Archives for June 2022

Distressed Commercial Real Estate Investing with Jake Harris – CRE PN #359

Jake Harris 0:00

When you’re having to convert and do heavy value add is like bring in new plumbing, bring in a kitchen, bring in that electrical load those, you know, it’s like the amount of construction work, the heavy value add component of it doesn’t make sense. And the only reason in the areas that it does is you’ve had such an uptick in values you can go buy those at $20,000 A key when everything else is trading at $100,000 $1 or $200,000. You’re you have enough margin to effectively get in there.

Announcer 0:35

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.

J Darrin Gross 0:55

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is Jake Harris. Jake is a best selling author on distressed commercial real estate with over 18 years of experience in real estate, construction and investment management, and has been featured as a national speaker on his expertise. Over the past six years, he has managed and developed and acquired over $200 million in projects and over 250 million in the development, or he has over 250 million in his development pipeline. In just a minute, we’re gonna speak with Jake about what to do before investing in distressed real estate. But first a quick reminder, if you like our show CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, we encourage you to subscribe. With that, I want to welcome my guest. Jake, welcome to CRE PN Radio.

Jake Harris 2:30

Thank you, Darrin, I appreciate that.

J Darrin Gross 2:32

I’m looking forward to our conversation. Before we get started, though, if you could take just a minute and share with the listeners a little bit about your background.

Jake Harris 2:43

Yeah, so a question I get asked often, where do I get started? And there’s a couple of different versions of that, that I’ve kind of reflected upon over my life. And you read that bio 18 years experience? You know, yes, but the reality is, is like when I was a kid, my parents had bought an old farmhouse it built in the late 1800s in the Central Valley of California. And it was the farmhouse of 1000 acre orchard. And by the time we bought it, it had been parceled down to I don’t know, I think an acre and there are some other, you know, multiple acre kind of parcels around our property. And we lived in a 16 foot camp trailer, a family of five. And we read, built or remodeled this house that was built in the 1800s didn’t even have a foundation, it sat on rocks. And we had to jack up the house and pour foundation and set the house back down. And so when I was at my mom’s the other day, I saw a picture of my brother and I carrying a sheet of plywood. And we were probably like seven, I was seven he was five or nine and seven were a couple years apart.

And so I looked at that. And then I looked at some other photos as we were taking like a bath and a wheelbarrow. Again, we’re on a 16 foot camp trailer. And so now I look at that as like how did I get my start? How did I get started? And I was like really I kind of feel like I grew up on a construction site. And it was that that epiphany of like, I’ve kind of been doing this my whole life led by my parents for the relevant in the last 20 years. I’ve gone off to the army. Somebody handed me a book 20 something years ago of Rich Dad Poor Dad, that purple and gold book and I read that and it was like a light bulb. And I think maybe I reconnected with that time of being that kid you know fixing up houses and I was like yeah, this is what I want to do. It took me a few years until I started getting an investing Myself, I after the army, because I didn’t know how to do this, I didn’t know how to get started, like the concepts were not, you know, too crazy and Rich Dad, Poor Dad is a pretty basic, you know, information, buy assets, not liabilities.

But it was like I didn’t know how to buy assets, I didn’t know how to even ask anyone. And so I got a job bartending at a country club, after I got out of the army. So I thought being a bartender and hanging around rich people, and I would ask them advice. And then they gave me some advice of getting into commercial real estate. You know, I illustrate this is because a contractor is involved in everything, real estate, I don’t care if you’re moving dirt in a subdivision, you’re remodeling your kitchen, you’re building a high rise, a contractor is involved. And so he said that the the people that come from the trades that know how things are put together, and it’s this interesting relationship between a contractor and an investor is you’re after the same dollars, what the material costs, what the labor costs, then you’re kind of after that, and so it’s a dance and your partner’s, but you’re also trying to get known keeping each other’s you know, honest and out of each other’s pockets, you know, as far as like, I want more as a contractor wants as much money as they want, the investors want as much money as they want as the owners. And so you have to balance that out. And so getting that foundational knowledge of going into commercial construction, was really what became my foundational experiences 20 years ago, of understanding how buildings were fixed up kitchens, baths, you know, building out an office building. And so my first projects were building industrial centers, doing tilt up concrete buildings, and then I got into doing some stuff for equity office properties. And that was how I cut my teeth 20 years ago.

J Darrin Gross 6:57

Well, it certainly sounds like you have been in real estate from the very beginning. And love the story about the, the farmhouse there and in California, that’s awesome. So if we can, if we can back up just one second here. And I wonder if you could define or give some definition to what you consider to be her what is a distressed property? Or how do you define distressed real estate.

Jake Harris 7:30

So distressed, and obviously, I wrote the book in 2020, I was anticipating a lot more distress, the government went out and printed $20 trillion dollars, and all real estate values tripled. So I was wrong. The distress that I thought was coming down the pipeline was that they kick the can down the road. But the principles in the book are still, you know, foundational, in really, your fundamentals of investing in distressed real estate have to be a lot more robust than when they are in a, you know, economy that is booming.

And so the reason being is you’re not going to be able to get all the information in a distressed property situation. And so when I say distressed is there’s lots of versions of distress, there’s distress, say a tenant has moved out, there’s distress economic factors like Detroit when the auto industry left an entire market, and then all the jobs got sucked out of there. And it may be such a negative distressed environment that is not even worth investing into, in distress in buying real estate and oh nine and 10 and 11 was even though there’s systemic job loss and values were falling, by the day, there was such a steep discount on what you could buy real estate for it was beneficial to buy and oh nine and 10. And so what you’re not trying to do is time the market and say, Wow, we’re in a recession or the values are going down, what you really need to do is have a fundamental understanding of how you’re going to manage this investment.

And where we would underwrite a declining value. So if we said hey, it’s going to take us six months to fix up this property or reposition it or do something to it because it has some functional obsolescence. So whether it was deferred maintenance or whatever it was, we could take it this and say today, it’s worth this and then in six months is going to be worked down here. We would only be willing to buy it if it was way down here on the price point so that we still have a profit margin leftover once we’re finished fixing it up. So that distress can come in a lot of different ways. In even in a booming economy. There can be distress, there’s death, there’s divorce, there’s you know, mortgages that are maturing commercial loans. You talked about this on your show that there are certain factors of risk is a lot of people that maybe took on bridge loans with very low interest rates, and then were anticipating that they could exit at even cheaper permanent rates.

And now all of a sudden, the rates have gone up 200 bips, you know, and now all of a sudden, they’re like, Oh, crap, what do I do, those things are causing distress. And so someone may be willing to get out of a property sooner, you know, do something along those lines. And where, obviously, I enjoy the title of the book, here’s his catching knives, is the the the, you know, economic saying is to avoid catching falling knives. While I was like, actually, in commercial real estate, a lot of these assets, trade once a generation. And so you have to be prepared for when they do trade, because it might be 10 or 20 years, the next time that asset actually does trade. And so if you have an understanding of a business plan, and how you’re going to structure that, and you understand the information of the, you know, interest intrinsic value of the sticks and bricks, you have the opportunity to invest into something. So lots of different ways in which distress can occur. And what you’re looking for is an understanding of that discount and providing a margin of safety when you’re investing.

J Darrin Gross 11:32

No, I appreciate you kind of going through that, because I think that, you know, when people say distressed you know, I think everybody has a frame of reference or a thought that comes to mind, you know, like you mentioned, whether it be it’s the property is all dilapidated, or, or like you said that the financing is coming due or the, you know, the plans didn’t go as, as they had originally planned. I think probably a lot of people think back to the, you know, the crash, oh 708 had a crash and just how much distress there was in the whole market, but not recognizing that in all markets. There there are properties and investors that are in distress and need need an exit. And so that’s, that’s good. So let me ask you so in just having said that, that the do you find that there are times when they’re when there are greater distress? I mean, like, as we’re looking, we’re facing a, you know, rise in interest rates? Do you would you expect there to be more opportunity as the as the change in the marketplace occurs?

Jake Harris 12:45

Yes, I think we’re already starting to see a little bit that some repricing in especially the secondary and tertiary markets, where people were, you know, really compressing down cap rates, meaning speculating on continued, you know, low interest rates, you know, profitability being there, I see that expenses are going to continue to go up, interest expenses are going to also go up and you hope that you’re also getting the rent appreciation or cashflow appreciation in excess of that as well. So when I look at that is there was a whole lot of buyers, and there still is a lot of dry powder liquidity in the market, you know, and so I don’t actually see a lot of massive market distress happening.

You know, I think the fundamentals of real estate are actually very, very strong, especially in an inflationary environment is you know, it goes up in value and all solid assets go up in value. Specifically, you know, some some conditions that you mentioned, I think there’s asset types and asset classes that are going to experience more discount and more opportunity to buy I am especially bullish right now in hospitality. We’re actually getting ready you know, we’ve been submitting some offers, acquiring some hotels, looking at roadside motels and hotels, in leisure oriented and markets. I have an investment thesis that that leisure drive to market is going to see an uptick, especially as let’s call it the work from home or remote work or a hybrid work environment. Once that, you know tube, you know that toothpaste is squeezed out of the tube it doesn’t go back in. I think office is going to be distressed a little bit more discounted more, depending on the market type and What, you know, the clientele is service there? I’m not really quite a buyer on office right now, because I haven’t quite seen this play out as far as how some of these hybrid work environments Connect.

But when I’m looking at it is we’ve already seen a significant uptick in road trips, RV sales, people are willing to drive more even though that the gas prices are more expensive. I think people are going to be more willing to revisit national parks, there’s been a big migration reshuffling on the country over the West Coast, California, Washington, Oregon have done a fantastic job of driving people out of the west coast, and they’ve gone in reshuffle do. You know, Idaho, Nevada, Arizona, Texas, Tennessee has seen a significant uptick, as people have relocated from other parts of the country also think that they’re going to check out the parts of the world that they move to, you know, the Smoky Mountains, and you know, the hot springs of wherever, they’re going to go to places that they haven’t historically gone.

So when I look at that those higher interest rates, the fluctuation of the pandemic, up and down, there may be some opportunities to acquire some of these if you have a strategy and a plan to get on the other side of this office, I continue to see as is some, some headwinds, some challenges, especially as interest rates go up, and vacancies are looking, you know, people just aren’t signing the long term leases, as much as they were, if you’re more pragmatic and willing to accept shorter term leases, or do some more, you know, co working environments make the environment, the office building, more engaging, there is possibilities to extract some some higher returns out of those. But, you know, again, every market is different, every sub market, you know, even in nuances of Portland, there’s areas that are doing really, really well and other areas that you’re you’re stocking and you probably wouldn’t want to buy at what the currently traded prices are.

J Darrin Gross 17:16

Now, no doubt who I wanted to ask you you commented on hospitality how you’re bullish on that. And if you’ve got some opportunities you’re looking at? Are those are you looking at those as hospitality in the you know, more of the temporary housing like Hotel Motel kind of thing? Are you looking at those as an opportunity to convert to multifamily or what’s your, your,

Jake Harris 17:47

I think hospitality as hospitality, I, so I see. So a combination is more of these hotels are being taken offline, because they’re being converted to apartments. And actually, very few I’ve seen makes sense from an economic standpoint, because oftentimes, you’re talking, let’s give you an example, a hotel room is typically about 250 300 square feet. That’s a little bit difficult for a lot of secondary and tertiary markets to make that as a viable unit. So what happens is, you oftentimes need to take two of those units and convert them. And so now you have a 500 square foot apartment, you can put a kitchen in there. If it’s already like a suites, and it’s already got a kitchenette, then it’s easier and the plumbing is already there. Those are the ones that kind of make a little bit more sense to convert that to kind of a micro unit, because the plumbing, when you’re having to convert and do heavy value add is like bring in new plumbing, bring in a kitchen, bring in that electrical load. Those, you know, it’s like the amount of construction work, the heavy value add component of it doesn’t make sense.

And the only reason in the areas that it does is you’ve had such an uptick in values, you can go buy those at $20,000. That key when everything else is trading at $100,000 $1 or $200,000, you’re you have enough margin to effectively get in there. Some of those are being converted to affordable housing or homeless shelters or other things. And so we’re seeing a decline. And that motel hotel class that the kind of roadside, nobody’s building that nobody’s building a new product of that there’s no you can’t build a $50,000 key hotel like it doesn’t exist. The sticks and bricks cost you $100,000 to build so like as they take more of these offline. I see that environment in those category of hotels and motels. actually be coming more profitable over time.

