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Paul Moore from Wellings Capital is back with us to talk about how to get started in the multifamily rental space. We discuss Paul's transition into the multifamily strategy, how to evaluate the trustworthiness of potential syndicators, different forms of multifamily investments, how to make the SFR to MFR transition yourself, common mistakes investors make, and taking action.

Visit Paul's site: wellingscapital.com    

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Transcript

 

Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.

 

Michael:

Hey, everybody, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by my co host,

 

Tom:

Tom Schneider.

 

Michael:

And with us today, we have a repeat very special guest, Paul Moore of Wellings Capital. And Paul is going to be talking to us today about the transition going from single family into multifamily and then into massive multifamily syndication. So let's get into it.

 

Paul Moore, thank you so much again, for coming back on man. Really appreciate you taking the time.

 

Paul:

I's great to be here, Michael. Thank you.

 

Michael:

So Paul, what I wanted to chat with you about today is multifamily? Because I know that you are a big, big, big player in the space. And so maybe you can just start off by sharing with folks. What are some of the benefits of multifamily versus single family that in your opinion you've seen?

 

Paul:

Yeah, so I just for a quick history, I flipped single family homes for years. You know, we did dozens and dozens and dozens of homes. And we also did waterfront lots, I did some ground up single family. And I wasn't sure how to get into the commercial real estate realm. And actually a friend of mine and I found this huge glut in or the shortage actually what am I saying a glut? An anti-glut and housing in North Dakota for the oil boom that was going on there during the Balkan years in late 2010 and on.

 

And so we built a multifamily facility sort of a quasi hotel and then we build another one next door then we ended up building a Hyatt Hotel and found out that man, I really like commercial multifamily. I like having all these doors under one roof. I like one parking lot. I like one, you know place where all the toilets are and everything. So we really we jumped into multifamily. And we really never looked back from that point on. And so that's how I got into it.

 

Multifamily is interesting because the government cau… helped cause a huge supply and demand imbalance in multifamily. So in the mid 90s, in the mid 1990s. The government and its great wisdom decided that everybody who could fog a mirror should own a house. And so they actually pass laws and they forced those laws down on the bankers. There's different opinions on how this really happened. But basically saying, you know, like starting this massive subprime mortgage boom.

 

And basically they said, Look, you don't have to have a good income, you don't even have to tell us your income. You can just do stated income or you can even do no doc and you guys remember that. And so lots and lots and lots of people were able to buy a home I have a friend who was making about 40 or $45,000 a year, he had a house and he bought a I think was a $500,000 second home in this town he grew up in and it was actually a little castle. It was in, you know this town that was actually in decline in West Virginia. And he bought that as a second home.

 

And you know, he didn't even have a really good plan. It was years and years before Airbnb. And so he lost it back to the bank and a lot of people lost their homes. But what happened is homeownership went up from its historical norm of about 63% to 69.2% by 2005. And so from ‘95 to ‘05 and went up a whole lot and so single family home ownership was in multifamily was not so much and then of course we have the crash that you know the cracks that started in ‘06 and ‘07 and then the crash that happened from really ‘07 to ‘10 and there was a lot of people who lost their homes. And a lot of people who said you know what? The American dream of having a home having my own house is not such a great dream as they watch their some of their parents and their friends and themselves, lose a home and lose all this massive amount of equity.

 

I know a guy named Rod Cleef who you guys might have heard of in Florida he had his net worth went up by I think $30 million in in Florida in single family homes between like ‘05 and ‘07 and then it dropped like fifth million dollars after that, and he lost all his single family and his multifamily because they were tied together on loans, you know that we're kind of cross collateralized. But at any rate, single family home ownership dropped back down to around 63%. And every 1% drop from 69.2 to 63 ish was represent a million people coming into multifamily.

 

But they came in at a time, when there wasn't a lot of multifamily being built, you know, like,’07 - 09 10-11. And so there's became this pretty significant supply and demand imbalance. And the four types of people who are coming in and at the time, especially right after the Great Recession, but even to now are coming in, number one, baby boomers, people my age, it's the smallest number of multifamily tenants, but it's actually the fastest growing. And statistics say when someone goes from a single family home that they own to multifamily, they typically never go back to owning their own home.

