:52Anthony Pompliano?

  Man, that was a great conversation. I love learning from these folks. Next up, we have Adam Littlefield. He is the Chief Real Estate Officer at investment.com. I'm very, very excited to talk to him because they're doing something brand new when it comes to some of these short-term rentals. Let's bring Adam up on here. All right. So Adam, I thought a great place to start on short-term rentals is just what the hell is it? People have seen folks on TikTok, in the mainstream media, all over the internet talking about short-term rentals has become very popular. How do you think about what qualifies as a short-term rental and what is not a short-term rental?

• 1:10:26Speaker 05

  Yeah, great question. So, short-term rental is a relatively new space people get into invest, and it's really taking off. There's been a huge increase in short-term rental listings over the last couple of years, for sure. The main difference between short-term rental and a long-term rental is, right, your long-term rental is you're finding a tenant for your property and you're getting a one, a two-year lease at a set amount. So you can kind of have a predicted amount of revenue. And there's a lot of positives to that, and I highly recommend you have those in your portfolio. However, short-term rentals, the main benefit that people look at when they look at short-term rental is the increase in revenue. So you can get two to three times the amount of revenue on a short-term rental than a traditional long-term rental.

• 1:11:11Speaker 05

  There are a lot of differences, though, in managing the two. Short-term rentals, obviously, you're looking for a unique place of tourism, skiing, beaches, state parks, mountains, forests, whatever. You're looking for a place people want to be and stay in. And so, if you don't live near that and you want to manage them directly, it can be difficult operationally to manage them across all these different tourist markets in the US. Whereas a traditional rental can be right down the street and you can manage it yourself, keep the costs down. The other thing is that we're getting this thing called amenity wars. So people want things to do at their rental.

• 1:11:53Speaker 05

  So everything from games, pool tables, ping pong, arcade games, saunas, spas, swimming pools. The more you can stuff into a short-term rental, the better. So it can have a high upfront cost to set them up versus a short-term rental, or sorry, versus a traditional long-term rental, where it's just an empty house that people move into. So, again, coming back to the benefit of it is just really just the increase in revenue and the control. You can get in and out of your house more frequently than a long-term rental to kind of check on it and keep repairs up to date. So that's a benefit as well.

• 1:12:30Anthony Pompliano?

  So it's interesting that you immediately jumped to the, one of the big advantages being more revenue. Now with more revenue, I'm assuming some of that is higher turnovers. You've got more and more people kind of going through and you're really just trying to fill as many of the days or nights as possible. But also on a per night basis, it ends up being a lot more as well. How much of the increase in revenue for a short-term rental is around kind of holidays or specific times of year and their seasonality? Versus you see an increase in revenue even in what many people would consider, you know, kind of off months. Yes, you still can make more than you would in like a longer-term rental.

• 1:13:05Speaker 05

  Yeah, yeah, you can. I mean, there is the off chance like poorly managed or if it's just not the right location. You know, there is a chance that like a long-term rental, let's say you have a property like on, on your existing property. You have a secondary unit. Could be, could be that that, that pans out better as a, a long-term rental due to certain circumstances. However, most of the time you're able to get more revenue just by simply renting your home a couple of weeks or four weekends a month due to the, the higher nightly rate. Occupancy is a real thing. It's a challenge to, to get occupancy. Now, if you're in a, if you're in Orlando, right next to Disney World, you're probably going to have year-round occupancy because of the weather and things like that.

• 1:13:44Speaker 05

  If you are next to a ski resort, you might get heavy, heavy, you know, occupancy and high average nightly rate, daily rate during the ski season and maybe zero on the off-season. So you kind of have to take that into account when you're thinking about buying that, like balance out the year, but have your reserves, you know, available for those, those months with like zero occupancy.

• 1:14:06Anthony Pompliano?

  So at investment.com, I know you guys are spending a lot of time initially with short-term rentals. There's a whole plan to kind of go after other parts of the real estate market later. But when you're evaluating these short-term rentals, we've talked about kind of location and the amenity wars. Also maybe the things that you have around you that people can go and do. What else do you all look at as the, the things that make a property really, really attractive from a short-term rental standpoint?

• 1:14:29Speaker 05

  So specifically us at investment.com, our expert team kind of looks at houses that'll perform in the 95th percentile. So when I was talking about like you look at a company like Air DNA, which is a trusted data source for short-term rentals, and we're looking for houses that perform in the 95th percentile of average data rate and occupancy. And what you usually see there is is more luxury homes, homes with tons of amenities, homes, beautiful homes, unique architecture. So that's kind of what we're looking for. And I highly recommend that avenue if you want to get the highest revenue for your property. So we're looking for the best locations, places people want to be, you know, if let's take the ocean, you want to be right on the beach, you want to be able to sleep 12 to 14 guests

• 1:15:11Speaker 05

  at minimum, I would say, so people can bring their families and all be together. And then you want to provide everything that you can. You want to provide, like I said, spas, you can swim pool, if you have bicycles to rent, games, just about everything that you can think of that's for people to use and just kind of enjoy their stay at your property will increase your revenue a lot compared to just a basic home with no amenities.

• 1:15:36Anthony Pompliano?

  As you're going and looking at this, how much debt, how much equity, how do you guys look at acquiring these properties? Talk to me a little bit about the economics of a short-term rental and kind of what you all are targeting, and then maybe some of the things you guys have learned along the way to avoid when actually looking at what are these things worth and what are you willing to pay for one?

• 1:15:53Speaker 05

  Yeah, so for us, you know, we run it through a stringent underwriting process every single property. So we look at, you know, we look at the air DNA data, we look at the local comps, we talk to local property managers. If the house was a previous Airbnb, you know, we pull the performer or the P and L statement and we and we look at that. So we really look at, then we look at like, what are we going to do the house? We're going to do value-add renovations, we're going to add amenities. And so we look at like what that might increase. And then we underwrite. So we definitely wanted to have a A really good return on investment for our investors. That is the top priority for us is to make sure that that that happens. That's that's kind of what we're about is is is cash flow for our investors at investment.com.

• 1:16:36Speaker 05

  So that's what we're looking for. The the main thing that that we're wary of that that we'd be really careful of. And I suggest everybody be careful of is regulations. So regulations are becoming stricter and stricter, popping up all over the place, all across the country and all different areas. So you have to be really make sure that you're on top of that, that you that you really get that approval from the county or city before you get into purchasing that property or even the full underwriting process, if you don't waste your time. Because, you know, and even if there's a history of past regulations where they're pushing things forward, we tend to avoid those areas as well as we think that we might, we might get pushed out via a regulation in the future and we don't, we don't want to have that happen.

• 1:17:17Anthony Pompliano?

  Yeah, that makes sense. So obviously, regulation being maybe one of the downsides or the risks when you're looking at one of these properties, what else do you all put kind of in that risk category? Are there other things that you know 100% you'll avoid? Or maybe other things that if people are considering whether they're doing this themselves or they're going through a platform, short-term rentals bring, you know, what downsides or risks?

• 1:17:38Speaker 05

  Yeah, I mean, really, the the two biggest risks for a short-term rental is, like I said, is the regulations. That's really the biggest one. The regulations are are different. There's there, there are some companies out right now that are trying to like, kind of, kind of organize the regulations across the US and have one-stop shop for you to like, be able to see that, but but they're not extremely accurate yet. So that's something you have to do your due diligence on. The second would be, I would say, be occupancy. You know, it's really be careful that you're going to get a good occupancy year round and and really be able to like, get that return on investment like I'm talking about. So that's something to really do due diligence on is is the occupancy. Nightly rate is important as well, but not as important as as the occupancy.

• 1:18:21Speaker 05

  You can, like I said, you can end up with a property where during the summer it's it's crazy booked and then has zero occupancy over the winter. And if you didn't really do your due diligence on that, like you, you wouldn't see that, especially if it wasn't a previous short-term rental, if you're going from scratch. That's something you really need to to maybe talk to other owners of short-term rentals and things like that to make sure that that, you know, you're in a you're more of a year-round market.

• 1:18:45Anthony Pompliano?

  Talk about fractional ownership versus doing it outright and also maybe managing yourself versus outsourcing the management.