And actually I do my thing is to deep flag them, get rid of the Super Eight get rid of the Days Inn, get rid of the Motel Six, because they have a declining valuation, they you get charged 10 to 20% and franchise fees to have a Super Eight and be $59 a night, you know, and it was like your entire profit margins, you know, $8 what happens is you need to decouple from that $59 A night room, right, you need to do a remodel, but in the location becomes very, very critical to this is you have to have some top end ability to now rent those out for 139 a night or 159 a night and that’s going to be and you know, like Cannon Beach, you know, it’s going to be you know, in Morro Bay, it’s going to be in, you know, Yosemite or Santa Fe, New Mexico where some of these markets where you have a little bit more of fluency, major metropolitan areas that somebody will pay that.

And what I believe is as the rich are getting richer, as this inflationary and the money is flowing down from the government, people have a little bit more disposable income, they’re not willing to stay at the $59 a night hotel, they want to stay at the 139 or 159, especially as they’re doing kind of a road trip. So hospitality for the hospitality stake. There are people that are doing those heavy conversions. I’ve done some where I’ve converted office buildings and multifamily right now I’m a little bit I’m gonna say not shell shocked. But you know, construction sucks right now is like supply chain sucks, like every single day, it’s like a new problem of what material you can’t get. So for the fast low hanging fruit is doing cosmetic remodels of an existing hotel to a hotel is a lot easier than converting it to something else.

J Darrin Gross 21:58

Makes a lot of sense. And again, kind of your your thesis there about how you know as the the market loses some of this hospitality product because of the conversion that’s going on. And then you have the uptick of available, you know, renters or lodging or people seeking lodging based on you know, the the demand. It seems like that’s a that’s a good good spot to be in for a well placed property kind of thing in like your thesis you’ve talked about around leisure and drivability, the thing that makes it makes a lot of sense. I’m curious if you have any kind of a sense of what the possible outcome will be with Office. Can you come in and on some headwinds are facing Do you see any kind of a play or an opportunity for conversion to a different use? Or you have any sense of what what might look like?

Jake Harris 23:05

Yeah, I’m actually just finishing up a project right now I bought a 10 story office building in downtown San Antonio on the Riverwalk, and it was an opportunity zone. I know Portland has quite a few. There’s a lot of other cities that have opportunity zones. So you need to do a significant remodel to qualify for an opportunity zone investment. And so I think converting office to multifamily makes sense or converting it to a hotel or converting it to one of these other uses, but especially multifamily, it makes a lot of sense. Because the existing infrastructure of the building, I particularly like historic buildings, they have some inherent challenges with them, but they’re aesthetically a lot more pleasing. There’s some story in history to them, that you can take advantage of, versus like a 90s office building, that’s just one of those, you know, glass, you know, you know, got beige tinted glass curtain wall, those I think are going to be a little bit more challenging to convert to a multifamily than it is to a 1929 office building that has traditional type windows that you can configure in the right layout.

The reason I also like historic buildings is it opens up the possibility of financing them with like historic tax credits or renewable like we use PACE financing. We use some other mechanisms to create some structured finance or kind of almost like financial gymnastics to create, we’re gonna go buy this for 12 $15 million dollars, we’re gonna do a $15 million remodel on it, but when it’s done, it’s going to be worth 50 million. You know, it’s like that is the math that you need it to be able to get through and then again also that kind of margin of of safety. So it’s like most investors are looking for the multifamily sugarcoated, paint carpet clean up bumper and 50 bucks a month, and then we’ll just hope and move along. I’m not very good at those. Because a lot of speculation is in the future rent gross throw, when we’re doing those heavy value ads, we are looking at it, we’re buying the building for 75 bucks a foot, we’re gonna put $150 A foot into it, well, that’s still under what it would cost to build brand new. And so if it’s still under, it’s called 200 $300 a foot, you know, build cost, that makes sense. And we have some additional tools like the historic tax credits, or new market tax credits or low income housing tax credits or PACE financing or these other toggles that we can pull to make it financially beneficial to investors.

That’s where you can do that. Not a lot of these properties make sense to do that. But I also see that’s how you were going to also take some of the Office product. In some markets, it’s maybe been overbuilt, I haven’t quite figured out how to do that with the, you know, 80s, you know, REIT, office boom, you know, towers and Dallas and Atlanta and everywhere else, they got built during the REIT, you know, kind of boom days. But I’m sure, given enough money, or enough opportunity, someone will figure it out.

J Darrin Gross 26:32

Ya know, I appreciate you kind of given some examples there. Couple of questions that that wanted to ask you on that. You mentioned, PACE financing, and I’ve talked with a couple of different people that have used that. And other financing tools that you’ve been using? How important do you feel like those financing options are to the success of your project? Are those really kind of do they push it over the edge? Or is it is it profitable? If you just went to conventional financing, but this just sweetens it or how integral are those options to the success of a project like that?

Jake Harris 27:15

Yeah, so I’d say so PACE financing is, I think a good vehicle for or an alternative to like EB five money or mezzanine financing. So, you know, if you’re trying to use, you know, mezzanine financing, you’re, you know, typically going to be paying, you know, double digit interest rates, EB five, had a, you know, kind of a boom, and then it kind of pulled back as they tightened, you know, some of that, and then they added more, you know, hurdles that you needed to jump through. So the PACE financing, I think, is really looking at that as that alternative to pref equity mezzanine or EB five, and it creates and becomes a little bit of a sleeve in your capital stack that is in replacement of one of those. And I think any one of those could be interchangeable. I haven’t seen a whole lot of them where they’re, you know, senior pays and mez.

But again, from a return, you know, matrix is when you can secure long term kind of financing at a fixed rate. That is always beneficial because you understand what you’re going to be paying. Some of those are amortized, you know, 2025 years, it’s oftentimes married up to the life expectancy of the equipment or the energy savings that you’re putting in there a new roof, new windows, HVAC, something along those lines, and they’re trying to amortize them during the life of that particular equipment. So it creates, you know, can we lock in 5% interest on 5 million bucks for 25 years, okay? That’s less than mezzanine, that’s less than preferred equity at an eight preffer, something like that, plus some upside, it’s less than, not less than EB five, EB five, you know, has some advantages to it, but maybe you just get the deal done. And it’s an underwriting department. It’s not open to investors, you know, collectively interested in your project.

So, it is just one of those additional tools in which you can make a deal. Make sense? You know, there’s also ways just to come in and protect your downside by bringing in more money, you know, lowering your debt structure overall. And so if you have more money, you know, you may not need pace, you know, but when we see things, we’ve had some of those in particular, we’ve had some project cost overruns. stuff that, you know, two years ago when we signed this contract, and now they’re just like, sorry, your appliances are double, you know, sorry, your windows are delayed 689 months more. And so then it’s like, well, that additional carry cost, what is that do from replacing those? Well, now we can use those, you know, buckets of money, you know, to say to help cover those costs and not have to do a capital call or bring in more investors capital?

J Darrin Gross 30:31

Yeah, no, definitely. Interesting times we’re in now with I mean, it’s always a challenge whenever you have, especially a rehab project, where you’ve got, you know, your opening walls, and whatever you might find kind of thing, but definitely some some interesting times with supply chain demand, and interest, inflation, etc. going on right now. Just curious. So you mentioned kind of bringing in capital? Are you for the projects you’re doing? Are you typically syndicating? Are you doing these? Joint Venture? Are you buying hold? What, what’s your basic investment strategy?

Jake Harris 31:17

Yeah, so as a private equity company, we kind of do all of them. We and it really is we’re oftentimes structuring deals for clients, you know, high net worth, high net worth individuals that want access to alternative investments that want to be in real estate, sometimes that has been in a fund, so you’re going to get multiple property, you know, diversification and locations, some of those are going to be syndicated, or, you know, a single purpose entity, you know, fund or, you know, investing into, some of that is going to be, you know, maybe we’ve structured some jayvees In the past, because, you know, they really liked that deal. Or we said, hey, this is more than we can take on or our bandwidth of our team, it’s kind of outside of our expertise. So we’ve placed some capital with somebody else, and then created some JV mechanisms.

Again, what we’re typically, you know, seeing is, you know, kind of mid teen IRR is bumping up into mid 20 IRR, returns to investors, depending on what we say is the risk profile development projects have higher risks. So we want you know, higher returns and those typically start for us at like a 20% kind of IRR hurdle that we’re trying to get to because there’s going to be some ups and downs in that are unknownst. I mean, deals I think, you know, that are just coming finishing up right now we did three, four years ago, I had no pandemics, no epidemics and our underwriting like literally none of that. And so then just like, well, let’s figure out what we’re gonna do with this. And those are kind of a little bit. Of course, that’s a black swan type event, but I was like there is and almost with 100% certainty, I will say, no pro forma has been 100% accurate that I’ve ever done on any project and 20 years.

J Darrin Gross 33:15

Yeah. That’s always kind of a frustration you do the best you can with a budget. And try and get through it as quick as you can, so you can get the next one. Jake, I’m curious, how would you encourage investors to prepare for him? We talked a little bit about it, maybe this is kind of the answer to but you know, prepare to take advantage of a distressed situation. He mentioned, like, you know, just absolutely knowing the market is that is that kind of the fundamental kind of the cornerstone of, you know, putting yourself in position to be able to take advantage of, of a distressed property.

Jake Harris 34:08

So I think the, the number one thing is I have a lot of, you know, because people I’m on podcast, I do these, I have people reach out like, Hey, I’m looking for a good deal. I’m looking to get started in commercial real estate, like, what do I do? And I was like, you know, when somebody comes to me and says, I want a good deal. Or hey, can you look at this deal and help me underwrite it? Is it a good deal? And so when I say this, and I’m going to give you kind of an unpack this a little bit these because I don’t know, because it really, really depends on the person. And so something that’s a good deal for me, may actually be a terrible deal for you, Darrin, it may be because what it’s trying to do is offset this and fortunately, I’ve been had an opportunity so I went I went back to grad school as a lot of understanding of portfolio kind of management is, you know, because it was an international real estate degree in finance and knows, like, how REITs balance out their portfolios, how are you diversifying yourself so that you know, especially even this podcast, in general, mitigate risk.

So then when so something that may be a good deal for me, could be a terrible deal for you, because it is already over, you’re already overweighted in that in your individual category. So what I talked to people about first is figure out what you want to do. Who are you? What’s your, what’s your like? Mo? Like, what is it that fires you up? What excites you and stop looking necessarily for the good deal. And then what you can do is you can understand, like, what is it that you want to do in life? So for me, I was talking to somebody the other day, they’re doing rentals, and they’re renting out every single bedroom by to an individual tenant. And so they have, like, I got all these things I got, like, I don’t know, 60 different people that they’re renting out and all these individual rooms, and he’s like, look, I’m crushing it and making their turn, I look at that. And I like cringe, I’m like, like, that sounds like the worst version of hell for me. And I was like, There’s no way I could maintain that for a very long period of time, like, because that just does not interest me at all, like the returns could be double all the other deals that I’m doing, but it’s not sustainable for who I am.

And so that’s why I say figuring out yourself, and what interests you first, I like hospitality, because I like the interaction and the toggles of creating community and how that impacts people and creates a very dynamic ripple effect in social media and Instagram and driving direct booking and that, you know, bumps, your food and beverage and other things. Where there’s some people that are like, I don’t want to do that at all I’ve done manage Airbnb is no interest, I want an industrial tenant that signs a 10 year lease that I never talked to them. So they’re like, that’s more exciting to me. And so then again, what we can start doing is figuring out like who they are first. So then when you understand who you are and what you’re trying to achieve, because you have to have a goal that you’re aiming at a good deal. What does that mean? That’s a completely subjective to what a good deal means to you. And I also think words are very ambiguous. So what someone says is, I’m aggressive, I’m an aggressive investor, well, what does that mean? Does that mean, you’re willing to go put a million dollars into Dogecoin? And you’re waiting for it to go up to 10 million, or maybe zero? Or are you like, I’m aggressive, I’m looking for a 12, or 15%, return on a multifamily in the urban core of a major city, that, so aggressive is a ambiguous term.