 

Second group is millennials now millennials in general, not you guys, but a lot of people, you know, a lot of them don't see the point in tying themselves down to a 30 year contract on a seemingly overpriced home, when they might have new opportunities, new friends, new jobs, you know, something across town or across America or around the world next year. And a lot of them historically have had a lot of debt. And with the new rules that came in after the crash, you know, a little over a decade ago, it's harder to qualify for a loan. And so millennials on average rent more than buying compared to other generations.

 

You've also got Gen Z, it's hard to say where they're going to land, but at this time, Gen Z, which is about as large as the millennial group at 77 to 82 million strong in America, they are also renters. And then the fourth group is immigrants. Now people who weren't born in the US, on average, rent more often and rent for longer than people born in the US. And so the question is, are we going to end up going more trending more toward Detroit, whether it's over 70% homeownership, or more toward Dallas, where homeownership is down around 50%? It's hard to say, but my money is on Dallas.

 

Tom:

You know, it's funny, that inverse relationship of in Europe, it's there's some studies out where you have countries, some Scandinavian countries where maybe homeownership is left, but the economy is a lot more dynamic versus country where homeownership is very high, Spain and Greece, and usually the economy is a little sluggish. I think a lot of it has to do with what you're talking about where you have that mobility, you aren't necessarily locked in here. And you can, you know, move around. I think that's, that's part of it.

 

I love that story related to The Big Short, you know, talking about the run of the economy, I love to hear how your business evolved throughout that. So like you said, you initially were in single family was that in this run of time? Or had you already transitioned? I'd love to hear kind of the confluence of you through that whole, you know, through that market dynamic change?

 

Paul:

Yeah, I'd like to say I thought through it. And some intelligent decisions based…

 

Michael:

Crystal ball.

 

Paul:

Yeah, just didn't work for me. But no, I had a public I sold a company to a publicly traded firm when I was 33, in Detroit, and that was in 1997. At 34, I found myself pretty bored. And so I started seeing flipping single family homes in 2000. And we did that and then we built some ground up like homes, and then we did a small subdivision. And like I said, I did I got into land and lots for a while. But I also set up a website that sold leads to realtors, and I still have that running in the background 17 years later, and it's still going pretty well. That's a regional thing right here in the southern part of Virginia here.

 

But at any rate, during that time I was I just I didn't know how to get into commercial, like I didn't know, like, how would I get into large scale multifamily, I didn't have $10 million. And I didn't know to trust where to start syndication was a thing we didn't really know much about. I mean, we knew that there was a thing called syndication where you can pull together a whole bunch of few active and then a whole bunch of passive investors. But we really didn't know how to do that. And we were sort of thrown into that when we started building, you know, much larger assets, you know, then we had the money for ourselves. And that was in 2011.

 

And, you know, when when single family and small multifamily around the country within the tank, we found that the opportunity in the Balkan region of North Dakota with the oil boom made, you know, was made a lot of sets. And so we, and we've kind of fell into that, Tom. I mean, we actually we then we had a failed oil and gas investment in North Dakota. But that's how we learned about the housing shortage there when we drove up there and saw people sleeping in their pickup trucks along the side of the road, in rest stops in a Walmart parking lot.

 

Tom:

There's so many interested, interesting, successful businesses like that, where you went to the gold mine, you know, searching for gold, you know, the analogy of oil. But then you found the money was in the picks and the axes. And in that analogy, that would be the actual housing for it. So that's, and that's such a common, successful entrepreneur story of just kind of having eyes wide open. And, you know, pivoting as it makes sense.

 

Paul:

Yeah. So which is more exciting. Hitting oil? or building a multifamily property? The Healthy oil workers? No, seriously, there's a thing called like, I'm trying to I'm working on a book, I'm just kind of in the early stages, the joys of boring investing, or possibly the boring investor. Boring investing is powerful. I don't know if you guys heard of the coffee house investor, but it's basically saying this look, why should we actively trade stocks, and Bitcoin and all these things that are so exciting? Sure, throw a little bit of that, but why are we spending our life's energy, when we could be hanging out with our families or friends are having a better marriage or whatever those things can be and make more money and ETF, you know, ETFs.

 

And so I, the thought there are not a stock guy. But the similar thing in real estate is this, would you rather give your let's say, your professional, let's say you're a doctor, a dentist, a lawyer, an IT person, you're making hundreds of 1000s of dollars a year, and you're trying to flip a house on the side does that it doesn't always make as much sense to do that when you can have somebody else do it for you. And so I think companies like Roofstock, and my company, we, you know, we provide opportunities for people to get involved passively, still get the profit still get the appreciation of real estate. But at the same time, they don't have to give every waking moment of their free time to this. And that's one thing I love about it.