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• 1:19:22Speaker 05

  So, short-term rentals are off, you know, the operational rigor is huge. You acquire the property, source the property, find the place that people want to be. Like I said, inspirational properties, amenities, all that thing. Then you need to acquire and the property.

• 1:19:40Speaker 05

  You need to manage the purchasing of it. There's debt financing that has to be done on the property. And then ultimately you get your property, you know, you do some value add renovations and you get it up and running. And now, you know, it's not smooth sailing from this point. Now you have to manage the property. So, short-term rentals take incredible customer service. Again, you're competing against other short-term rental brokers. They're always trying to out amenity you. They're trying to out customer service you. So you have to make sure your customer service is top-notch, your communication is on point all the time. I always say it's like a 24-hour concierge. It's kind of what we offer here. Like you can get ahold of us anytime.

• 1:20:15Speaker 05

  And so, you know, operating takes a lot of work. And then there's the maintenance, right? You have people in and out of your home constantly. And so your, things get broken, things have to be, you know, kept up, dishwashers have to be replaced. So there's more of a maintenance to it and a cleaning. That's the other thing. Vendor management is a lot more intense than a traditional rental, you know. It's just a constant everyday thing, managing vendors on your property. Maybe going through different vendors because one didn't work for you and one did. And so the, just operationally, it's a, it's a very time-consuming thing that you have to have time for. If you don't have time for that, a great option is fractional investments.

• 1:20:56Speaker 05

  And companies like investment.com have popped up where we kind of do all that work for you. And we try to provide a true passive income experience where you, you buy shares of these properties. How much you want to pay is up to you, as little as a hundred dollars. And you own that share of the property and you... Participate in the benefit, the distributable cash flow benefit of that property, plus appreciation as well, without any of the operational constraints.

• 1:21:25Anthony Pompliano?

  When you think about that kind of fractional ownership, immediately I think people see the low limit, right? They're like, oh, with a hundred dollars, I can participate. And so there's this like democratization or kind of increase of access. But also, talk a little bit, is there some sort of like mitigation of risk or kind of reduction of risk? Because now, yes, you're putting less money in, but you can take maybe a hundred thousand dollars and spread it among a bunch of different properties. And so you almost get more of a portfolio diversification than if you just took the amount of money you had and put it into a single property?

• 1:21:55Speaker 05

  Yeah. A story I love is when I was in eighth grade, we were challenged to buy stocks with a dollar. We had one dollar, you know, 100 cents. And the kid in my class that ended up winning put one cent in 100 different stocks, where I think I bought like, you know, 40% Nike. So, you know, and that opened my eyes in eighth grade, like, you know, I was like, that was very smart. So that's kind of what fractional investing allows you to do. Instead of putting all your eggs in one basket, one expensive, you know, I live in California, so $600,000 short-term rental property, and you're kind of fully invested in that's very risky. Instead, you can decide to put $100, $1,000, $10,000 in a whole bunch of different properties. And then ultimately, like you mentioned earlier,

• 1:22:40Speaker 05

  investment.com is not just going to be short-term rentals. I mean, you can diversify amongst long-term rentals, franchise businesses, commercial properties. That's kind of our goal. And you can kind of do all that in one place. And so that creates less risk and diversification of your portfolio.

• 1:22:56Anthony Pompliano?

  And when you guys started doing this to now, what's been like the biggest surprises or the things that maybe you didn't realize? And they can be positive or negative surprises, but kind of lessons that you've learned along the way that say, hey, look, you know, we really now have a better understanding of how to do this and do this well at scale across the country?

• 1:23:16Speaker 05

  Yeah, I mean, there's just, there's a continual demand for, for, for short-term rental specifically, there's a continual demand, but there's also increase in listing, right? There's, there's competition. So we've, we've kind of learned that there's a lot of competition out there. People want to get into the space. It's a lucrative space. So then we're trying to, we're adapting to, how does the team adapt to? How do we be the best? How do we be the best at acquiring properties, the best properties, providing the best return? So that's been a challenge for us. I think we're doing a really good job with that. You can see our, our first two properties are amazing, beautiful properties and, and, and our first Blue Crab is already up for live booking and it's being, it's been, you know, booked several times through the first month. So we're seeing great success there.

• 1:24:00Speaker 05

  The other challenge, I'll go back to regulations. That's been a challenge. We're, we're, we're trying to make sure we protect our customers with, with ever-changing regulations. For example, Los Angeles has become very strict on regulations, even though it's a beautiful place to visit, people want to go there. Vegas has become strict on regulations, even though people want to go to Vegas. So we have to be kind of careful of that. There's loopholes you can find, you know? You can be kind of outside of the city, just outside those, those regulations. And then, and then that actually will increase your demand. For example, our, one of our properties in Chesapeake Bay is just outside of the city, Chesapeake Beach, which passed STR regulations that, that capped, capped all the STRs and you can't add one. But we're just outside the city and so increases demand for our property, which benefits our investors.

• 1:24:47Speaker 05

  And then also just like the hunger for a one-stop shop for like all kinds of investments. That's really our goal, investment economy. There's a hunger for that and we want to facilitate that for everybody. We want to have, we want you to be able to pull your phone out on your couch or in your car and invest, you know, in a, in a business or a commercial property or multifamily, like just from one space, very easily, very easy to use, user-friendly. That's our goal.

• 1:25:13Anthony Pompliano?

  My last question for you is the macro environment obviously has been very volatile. We've seen low interest rates, high interest rates, quantitative easing, quantitative tightening. We've been talking all day about all of these factors. How is that impacting the short-term rental market right now?

• 1:25:26Speaker 05

  Huge. So the short-term rental market a year ago, you were looking at like 80% you know, net profit compared to your, to, to your debt. And, and now you're, you're maybe five to 10%. So, you know, so the, the increase in, in interest rate and has, you know, has made it so that you're making a lot less profit, if any profit at all. So you have to be, now you have to be very careful about, about the deal that you get, what you buy, what type of financing that you use. If you can buy all cash, then you know, you're, you're kind of assuring yourself some cash flow. And so, you know, that's, that's something that people need to really look at right now in the current climate is can I afford to buy a short-term rental on

• 1:26:09Speaker 05

  my own with the current interest rates? And the answer is, you know, is maybe, I mean, that's really what it is because it's, it's the, you have to have a really, really good deal and you have to have a really good product and a really good area to make things work with these, with these current interest rates.

• 1:26:27Anthony Pompliano?

  That makes a ton of sense. Where can we find you on the internet or find out more about investment.com?

• 1:26:32Speaker 05

  You can go to investment.com, our website, and you can find out everything you need to know. You can download our iOS app we have on there for Apple. And when you do that, you can invest right now, like I said, for $100 in our current property, the Blue Crab. We also have another property coming soon in wine country in Paso Robles, California, beautiful place. And, and that's where you can find everything. And there's also, you can also email us at [email protected]. And let's see, get ahold of us, yeah.

• 1:27:00Anthony Pompliano?

  Then the next time we'll talk about how you guys got that URL because investment.com is a pretty good one. But I appreciate you taking the time to do this. I'm fascinated by the short-term rental space and you guys are really kind of shot out of a cannon right now and seem to be doing some great things. So anyone who hasn't checked out investment.com suggests you do that and we'll definitely do this again in the future.

• 1:27:19Speaker 05

  Yeah, thank you so much for having me.

• 1:27:28Anthony Pompliano?

  My next guest today is Omar Morales from Berkadia. He has helped process over $3 billion of transactions in the South Florida market. He's one of the young guns in the real estate industry and he continues to be on a trajectory compounding knowledge, insights and relationships. Omar constantly sharing information across the internet and I've learned a ton from him. Let's bring Omar Morales up onto the stage.

• 1:27:59Anthony Pompliano?

  All right, Omar, I thought a great place to start would be on South Florida, right? There's tons and tons of people who are talking about South Florida, moving there, potentially moving their businesses there. Real estate has been up significantly over the last two years or so. You and your team are very focused on the South Florida market. What exactly are you seeing? What is the market going up? Is it going down? How is that happening in comparison to other markets in the country?