And so like when we can start aiming at is I’m trying to achieve $200,000 A year passive income, because that’s going to allow me to quit my w two job and start traveling more. And let’s be honest, everybody wants three things, they want more money, they want more sex, and they want more power. Really, when you break it down, is all the things that we’re trying to do is achieve that is we want more free time, so that we can, you know, take care of our partner, so that we can, you know, have more power, we can have more sex, we can have more travel, we can enjoy those things. But what it is is like how and what those fundamentals are that get you to that point. And so like defining, okay, at $200,000 a year passive income is what I’m trying to achieve, then, and I don’t want to lose this, now we can start putting together a framework of this is the type of deal that works for you. And then that good deal, or that market, or that asset type is, is niche specifically for you. And now you can go in and invest into that. We see this a lot of times.

And I see this a lot of times as Dr. So and so this making a million dollars a year, they’re paying half a million dollars in taxes, and they want to start buying and owning real estate. And I look at it and be like No, you don’t you already work 80 100 hours a week, what you need to be as a passive investor, you need to invest in other people’s funds, you need to invest into their individual deals, or JV or do other things because you don’t have more time. You think because you’re super smart. You can figure it out and be like, but that’s actually a fool’s errand to go down and go buy a $2 million retail shopping center. What you need to do is throw some money into a $20 million fund have someone else that has already proved it out already has system already has models and maybe create some structure around what it is that you’re trying To achieve.

And so when I say that is that gives you some fundamental understandings of the things that you already are good at. And then you can start preparing in the areas that you lack. And sometimes that’s assembling a team. Sometimes that’s gathering information about a market that you’re interested in. And so when you have that information about a market, you’re ready to strike when that price hits, because, you know, hey, this is the return that I’m trying to get. This is the market I’m trying to be in this is the, you know, cash flow. And so like we’ve we some, oftentimes, like, identify like, this is our strike spot, it’s a 50 to 125 key in these markets at this price point, it does revenue, and then we get very, very specific, that Aim small, miss small, because then we know what is we’re good at and what we’re looking for. And then it also becomes a lot easier to say no to everything else. When you have that focus, and when you know what you’re aiming at, then you can actually start getting and diving into and creating good deals, I talked about some of these things in the catching knives, the book that I talked about, because it’s like assembling your team, I might have construction knowledge, but maybe you don’t have construction knowledge.

So you may be needing to develop relationships with a contractor, you may need to be developing relationships with a broker, you may need to be developing it with a lender, an insurance guy like whoever it is, like you need to understand the things that you’re already lacking. So if you’re going to be an owner, and that is your future aspiration of you is to be a real estate owner, then you can start putting out and I’ve been doing this for 20 years, I’ve read and I’m a broker, I’ve done hundreds of millions of dollars of transactions we’ve done, I don’t know 1400 transactions in 23 states. And I hire real estate attorneys, I hire inspectors, I hire contractors, I there’s so many people that collectively become part of a team that I go do and by thing, even though I have all this experience, the more that I realize and the more experienced that I look at these things, the less I actually realized I know. And it’s super easy to skip over very basic fundamentals. Did you get all the estoppels and all the tenants?

I don’t know. I mean, well, I checked the lease. Oh, we just looked at the leases extract. Did we review all the leases in totality? Like what? What is their out provisions? What if JC Penney’s leaves as an anchor tenant? Oh, wait, they’ve already left as an anchor tenant. So this tenant can cancel their lease whenever they want, if they want and walk away, but I’m investing into it based on that. That’s why like a real estate attorney, I’m not good at reading legal contracts. Like I kind of glossed over and hit the highlights and if it’s really somebody’s like, I don’t do that I hire a real estate attorney to review my loan docs review. My you know, Lee says to reveal those and then like give me the feedback and like protect my ass because I don’t like doing those things.

J Darrin Gross 43:10

That’s I appreciate you expanding on that because I think the the summary there is know what you want, I mean, know what you you’re looking for be specific, and you’re gonna be able to identify a good opportunity. When it when it does show up. I get that he Jake, if we could like shift gears here for a second by damn an insurance broker, and work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically consider. We we first look to see if there’s a way we can avoid the risk. If that’s not an option, then we look to see if there’s a way to minimize the risk. And when we cannot avoid or minimize the risk, then we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is. And so I like to ask my guests if they can look at their own situation. And frame the question however they choose, you could be referring to clients investors, the market interest rates, on the political climate. However you choose to do so. And and look at it and determine what is the biggest risk. And again, for clarification. Again, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Jake Harris, what is the biggest risk?

Jake Harris 44:42

So, I mean, I’m gonna give you kind of It depends, because depends on who who you are, as an investor, an LP investor investing into a deal. I think your sponsor Are as your biggest risk. And so because they’re the ones that’s kind of captaining the ship, I think if you’re someone that’s buying real estate, your biggest risk is the purchase, actually, because and maybe you’ve heard this or maybe you haven’t heard this is you make all your money on the purchase. And if you overpay for an asset, it’s very, very difficult to correct course, and trim out the expenses. And then you’re kind of, you know, writing this, you know, failed investment out. And sometimes it takes so much more energy to even get out of it, then, you know, and you’d be like, all I’m trying to do is get my money back. And I see a lot of that right now. And alas, and actually, this morning, I was talking with a buddy, I realized I did not buy a single property and 2021. And actually, so far in 2022, I haven’t this is the longest period of time that I have gone without buying a property. I think in the last 20 years, I think this might be one of the only years I have not actually bought real estate at all, any property, and over a year time period. And so I was looking back at that. And I was like, Wait, I didn’t even realize that happened?

Well, because I have a very disciplined, you know, like buy acquisition model that I’m looking at. Part of it is because I lost my ass in the subprime meltdown, I became a millionaire. And then I had a negative network. I remember sitting on the street corner in Tucson, I was crying. I was like, you know, a grown adult, crying, and sobbing and praying, dear Lord, can I be worth no money. And there are so many aspects of my life that I look back at that moment of that rock bottom. And the least important of it was the losing the money. The least important of it was going from a millionaire to a negative net worth and wanting to start over at zero, I was 7580 pounds overweight, my relationships sucked with my family, the girl I thought I was going to marry it dumped me. You know, there was so many other things. And so lots of people focus on the money risk of things, and they forget about them 80 or 90%, that is the real life. What is your relationships like, you can make more money, you can’t rekindle the time of your relationship with your spouse, your kids, they kind of go away that opportunity to live those those, you know, Bucket List adventures, you grind, grind, grind, grind, and all of a sudden you realize you’re 60 7080 years old, and you don’t have the health to go travel and do those other things. Those are important. And so it depends on the category.

As a human, I think the biggest risks that we’re currently facing, is not pursuing the things that excite us that we truly, really want and living a very fulfilled life. And so I’ll give you a Maslow’s Hierarchy of Needs of premises. When you get and you’re trying to figure out how to pay bills, you’re just in a survival mechanism, you get to a levels of and I’m assuming that your audience members are starting to elevate up into that, because they’re thinking about investing is they’ve gone beyond some of those levels. And they’re starting to get into the self actualization kind of topper end of the pyramid of Maslow’s hierarchy of needs. And so then they’re trying to figure out what they are or who they are, what’s their purpose in life. And myself, and this is a constant struggle. And I think everybody has it is like they need to give themselves that validation or approval. Sometimes it might be a millionaire, sometimes it might be making the New York Times bestseller list. But what happens is you stop thinking about what everybody else wants for your life, and you start leaning into the purpose of what you are put on this planet for.

And then, because money doesn’t equate to happiness, your success and making money is not what makes you happy, you’ve elevated up to that. And I think there should be an extra category on Maslow’s higher hierarchy of needs, is when you’re living your purpose and life in the service of others, is when you unlock true happiness is when you unlock the ability to then really impact the world. Because what you’re doing is you’re serving people that couldn’t give you back and just not about a transactional equation of how do I make more money or know how can I benefit them? And they give me $1 back? How can I do this and you’re elevated out of trading time for money into an investment that you have a certain free, you’re living your purpose, and you’re pouring it into the world in the service of others is when you will unlock true true value and I think that’s what we’re all really Seeking, we have to get through some of these levels of validation, we have to get through this of self actualization we have to get through this. And again, this is also part of my own journey. So to me, the risk and the biggest risks that we’re all facing is not pursuing that. However, that mechanism looks for you.

J Darrin Gross 50:18

I appreciate you sharing that. That’s That’s some real insight. Don’t lose sight of the what’s really what’s really important. Appreciate that. Jake, where can listeners go if they’d like to learn more connect with you.

Jake Harris 50:33

So the main website that we share a lot of this content is catchknives.com. That’s plural knives. So catch knives.com You can sign up for the news list. We have like an insider list. We do some due diligence courses on PPE, people looking to invest into commercial real estate, especially first time or early investors. You can buy the book there at Jake.realestate on Instagram is where I’m most active that I managed. But we also have you know, a YouTube channel. I don’t think we have a Twitter, I might have a Twitter. I don’t know, my team might put out the content on Twitter, but I don’t manage that. So catchknives.com Or at Jake.realestate. And if you just type in Jake Harris real estate, you can pull me up on YouTube and Google and other places. I’m usually you know, near the top of those or maybe that’s just specific to me, because I google myself and it keeps populating myself. I don’t know how

J Darrin Gross 51:30

You’re gotta look up yourself some time when Google and see what’s there, so that’s good. Hey, Jake, I can’t say thanks enough for taking the time to talk today. I learned a lot. I enjoyed it. And I look forward to doing it again soon.

Cheers. I appreciate it. Thanks, Darrin.

All right. For our listeners. If you liked this episode, don’t forget to like share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 52:06

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Multifamily Agency Direct Lender with Alison Williams and Ana Ramos – CRE PN #358

Alison Williams 0:00

And one thing to point out, you know, our requirements are obviously going to be a little bit different than maybe a bank. And that’s because the lending that we do is all non recourse. So you know, you are not actually signing any personal guarantees. There’s no contingent liabilities on somebody’s balance sheet, which is extremely important, particularly if they decide to go and build another property, you know, because that is something that lenders look at in terms of credit and financial strength. So everything that we’re focused on is strictly based off of the property’s performance. And then we supplement that with the borrower’s experience. And obviously meeting you know, minimum net worth liquidity requirements.

Ana Ramos 0:37

And you know, what you just reminded me like one of the biggest things that I hear a lot of and I did close a portfolio recently, the borrower refuses to provide tax returns, most banks require tax returns. And on the agency side, we don’t require that for qualified qualifications. So we do ask for Financials, real estate schedule, bank statements, but we don’t require tax returns. And I think that’s a big plus for a lot of borrowers.

Announcer 1:03

Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you are an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.

J Darrin Gross 1:22

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guests are Alison Williams and Anna Ramos. Allison is the Senior Vice President and Chief Production Officer at Walker Dunlop. And Anna is a managing director for the West Coast and mountain regions. And in just a minute, we’re going to speak with Allison and Anna, about commercial lending strategies for multifamily.

But first a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see i tractive Our guests are Be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, we encourage you to subscribe. With that I want to welcome my guest, Alison Williams and Ana Ramos. Welcome to CRE PN Radio.

Alison Williams 2:43

Thank you for having us.

Ana Ramos 2:45

Thank you.

J Darrin Gross 2:46

Well, I’m really looking forward to our conversation today. Before we get started, if you guys could take a second and share with the listeners a little bit about your background.

Alison Williams 2:56

Absolutely. I’ll start so as Darrin mentioned, I’m Alison Williams and Senior Vice President and Chief Production Officer at Walker & Dunlop. I oversee the small balance lending department where we focus on smaller multifamily assets, usually loan sizes ranging from one to 15 million. I’ve got a team of seasoned professionals scattering coast to coast and Ana Ramos is one of our best and talented individuals out in the west coast and mountain region. And I’ll kick it over to Ana.

Thank you, Alison. Hi. And I am Ana Ramos. I’m a managing director here at Walker and Dunlop. And like we discussed I oversee the Western mountain region. I have currently a team of five and we’re here to definitely boost up the small loan production over the entire West.