 

And that's sort of similar to what you said, Tom, and I mean, you know, you can either go out there and try to mine, you know, try to be out in the caves and you know, in 19-1849, trying to mine for gold, or you can just sit comfortably in your hardware store and sell all the equipment to them, you know, or you could be Amazon and shipping equipment. Anyway.

 

Tom:

I love that concept of a book, The urge, you know, just kind of going into the the boringness as like the winning strategy. And I mean, just in talking with friends, I think a lot of it is FOMO it's a lot of it the psychology, you know, maybe you have some, you know, of some guy who got in Bitcoin really early. And it's like, oh, maybe I should do that. But it's like, having a kind of a balanced approach at looking at the, the, you know, the variability of it, right, the beta versus some some boring ETF strategy.

 

Michael:

I agree with you both, because I think it's not sexy to talk about at dinner parties, you invested your money in something and it's just sitting there, earning you a great return. And like, everybody wants to hear the big win stories where you swung for the fences and knocked out of the park or it didn't go so well. I mean, that's, that's the stuff people want to talk about. But I couldn't agree more the passive stuff is, is really great.

 

And Paul I was hoping to kind of get your your take on this about how folks you touched on it a little bit about syndication, but I think so many folks can't fathom investing in commercial real estate, multifamily real estate. And for those of you that don't know, that's five units and up residential is four units and below. So how can people start investing in 100 units, 200 units, 500 units, you know, what, what's the path to get there? And then we'll come back to it and talk about how people can go from four to five.

 

Paul:

Yeah, that's great. So if they want to invest in larger, you know, like, let's say, so I have some money in an IRA and I can't invest in my own company, because it's an IRA and I it has to be, you know, like arm's length. And so I look for other opportunities there. And I'm looking for something really passive and really boring. Now, recently, my friend told me how he was getting a 60% return on setting up this amazing log cabin, Airbnb in Gatlinburg, Tennessee. And I was like, Wait 60% annual return. He's like, yeah, I bought a million dollar house, I financed 900,000 of it. So I have 100,000 in it. And I'm getting 60 to 70,000 free cash flow a year.

 

And he's actually done this over and over. And he's helping other people do it now. So I got really excited about this in June. And then I thought about through July, and I thought about it through August. And I thought, Wait a minute, you know what that will be so exciting, because I love Gatlinburg, that will be exciting. And that will make a lot of money. But that'll be another thing to think about. That's gonna be another thing I have to worry about. That's going to be some call, you know, from even if there's a third party manager, I'm going to get calls, you know, about some toilet overflowing or some insurance or something. And I'm making pretty good money in our company. And I don't want to have to think about that. And that's the path. That's my passion, to tell people, you know, to be a boring investor and to do it through like syndication, for example, do I mean, do any of us really think we're gonna go out and find a two or three or 500 unit apartment and somehow find a deal that nobody who's given their whole life to it, you know, these hundreds and hundreds of companies who are pursuing these night and day with a team of people? Do we really think we're gonna find a deal, it's probably not going to happen in the real estate realm at that size.

 

And so why not align yourself with the people who know how to find those deals, and just invest in their deals. And so that's what I recommend I I talk about my new book has a section like 50 pages of seven paths to get into large scale commercial real estate, but the path I'm recommending for this podcast for this discussion would definitely be invest passively with somebody who is an expert.

 

Tom:

So this is a, this is probably a common question.

 

I think this all sounds great. But, you know, how do you build trust with someone where you're going to give them a bunch of your money? How do you cross that chasm cross that bridge to get uncomfortable, especially for doing it for the very first time putting funds into a syndication?

 

Paul:

So Tom, before I answer that, I just want to make sure are you saying, How do I build trust as a syndicator? to get people to give me money or vice versa? How do I price it versus…

 

Tom:

Vice versa? I'm evaluating Yeah, sure. You know, the log cabins in Gatlinburg sounds super fun, but I you know, passive income, let's let's do that. Okay, how do I sort of vet a potential syndication to put funds into what would you be out around that?