• 1:28:22Speaker 06

  Yeah, thanks, Pam, for having me. I think everything, it depends the point of reference that you're using, right? So if you're talking about where the market was 18 months ago to where it was today, in the multifamily space, which is probably the asset class that's best, that looks best relative to all the other asset class, it's still probably down like 15% from the highs, right? In South Florida, what ends up happening is the sellers are just not willing to sell at a, call it 15%, not even discount, but 15% to what their properties were valued at 18 months ago. So you're not seeing that much inventory. So the guy's like, why am I going to sell if I don't have to? So they're holding on because they're still bullish South Florida. I think something to talk about specifically is what we're seeing in South Florida, and

• 1:29:07Speaker 06

  this is very different for the rest of the country, is it is still growing and proving to be growing at the same rate that it's been growing for the last two years. So I just read this morning, Guggenheim is apparently on the verge, it's a 300, they manage over $300 billion of assets. They're on the verge of leaving Chicago to come to Miami, is the article. And another thing was, this Bloomberg came out with this yesterday, is there's a socialist wave in Latin America flying into like US real estate. So I think the big takeaway for most people in the real estate world is that there's a flight to quality.

• 1:29:47Speaker 06

  We're seeing that in office. We're seeing that geographically. So yes, the whole world is not as rosy as it looked 18 months ago in any asset class. But, okay, so now the world is here. And, okay, understanding that the world is here, where's the quality? And people around the world are like, it's the United States. And where in the United States? It's southeast business-friendly, tax-friendly geographies. And where is that? Florida. And then you keep going down and down and down. And you end up with South Florida where you've got investors that still have capital they want to deploy. And they're saying, if I'm going to deploy capital today, I think South Florida is my safest bet.

• 1:30:29Anthony Pompliano?

  So within that South Florida or Miami market, let's break down kind of what you all do, right? You guys have done over $3 billion worth of transactions. My understanding is that it used to be about 70% multifamily, 30% land. Now it sounds like maybe that's swapped and you're doing more land than you are multifamily. But break down both of those kind of segments. What are you seeing in the land kind of transactions? And then what are you seeing multifamily-wise?

• 1:30:51Speaker 06

  Absolutely. So, correct. We have sold a lot of land and a lot of multifamily buildings, right? Just investment opportunities. What ends up happening right now, the reason why, and you're right, my business, I used to sell more multifamily buildings than I sold land, land opportunities. And now it's swapped. Why is that the case? This might be a little nuanced, but the reason why is because if I have a multifamily building today, even if my, the sellers, right? Even if my valuation is down 15%, if I don't have a gun to my head and I don't have to sell, I am still bullish on South Florida and my building. So why would I sell at a discount, right? There's still cash flowing and they're still covering their debt.

• 1:31:33Speaker 06

  The pain that we are going to see, because we are going to see pain nationwide, because there's a bunch of interest rates, you know, went up 200, 300 basis points. And that's just sort of percolating through the economy. The pain that we're going to see in South Florida is going to be sponsor-specific. Full stop.

• 1:31:52Anthony Pompliano?

  Explain what that means.

• 1:31:52Speaker 06

  If you bought, yeah, if you bought a property at peak market, this probably means you closed on that deal in early 2022. If you bought that property with long-term fixed rate debt with as much interest only as possible, 10 years from now, I would bet my money that you are going to be fine. In 2033, that property in South Florida is going to be fine. When I say the pain is going to be sponsor-specific, it's if you closed on a property in early 2022, which was like peak market, and you did a two, three-year bridge loan with no extension options,

• 1:32:36Speaker 06

  and you levered up 80, 85%, you are going to have a decision to make in the next six to 12 months. And that decision is going to be painful. But the property, the property is performing, right? This isn't office where it's vacant. In South Florida, you've got capital still flying down here. You've got jobs and offices still flying down here, and you've got people still flying down here. So the property is fine. It's just sponsor-specific decisions, which is where we're going to see pain. And what's interesting is people are getting ahead of that pain. So the people that are just waiting for blood in the streets, I think they're going to be surprised to not find it because you've got players that are saying,

• 1:33:19Speaker 06

  hey, let me reach out to so-and-so that I know has a loan coming due, and let's offer him a recapitalization. Let's offer him some Mezor Prep for him to be able to kick the can on a decision for a handful of months. And I think you could probably appreciate more than most how creative financing instruments can be to sort of kick the can and weather the storm. And in real estate, as long as you're able to hold long enough, you're likely going to see light at the end of the tunnel.

• 1:33:48Anthony Pompliano?

  So explain why you think land has exploded so much? Is it the land transactions are actually increasing at that high of a rate? Or is it that multifamily is just slowing down?

• 1:34:00Speaker 06

  It's a good question. So the reason why land is where we are seeing opportunities right now, primarily, is because, again, if I hold the multifamily building, no need for me to sell until I absolutely have to. If I own a piece of land, you have carrying costs to the land that you own. You've got investors that are accruing pref, you potentially have a land loan that you're paying down, you've got taxes, and you've got insurance. That land does not produce you income that helps you offset those costs, those carrying costs. So you basically have, you know, for lack of a better word, a ticking time bomb until you build this deal, right? What ends up happening is the people that bought land over the last 24 months,

• 1:34:44Speaker 06

  that they thought they were going to be able to develop this building, they've realized that the assumptions that they made to buy this land were too rosy, and now construction costs are up, rents are lower than you thought they were gonna be. They're not really down. Year over year, a report just came out, from March 2022 to March 2023, rents in Miami are up 8.1%. That's a phenomenal trend. It's not 30, 50% that we're seeing, but that's great. So rents are lower than you thought they were gonna be, construction costs are higher than you thought they were gonna be, and more importantly, the loan that you thought you were gonna get, that loan at 70, 75%, is now 50, 55%.

• 1:35:30Speaker 06

  So you've got to go back to your investors and try to raise more equity to mobilize this asset, and you're realizing that's really, really hard. So what I'm seeing, and a lot of our, like, we're actively working on a bunch of land deals in South Florida, what I'm seeing is people that own land are saying, crap, I need to figure something out with this, it's sort of burning a hole in my pocket. And surprisingly, this is, to me, this shocked me. We take these deals out to market, and there is interest for these deals, because there are people out there that have a longer-term time horizon. If you go to a financial advisor today and they say, what should I invest in? They go, how long of a time horizon do you have? Are you looking to invest your money

• 1:36:15Speaker 06

  for six months or 20 years? There's capital out there that's looking to invest money for their next 20 years. And those guys, I mean...

• 1:36:26Speaker 06

  I don't know how specific I want to be on this, but I've got people flying from Canada, a country in Europe, Latin America, this week to see an opportunity that we have to sell. Cause they're like, I love the real estate. I love the location. I can capitalize it. I can build it. I think three years from now, the pain we're seeing is going to be okay. And South Florida is going to continue growing as it is. So land is, is hot right now.

• 1:36:55Anthony Pompliano?

  When you look at the debt market, uh, it's very obvious that people with equity capital are uh, maybe a little gun shy if they have the shorter time horizons. If they're longer time horizon, they may actually be acting right now. What are you seeing debt wise? Obviously interest rates play a huge piece in this, but is it just, there's no debt being extended? Is it the, the terms are just too onerous? How, how is that playing out in the market?

• 1:37:18Speaker 06

  There's a thousand different things happening in the debt market. I can tell you that by and large lenders are being extremely selective with the sponsors that they're lending money to. I think right now it's very relationship based. So if you've got deposits with a bank and, and they're using those deposits in other ways, given where interest rates are today, the bank will be like, okay, I'll give you a very conservative loan. So if you're like the tried and true real estate player that has been doing this for 10, 20 years, you'll, you'll be able to get money from a bank, just very conservatively. If you are a brand new person that got loans 18 months

• 1:38:00Speaker 06

  ago, like you're not getting loans today. And if you are, it's like predatory money that is extremely expensive that won't make your deal work. So by and large lenders are just, the risk reward isn't them, isn't there for them to be doing anything more than 55%. LTV. And if you're getting above that, it's with mezz and it's with pref where there is a huge opportunity. And there's a lot of people today that are raising mezz and pref funds to be able to put capital out at 12%, 14% to people that just need the money to kick the can.

• 1:38:34Anthony Pompliano?

  So there's two specific things that have happened in Miami recently. One is Ken Griffin has decided to move Citadel down to Miami in South Florida. And the second is that there was this big kind of $1.2 billion real estate deal that just occurred with this property that's on the water. Let's talk Ken Griffin first. What is the impact of someone like that moving? And also not just moving personally, but also bringing kind of an entire investment firm full of, you know, high income earners along with them.