J Darrin Gross 3:47

Got it? Yeah. Well, I’m excited. I’m excited to have our conversation and have a chance to talk with you guys today. The I guess the first question I’d have is Walker Dunlop. Are you guys a direct lender? Or do you go through mortgage brokers or not merge mergers but commercial real estate brokers?

Alison Williams 4:12

So I like to think of us as the best secret out there. So we actually are direct lenders. We were founded in 1937 and then went public in 2010. But we were actually one of the very first Fannie Mae approved just lenders that started back in 1988. So we are a direct lender for Freddie Mac and Fannie Mae and we also have our own proprietary lending programs. So if you know if there is a borrower out there that’s looking for direct financing or a broker that’s actually looking to access the direct lender than than we are that group. You know, historically, we’ve been top number one with Fannie Mae seven out of the last 10 years, and we are consistently a top five Freddie Mac lender and a top three husband are so dominantly playing in the multifamily lending space, just to kind of give you an idea of our scale and size in 2021, our company, you know, financed and sold over $68 billion in in commercial real estate assets, and the primary focus has always been multifamily.

J Darrin Gross 5:21

Got I was gonna ask you if it was limited or focused strictly on the multifamily or if you were across all asset classes, but

Alison Williams 5:31

We are we are across all asset classes. So we do anything that’s income, cash flowing or construction, that will be you know, cash flowing assets. So retail, hospitality, industrial office, self storage multifamily, but predominantly, our team when you look at, you know, the individuals in our origination, you know, they are truly focused on the multifamily space.

J Darrin Gross 5:54

Got it? In in in that I’m kind of curious, you know, the way the I was having a conversation with somebody the other day, and we got to the point of some of the pricing is getting hurt has been right, all until rates are starting to creep up, we’ll see what happens. But, but the price per door was getting so costly that look like the the construction, you know, option was looking more and more attractive. Are you finding that construction? Lending? Is? Is his or increased interest in that? Or is that that always been kind of steady out of your can? Yeah, yeah,

Alison Williams 6:33

I mean, I think construction lending, I’ve actually been probably it’s been more difficult actually. Because the in order to find vacant land, right, or repurpose land that’s extremely difficult and prime, you know, locations. So I think that becomes more challenging as cities and other areas get built out. And then obviously, with the rising cost of construction coupled with supply issues, we’re actually seeing more people hit pause on construction than ever before. And I think that they find that they can actually go buy an existing asset below replacement cost, and then do some type of value add and immediately add value to that property. And they don’t have to wait, you know, two to three years to actually have it built.

J Darrin Gross 7:18

Yeah, no, it’s always made more sense to me as if you can buy it for less than it cost to build. That’s, that’s a good option. I think Sam Zell, Sam Zell had that idea that was good. So Fannie and Freddie. In a small balance, you said under 15 million small balances at the range, kinda from one to 15 is where you guys define small balance.

Ana Ramos 7:48

Freddie Mac defines small and up to seven and a half, and Fannie Mae defines it up to 6 million.

Alison Williams 7:55

And then we have a proprietary program that goes up to 15. So what we find is that, you know, most of our clients that play and, and I use the to term loosely, small, smaller multifamily assets, typically are in you know, one to 20 million is kind of the asset valuation that they’re targeting. So it was really important that Walker and Dunlop for us to be able to serve, you know, basically all of those areas. So that’s why we we ended up rolling out a newly launched proprietary platform that could take us up to 15 million to make sure that we’re meeting the needs of the clients.

J Darrin Gross 8:26

Gotcha. No, I was surprised or not surprised. I guess, as you see, the values continue to increase. You know, what used to fit in the box doesn’t fit in the box anymore. And, you know, if there’s gotta be some sort of adjustment to the market, or to the platforms that are in play to make it still work, that’s good. Well, so let’s talk a little bit about, you know, the the the lender, the borrower lender relationship, and what you guys are looking for for or to lend on?

Ana Ramos 9:06

Yeah, I would say I’ll take it Alison, I would say on the Small Loan Borrower, typically the requirements that we look for minimum FICO score is 680. Or better than net worth, we’d like the net worth to equal the loan amount or greater and liquidity, we do ask for nine months of principal and interest payments of the existing loan that we’re about to refinance. And we also are looking for some type of multifamily experience, one year to two years is something that we really need to get comfortable depending whether it’s Fannie or Freddie to have at least that background and multifamily for the borrower to qualify, typically, we’d like for them to be local, but if they’re not local, we do ask for a third party management if they’re considered absentee, which is greater than 100 miles of the subject property.

Alison Williams 9:51

Yeah, and one thing to point out, you know, our requirements are obviously going to be a little bit different than maybe a bank and that’s because the lending that we do is all non recourse. So you You know, you’re not actually signing any personal guarantees. There’s no contingent liabilities on somebody’s balance sheet, which is extremely important, particularly if they decide to go and build another property, you know, because that is something that lenders look at in terms of credit and financial strength. So everything that we’re focused on is strictly based off of the property’s performance. And then we supplement that with the borrowers experience. And obviously meeting, you know, minimum net worth liquidity requirements.

Ana Ramos 10:28

And you know, what you just reminded me, Aly, one of the biggest things that I hear a lot of and I did close a portfolio recently, the borrower refuses to provide tax returns, most banks require tax returns. And on the agency side, we don’t require that for qualified qualifications. So we do ask for Financials, real estate schedule, bank statements, but we don’t require tax returns. And I think that’s a big plus for a lot of borrowers.

Alison Williams 10:55

Absolutely.

J Darrin Gross 10:56

Yeah. No, there’s a couple things that you said there that I hadn’t heard, I’d always heard, you know, non recourse was always like a preferred option, if you could get it based on you know, if things blew up, and there was some sort of a something unless you were committing fraud or something like that, that you weren’t necessarily on the hook. But for you to frame it in as much as that it improves your balance sheet to where if you’re going to develop another property or something. I mean, it sounds like that’s really probably the the real benefit of of having a non recourse loan there.

Alison Williams 11:29

Yeah, it’s definitely I mean, I think as people begin to scale and grow portfolios, they start to see, you know, the value and doing just non recourse loans, you know, not only from a liability standpoint, but also being able to give them access to more capital, and to be able to actually scale quickly. You know, like, as I mentioned, banks really are focusing on your contingent liabilities, what is your overall debt ratios look like? We don’t get into that we’re really just underlying valuing the property itself, and making sure that we’re comfortable with the cash flow that the property produces to meet our mortgage payments.

J Darrin Gross 12:05

And what kind of a cover ratio do you guys require with a debt debt service coverage ratio?

Ana Ramos 12:12

Typically are, you know, in larger markets, or minimum debt coverage ratio is 1.20? If not, across other markets were at 1.25.

Alison Williams 12:21

Now that’s up to an 80% loan to value so 20% down?

J Darrin Gross 12:25

Yeah. Okay. And what’s a typical term? Do you guys do interest only? Or is it pretty much?

Ana Ramos 12:33

All the time? Yeah, that’s I think that’s a big thing that differentiates agency with banks is out, banks are really comfortable doing interest on I mean, I’m sorry, fare agencies really comfortable doing interest only full term interest only that we have anything from a five 7 10 15. And we do have longer terms as well as you believe it or not, some clients do want to 30 30 year term, fully amortized. If they want to leave the property to their children never want to touch it. Again, we do have a fully amortizing loan, which is great. On the Fannie Mae side, we do sell that as well. But typically, I always very, is very popular with the non recourse. And cash out, I think that we see a lot of banks that some banks will definitely be aggressive in the pricing, they limit the cash out. For us. I mean, we don’t necessarily we don’t have an issue with cash out if the property is performing and the property is maintained, we don’t have an issue with cash out.

Alison Williams 13:27

Yeah, and that’s, you know, something that we see much a lot more common in the larger space than we do necessarily in a small, but I think it’s something that the borrower should be aware of, I mean, what typically happens in the larger space is somebody acquires a property, they improve it, and then three to five, maybe seven years later, they either sell it, or they actually then refinance it and pull new cash out, you know, immediately right there, and that’s treated as refinance proceeds, so it’s taxed differently. And so that is just immediate, you know, then they can pull proceeds out and then go buy their next asset. And that is really how you scale. So that’s what we typically see our clients do, you know, they’re, you know, but I wouldn’t say that some want to hold long term, obviously, for generational wealth and for estate planning purposes. But I think those that we see scale quickly and pretty large, they’re really improving the property’s creating value and then coming back in for another bite at the apple and that’s what you know, I think is just a really really strong business plan that has proven itself out year after year.

J Darrin Gross 14:30

You know, from experience speed wins and that thing faster you can get it improved and and get those higher rents and get that money back. That’s that’s really the way to do that. That’s good. So let me ask on the cash out refi same lending requirements or ratios and then we go to the 80 80%.

Ana Ramos 14:53

Typically on the cash our 75.

J Darrin Gross 14:56

Okay, and then same on the debt cover, or district

Ana Ramos 14:59

125 to 130 for the cash out. Okay.

J Darrin Gross 15:05

Okay, so that was the, her I guess the balancing act, I guess it changed a little bit there we go from go into go out. So talk about value add, are you able to provide any of the funds for the capital improvements? Or is that still required by the borrower to bring that

Ana Ramos 15:28

In terms of programs, we do have some smaller bridge programs that we that we can apply and see if the property qualifies them, there’s a structure and a plan in terms of what they’re putting in place today. So between our proprietary and some of our bridge capital, we do have some of that starting at least 3 million in loan size, and above that we can consider

Alison Williams 15:51

The agency’s job. So agencies are really looking for stabilized assets, you know, we have seen where 1031 buyers will come in, and they’ll purchase something, and then they actually want us to do a whole back for, you know, capital improvements, because it actually helps with their 1031 transaction. And so we’ll do that, and then we’ll fund those dollars, you know, as they’re spent. But the program itself isn’t structured to be like a true bridge program, as Anna was mentioning, those are more, you know, debt funds is some regional banks play in that space. And there’s also just some investment firms that play in that space.

J Darrin Gross 16:26

Got it. And when you do that kind of bridge thing, is it kind of like a construction loan anywhere you have a line and you draw it down? Based on the?

Alison Williams 16:35

Yeah, I mean, it’s it basically is an initial funding. So it’s usually, you know, maybe 75% of total cost. So you would do 75% of purchase price, and you would do 100%, hold back for any capital improvements. And then as those improvements are completed, then the borrower basically submits a drawl to take those funds back. And it’s all you know, tied to a set interest rate. But most of those deals are floating rate, typically, when you want to do you know, just as you mentioned, like a construction loan. Right? So construction, lending is always on a floating rate basis, as well. And that’s what we see in the bridge place. It’s also typically, you know, a one to three year term, it’s not a long term, five, seven or 10 year program, like we do with the agencies.

J Darrin Gross 17:18

And then there’s a bridge then do you convert that to permanent financing? Or are

Alison Williams 17:24

You do you refinance out?

J Darrin Gross 17:26

Okay, just refinance. Gotcha, gotcha. All right. So kind of talked about the different types of loans. What, what do you project when you are talking with a borrower as far as closing fees? What kind of closing costs should one expect? Ya know, typically,

Ana Ramos 17:48

I mean, depending on the structure of the transaction, but typically, closings fees will range anywhere between 3500 to 7000, just depending on the structure of the deal. Whether there’s a different borrower structure, more like a tiered structure, it’s a little bit more convoluted, versus straightforward, a single asset. So it’ll depend that anywhere between 35 to 7000. At closing, after the, we do collect an application fee that covers a third party reports, which is the engineering and the appraisal, and then that’s the actual closing fee that goes along with initially also we do have closing fees of UCC searches and Title and Escrow that the borrower does take care of.

J Darrin Gross 18:32

And for borrowers, considering, you know, are looking for financing for a multifamily property, what are some of the most important questions, you think that a borrower should be asking their borrower or their lender?