 

Paul:

Yeah, so a couple things I would do. There's a book called The Hands Off Investor, by Brian Burke. And this book is, it's a wonderful book by a guy who was a syndication expert. He's done 1000s and 1000s of apartment units. And it's published by BiggerPockets publishing, so I'd highly recommend The Hands Off Investor, it's about 300 page Guide, which will tell you how to evaluate a syndicator before you invest. Secondly, I would go to the real estate crowdfunding review. And it's not just for crowdfunding, it's for syndication in general. And it gives a tremendous amount of information and education about how to vet operators, fund managers, syndicators, etc. And it basically helps people figure out, you know, the, what they need to know before they invest, there's a lot of other investors on there, and they give very honest reviews. And there's no syndicators or fund managers allowed in their group at all. And so I could never see what people are saying about me there. So they probably feel a lot more willing to, you know, willing to be honest, good and bad.

 

Tom:

I love how self serving these episodes are. This is this is incredible. Yeah, I love it. I have my Amazon cue the hands off investor in my that link to that site up right now.

 

Paul:

Yeah, you know what, I didn't really answer your question that Well, those are two resources. I'll just tell you real quick. I want to actually see how much skin they have in the game, how long their track record is, do they have a cohesive team? How do they treat their staff? How do they talk about their other investors? What do other investors that they refer but also that you find yourself, what do they say about them? What kind of risks are they taking? What kind of cap rate are they assuming on exit, which in other words How much do they assume that the market will go up or down on exit? What kind of occupancy? assumptions are they making? What kind of rate increases rental rate increases in cost increases of a assuming there's a lot to know? And that's why it's so important to lean on things like you know, other people's reviews, which you get especially That real estate crowdfunding review site.

 

Michael:

Paul, I agree with everything you just said. taking it a step further and allow your deeper if someone is brand new to the multifamily space and brand new syndications, how can someone know if the cap rate that's being projected on the exit is reasonable, or the vacancy that they're projecting is reasonable, their costs are reasonable.

 

Paul:

That's really tough. I was just talking about this to an investor about an hour ago, and he was asking me, he said, If I invest with you, what kind of quarterly reporting will I get? And I said, Well, you know, the problem is, you're gonna have to really trust us, honestly. And you're gonna have to trust the people we invest with, because the quarterly reporting will not it might like make you feel good to see a big page of numbers. But first of all, if there's one mistake in their Excel spreadsheet, it can throw off the whole sheet, you know, that's

 

Michael:

It’s all garbage. Yeah,

 

Paul:

It's all garbage. But also, you won't really understand, I mean, you won't really, really know. And so this is, again, going back to trust. And this is why I like the educational model, which is what you guys do so well, you're educating your audience, you're telling them about, you know, the different reasons people should look at a real estate investment with Roofstock, and other people on podcasts are telling you about theirs. That's why I think education is so important. And building a loyal group of people over many, many years.

 

There's a lot of newbies who are doing this now. There's some of them, say stuff like, hey, the real estate market will never go down again. You know, people always need a place to live. That's not true. And history tells us it's not true. And so my money is again, on people that have been around like Buffett, you know, 91 years. And he has some things to say even though he's not a real estate investor. He has some really, really important principles for real estate investors, and I love to study this stuff.

 

Michael:

Yeah. It's such a good point. I've been to several multifamily workshops and syndication workshops, and they're talking about how, you know, it's really important to evaluate not just the deal, but just to your point, the sponsors, who's putting this deal together, why is it that they're asking for money? You know, what is their track record look like? So I think if, if the numbers you can't read the numbers, or you can't tell the story between the numbers, look to the folks who are behind the numbers to get a good understanding of what how that deal is going to perform.

 

Paul:

Yeah, that's true.

 

Michael:

So wondering if we can shift gears here a little bit, Paul, and if you could share with us a little bit on what you've seen folks do really well. Or maybe you personally how you went from single family into small commercial multifamily, because I think that there's this chasm, Tom, to use your word, that people can't make this mental shift, that there's this commercial real estate in the multifamily space is so different than residential or than single family. So what have you seen folks do to be successful to make that leap?

 

Paul:

Yeah, I think it's just actually doing it. I mean, getting some education. There's a lot of great podcasts out there these days. There's books, there's mentoring, there's coaching of the path, you know, that I mentioned earlier, I really highly recommend, you know, getting paid coaching, or even unpaid mentoring and learning from somebody who's been before you.