• 1:39:02Speaker 06

  I mean, the impact is the prime real estate is going to continue growing at a rate that

• 1:39:14Speaker 06

  I think this is what ends up happening when people underwrite real estate. I can't sell you a deal. I can't sell you on numbers that grow like rent growth. I can't tell you rent growth in Miami is going to grow 8% and 12% and 20% because you're going to be like, what are you talking about? But when you look at the prices in New York and Chicago and LA, and then you look at the prices in Miami, you realize that there is a huge change that's happening right now. And that growth will continue because what happens with Ken Griffin is what people have bought into, this is like the most important thing, the hype, if you will, that people have bought into still hasn't hit the market.

• 1:39:55Speaker 06

  Right? My office overlooks Ken Griffin's $363 million waterfront property that he's building his headquarters in. It's still a parking lot, right? It's still a surface parking lot. It's not going to be until 2030 until that translates to hundreds, if not thousands of jobs and people moving down here. So the same way that a lot of the pain that we saw from the law, a lot of the pain that we are going to see from interest rates. And increased over the last eighteen months, that's still percolating through the economy in a global and national way. All the benefits that we're seeing from Ken Griffin, another huge name is Steven Ross. I mean, one of the biggest players across the country in New York.

• 1:40:41Speaker 06

  And he's already, he's the biggest office landlord in West Palm Beach. And the things that he's doing with a, for example, there's a company called Swire. It's a global investment company developer. Swire and Steven Ross are partnering up to build one brick wall city center. It is a 1.5 million square foot office building. That is just as impactful as Ken Griffin's uh headquarters coming down here. Both of those are mobilizing right now. Both of those won't be done until, I don't know, 2028, 2030. So I think it's just, if you're going to invest money.

• 1:41:25Speaker 06

  You look at a place like South Florida and a lot of the benefits are still to come.

• 1:41:31Anthony Pompliano?

  Talk about Tara's David Martin and the 1.2 billion dollar purchase of the Miami Herald vacant waterfront lot. I think at one point it was zoned or there's like a planned casino that now he's buying it. Uh, maybe explain kind of the importance of this piece of property to Miami and why this deal is such a big deal.

• 1:41:50Speaker 06

  Well, geographically, the reason why it's so important is because it connects sort of edge water in downtown Miami. It's a 15 acre site on the water. So there's like a big gap between two submarkets that he will now connect, which is huge. I think more than anything, it shows you have a local developer being extremely aggressive on an acquisition. Because he sees what is happening. Someone like Tara has information on all their existing portfolio and project. That they're saying, wow, this is not slowing down. The trends are accelerating. We have information, the interesting thing about real estate is like insider trading is not illegal, right? If you have better information.

• 1:42:35Speaker 06

  than other people, you can act on that information. So I think the best way to put it is we sold a piece of land for about thirty two million dollars to David Martin three years ago. He is now like building that property. It's a condo development and his sales are going extremely well today, right now. So I think having data like that and seeing the trends continue and accelerate gives him the ability to make the bet that he has made on this property. I think the reason, this is me more so speculating, so I cannot confirm this, but I think the reason why he went public with having this site under contract is because now

• 1:43:17Speaker 06

  he's got sort of the real estate world looking at him and probably calling him and saying, hey, this is a one point two billion dollar fifteen acre acquisition. You're likely going to have a mixed use project here. So if I'm a hotelier that wants to build something in Miami, now I can call David Martin and say, hey, I'd love to be part of this investment. I'll build a hotel. An office guy may want to build an office. So I think the reason why he went public with it, and again, this is just me speculating, is so the best sort of real estate developers and minds that he wants to partner with are going to be reaching out and saying, I want to be part of this deal.

• 1:43:58Speaker 06

  And when you're talking about digesting a one point two billion dollar land acquisition, you want partners to be able to make that much more palatable.

• 1:44:10Anthony Pompliano?

  Talk a little bit as to Miami and South Florida compared to other regions in the country. Obviously, Acadia is, you know, national and you guys have access to some information probably that's going on in these other markets. How do you all think about the pros and cons of investors coming here versus maybe still investing, but just doing so in other geographies in the United States?

• 1:44:28Speaker 06

  Yeah, so I think the most interesting part about answering that question is I think we're going to see more pain in other markets across the country than we will see in South Florida. So I think interestingly, if you're able to buy something in, and I don't mean to pick on anything, but like, let's just say Phoenix, if you're able to buy something at Phoenix at 50 cents on the dollar, maybe that could potentially be a better three-year investment than buying something at 99 cents on the dollar in Miami, for example. So I think, and I'm not, not speaking for Borcadia, but I know that there's going to be more

• 1:45:11Speaker 06

  pain in other states and other cities in the country. So people that need to sort of churn money faster may have better opportunities to invest in a place where there is more pain, there is more blood in the streets, to then flip it three years from now when the world looks rosier and it turns out that things weren't as bad as people thought. What's happening in Miami is there's so much long-term oriented capital increasing the floor of, of what the pain that we could potentially see, that I don't think today is the right day to invest in South Florida to flip a deal in two years. Because we don't

• 1:45:54Speaker 06

  know where we're going to be in two years, right? Like, a lot of the interest rate damage from the, from the increases in interest rates could still be percolating for the next two years. So interestingly, I think outside of Florida and maybe in states where there, there could be more pain, there could be more opportunity in the near term for shorter, for money that needs to be flipped quicker.

• 1:46:18Anthony Pompliano?

  My last question for you, you're a young guy. I like to think I'm a young guy. A lot of people who are doing these big deals, they're older. And so their long-term kind of time horizon may be 10, 15, 20 years. I think that you and I both have the benefit of being able to look out 30, 40, maybe 50 years. What do you envision happening here in Miami? Is this something where the next five or 10 years are good and then kind of, you know, interest wanes? Or does this feel like it is something that's like a multi-decade trend that will really revitalize and kind of change the dynamics of South Florida?

• 1:46:51Speaker 06

  Absolutely the latter. So I think what's happening here is you look at what happened to New York over the last hundred years, and it didn't matter how much more expensive New York got. People got accustomed to renting a $3,500 studio with no view staring at a brick wall, because you just had to be in New York to do XYZ thing. That, I think, is happening to Miami, and I think it's a multi-decade trend where the more people move to Miami, the more people want to move to Miami, the more people are going to move to Miami. And the interesting thing about South Florida is the international appeal that it has. So we're getting people

• 1:47:35Speaker 06

  and capital from Latin America, people and capital from Canada, from Europe, from Mexico. It's a really culturally diverse place. Fortunately, we have Mayor Francis Suarez and like the limelight of the country, if not even past the country. So for me, it's it's a century type of shift, like tectonic shift that we're seeing. And I wish I could just stress the fact of the calls that I get and the emails that I get from big, big, big moneyed guys that are saying, I'm leaving New York, I'm leaving Chicago, I'm leaving LA, I'm leaving

• 1:48:17Speaker 06

  San Francisco. And I'm just like, I get it, right? So I mean, again, I I think what's happening now is not something that just happened because of COVID. I think people are sort of waking up to realizing that I don't need to go to New York or go to Chicago to live the professional aspirations that I have. I can do that from Miami. It's got the jobs, it's got the lifestyle, and it's got the balance that I want to have. So for me, if you're a long-term investor, I'll give you a perfect example. Friends close to me that are looking to buy homes, I'm like, if you could afford a home, and you're going to be happy in that home for 10,

• 1:48:56Speaker 06

  15, 20 years, there is no better place to be parking your money and buying real estate and leveraging it than South Florida.

• 1:49:06Anthony Pompliano?

  Omar, we gotta go, but where can we send people to find you on the internet or find out more about Berkadia?

• 1:49:12Speaker 06

  Twitter is where I'm most active. If not, my email is Omar dot Morales at Berkadia dot com.

• 1:49:18Anthony Pompliano?

  Whoa, that is, that's a bold move, giving out your email live. All right. I appreciate it. I always enjoy talking and we'll definitely do this again in the future.

• 1:49:27Speaker 06

  Thank you, pump. See ya, brother.

• 1:49:29Anthony Pompliano?