Ana Ramos 18:52

For me, personally, when I think the borrower and the typical questions that I get is, one, how much cash out do you do? How much do you service? What’s the servicing look like? What’s the timing cost? And obviously, the non recourse, so what are my proceeds that you’re able to do? I was a big one, and especially right now, in today’s environment, the costs and the timing, I think, given where interest rates are, timing is really important. One of the advantages that we have is that, you know, on the Freddie Mac side, we’re able to lock the interest rate at application. So once the borrower signs the application, the interest rate is set, which is really critical and important in today’s environment. On the Fannie Mae side, we can also accommodate an early rate lock, which takes about maybe three weeks, so it’s not as quick but it’s also quick in order to accommodate that. So borrowers are always looking how fast can you lock me? How fast can you close me? What’s it going to cost me primarily in the West Coast? What is it going to take to get it done, but I O is a big factor today. And now we’re able to accommodate.

Alison Williams 19:56

Yeah, Anna touched on to servicing so I think that’s something that people don’t Really think about but we do service all of our loans. That means we collect the mortgage payment, we hold the reserves, we’re the group that’s funding those reserves when you need them. So we’re we kind of view ourselves more as a partner and an advisor and the entire lifespan of the deal, rather than just doing the origination and then tapping out. And so you know, some banks do service their own deals, but some actually out service to another lender, or it might be sold post closing. And that’s just something that Walker and Dunlop does not do. Yeah,

J Darrin Gross 20:31

that’s great. The, that’s my dad was a banker, and I didn’t really understand what he did the borrower borrow money, but that relationship is definitely it’s critical to actually, you know, having the opportunity, I mean, when things do happen to have somebody to contact and be able to, you know, work through and that knows you or has a history, definitely important.

Alison Williams 20:57

I think the other thing, too, it just made me think of something is, you know, right now, obviously, there’s so much market uncertainty as well. And I think the other important piece is people are trying to decide which financial advisor they’re going to use to, you know, you know, finance their next deal, because they need to think about how often are they in the market? And what is their access to capital. And well, we are a dominant Freddie Mac and Fannie Mae lender, you know, last year, we closed with over 300 Different capital sources. So I think making sure you pick the right partner that actually understands the landscape, and also sees how the markets move very quickly, and you’ve got to react fast, and you’ve got to have a lot of windy relationships to make sure you get, you know, the best structure in terms for your client. So just making sure that you pick the right partner, particularly in some times that we’re in right now, where it’s a little bit uncertain.

J Darrin Gross 21:46

I was gonna ask you, you mentioned, her, again, had mentioned the questions that a borrower should ask, what what kind of timeline should one expect to you know it from application to? Presuming all of the information, you know, comes in as you need it, but is there is there a realistic timeframe that you can use,

Ana Ramos 22:13

it’s very realistic to say, 50 to 60 days, if we were going on the Fannie Mae side, and it’s an acquisition, and we control more of the process, just because of the model being a little more delegated to us. We can do something in 45 days, so just depending, but I would say average 60, but anything sooner that we can accommodate on a case by case and how quickly the bar does provide the information.

J Darrin Gross 22:38

So, Walker Dunlop, you guys are direct. How would you compare direct lender to a broker?

Ana Ramos 22:50

Well, that’s easy. The broker? I think we have? That’s a really good question. Because I do work with a lot of brokers myself, given my previous history, and where I came from, I do have a lot of relationships with brokers. But what I find here being at Walker is that, although we are definitely a direct lender, and our ratio is really high as direct business, we do have a lot of capital resources, a lot of capital available, because we do work with life companies, banks, with other institutions that were able to facilitate and help borrowers and direct them to the right structure and the right lending opportunity in order to get their loans done. So we are a direct lender, but we also have that capital resource. And like I said, I have experienced that I do have a lot of clients that are brokers, and we’re able to work with them as well, because we do work with brokers, and we’re able to structure deals and maintain that relationship as well.

Alison Williams 23:45

Yeah, I mean, I think the other biggest differences, obviously, when when we’re the direct lender, it’s our credit team. It’s our underwriting team that’s actually underwriting the deal and improving it. And when you’re a broker, you’re basically relying you’re the intermediary, so you’re relying on your communication with a group like us, that then is communicating with credit. So you know, you’re just one step removed. And like Anna said, we value our broker relationships are very important to us, you know, we we honor them, we pay referral fees, etc. Because we love that business. But you know, we predominantly are a direct lender, we have a lot of direct relationships, because they know that the individual they’re talking with, ultimately is a part of the group that’s making the ultimate decision.

J Darrin Gross 24:30

And as far as like a borrower that’s, you know, in the market for a property. We talked about, you know, from application to close, any recommendations for establishing a relationship with you guys for you know, Hawker Dunlop before they’re ready to make an application has a good, good rule of thumb as far as you know, getting in touch with you guys before that.

Ana Ramos 24:57

I would say yes. Today actually, we do see a lot of referral business a lot of from our quote app right now that we’re marketing and it’s on our website. So even if today what’s what’s great about the the regional model, what we have today at Walker and Dunlop is that, even if a borrower does not qualify today, we maintain contact with them, we continue to continue the marketing. And we’re also giving them guidance of if you don’t qualify today, or that or the deal doesn’t fit the box today, here’s what needs to happen in order to fit the model or to fit the box. And also for the borrower. What we do see a lot of is maybe lack of multifamily experience. So we encourage them to go and get a bank loan or credit union loan, get that first spend about a year or two, then come back to us. So we stay in contact with them in order to help them get ready for agency takeout.

Alison Williams 25:53

Yeah, but you can’t start that process too soon. I think a lot of times borrowers come to us when they’ve already signed a contract. And they’ve already said, you know, we’re gonna close in 45 days or you know, they’ve, they based it on a loan that they just thought it was going to be 25% down, because that’s how they financed their last, you know, home loan or second vacation property. And it’s just a very, very different dynamic and the non recourse lending. And so I always tell all of our clients come to us early, let’s have discussions, let us know what you’re bidding on, you know, what markets you’re in, depending on what market you’re in, it could change how competitive a lender might be. So, you know, we don’t get paid until the deal closes, we were, you know, for free consultant on the front end, reach out talk to us will guide you in terms of what we’re seeing in the market, what to expect how to underwrite the deal. And then as Anna mentioned, and I’ll share it with you here later, but we do have an online quota that actually allows borrowers to put in property specific information, including net operating income, and then it actually will tell the borrower what kind of loan they can get with very specific loan amounts and interest rates based on those assumptions. So that tool is there at all times, if they didn’t want to talk to somebody, but if they actually want to reach out and have communication with one of our bankers, you know, we can we can make that introduction as well.

J Darrin Gross 27:15

That’s nice to have the tool I find, though, that if you’re going if you’re really going to be serious, you got to have that conversation with the person that’s gonna give you the thumbs up or thumbs down kind of thing. So, but a nice to have the tool. I mean, I would think that, you know, to give you some sort of, of a budget process, or you know, some for an idea, do you ever engage or provide, like a pre approval letter that somebody can? I mean, depending on the market, I’ve seen, you know, that can be a something that tips the seller to consider you as opposed to the other guy who’s offering more that, that hasn’t been approved kind of thing.

Alison Williams 27:55

Yeah, I mean, well, we see. So obviously, the financing is contingent on the property’s performance, right. So if we’re going to put out a soft quote, you know, and actually provide that debt grid, it’s, it’s all based on the property that they’re actually acquiring. And we’ve already received financials, you know, a trailing 12 income and expense statement and a rent roll. And just with those two pieces of information, we can tell you exactly where we think the loan with shakeout, and we’re happy to provide that, you know, in a form that can be shared with a potential seller, but it’s not per se, like a pre approval that you would see in the single family world where you’re just approved for whatever loan amount based on your personal assets and income.

J Darrin Gross 28:33

Right now, I mean, commercial is obviously going to be tied to the property, but just I’ve just seen that, you know, give the edge to the to the one that is that has a relationship already with a banker, as opposed to the one that hasn’t. Yeah, so that’s good. So let’s talk about current market today is we are recording this on May 18 22. Rates, what do you what’s your crystal ball? Or what are your expectations with rates throughout the balance of 20 tail?

Alison Williams 29:10

So I’d say we’re gonna, I feel like we’re in a much better place today than we were 30 or 60 days ago, 30 to 60 days ago, we saw a lot more movement and the Treasury indexes, which is how we base our loan amounts, we base it over the five, seven or 10 year Treasury yield, and we started to see some normalcy in those. So we’re hovering the three tenure Treasury is hovering around 3%. It’s pretty much been, you know, plus or minus 10 basis points of that for the last 30 days. But prior to that, I mean, it jumped 100 basis points from December, you know, today, so we had a lot of uncertainty and a lot of, you know, just feelings of, you know, concern obviously in the beginning of the year, but I think we’re finally at the point where, you know, we can size appropriately we don’t feel like our loan receipts are going to change dramatically, we’re finding more borrowers are coming back in that were, you know, kind of putting their deals on pause and sitting on the sidelines, I think they, for them, it’s just managing expectations, if they can manage their expectation they want to be in the market. But when you see market movements as wide swings, as we were seeing in March, it was really hard to do. So I feel I feel much better today about where we are than I do 60 days ago, I think short term interest rates. So So for LIBOR prime obviously, is going to continue to increase. And that’s just based on where inflation is and what the Feds gonna have to do in order to combat that. But I think in terms of, you know, longer term interest rates, I think we’re in a pretty good spot, we’ll probably see a little bit of uptick, but I don’t know how great that will be. But we’re starting to see a little bit of settling in that area.

J Darrin Gross 30:52

Any sense of just the multifamily marketplace. You know, looking forward to the next 12 months.

Alison Williams 31:00

I mean, last year was huge. So just in small multifamily alone, the asset valuations went up 15% year over year, and then our debt originations went up 47%. So, in 2021, was $85 billion of financing for small multifamily assets in the US, which is just, you know, just insane. The entire multifamily market was 470 billion. So you can just see, you know, how big of a piece of the pie the small multifamily market is. And, you know, I think the forecast going forward, we haven’t really seen that much of a slowdown, as I mentioned, there was a couple people, you know, of our clients that were kind of on pause for 30 to 60 days, but it seems pretty normal again. So I think as long as we can continue to see rent increases, but that has to be justified by wage growth. And so in my mind, I go back to wage growth, what markets are we seeing wage growth, then where are we seeing corporate relocations? If we can kind of track those areas? I think we’re gonna see a lot of activity, just kind of following those pockets.

J Darrin Gross 32:09

Jobs, jobs, jobs,

Alison Williams 32:11

jobs. Absolutely. And wages.

J Darrin Gross 32:14

Exactly. Doesn’t pay enough? isn’t good enough?

Alison Williams 32:19

Yeah, absolutely. So,

J Darrin Gross 32:20

Got it. Hey, guys, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker and try and work with my clients to assess risk, and determine what to do with the risk. And there’s three strategies we typically consider, we first look to see if there’s a way we can avoid the risk. When that’s not an option, then we look to see if there’s a way we can minimize the risk. And when we cannot avoid nor minimize the risk, then we look to see if we can transfer the risk. And that’s what an insurance policy is. And as such, I like to ask my guests if they can look at their own situation. Could be your clients, investors, tenants, the market interest rates, political, however you choose to frame the question. But if you can take a look at your situation, and identify what you consider to be the biggest risk. And again, for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Alison Williams, and Ana Ramos, what is the biggest risk?

Alison Williams 33:35

Anna, do you want to start?

Ana Ramos 33:36

Yeah, you know, it’s interesting, because I think there’s a lot of risk in what we do. And I think I’m pretty aggressive. I think we underwrite our loans pretty well, we’re at a 125 120 debt cover over breakeven. Yes, we are a non recourse loan, but we vet it out the client. So when I assess risk, I’m looking at risk. It’s more for the borrower, the risk of capturing the rate in today’s environment, I the way we underwrite the way we get our values, the way we package the file. I think the agency when you look at agency, historically, our losses are very minor. So if being as in on the origination side, I would love to be much more aggressive and see more. But we don’t we don’t see that a lot. So it’s really hard to speak on that, at least for me, because we don’t see a lot of that the losses are there. They’re unheard of. And it’s very, very small. Just because of the way everything is packaged and the way everything is the way we underwrite the transaction, the property the sponsor, the management and we service the loans and how often we service and how involved we are with the loans from beginning to end and also through the life of the loan. So for me, it would be more the borrower side that today I think it’s really critical, especially in today’s environment is to lock that interest rate because of the risk and the volatility.