 

One thing I mean, I hate to sound like rude, but I'll be on a, you know, I'll be on a BiggerPockets forum answering a question. And if somebody says, I'm trying to make a decision on how much to offer on a single family house, great. That's great. That's no problem. I understand that. But when somebody is on there, saying, I'm trying to buy a two or $3 million mobile home park, or self storage facility, or you know, even a 20 unit apartment, and they don't even know really basic stuff, like what does cap rate mean, or whatever. I'm like, Don't do this.

 

Michael:

What are you doing?

 

Paul:

You're risking your family's money and your friends money, and it's almost sure to be a failure. I mean, the money. The big money in commercial real estate is buying from a mom and pop operator and improving it. And we've seen people double or triple. I'm doing a case study this week with somebody you know, somebody who was able to quadruple their investors joint, you know, the group of investors equity quadrupling, in two years. It was from buying a $10 million Self Storage Facility from a total mom and pop operator who didn't know what he was doing.

 

And so don't be one of those. And the way to not be one of those is go get a paid coach, or an potentially an unpaid or semi paid mentorship with somebody who's way ahead of you. And then like I said, books, podcasts. cetera is really helpful.

 

Michael:

Yeah, that's such a great tip. I do a lot of coaching inside the Roofstock Academy. And I'll get folks in there sometimes say, Oh, I want to go big for my first one. And I said, Well, why? Well, because I want to do this and everything. And I said, Look, I can almost guarantee you, you're going to make mistakes, you're going to learn lessons. Would you rather learn those lessons on a big, big property with a lot of risk or on a smaller property with a whole lot less risk? and 90% of the time? That's so let's go learn. Let's go learn with training wheels, and then we can go ride our bikes.

 

Paul:

Yeah, I agree. It's so true. And I wish I didn't know that years ago. I mean, I made so many mistakes like this. And, you know, I love what the first Nobel Peace Prize winner Paul Samuelson, in economics from the US. He said, investing should be boring. It should be like watching paint dry are watching grass grow. If you want excitement, take $800 and go Las Vegas. You know, it's it's so people wanting to be part of the excitement is going big, go big or go home. Right. But, you know, life doesn't work that way very often. And when it does, it's such an exception, that, you know, they write books and tell stories about people. I mean, people think, you know, Jeff Bezos was an overnight success. He has massive pain and failure in his background before he got to where he got, you know,

 

Michael:

Yeah, it's so true. People only talk about the highlight reels no one talks about the other 99% that fail or don't make it or that, you know, go home crying,

 

Paul:

Right.

 

Michael:

Yeah. Yeah. Curious.

 

Paul:

That's true.

 

Michael:

Curious, Paul, what is one of you know, a couple of the big mistakes that you see newer investors make as they make the transition to multifamily?

 

Paul:

That's good. One would be just assuming that rent, you can increase rents, like 6% a year every year, but costs are only going to go up 2% make a ton of sense. Although it could happen, you know, it could happen if you can find some efficiencies and things like that.

 

Another one is not aligning with a great property management team. You know, I mean, if you, I mean, I think finding a property manager is critical. I know a guy who's a medical professional, I met him recently, and he had 42 units. And he was man… He was managing it himself, trying to run his medical practice and managing 42 units. He's like, well, the cash flow will be destroyed if I got a property manager. And I'm like, Yeah, but your life destroyed. Now, you know, like, he was telling me how a tenant had just moved into a place on Monday and on Wednesday, set it on fire. I mean, that was like three days before I met him.

 

And I'm like, okay, so if you just own that, and you weren't the property manager, you'd still have a ton of hassle here. But as the property manager, and the owner and asset manager, you've got, like, 10 times more. And so I think that is one big mistake people make, assuming they can do it on them on the side. And assuming it won't be that much hassle. And assuming that there won't be any vacancy, things like that.

 

Tom:

Pennywise pound foolish, I guess, Penny penny wise, sanity foolish.

 

Paul:

Yeah right. Yeah, sure.

 

Michael:

One big one that I see is when folks start to make bridge this gap, and it could even be in residential multifamily, but they'll look at a single family house that rents for 1000 bucks a month, and they'll look at a duplex that rents for 1000 bucks a month gross, you know each side for 500 bucks a month, and they'll evaluate those two properties as the same. And I would say that they're not because the folks renting that single family are going to be a different tenant class in the folks renting the duplexes. So don't you've got to go beyond the numbers and don't live in the spreadsheets because it'll come back to bite you in the keister.