  Man, we are on a roll today. Another great conversation. Next up, we have Mitchell Baldridge. Mitchell is the owner of Baldridge Financial. He is a well-respected CPA who does work for many of the people that you see across Twitter and the internet. On top of that, he's the managing partner of RE Cost Seg, which is a brand new business that's done some innovation around how they deliver cost segregation studies, but also is working with Nick Huber and many others that you know in the real estate world. Let's bring Mitchell up for this conversation. All right, Mitchell, I thought a great place for us to start the conversation is what is a cost segregation study? Just everyone's heard the term, but what exactly is going on when somebody gets one of these done?

• 1:50:10Speaker 03

  Man, pump, thanks for having me on. Yeah, cost segregation study is kind of zooming back this concept of you can defer taxes by cost segregating your property. We all know what that is, but, but what it is, is this engineered product where we essentially blow your property up into its, you know, the big diagram on the blue sheet of paper. Think about everything inside of your building being blown into its component pieces. We do that through, you know, our engineers do that and then they label a tax life on every component of your property

• 1:50:48Speaker 03

  in order to separate the 39-year property from the seven-year property, for example, and then you're able to bonus all the five, seven and 15-year property, year one, and take a deduction out there. So the whole point is you get to buy a property and depreciate a ton of it today rather than just waiting 39 years.

• 1:51:12Anthony Pompliano?

  How much have you seen people be able to write off? Is there like a rule of thumb? If I bought a new property, I should be able to write off X percent using these types of studies?

• 1:51:21Speaker 03

  Yeah, I mean, if you just asked me a percent, I'd say 30. Gas stations are 100%. They're all 15 year properties. So people have gotten wise to this with gas stations and started marketing the property effectively as a big bonus depreciation machine or car washes are similar to that. But if you're looking at, you know, a industrial building or an apartment building, call it 30% plus or minus.

• 1:51:50Anthony Pompliano?

  Okay. Now, talk to me about how the cost segregation studies have previously been done before you guys created RE Cost Seg.

• 1:51:59Speaker 03

  Yeah. So I mean, our unique benefit is that we can do cost segs in all 50 states through this virtual site visit technology. We all, you know, carry these phones in our pockets every day and they turn out to be really useful tools for this where we will literally get on a Google Meet call with you, record the meeting and walk through your property and inspect the property virtually. We do this for smaller properties and what it allows us to do is make, you know, previously unaffordable cost segs affordable. For example, for Airbnbs or smaller rent houses

• 1:52:41Speaker 03

  where someone was going to fly to your property and charge you $6,500 to, to walk around it like that, we're able to unlock that. So if you have a $200,000 property where they used to just kind of hang the phone up on you, we can sign you up, get you set up, walk the thing and get you a great report out in a short amount of time.

• 1:53:05Anthony Pompliano?

  Now, let's take that Airbnb that used to be $6,500 because someone had to fly out there and walk around. You're paying kind of time and travel and all this kind of stuff. For that type of property, what are you all able to cut the cost down? Are you saving people like 50%, 20%, 80%? How do you think about cost savings using you all versus kind of the more traditional method?

• 1:53:24Speaker 03

  Sure, like, you know, our lower end studies are, I would call it, you know, our smallest, simplest study would be a $1,400 to $1,600, you know, and that's fully engineered where we kind of soup to nuts, rebuild the property, kind of reskinch out the entire property and do a great job of getting it right. You know, from multifamilies, or if you have a, you know, a garage apartment in the back, it just kind of goes up from there. But yeah, that we don't have that fixed cost of having to fly out to you with the clipboard and walking around the thing, you know?

• 1:54:01Anthony Pompliano?

  Now, I find you fascinating because you have the CPA firm. You guys are doing a ton of work. You obviously are seeing people's taxes. Part of how you got into this, as you saw a lot of your clients, I think, doing this, and there might not have been a great vendor or service provider to kind of use. And so how have you seen your customers or your clients in the CPA side use real estate and specifically cost segregation studies to really enhance kind of their take home pay every year?

• 1:54:29Speaker 03

  Yeah, I mean, thanks for saying that. And I've always loved the business because it's just a huge value driver and it's a simpler business than going, hey, Pomp, I'm gonna take you on and every one of your companies on and your wife and your mom and your grandkids and everybody, you know, cost seg is a kind of more narrow niche and it's a huge value driver. So, you know, how we've seen clients use this, I talk about it like it's a 401k almost, in the sense that we all know what a 401k is. You put 20 grand away and then you go get it back when you're 70 and it's way more money than that.

• 1:55:12Speaker 03

  Well, this is a similar idea in the sense of if you're a real estate professional or if you have passive income to be able to utilize the losses. You're going to go spend equity to go buy a property. Presumably you're going to put some debt on it. And you're going to generate a huge year one loss. That is plus or minus, you know, some portion of what your equity payment was. So basically, if I'm going to go take a hundred thousand dollars and buy a $500,000 property and get, you know, 30% of the property deducted year one.

• 1:55:51Speaker 03

  I'm going to get, you know, a hundred, $120,000 deduction year one for the dollars that I put down on that property. So that's massive because now it's not stuck in a 401k until I'm 70 and a half. It's out there in the, the real world. I can sell it without having to pay a penalty. I can 1031, we'll like kind of exchange it. I can go borrow against it. I can go, you know, I'll get a step up in basis when I die and, you know, my kids inherit it. So really it's this idea of being able to

• 1:56:27Speaker 03

  put equity into a growing asset and get a deduction year one. And you just don't get that if you buy Facebook stock. You know what I mean? You only get it by buying this real asset and, and running tax strategies out there today.

• 1:56:42Anthony Pompliano?

  When should somebody start thinking about the cost segregation study? Is this, uh, before they even go out and look for a certain type of property? And it really should dictate what type of property they're trying to buy. Is it, once they've identified a property, they should bring you guys in? Is it, once they've purchased the property and now they want to go and get the study done? How, how do you think about the sequence of, uh, kind of a purchase journey? When actually a cost segregation study should be introduced?

• 1:57:06Speaker 03

  Sure. So there's this like,

• 1:57:09Speaker 03

  there's the, the first gate, which is like, am I going to be able to use this depreciation? So you either have to be a real estate pro, which is I spend 750 hours and more than half my time in real estate. And then I'm going to be able to offset other active income with this loss out there today. Or I just have a ton of passive income and I can utilize a passive loss against my passive income. So, so that's step one, like. Is this going to get me anywhere? Cause there's no use in buying a cost seg that isn't going to be able to benefit you in, in, you know, the next few years, definitely. And so the second

• 1:57:49Speaker 03

  kind of framework is what are these value drivers or like, how does a cost seg return? One of which we've talked about is what percentage of the property will become immediately depreciable property, whether you have a gas station or whether you just have a big, you know, metal building with nothing inside of it. The gas station's a hundred percent, that big metal building might be 10%. Another factor would be what is the land value out there? If you're on the Miami beach, buying a little tiny shack, well, you can't depreciate land. So that's not going to derive as much value as if you're in a cornfield with a, with

• 1:58:29Speaker 03

  a big old, you know, mansion or industrial building or whatever that is. And then how much debt are you going to have on it? Cause that helps you, you know, put down less equity and derive a bigger return. And so those are factors to think about, just kind of meta factors. But to answer your question, kind of like where in the process is probably earlier, like there's a condo you could buy where you have no share of the land value, where you're going to get this huge return and a condo next door, just depending on how the county looks at it, might be encumbered by 50% land value. And so if you were just

• 1:59:10Speaker 03

  an investor going, hey, I want to buy a condo to get a bunch of depreciation, you know which one you would pick. So, you know, we spend a lot of time trying to help our clients

• 1:59:23Speaker 03

  early on in the process, try to know kind of what they're going to get. And to the extent that with our bigger clients, we can be a partner, we love to do that.

• 1:59:33Anthony Pompliano?

  When you start looking at these cost segregation studies, obviously they are done when somebody's buying a new type of property. You mentioned two, you mentioned gas stations, and then there was another one. What are the types of properties where there's outlandish type depreciation? I know that there's like opportunity zone stuff that is separate from cost segregation that people have been very excited about, but are there funds that just go and buy properties for bonus depreciation? Are there certain strategies that you've seen people pursue? Talk to me about kind of the, the maybe professionalization of using this as a specific strategy in the real estate market.