Alison Williams 35:08

I’d echo Ana’s comments, but I’ll take a slightly different take. And I think what concerns me the most when I think about today is affordable housing. There’s just a massive demand for affordability right now. And every market with the amount of rent and growth that we’ve seen in every city. I’m currently in Tampa, we had 25%, and rent growth year over year. And we’re just starting to see, you know, just the lack of affordability. And with a lack of vacant land and where you can build and raising, you know, construction costs and rising interest rate, it’s going to become much more challenging to build affordable housing to fit the needs of, you know, the average American. So I think that, to me, is when I think about the future, and my daughter and that kind of stuff, I just think about like, wow, we’ve got to tackle this affordable housing crisis that we’re dealing with right now.

J Darrin Gross 36:01

Ya know, the affordable housing, it’s kind of a Rubik’s Cube kind of thing. And everything keeps going up. And and I don’t know that we’ve got that figured out just yet. But definitely, an ongoing problem doesn’t does not look like it’s going to be solved here soon. So good. Hey, Alison, and Ana, where can the listeners go? If they’d like to learn more connect with you?

Alison Williams 36:27

Perfect. Yeah, you can go to www.Walkerdunlop.com. And then you can toggle over to small balanced loans from there. And we actually have a very in depth website that has a blog post on how to financing guides. It has an entire regional map where our entire team you can get bios and their location. You can also have access or quote up where you can do live sizing of a deal and also see lender term sheets.

J Darrin Gross 36:55

Awesome. Well, Alison, and Ana can’t say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot, and I look forward to doing it again soon.

Alison Williams 37:06

I appreciate it. Thank you so much. All right.

J Darrin Gross 37:09

For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 37:26

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Multifamily Investor Fear Mindset with Rod Khleif – CRE PN #357

Rod Khleif 0:00

Let’s talk about fear first. You know, the thing that you need to remember about fear is we all have it. But but when you take action and push through it, it mitigates and, and and it actually diminishes the fear. And I will say something else too. When you’re grateful it’s you can’t be fearful at the same time when you’re grateful you can’t be angry at the same time. So use gratitude as well. Just take a minute and look around it. You know your home and your family and go outside and look at nature and just be grateful. You can’t be fearful at the same time. So that’ll be really important through this next session.

Announcer 0:38

J Darrin Gross 0:58

Welcome to commercial real estate pro networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today my guest is Rod Khleif. Rod is a multiple business owner, and philanthropist who’s passionate about business highperformance real estate and giving back. And just a minute we’re going to speak with rod about the investor mindset.

But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, please subscribe with that one. Welcome my guest rod. Welcome back to CRE PN Radio.

Rod Khleif 2:09

Good to see you. Darrin, let’s have some fun today. It’s crazy times we’re in right now. So I think we’ve had a lot to talk about.

J Darrin Gross 2:15

Well, I am. So looking forward to this. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.

Rod Khleif 2:23

Sure, sure, sure. And then for those of you that have heard this before, forgive me but I’ll be very brief. So I’m an immigrant. I was born in the Netherlands so you know wouldn’t choose when Mills immigrated when I was six to ended up in Denver, Colorado, we really struggled. You know, I remember eating expired food and drinking powdered milk with our sirloin in the morning, which sounds better than it is and we and I wore clothes from the goodwill and the Salvation Army all the way through junior high school till I lied about my age at Burger King and got a job when I was 14. And you know, and I’m sure there are people on listening now that had it harder than we did. But I knew I wanted more. And luckily my mom had an incredible work ethic. She babysat kids, so we’d have enough money to eat. And she was an entrepreneur with her babysitting money, believe it or not in she invested in the stock market successfully. And she also invested in real estate. Her first real estate acquisition was house right across the street from us when I was about 14 She paid around 30,000 When I was 17. She told me she made $20,000 in her sleep and I’m like what you make 20,000 You didn’t do anything. I’m forgetting screw College, I’m getting into real estate. So I got I became a real estate broker. Right when I turned 18 You could do that with education. I got smart now you need some experience, but I could have my own office right when I turned 18. And you know, my first year I made about eight to 10,000 my second year maybe 10 to 12,000 Keep in mind this is 44 years ago, but my third year I made over $100,000 So what happened between your two and year three that would cause me to 10x my income? Well, what happened was I was dating a girl and worked with her dad who was a broker who taught me about mindset and psychology, how not really 80 to 90% of your success in anything is just that your mindset and psychology only 10 to 20% of The Real Estate stuff. You know, Darrin and I talked about on our podcast, it’s it’s really taking action with what you learn not getting locked up in fear are caught up in limiting beliefs. And, you know, fast forward to today I’ve owned a couple 1000 houses that I’ve rented long term in three states. I’ve you know, I own 1000s of apartment units in 2006 my net worth went up $17 million while I slept. And you might say wow, I because I said Wow. And I got a little I got a little bit of an ego and thought I was a freaking real estate God and you know, barely fit my head through the door sometimes and you know when that happens, God or the universe will give you nice little smack Well, that was 2008 Nine I lost $50 million in 2008 Nine and so you know what I’m known for the most on my podcast, which is called lifetime cash flow through real estate investing is talking about the mindset it took to have 50 million in the first place and then more importantly the mindset It took to get it back. And, and I think in the times we’re in right now with, you know, rampant inflation, the Fed is promised five more interest rate bumps. And as of this recording, they’ve already gone up 50 basis points a couple of weeks ago, which derailed several of our deals. And, and so, you know, I think we are heading into a time where there will be fear. And so, you know, I’d love to maybe talk about some strategy with you, Darren, around mitigating that and dealing with it.

J Darrin Gross 5:35

Now, I think that’s exactly where the conversation needs to go. You know, you mentioned that you’ve been through, well, just the cycle, the the 07 09 period, or, 06 09 period, when, when, you know, nobody could see anything, possibly go wrong to where, you know, nothing was right to where opportunities were everywhere. And then the cycle rode back up. You know, when I’ve talked with people about this, in the past that the notion has been a cycles typically run, you know, somewhere between seven to 10 years, the from, you know, low to high. And that’s just kind of the, the, you know, the wavelength of a cycle kind of thing. Ever since I’ve been doing this, this podcast, there’s always been this kind of sense. Well, we’re kind of late in the cycle, like we’re in the second, second, double, you know, a doubleheader.

Rod Khleif 6:27

It’s kind of three, three years ago, they were saying that four years ago, there was no, right.

J Darrin Gross 6:31

No, I mean, every ever since I’ve ever since I’ve had that did the first interview. And so clearly, there are things that have, you know, we’ve gone past whatever the normal cycle is, and, and when we look back, you know, 10 years from now and look back in history, it’ll be just kind of like a curve that goes up and down kind of thing. But in, you know, at the end, they, they tend to, there’s always an upward line there. But it’s those those cycles, where we’re, you know, we’re where we are right now, and we’re probably headed, based on just all of the things that are in line to happen. And I thought, you know, given your experience, your work that you do with mindset, your coaching and the boot camps, and just all of your investment experience, who better than to speak about just the, you know, how to stay strong, how to keep your mindset sharp, how to be ready for what’s coming, ready to capitalize on what’s coming in the van in your course, you know, and your belief and recognize, you know, the opportunities are gonna come. And so I don’t know, what the what, you know, where the right place to start this conversation, but I mean, is that it’s just,

Rod Khleif 7:44

I can run with it, I can just run with it, because because I will tell you, it really ties right into what I had to do when I lost everything. Okay. Because, you know, when, of course, I had massive fear at that time. I mean, I thought I was set for life, you know, I $50 million net worth conservatively. And and it just imploded. And so, you know, I will tell you some of the things that I did to recover from that, because you can cross correlate those strategies to what you’re going to need to do moving into this in this recession. And I think, you know, there are some people were saying it’s going to be a big one. In fact, who was that that just said, use the word hurricane. One of the big CEOs, one of the big, big banks, I believe it was but you know, all many, many people have said, there’s a recession coming ahead of Fannie Mae, the head of JP Morgan Chase, think that think actually, he’s the one that said it could be a hurricane. So you know, but the bottom line is, when that happens, of course, the news, the media will be building it up and making it much worse than it is they’ll say real estate’s going to crash for 10 years. And, you know, don’t get me started on that fake news crap right now, but but the point is, you’ve got to, you’ve got to mitigate that in your own mind and recognize they’re not there to inform us, they’re there just to scare us and startle us and, and get subscribers so and who and, you know, forgetting the political agendas, but but the point is, you know, it’s important to first of all, to stand guard at the door to your mind during that time. Okay, keep that, you know, yes, scan the headlines, see what’s going on, but don’t get sucked into it. Because what, you know, focus is absolutely critical. During that time, in fact, you know, if you’re listening to Darrin, his podcast, you’re a leader, there’s no question, you’re a leader. And right now more than ever, the world needs more leaders. And to be a leader, you’ve got to manage your focus. And that’s what I had to do back when I lost it all because it would have been very easy for me to focus on the loss. And I did for a short while. I mean, you know, it was a big hit. For me, I thought I was set for life, like I said, But I recognize the fact that whatever you focus on gets larger, both positive or negative, you know, and so, you know, if you’re, if you’re focused on on that negative crap on the news, that’s what’s going to get larger and you’re going to basically just You know, scare yourself into a corner. And, and we all succumb to this sometimes, but it’s really critical to pay attention to your focus. You know, I’ll give you a great example of this dynamic. They asked Mother Teresa, when she was alive if she was anti war, and she said, No, I’m pro peace. And I and it’s just a, you know, play on the same thing. But but you see the point there and so, you know, and I have students are not even students actually just people that aren’t students, my students know better, but but people call me and say, you know, I’ve got all the student loan debt, how do I get out of this debt? And I say, Wrong question. How do you make so much money that the debts irrelevant? Right, so So, again, focus is super, super important through this period? And, and I will tell you, you know, the most successful people on the planet are the ones that have the most enhanced focus, okay, I mean, look at people like Elon Musk and, and, you know, Bezos and and so, you know, I, my podcast just broke 13 million downloads. I’m very, very proud of this. But I listened to really two podcasts, Joe Rogan on one side and Tim Ferriss on the other. And there’s a political component to that as well, but on Tim Ferriss show, and I think he gets 13 million a week. So just to give you some, some, some framework for this podcast, but he introduced he actually interviews the best of the best in the world in every walk of life from actors like, you know, Arnold Schwarzenegger, Ed Norton, Jamie, Jamie Foxx, Hugh Jackman, to, to, you know, Olympic athletes like Phelps and to billionaires like Ray Dalio. And I started to hear a pattern in those interviews, most of them meditate, and what is meditation enhance focus, right. So again, your focus is critical. And I don’t know about you, Darrin, but sometimes I’ll be watching a movie and I’ll have my phone up, and I’ll be scrolling social media, and what does that kill your focus, right, because your brain is making these micro decisions, you know, that, you know, that, that that just kill your focus. So so the focus is a super important piece and you also have to make a decision. When when you know, if the soup really hits the fan, you’ve got to make a decision that that you’re going to focus on the positive and focus on what you want. And and bring that in because and you know, the Latin root for the word decision means to cut off if you’re going to you know, attack the island and battle you burn your ships because you’re taking their chips home, that’s, that’s a decision. It’s not a one foot in one foot out sort of thing. It’s not a dip a toe in the water, it is frickin done. And so that is you’ve got to make sure you make that decision. But you also you know, need to have positive expectation. Okay, because it’s so easy to focus on pain and struggle we actually connect through pain and struggle I’ll give you an example of this. You know, Darrin if you came up to me and said Rod, how you doing? I said oh my god, I am freaking fantastic. Life is amazing. You know, I you know Darrin you probably you’re you’re evolved you might not but most people will take a few steps back and say okay rods off his freakin meds. But if you came up to me said Ron, how you doing I sell on my on my back is frickin killing me I just lost 10 grand in the market or 100 grand in the market, you put your arm around me and say, Oh, I feel your brother, we actually connect through pain leaders cannot do that leaders have got to focus on positivity, you know, and, and really, you’ve got to make some declarations to yourself, you have to decide what it is that you want. And really focus on that and God or the universe, whatever you believe will conspire to help you make that happen. And don’t forget this either, you know, I’ve had super negative things happen to me like that $50 million loss, you choose the meaning you place on something, okay? And it can it can be a positive meaning the meaning I place on my $50 million losses, I would have never met my supermodel beautiful wife been together 15 years and she’s supermodel beautiful, I’m not exaggerating, and more beautiful on the inside than the outside. So so, you know, again, that would have never happened to give it all up again for her. So if you had a negative thing happened to you don’t don’t let that be your identity, Don’t wallow in that. You remember you change the meaning of what happens to you. Now the other thing is many of us have fears and limiting beliefs. In fact, I’m sure you’ve got people listening that have never taken action in this commercial real estate. They listen to the, to the to these podcasts, but they’ve never made a move because of fear or because of limiting beliefs. And, you know, and they’re caught in analysis paralysis many times and so, but let’s talk about fear first. You know, the thing that you need to remember about fear is we all have it but but when you take action and push through it, it mitigates and, and