 

Paul:

Yeah, sure. Well, that's great point. Appreciate that, Michael. That's good.

 

Tom:

Paul, I think we're we're kind of in an interesting economic point right now where we've had this this wild run up on appreciation, and maybe it will continue. Maybe it won't. I'd love to hear kind of your crystal ball thoughts around the market, rent prices, just kind of a general musing on what to look look towards and coming up and 2021 and into 2022.

 

Paul:

Yeah, well, I was sitting in airport, going in a tiny little airport in Belize city going to The Real Estate Guy's annual conference in June, and I was sitting next to a well dressed guy and I started a conversation with him. It turned out it was Doug Duncan, who was the chief economist for Fannie Mae. And I was like, Well, okay, what do you really think about inflation? I really think the same thing I'm saying publicly, I think it'll be in the fives this year. It'll be like 3.8% next year. I'm like, why do you think it'd be so low 3.8 as I said, they just injected 30% of cash that's ever been created in the US. It has been created in the last 17 months. So why won't inflation just go through the roof?

 

And he explained that it's not only the amount of cash, it's the velocity of spending. And he said, he thinks there's gonna be a lot of velocity this year, you know, kind of in this post, you know, like the year after 2020, where COVID was just reigning and ruling over all vacations and everything else. But he thinks there's gonna be a big spending spree this year, of course, we're seeing that tons of shortages. I mean, go try to buy a four wheeler or a four wheeler trailer right now you can tell I tried really hard to find anything or try to find a car. You know what the chip crisis, but it's the same in real estate.

 

And Doug Duncan went on to explain, he said, I think the shortage in the real estate market is real. He said, I started sounding a siren in 2014, saying, you know, seven years ago that there was this growing supply and demand imbalance, which is sort of what I was talking about earlier, that includes multifamily, and single family. And he said that the amount that in balance is going to take years to catch up. And so it really does seem like the price inflation in, you know, rents, and single family home prices and apartment prices, it seems like it's real, it is justified. And it seems to me that without some huge exogeneous shock to the economy, which, you know, we found out we could have, of course, with COVID and other things. Aside from that, which is kind of a black swan issue. It seems like the cap rates are going to continue to stay compressed, returns are going to continue to stay low, it's going to be hard to find single family or small multifamily that cash flows, and people are going to be relying on appreciation. But that's what we've been talking about earlier that that's really risky. Do we want to take risks like that?

 

Well, I'd say this, align yourself with people who have decades of experience if you're going to, because right now, if you're just coming in near that, what could be the top of the market, where the margins are razor thin, if existent at all. And you know, if there's a shock, or if there's a downturn, you could get, you know, in a lot of trouble getting a 97% loan, and then the value drops by 20 or 30%. It's I think it's a very risky time to get in, even though what I said a minute ago, it seems like the prices are justified, according to Doug Duncan's analysis, which made a lot of sense.

 

Tom:

Thank you for that, that I feel very optimistic about, you know, in hearing that, and that makes a lot of sense. How would that how does that translate into, you know, your strategy and going into the next year? Is it you know, kind of cautiously continuing to deploy capital into the space? Or are you know, I know, there's a lot of other strategies, perhaps, you know, new builds or build to rent, new development. I'd love to hear your thoughts on that, on translating that information into action.

 

Paul:

Yeah. So Tom, you know, Warren Buffett, that sounds like I'm going to go on a bunny trail here, and I am, seriously, he bought, he hated tech stocks, and he was famous writing it. But when when Steve Jobs died, I think it was 2013 or so Apple just was really, really stagnant. And he saw a huge, he saw his grandkids, how they were addicted to all these Apple products. He saw the consumer behavior among a lot of, you know, Apple people that they just couldn't wait to get the next thing that they were basically addicted and chained to Apple. And he said, Look Apple’s, like in the $20 per share range. And so he started quietly buying it. And he became the largest To my knowledge, the largest shareholder outside of apple in Apple stock.

 

And he did it because he saw intrinsic value. And that's where I'm going here. We need to find, I think at this point in the cycle with this much uncertainty, we need to find intrinsic value. And by the way, Buffett made massive, massive profits for Berkshire Hathaway, by his bet on Apple as it went up through the roof after that, and because people saw this something he saw something that people couldn't see before that this kind of crazy quote, Michelangelo said, I saw the angel in the piece of marble and I chipped away all the other stuff to get the angel to, free the angel.