• 2:00:06Speaker 03

  Well, like you and I both know a guy who sold his company and had a 100-plus million dollar exit and his wife happened to be a real estate pro and he went and bought a huge portfolio of gas stations that, you know, someone was selling out there. There aren't really, as far as I know, or there probably are, or there will be soon, just big depreciation funds. But yeah, I mentioned car washes, I mentioned gas stations, things that are super kind of like materially intensive, mechanically intensive. One example, I had a client buy

• 2:00:46Speaker 03

  a building that they had to outfit into an R and D facility for a pharma company. And I mean, that is just, you know, cooling systems and different mechanical systems that are all write-off-able, you know, versus, again, just this like empty box that all it has is a roof and a foundation and walls on the side that you're just not going to get that much out of that. So it's really things that are built to be specialized assets. You know, our good buddy Nick does the storage units. A fun thing about the storage units

• 2:01:27Speaker 03

  is all the movable interior walls are short-lived properties. So, storage units can get it versus if you buy one that has cinder blocks for, you know, that was built way back in the day, you're just not going to get as good of a payback. So it's really this kind of property by property basis, which is again, why, you know, if you have a LOI on something, go onto the site, raccosteg.com, you know, fill out the form and we can kind of give you a customized proposal for free that tells you what you're going to get on your property and what we think you might, you know, return.

• 2:02:10Anthony Pompliano?

  I think a lot of people have heard of people buying planes and other types of assets, but I haven't seen that many people actually saying, hey, I went and I bought real estate and used the bonus depreciation to offset some sort of income. And so for the client that sold the company for $100 million and bought a bunch of gas stations, were they trying to offset 100%, 50%? Like, how did they think about, you know, that's a lot of gas stations you'd have to buy to offset $100 million, but how did they think about it?

• 2:02:33Speaker 03

  I think they thought about it as again, his wife was a real estate professional. He liked real estate and he said, I have a big lick. I want to get some cash flow over the next few years anyway. And I was working with him on this and said, hey, you might want to look at gas stations. And they went and realized they have this hot ball of money. They have this thing that they're going to pay tax on no matter what. And that they could go buy a big asset portfolio and get a ton of depreciation right off the bat. So, you know, look at the economics of that deal of if you put 50% down, let's just say he bought $20 million of gas stations.

• 2:03:18Speaker 03

  And he put 10 million down and got 20 of gas stations and was able to get, you know, upwards of 15, 17 million dollars of depreciation out there because he couldn't depreciate the land again, remember? But like, he took $10 million and got $17 million of deductions, which equated into like $7 million of tax savings right there. So, I mean, that's a good deal for someone who had a big exit. So, yeah, he didn't want to go buy, he didn't buy out all of 7-Eleven that year or anything. But he just knew he wanted to be in the real estate business anyway. These were kind of triple net leases.

• 2:04:02Speaker 03

  They're going to pay a coupon for a long time. And he said, this is a great way to save money today and buy a stream of money right now. Yeah, the, the other thing to look at is just when you, I've done this with clients like underwrote planes and underwrote, you know, cruise liners or, or, you know, catamarans and stuff like that. And it's just like, those aren't real assets. They never have a terminal value. The terminal value is sort of nothing or, you know, one 10th of the value of, of what you're going in at. And so those never really quite work unless you really like. You know, sailing boats around the world, or if you really like flying in private planes. But, you know.

• 2:04:46Anthony Pompliano?

  But everyone loves real estate, right?

• 2:04:49Speaker 03

  Love going to gas stations and filling up my car, you know.

• 2:04:53Anthony Pompliano?

  Absolutely. So if somebody is going through a real estate transaction right now, explain again what they can do in terms of before the actual purchase, before they engage you guys in a paid kind of arrangement. What do you guys provide that is kind of this, you know, almost like a proposal? And then what happens after they go ahead and say, yep, I want to move forward with this?

• 2:05:12Speaker 03

  Yeah. So you go to REcostseg.com and you know, you click the hero page, see if you qualify. And then you go to the bottom and put in your email and your name and give us a little bit of information about your property. And we get to work providing you a customized quote of, you know, we go look up your property. We go look up the land value on the tax rules. And we go to you and we say, hey, if you paid X, we think you're going to save Y. And it's going to cost you Z. So you're going to have a, you know, blank to one payback ratio right off the bat. And, and we work hard to make sure that that's right. And the customer knows the value right up front.

• 2:05:54Speaker 03

  So that another reason why it's a good business is you get to go, hey, pay me a dollar, I'll save you 10.

• 2:06:02Speaker 03

  You know, can't beat it. But, and then so that's a free process of, of right off the bat, us qualifying you and us kind of consulting with you and answering your questions. And then you pay us half down and we set up the call or we set up a flight out to your property. We inspect the property. We drop the report. You know, you pay us the remainder, we give you the report, we give your accountant kind of instructions on how to use this report. And we go down the road until you order the next one.

• 2:06:35Anthony Pompliano?

  That's amazing. I know a number of different people who have used it. Obviously you and Nick both have done a great job, along with, I believe your wife is running the business. Just scaling the hell out of this thing.

• 2:06:46Speaker 03

  Smarter wives than us. That's, that's a good, it's, you know, how good that is.

• 2:06:51Anthony Pompliano?

  I, I, I'm in that club as well. So don't, don't complain about it and just let everyone else not realize the secret. So where can we send people to find you on the internet? And then the website is REcostseg.com.

• 2:07:04Speaker 03

  Yep, RE like real estate cost seg.com and you can find me on Twitter mainly at Balchidge CPA and you can find us on Twitter at RE cost seg where we, you know, on, on my site and on my Twitter and on RE cost seg's Twitter, we, we just have tons of information about different fun tax strategies out there.

• 2:07:26Anthony Pompliano?

  Amazing. All right. Listen, thank you so much for doing this. We'll definitely do it again in the future.

• 2:07:31Speaker 03

  Dude, thank you. Good to meet you.

• 2:07:39Anthony Pompliano?

  All right. My next guest is Jake Werjack. He is the founder and CEO of Dove Hill Capital Management. They specialize in all sorts of hospitality. They have boutique hotels and they also have hotels that you've heard of, but either way Jake and his team, they are pursuing excellence in everything that they do. I've learned a ton from Jake and I'm super excited to have him join us here today. He is our last speaker and so no pressure Jake, let's bring you up on the stage.

• 2:08:11Anthony Pompliano?

  All right, Jake, I thought a great place to start this conversation would be around hospitality. You really, really have a focus there. Why is hospitality of all the different verticals in real estate so interesting to you? And why do you guys think you have an advantage in that part of the market?

• 2:08:24Speaker 02

  Hospitality is one of the only real estate verticals that is both an operating business and a real estate business. So when you invest in a hospitality deal, you're investing in the hotel business, but also in the real estate itself. And there's varying degrees of how valuable the real estate is without the hospitality business. But in a hospitality business, you have so many more levers that you can pull because the operating business than a traditional form of real estate. And that's one of the ways that we differentiate ourself because we tend to focus on highly differentiated lifestyle assets in high barrier to entry markets where there's a lot more levers for us to pull. And when I say a lever,

• 2:09:08Speaker 02

  an example of that is I can add another restaurant, I can add a bar, I could have an event with a big group and sell a bunch of stuff to them. You just can't do that in a multifamily deal. You can't do that in industrial deal. You can do that in hospitality.

• 2:09:22Speaker 07

  If you are buying a commodity hotel, the real estate might not be worth much and more value might be placed in the operating business. That's just not where we focus. So we tend to find deals where the real estate is very valuable. You can't just build another hotel next door. And then the operating business as a function of that also compounds and continues to get more valuable.

• 2:09:45Anthony Pompliano?

  When you think about owning the real estate and operating the businesses, obviously, there's a lot of synergies or positives to what are the downsides? What are the challenges that introduces that maybe if you guys just owned real estate and you use some other sort of management company or operating company, you wouldn't have to face?