and it actually diminishes the fear. And I will say something else to when you’re grateful. It’s you can’t be fearful at the same time when you’re grateful you can’t be angry at the same time. So use gratitude as well. Just take a minute and look around it. You know your home and your family and go outside and look at nature and just be grateful you can’t be fearful at the same time. So that’ll be really important through this next session, you know, now the other thing I’ll mention is limiting beliefs. You know, when I immigrated this country, I didn’t speak English and I got thrown into school and I found out what bullies were for the first time. And you know, I got my butt kicked regularly. I didn’t hadn’t learned how to fight back yet. Love to run into a couple of those guys now, but but, but the point is that my mom is, you know, proud Dutch woman that she is. Gotta be a good idea to send me to school and wouldn’t shoes in those leather shorts. The Germans were for Oktoberfest the later Hosen. So I got my butt kicked again. And then the bullies would chase me home. And she thought she was helping me when she chased him off with a flyswatter next day, but kicking, and I came up with this limiting belief that I wasn’t good enough. And the reason I bring this up is a lot of people have limiting beliefs like that I’m not good enough. I’m not smart enough. I’m not old enough, young enough, you know, don’t have enough time to do this side business don’t have the money to do it. And honestly, there’s a reason that the acronym for belief systems is BS, because 99% of them are just that BS. Now, by the way, this is something we go into a great length in my bootcamp, I, you know, I can I mentioned my boot camp real quick, Darrin, just because he didn’t have time to what I’m going to say next. So I’ve got a live multifamily three day bootcamp coming up in Denver, it’s only one I do each year, it’s going to be in Denver, July 29 30th, and 31st, three days of training, it’s not a big sales pitch, I talked about my coaching for about 30 minutes, but the other three days is all full on training, every aspect of this business from building a team to picking a market to, you know, evaluating that market, assessing it to finding deals to evaluating those deals, underwriting those to financing them to raising all the money you need for your deals to syndication, joint ventures, even property management. But the reason I wanted to bring it up is I also get into this mindset, you know, there’s a reason that my students are so successful, I’m gonna brag for a minute here, I’ve been teaching a little over four years, my students are somewhere on somewhere in the neighborhood of 60 to $70,000, that we know of, it’s probably more than that. And, and it’s because they take action with what they learn. And so I spend time in my bootcamp, helping you take action with what you learn, and dealing with fears and limiting beliefs and very powerful. And so essentially a friend of dierence. If you text my name, Rod, to 72345, and use the code Rod friend, you can come for, for $197 For three days of training, it’s truly a no brainer, okay? So, again, text Rod to 72345, or go to rodin denver.com. But but but if you but but remember, the code rod friend is one word. Now, if if the price, it’ll even hit around $700 At some point, so if you’re hearing this, and it’s much higher, if you have any trouble, just DM me on any social channel, I’m on every one of them, they’ve even got me on tick tock now, and we will, we will respond and get you taken care of. But the other thing is that actually comes with a couple of bonuses as well, I’m thrown in my document library, which I’ve paid 10s of 1000s of dollars for the documents in there and my deal evaluator software, so that all all of that 497 bucks that held those two things alone are worth 10 times that so. But anyway, the reason I brought that up is because, you know, there, there are so many people, like I mentioned earlier that are analytical, which are some of the best people in this business. Because, you know, you have to underwrite deals, you have to review deals, but they have to check off every single box before they make a move, and then they end up never making a move. And so that’s why, you know, this mindset piece is so important and why I give it I give it time at the bootcamp because it’s so relevant. But, you know, because you’ve got to take that first step, you’ve got to take that first step in this business. And when I tell you, there is a probably a once in a lifetime opportunity coming over these next couple of years. I don’t say that lightly. I missed the one in a wait night, I will not miss this one. Okay, I missed that one. Because I was hiding under a rock feeling sorry for myself, but I’m gonna tell you there will be exponential opportunities in this multifamily business. And, and so, you know, the fact we’ve already seen big price, they call it price discovery, big price reductions. You know, we had a couple of deals in the $44 million range, one of them, they dropped to 38. And we still back down, we could have had it and we were looking at it 44 But for the interest rate bump, but so so, you know, these, these prices are starting to come down. And then once they do a couple more rate bumps, you’re gonna really see some some soup, and we could end up in stagflation, which would really be ugly, where we’ve got inflation and pricing, you know, and this recession, so so, you know, it’s just, it’s, it’s so but again, back to the first step. The reason I brought that up is is you know, you’ve got to take it. You know, Dr. Martin Luther King said, You take that first step and faith the next step. will be revealed. Lao Tzu 1000s of years ago said the journey of 1000 miles begins with a single step. And in real estate, I see it with my students. It’s the law, the first deal, it’s the scariest, it’s the most stressful, it takes the longest. And then then, you know, might take eight months to get it or even a year, sometimes my students next thing I know, after they get it, they have five, I’m like, What the heck just happened? So but you got to take action. And again, action mitigate spear. So I’ve been rambling. If you want to ask me a question. I’ve gotten more, but

J Darrin Gross 20:26

No, I appreciate everything you’ve kind of laid out here. And I think the thing that I think that anybody it’s been kind of either on the sideline, or they’ve been, you know, they’ve been working hard trying to find deals. And all of a sudden, now there’s all this information, and you said it, you know, it’s important to guard your mind. Because I think it’s so easy. And I think that, you know, it’s important to recognize that all of the, whether it be the social websites or the news, I mean, it’s a known fact that like even Facebook, you know, they know that if they can get you angry, they can get you to stay engaged kind of thing. And I think a lot of the news plays that as well. So

Rod Khleif 21:06

There’s a movie about that called the social dilemma, you’ve got these, these incredible supercomputers that are smarter, they’re really smarter than we are, and they’ll suck you in and they’ll stay in. And I forgot to mention something I’m sorry to interrupt buddy, I just when you said that, I realized I forgot to mention something, you know, you’ve not only do you have to stand guard at your mind, but you have to bring in the good stuff right now. Okay, like go on YouTube and listen to inspirational videos, I do these clips on my podcast called Own Your Power, which is just about that owning your power, I just want did one on playing to your strengths. In fact, that’s one of the things I want to talk about. But but you know, and they’re five minutes, so if you give me five minutes a week, I will juice you, they’ve got music, I’m really proud of them. There are hundreds of them there. But that’s the other piece of that not just guarding your mind, but but really bringing in good stuff. Sorry to interrupt, but he please continue.

J Darrin Gross 21:53

No, but I think just to be a you have to have the awareness that the game is not set up just to give you the good stuff, the game is set up to kind of keep you engaged in, they figured out a way to do that is to make it negative and keep you in fear in you’re going to have to pull yourself away because otherwise, if you don’t consciously do that, they win. And they they get your attention. And

Rod Khleif 22:18

I’ve even found myself sucked in on some Tik Tok stuff, you know, because I’ll look at some of the political stuff, and then I get sucked in and get angry. And my and I’ve had to take a hiatus, you know, from it.

J Darrin Gross 22:30

Not I think even even like the political parties, I think that, you know, a lot of the reason why we have the issues we have right now is the parties recognize if they can make the other guy, the bad guy, and keep the focus that the other guy is the bad guy. Rather than try and find some common middle ground, they can have power. And, and so there’s, I think it’s important to understand, they don’t want a solution when they run into the problem, because the problem keeps everybody energized. And so when you when you recognize, you know, it’s in the politics, it’s in the news, it’s in the social media, it’s, it’s up to you to take control of your mind. And, you know, invest in yourself and find that positive, you know, information or whatever it is, that’s good. Want to ask you. I mean, you know, the, you mentioned, like, you know, your bootcamp and talks about meditation. And so, how, what kind of frequency Do you recognize? I mean, do you have like a routine do you recommend? Yeah, good question regularly, good question. Is it just like, you know, quarterly go to, you know,

Rod Khleif 23:35

I meditated right before this, this interview, and, and I sit in my recliner behind this green screen here. And I have this little app that I use, there’s lots of meditation apps, I use one called buzzes, pz Izz. And, and, and you can set a time, from two minutes to three hours or 10 hours doesn’t matter. And it can put you to sleep very effectively, or meditate. It’s the focus piece of the app. And, and, you know, it’s been proven that a small piece of meditation is like, exponentially more relaxing, and what’s the word I’m trying to more rejuvenating than then even sleeping, believe it or not, and so, but But right now, more than ever, again, you need to clear your head and I’m speaking looking in the mirror while I’m saying this right now, more than ever, I need to clear my head. Because, you know, I’m my business is is, you know, very often we need to innovate, we need to pivot we need to redirect ourselves, you know, when things happen, like what’s coming, and so, you know, I want to be ready for it. And you know, I’ve had to innovate in the past. I remember when coat you know, in 20, early 2020, I had 800 People scheduled to come to Orlando, and if they don’t, and many of them had paid I’m like, holy crap, what are we going to do? And if you go to multifamily virtual bootcamp.com You’ll see rod on his cell phone shooting the video to go virtual, I went virtual almost immediately. I built a studio here at my compound. But you know, this Denver one is live. I mean, that’s in person three days, but I have done some virtual ones in the past too. And so, you know, sometimes you have to innovate or pivot to, but But what you said about social media is so critical. I mean, it’s really resonating with me, because I’ve noticed it myself. You know, like, I just came back from a vacation in St. Barts, and I was scrolling through a lot of that crap at the at the pool. And, you know, it’s just because, you know, I was bored, nothing to do. And then finally, like, yeah, this, I gotta turn this thing off and read read books, because it’s just so negative. But, you know, one of the things I want to mention Darren is, as you go through this, I mean, this this relates to the multifamily business as well, I just alluded to it that I just did an on your power clip on this, you must play to your strengths, especially through what’s coming, okay. Because, you know, some of the greatest partnerships I’ve seen, I’ve entered like you, I’ve interviewed some of the best operators in the world, really in multifamily. And it’s very often it’s a partnership between several people that are all paying two or a couple people, in many cases, they’re all playing to their strengths. The most common dynamic I see is I’ll see an analytical person that’s introverted, with a more outgoing, extroverted person. Those are, you know, incredible partnerships, I’m sorry, I’m sure you’ve seen it as well. And so it’s really important that instead of trying to maximize your weaknesses, you play to your strengths, and you hire a line or partner for your weaknesses, you know, because when you’re doing what, you’re strong, and you love it, okay, and when you love it, you’re going to be passionate in it. And it’s going to require passion for you to influence people to sell to you to invest, you know, with you, and, and so on and so forth. And, you know, if you’re not sure what your strengths and weaknesses are, you can do a Myers Briggs profile or what’s called a DISC profile DIFC, you know, or just ask your friends, you know, what are your strong and weak at and in. And again, playing to that is super important, because you need that passion, you need that passion to be able to influence people, especially when they’re operating in fear. And if you’re trying to raise money for a deal, if you’re passionate about it, you know, you’ll be able to influence and that passion is actually the fuel. So it’s really important that you discover what juices you and you and inspires you and you work in that because that passion also breeds creativity and, and minimizes and eliminates fear. So that’s a creep a critical piece and one that I’ve just realized I forgot to mention super important is be careful who you’re hanging out with through this, okay? Peers are critical when I was losing everything in a wait nine. Luckily, I was in a mastermind it was actually Tony Robbins Platinum Partnership. And I was around people that were thriving through the crash and they’re like, get up your big freakin baby 50 million, million, just get up and get back to work. And that and that’s what I needed, you know. So, you know, a lot of people, you know, will just

what’s the word I’m looking for, they’ll, they’ll, they’ll just end up being friends with people they went to school with, or work with. And sometimes with people out of their fear or jealousy or fear of losing you or fear of feeling like there’ll be let you know, perceived to be less than will hold you back. And so in sometimes it’s family, and I will tell you, you know, love your family, but choose your peers, be very proactive. You know, don’t don’t Don’t be lazy about that proactively. You know, like I started a mastermind that we’re meeting next week in Houston. And it’s I think it’s the largest multifamily mastermind there is about 14 billion in assets and represented by the members and, and, you know, we meet three times a year, but I started that thing, too. Because I want to be around people that think what I think is hard is easy. And that’s what you need to be seeking out. If you’re listening to this, you need to be seeking out groups that you know, that that are that are better than you that have people in them that are better than you at what you want to do like multifamily. Because, you know, if you’re gonna play tennis, you want to play somebody better or someone worse than you, right, you’re only gonna get better if you play someone better. It’s the same thing in this business. And you want to be around people, again, that aren’t afraid of your success. You know, that’s one of the amazing things in my warrior coaching program is, you know, most of these deals, these those 60 70,000 doors were done between warriors. And you know, people will post a win and everybody’s congratulating them and you want to be in that kind of an environment where people are praising you and, and holding you accountable. So, you know, I wanted to mention that as well Darrin.