 

And so the point of that is there's intrinsic value in certain real estate We've got to find that I told you the story about the guy I invested heavily with two years ago, who bought a $10 million self storage. And now he's quadrupled our equity in it. Because he saw intrinsic value. He saw stuff others didn't see. The guy in Gatlinburg I told you about, he has a way of unlocking intrinsic value in these cabins in to maximize the rental value. I know a guy in Minneapolis, he buys single family homes, and like for 400,000, but they only cashflow 1500 a month as to a single family renter. I'm like, how are you making that work?

 

He said, I furnish them and I rent them to students to beds per bedroom, to like for like five or $700 per bed. And the cashflow is massive because he's able to rent it to like eight students at like 600 a bed that's 4800 on a 44,000 excuse me, 400,000. home, he found intrinsic value. And that's what happens when we buy from a mom and pop, they don't have the knowledge, the desire or the resources to maximize the income and maximize the value of these commercial or residential assets. And so by buying from a mom and pop by seeing the intrinsic value, we have a chance to beat whatever happens in the realm of the market, the economy rents, all that stuff, we can beat it even if interest rates go way up from like where they are to 5,6, 7 range, which I doubt they will By the way, but even if they did a strategy like this can outfox that. And so I would just say that look for intrinsic value. Intrinsic value being the value that's not, that's hidden from the eye is what I meant.

 

Michael:

Yeah. I love chatting with you, Paul. Because every time self doubt starts to creep in on this redevelopment project I'm working on it's taken longer. It's become more expensive than I initially anticipated. But I hear things like this. I'm like, Yes, I'm doing the right thing. This is the right call. So it's it's exciting to hear and it's definitely refreshing to hear and something that I talk a lot of out to investors that I speak with, it's Hey, you know, everybody can see the same set of facts. But it's those who have kind of can look through things at a different lens or through a different angle, that you'll see something different and allows you to see and perform or others can't.

 

Paul:

That's great, man. Thanks for saying that. Michael. I'm glad to hear about your project. I'd love to hear more about it.

 

Michael:

Yeah, absolutely. Absolutely. Tom, any final thoughts for Paul before we let him go?

 

Tom:

No, this is uh, I love all the the Oracle from Omaha references, the Warren Buffett references and yeah, I love these conversations. Yeah. Thank you so much for for joining.

 

Paul:

Yeah, you bet. Well, I'm actually working on the book called Warren Buffett's rules for real estate investors and really excited about it, because I'm, we're taking two friends of mine and me are taking his principles and applying them to real estate. So it's really fun.

 

Michael:

When is that coming out, Paul?

 

Paul:

Well, I've got a couple publishers talking about publishing it, we had it. We had it about I think 75% done a year ago. And then I just completely stalled on it. And so I just reopened all those Google Docs yesterday, hoping to get it done by the end of the year and come out maybe late 2022.

 

Michael:

Awesome. Well, we'll definitely have to have you back on to talk about it. Cuz That sounds very interesting.

 

Paul:

Thanks, I love to do that, man. It's great to be on here.

 

Michael:

And for folks that are interested in learning more about what you do with syndications and learning more about you where should they go? How can I get a hold of you?

 

Paul:

Yeah, you know, like I said earlier, I had a hard time figuring out how to get in, do commercial real estate. And so I've written a guide for people who want to get in, it's actually a quick, quite simple, five day little course they can get that at wellingscapital.com/resources. That’s wellingscapital.com/resources.

 

Michael:

Awesome. And that's a free download for folks.

 

Paul:

Right.

 

Michael:

Fantastic. Well, Paul, always a pleasure to have you on thank you again, for spending the time with us really appreciate it really insightful, and definitely look forward to continuing the conversation.

 

Paul:

You bet, guys, thanks so much. Talk to you soon.

 

Tom:

Thanks, Paul.

 

Michael:

Alright, everybody, that was our episode a big, big, big thank you to Paul for coming on. Again. Always a pleasure to have you and definitely looking forward to having you back on and talking about your book. Paul's a wealth of knowledge, and feel free to go back and listen to that episode again. As always, if you'd liked the episode, please feel free to leave us a rating or review wherever you listen to your podcast, and we'd love to hear your ideas about future episode topics. Happy investing. Happy investing.