• 2:10:01Speaker 07

  It's hard work and it's really hard work. And when something goes wrong, you have to be the one to fix it. If you're an industrial deal and you're getting triple net, you don't like do anything, you know, maybe once in a while they call you and they say, hey, my roof's leaking or the AC's out. We get a call about a hotel issue every single day. I don't, I have a great team that that deals with all that. But it is a day in, day out business. You have to figure out what's on your menu. You have to figure out what rates to charge every single day and it's constantly changing. The flip side of that, though, is it's a lot of fun and it's very gratifying because if you start to get into a rhythm and find a strategy or an approach that hits, it is incredibly

• 2:10:45Speaker 07

  fulfilling. And in addition to the transactional side of real estate, you really get to add value in many different ways. Whereas a lot of other real estate is just about, you know, what, what did you buy it for? Kind of what did you sell it for? And all the in between stuff, you didn't have a lot of impact on hospitality is the complete opposite.

• 2:11:09Anthony Pompliano?

  What's interesting to me about kind of doing both, right? Operating and owning the real estate is a lot of people look at and say, oh, those are two different skill sets, but you have a very interesting background, right? You've got a lot of experience. You kind of grew up around these hotels. I believe that you went, you got a law degree and then you also have a ton of experience on the real estate side. So is it something where like you are uniquely suited to go and do both? Or do you think that actually people who want to say, hey, I want to get into the hotel or hospitality game, they could take a couple of these steps, acquire various skills, and then they could recreate what you've kind of positioned yourself to do?

• 2:11:43Speaker 07

  So when my dad started the business and I came in, we had like three or four hotels and we were operating all of the hotels at that time. But at that time, the operating business was very much a function of us just owning the hotels. Now we have a full-scale management company that can go manage hotels for other people that is incredibly sophisticated. And we think that's a competitive advantage versus other people that just own the real estate. So we have two ways of enhancing the value of the real estate. One is because we operate ourself and we are just so dialed into what's happening in the hotel. We can think like an operator. When we underwrite a deal, we know it's realistic, we know it's not.

• 2:12:26Speaker 07

  When we're underwriting a deal, we're talking to our operations folks and they're giving us live, on-the-ground feedback of what's possible, what's not, where we can push rates, where we can't. We also asset manage. Asset manage is very different. People like to blend hospitality management with asset management when you're vertically integrated. But the reality is, it's very different. Asset management focuses primarily on the real estate. They oversee the property manager. They focus on the CapEx projects. They focus on the overall vision, the strategy. And then they deal with all the typical real estate ownership type stuff that you have to deal with. If you think about a REIT, a hospitality REIT, they typically do not manage.

• 2:13:09Speaker 07

  And if they do manage, it's a fully separate company and it really doesn't impact their P and L at all. They are purely an allocator for those that want hospitality exposure, but they have less of an ability to control what the operator's doing than we do. That's just a fact. They will tell you that they can like influence the decisions and get really into the weeds, but they're not there day-to-day. And we have that day-to-day control. And I think that's a differentiating factor. The other thing is, it's really hard to set up a property management business because... Maybe until you get, depending on how big your hotels are, but until you get to like 10 hotels,

• 2:13:48Speaker 07

  you might not be making money. So you really have to be in it to build it and it takes a long time to build it. So there's kind of a defensive barrier that would prevent others to do it. So now that we have it, I really want to focus on it and continue to scale it.

• 2:14:04Anthony Pompliano?

  Talk about how you pick which hotels to either buy or build versus ones that you pass on. Is it geography? Is there something unique about the hotel? Like what makes a good deal for you guys? And what are the things that maybe you try to avoid?

• 2:14:17Speaker 07

  Well, let's just talk about the obvious one first. In today's environment, not a lot of deals are getting done because of the debt markets and financing and capital markets. If you are sourcing your capital from institutions right now, a lot of them are sitting on the sidelines. Might be different for family offices and high net worth capital, but institutions might not be doing it. Same side, banks are also very hesitant right now to lend and they're only lending to their best off borrowers. We have some advantages there, but that is kind of a gating factor. Setting those aside, location is a huge component for us. It sounds silly, but there are two criteria which we think about very closely.

• 2:15:01Speaker 07

  And a lot of these guys will like, look at all these charts and crazy shit. And it really comes down to two things. One, are there direct flights from where our local infrastructure is? And where our headquarters is? Two, is it a place that we want to go? And we think others want to go and people will continue moving there and businesses will continue moving. And those are two really guiding themes that influence whether we do a deal or not. And maybe if it's such a great location and we have to take two flights to get there. Okay, then that might counterbalance the accessibility side, but.

• 2:15:39Speaker 07

  Migration trends, where people are moving, where they're going, if you walk into a city, if you walk into a place, if you walk into a town and it makes you smile, that's a pretty good indicator of where we want to invest. The other place, the other thing that we would consider is how easy it is to build a hotel. Because if someone can just throw up a building down the street or next door, and the barriers aren't really low, then we'd be very concerned about basis and our entry point. Versus if it's really hard to build a hotel, that's something that we would heavily lean in on.

• 2:16:14Anthony Pompliano?

  When you look at inside of those cities, right? Obviously, let's say you find one where you got the direct flights, you find one where the migration trends are going, you find one where it's hard for other people to compete or build new hotels. How do you then pick which hotel? Does it just come down to economics? Are there certain things you're looking for? Are you trying to buy things that then you can go and improve? Or do you want to just buy the nicest one and operate it? How do you think about it?

• 2:16:36Speaker 07

  So not every hotel's available, right? I mean, you can certainly cold call people and find hotels that you want to buy and try and negotiate something off market. In fact, that's something that we're really pushing now because most people in the hospitality industry kind of sit around and wait for deals to come to them on market through national brokerage firms. We've made a huge push to develop our off-market network. So now we're getting a lot of deal flow off-market. So we're seeing things that potentially others aren't seeing, which we like because it's hard to compete against a small group of highly qualified investors against an even smaller group of assets that you want to buy.

• 2:17:17Speaker 07

  So if we can kind of eliminate some of the variables, that's a benefit for us. But a big thing is the sense of place and what the building looks like. Because in the hotels that we want to do, which are these lifestyle hotels, they have to have a certain vibe and a soul, and we can create some of that. But there's only so much fighting of the building that you can do. If you have a really just terrible, ugly looking building with a lot of challenges, you might not be able to overcome them. On the flip side, you might have a great building with a lot of architectural details, with a soul and a sense of place that you can really just enhance. And those are what we would try and zero in on.

• 2:18:00Anthony Pompliano?

  You're a young guy. I could say that because I think we're about the same age. You have much more time to invest than many of the people you're competing against. How does that change your investment decision making? Are you more likely to pay up for deals? Are you more willing to buy deals maybe they won't buy? How does kind of the the longer timeline actually work as an advantage or a disadvantage in your investing decisions?

• 2:18:26Speaker 07

  It's very heavily influenced by our source of capital. So in some deals, we use institutional capital and just the nature of institutional deals. They typically looking for a whole period of three to seven years. We also do deals with a lot of high net worth and family offices. And they might take a different approach where they don't need to be as transactional. And they're more focused on the tax benefits of real estate, the cash flow, the distributions, and the long-term appreciation of the asset. So that is definitely going to be a guidepost. But even some of our deals that are in shorter duration funds, it might be a great time to sell, but historically, real estate has always appreciated over time if you're in the right markets. So we've certainly looked at other ways.

• 2:19:10Speaker 07

  Well, like, I don't know, can we almost create like an evergreen fund of the legacy deals that we have that we want to sell because the investors in that in those deals want to sell, but where we think long-term, the market, the asset is just a total win. So that's really interesting and seeing it here now that I'm 37. We have so much time to invest, but we really listen to our partners and investors and let them do some of the guiding. The other thing that I think gives younger folks a unique perspective is we have the opportunity to see cycles and then learn from those mistakes that we made during the last cycle

• 2:19:54Speaker 07

  and not repeat them again. Whereas if you're coming to this later in your career, you might only see this event once or twice in your lifetime. Whereas real estate is so cyclical, hopefully over time you can start to spot the.

• 2:20:10Speaker 07

  Indicators and the instances where you'd want to lean in heavily or where you'd want to pull back. And I think that's a real advantage. The other, the last thing I'll say is reputation. I am so focused on my reputation because I have this long career ahead of me and I'm very conscious of being respectful to all of our capital, being grateful for all of our capital, but building relationships with other people in the industry that I'm hopefully going to come up with and we're all going to be successful. And I don't look at this thing as a, as a zero sum game because there's tons of deals that will come from friends. And I think the longer I have to build those relationships and to continue to grow

• 2:20:51Speaker 07

  the audience for our brand, the more successful we'll be. So it's definitely an advantage starting early.

• 2:20:57Anthony Pompliano?

  Talk about raising capital. Obviously raising institutional capital is very different than raising from high net worths and family offices. I think you all are unique in that you've also started to work with and figure out how to use the internet versus maybe just personal relationships. What has that experience been like? And what do you see working and what do you see not working right now?

• 2:21:16Speaker 07

  So when I first started out raising capital, we had never taken outside capital before. And that was something that I wanted to do in the business. That was a huge strategy. And it was literally word of mouth. And the way that I did it the first time was I found the deal. Luckily I had a lot of time to go out and raise the capital, but it was so fucking hard. Like we raised so much less than what I was anticipating raising. But then the second deal I did after that, like kind of community was built and we got a little bit of a reputation, I think we raised like 10x the equity that we did on the first deal. And it just spread through word of mouth. As we got later on, it continued to

• 2:22:01Speaker 07

  grow and spread, but we also started to use the internet to broaden our network because it was just spreading through word of mouth through like a local group of people that kind of knew each other, you know, whatever it was, country club people, whoever it was. But now with the internet, it goes all over the United States and potentially global. We take some international investors. So that I think is the future and something that we are heavily leaning in on. One area that I think I need to lean in on more is mid to large size family offices because

• 2:22:39Speaker 07

  Their capital tends to be a little bit more patient. They're definitely around for the long term, which is really important to me. Institutional partners are great. We've raised a lot of money from some of the biggest funds out there. But we are fortunate to have relationships with the founders of those funds. But the teams sometimes change. So you're cultivating relationships with the people you're doing deals with. And then maybe the team changes. In a family office dynamic, it's just a little bit different. And I think something that is a very big opportunity for us. The other thing that's interesting about family offices and high net worth is they are investing their own capital. Institutions are investing someone else's capital.

• 2:23:23Speaker 07

  So they tend to not want to be the first mover. Whereas family offices, it's not that they're more risky. It's just that it's their money. So they feel confident in doing it. When you're investing someone else's money, you know, you don't want to necessarily always be the first one. So institutions tend to kind of go with the herd. Whereas if you have diversity of capital, you might be able to take advantages at certain points in time where you see an asymmetric risk reward opportunity that an institution just can't jump into at that time.

• 2:24:01Anthony Pompliano?

  Talk about if you could go back and start your career all over again. Many of the people who are watching this are going to say, hey, I want to get into real estate, whether it's in hospitality or another sector. I want to build an asset management firm, maybe even an operating business as well. What would you do differently? Or maybe some of the things that you look back and you're like, man, I'm really glad I did that. How would you start your career and kind of get, you know, off the ground and really position yourself for success to have a long career?

• 2:24:25Speaker 07

  In my opinion, we were very lucky to have a hotel management company and some key people. But I think starting off, it would have been challenging to build two companies, a hotel management company and an asset management company. So the only way to do it, I think, is to like bootstrap it and kind of lump them together wherever where you're a small team and everyone's helping out. So that is a way that I think. Would allow someone to do both right from the start. I wouldn't do it any other way. I think, you know, it's a huge advantage for us to operate all of our own hotels and concept our own hotels. But it does take a significant amount of time.

• 2:25:06Speaker 07

  And there are times when, you know, maybe we're not looking at investments because we're leaning in more on the asset management or the property management side. Whereas if we potentially didn't manage, maybe we wouldn't have to do that. No matter how big the team is, there's always going to be some cross collateralization between the asset management side and the property management side. So I wouldn't change it. I would just do what I did, but I would

• 2:25:33Speaker 07

  advise others to not necessarily, it's great to dream big, but just focus on getting your first deal done. Doing one thing and doing that right. And then if that works out, do another one and then do another one and then do another one. So many hospitality companies out there, when they're launching a brand, they're like, we're going to have this brand and it's going to be in London, New York, LA, all the gateway cities throughout the world. And they don't even have one hotel yet. Just open one hotel, figure it out, get it right. And then all the business and all the opportunities will come. So my advice would be to just do it and let the work do the talking.

• 2:26:15Anthony Pompliano?

  When you look at the market today, give us a quick update in terms of how you're viewing this. You mentioned earlier, kind of capital markets and there being some constraints that are just given the cost of capital. Is there anything else that you're paying attention to in the macro economy and interest rates, the Fed? Or anything that you think is really kind of affecting your day to day decision making?

• 2:26:35Speaker 07

  So we projected and we were underwriting deals where SOFR, which is like the benchmark rate that all these real estate deals are primarily tied to would get to 5%. So all of our underwriting over the past three months was based on that assumption. And we were looking at the yield curve. So I think it's really important to look at the yield curve and make sure your underwriting reflects what the yield curve is. One thing that we look at is Not trends, but how people are viewing travel. And I think there was a huge shift post-COVID where people are prioritizing travel and they're choosing to spend any savings that they have on travel and on experiences.

• 2:27:19Speaker 07

  And I don't think that's going away. So, right now, the savings limit in the United States or the savings amount is higher than it was pre-COVID. So, that's a positive sign. I mean, you'll hear all this stuff where people are saying it's down, but I'm doing an investor presentation today and we just looked at the data and normalized, it's actually up. So, that's one important piece of data. Another thing that we're seeing is group and business travel is definitely coming back. During COVID, it was primarily dominated by like leisure and people taking vacations

• 2:27:59Speaker 07

  and all that stuff, but now we're seeing group business come back, even to the markets that were last to recover, like DC, Philadelphia, some of these Northeast cities are now getting the benefit and are actually recovering, whereas some of the smile states like, you know, South Florida, Texas, they're leveling off from a revenue standpoint. Now, their revenue is still well above where it was in 2019, but the year-over-year growth is flattening, whereas these Northeastern cities, it's rocketing up. So, what's interesting there is if you can get into a great entry point at a city that's recovering, you can get a bigger piece of that tail, whereas investing in Florida certainly,

• 2:28:43Speaker 07

  you know, I think it's a better market, but the year-over-year growth isn't going to be as strong and you need to think about that over your whole period.

• 2:28:50Anthony Pompliano?

  Jake, I could literally talk to you for hours about this. You guys have built an amazing business, not once, but twice, which I think is a part of the advantage that you have in the market, but also it shows that you have this playbook, right? You've started to understand how to hire the right people, how to actually operate effectively, how to raise capital and kind of repeat and do it over and over again. So, I'm excited to see what you do over the coming decades, which is pretty cool to be able to say to someone who's already had so much success. Where can we send people to find you on the internet or find out more about the businesses or if they want to see any of the deals that you guys are looking at?

• 2:29:21Speaker 07

  So follow me on Twitter. I'm really active. I learned that from you, Pom, @JWurzak. W U R Z A K. You can also go to my website, jakewurzak.com. And that's where you'll find all the fun stuff and all the links.

• 2:29:35Anthony Pompliano?

  The fact that you said you learned to be active from me just means that I taught you to waste time, which I don't want to claim. But I appreciate you doing this and we'll definitely do it together in the future.

• 2:29:46Speaker 07

  Awesome. You're the man. Appreciate you.

• 2:29:55Anthony Pompliano?

  Wow. What an end to the day. I really appreciate all of you joining us today for the Build or Die Real Estate Investment Conference. I learned a ton and I hope that you did as well. I want to thank our sponsors for helping make this possible and I want to thank every single one of you for tuning in. We're going to continue to try to do these across asset classes right here on YouTube and on the various other platforms where we post this content. My goal with each one of these conversations is to have a little fun, get a couple of laughs, but more importantly, to learn. Learn from the best people in an asset class. Understand not only how they're investing, how they built their firms, how they raised capital, what they're thinking about the current market situation, and also to pull out insights that you can apply to your day to day, starting immediately. I think that we accomplished

• 2:30:38Anthony Pompliano?

  that today. I know I learned a lot and I was able to take something out of each one of these conversations, so I hope that you were able to as well. Thank you so much for tuning in to the Build or Die Real Estate Investment Conference and I hope that you'll join us for the next one.