J Darrin Gross 29:35

I think it’s all you know, again, it’s grabbing hold of your mind and protecting it from all the negative information and just as you know, you’re being attacked by the negative information, see it to kind of like safeguard the door. Get some positive information, surround yourself with, with people that are going places that you know, a mindset of achievement as opposed to Woe is me. And, you know, I think then beyond that, you know, how would you see if you’ve got your mind? Right. You know,

Rod Khleif 30:07

Let me let me add something Sorry. Sorry. Sorry. Please hold your question for one second. I just remembered I forgot something else. You know, we talked about, you know, that soup is coming, it’s coming for sure. And, and you also asked me what I do, routines that I have, and I realized they really didn’t answer that question. So that recliner I was talking about, typically, most mornings, I will sit in it, and I will manifest you could call it prayer, whatever you want. But I mean, I mean, I’ve manifested some big things in my life, you know, mansions, a, you know, a million dollar home, you know, all the stupid cars, I thought were important roles in the Lambo and the in the Bentley and all that stuff that I thought was important one time, but I manifested it, and how I did it was and how I do it now is I’ll sit in that chair, and I’ll just do gratitude, I’ll just be grateful for my beautiful wife, my kids my foundation, and and then I’ll do gratitude for the things that I want as if I already have them. And I know I’m going to lose some of you analytical ones on that one, but I’m just telling you, it freakin works. And so that’s, that’s, that’s what I would call a success habit. Okay. And, you know, we’ve all got habits, and through this period, you got to be really conscious of what your habits are, because some of your habits will project your life up, and others will project your life down. And I suppose the easiest way to look at that is with, you know, what you eat and whether or not you exercise, but, but it’s really critical that if you’ve got some bad habits, that you’re consciously aware of them, you mitigate them, and focus on, you know, success habits. You know, like having clarity around your goals, you come to my bootcamp, the first hour and a half is spent is goal setting on steroids. Because how are you going to get anything if you don’t know what it is, you need to know what you want with clarity to create what Napoleon Hill in his book, Think and Grow Rich calls a burning desire, you got to really want it, okay. And so, so, you know, you’ve got to have clarity with your goals, and you should reassociate with those goals. That’s one of the things when I lost everything I, I re associated with what I wanted, why I wanted it so that I was focused on that, not what I didn’t want, you know, and, and focusing on results instead of busy work, you know, making sure that you’re, you’re actually doing the you know, looking at your to do list and using the Pareto principle, the 8020 rule to work on the 20% that’s going to get you 80% Further, you know, and then another success habit is massive freakin action. Massive Action, mitigates everything, you know, and of course, really paying attention to your health through this as well. You know, not just your, your, your your, your will, of course, your physical health, what you eat your exercise, but even your mental health, making sure you’re getting outside spending time with family, meditating, praying, whatever, is super, super important. So habits through this managing those are really important.

J Darrin Gross 32:55

But I think, you know, where I was just kind of trying to go is just, you know, not only the routine thing, but just, I think the the, the global thing is that life is always going to happen. I mean, there’s always going to be whether it be, you know, the political situation or the economic situation or whatever that is that that’s, that’s going to create opportunities, stress, you know, wins losses, that are things that I can’t control. But if I can control the mindset, and I can, you know, look forward and have it in, like you said, the focus knowing exactly what I want, and what I need to do next. And you know, the massive action thing I think is the one that is obviously the the

Rod Khleif 33:42

It mitigates fear it mitigates fear, you know, whenever I’m stressful if I take massive action, it mitigates that, you know, achievers call it stress, but but it’s really fear. Okay, and so it mitigates that stress, slash fear. And it’s really important. Yeah.

J Darrin Gross 33:58

Yeah. It’s all good. Hey, Rod, if we could. Let me ask you one. Just one more question. In the, in the whole plethora of kind of what we’ve talked about, is there one most important tool for maintaining mindset?

Rod Khleif 34:17

I think its goals. I really do. I think it’s making sure you’re focused on what you want, not what you don’t want. And that’s why again, that’s my students know this and you know, re associating with what you want on a regular basis, maybe even a daily basis. By the way, I did a if you can’t make my bootcamp I did a goal setting workshop I do it every year on the on I did on January 1 this year on the New Year’s Day, and it’s if you go to rods, links.com, rods, plural links plural.com And that’s all got all my stuff on it. But at the bottom is this goal setting workshops, got music, there’s a guide you can download. So if you can’t make my boot camp for God’s sakes, go download that and do that goal setting exercise with your spouse with if you’ve got a kid Kids that are over 10 years old, have them do it super powerful. And I’m not going to try to sell you anything, it’s just a gift. So I highly recommend you do that. Because it’s so important people spend more time planning a freaking birthday party than they do designing their lives, that’s designing your life. So I think that’s probably the most important thing, God.

J Darrin Gross 35:21

If we could, I’d like to shift gears here for a second, by day I’m an insurance broker, and I work with my clients to assess risk and determine what to do with the risk. And there’s three strategies we typically look to, we first look to see if there’s a way we can avoid the risk. When that’s not an option, we look to see if we can minimize the risk. And when we cannot avoid nor minimize the risk, then we look to see if we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests if they can look at their own situation. And you can frame this however you like could be, you know, the market politics, the interest rates, you know, however you choose to to frame it. But if you can identify what you consider to be the biggest risk. And again, for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer.

Rod Khleif 36:15

Got it? Got it? No, that’s not the answer. I’ll give you Yeah.

J Darrin Gross 36:19

So if you’re willing, I’d like to ask you, Rod Khleif. What is the biggest risk?

Rod Khleif 36:25

I will tell you to, Today is June 8. And I have to say that because who knows what will happen to things are changing daily right now. But and I know this alehrer in a week or two, but But right now, the biggest risk that I have alerted my students to on several occasions is the debt markets. Okay, that I mean, it is crazy out there right now. And and I’m going to tell you that it when you’re performing a multifamily right now, you need to do some worst case scenarios, like if you’re planning on getting in, right now, the most common debt is bridge debt. And that is very, can be very honest debt. And, and because you have a business, you have a business plan, you got to adhere to that business plan. Otherwise, you know, what’s could be non recourse can become full recourse. So it’s very, very important that you do what you say you’re going to do. And some of those have short fuses like three year timelines, and we could be in the midst of this recession in three years. So I would encourage you to do absolute worst case scenarios as it relates to interest rate, you know, take out interest rate, when you refinance, we just did, we just put 138 unit under contract, by the way, if if, if you were accredited, we it’s a phenomenal deal. 54,000 A unit which is unheard of in an emerging market in Arkansas, so so if you’re interested text partner to 72345, and get on our portal, because we’ll be presenting that probably about the time this goes live. And it’ll be a very short, it’s not a big raise. So it’ll it’ll subscribe very, very quickly. But that that’s a really good deal. But the point is, you know, we did worst case scenarios, what happens if the interest rates 8%? And can we still be okay? And yes, we could and so, you know, most people aren’t doing that. Most people aren’t, aren’t stress testing these deal strongly enough? You know, and, and I think we’re gonna see some upset when I’m, we’re going to snap up some deals where they didn’t do it right. You know, and I hate to say it, but that’s likely going to happen, people are still overpaying, and they’re not paying attention to that risk. And so I think that’s the biggest risk right now. That’s the first thing I thought of when you when you prepared me for that question earlier, Darrin, because I really, that jumped right into my head. So

J Darrin Gross 38:41

Well, I think it’s definitely timely and well put and, and we’ll know more when we get there. Yeah. But

Rod Khleif 38:48

I wish I had a crystal ball to see where we are a year from now, buddy, I just like, it’s like every day, it’s something new is like, what the heck’s going on out there?

J Darrin Gross 38:56

Well, I think that, you know, like, we’ve been talking mindset, and if you have your mindset, right, and you focus on your goal, you know, and you’re, you’re prepared to take action, I think you have the opportunity here, likely, you’re gonna be in a better spot than if you did. And so I appreciate you taking the time to. Thanks for having me. Hey, Rod, before we wrap up, where can listeners go? If they’d like to learn more connect with you?

Rod Khleif 39:20

Sure. Sure. So my bootcamp, again, is it’s multifamily bootcamp, I’d say Rodindenver.com is better, rodindenver.com is my boot camp or just text my name “Rod” to 72345. Listen, it’s $197 for three days without a big sales pitch, just training. You really if and if you’re trying to learn this business, once the recession is hit, it’s too late. You need to I mean, this is probably the most important event that you can do right now to really learn this business, not an event where I’ve got multiple speakers coming in to talk about different things because you don’t learn the business that way. You get some insights, but this is soup to nuts, the business and so if you can make it for God’s sakes do you’ll be glad in fact, if you come and you don’t Love it. I don’t mean like it. I mean freaking love it. I’ll give you your money back. So no questions asked. But, you know, so that’s that’s important but if you go to rods links.com that’s got all my stuff’s got my podcast, you can quickly get that it’s got lots of free books that you can download. You know, all my social media links, everything’s there. And that’s probably the best place, buddy. Thanks.

J Darrin Gross 40:25

Awesome. Rod, again, I cannot say thanks enough for taking the time to talk today. I thoroughly enjoyed it. Learned a lot, and I look forward to doing it again soon.

Rod Khleif 40:36

Thanks, buddy. Good to see you again.

J Darrin Gross 40:38

All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.

Announcer 40:56

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Land Deals with Brent Bowers – CRE PN #356

Brent Bowers 0:00

And then there’s the other list that the tax lien investors don’t buy the tax liens on, because the property suck, like they’re not accessible, they’re not buildable, they’re blah, blah, blah, they’re they’re landlocked, you name it. So I mailed the sucky list, like the land that no one’s mailing any offers to or even buying their tax liens. So when these guys got a postcard for me, it was like, you know, when the rivers dry up and there’s little puddles left and the fish are starving to death. And one little cricket jumps across, it’s like explosion of Puranas, basically, and that’s what happened to my phone. And I was hooked. Like I did two deals within about a week’s time. Each one of those deals I bought the first one for $285 sold it to a realtor for 5000 next day, I was like, Holy crap, this works better than that guy was saying on the podcast.

Announcer 0:51

J Darrin Gross 1:10

Welcome to commercial real estate pro networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is a returning guest, Brent Bowers. Brent is an investor and coach with a focus on buying and selling land. And in just a minute, we’re going to speak with Brent about the business of buying and selling land and investing strategies.

But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple of things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest back to CRE PN Radio. Brent, welcome back to CRE PN Radio.

Brent Bowers 2:21

You brought me on to quick I was trying to subscribe to your channel. I love it. All right. I’ll do that later. All right. Awesome. Um, first edition.

J Darrin Gross 2:33

Hey, thank you. spike up today. So Brent, I’m looking forward to our conversation today. But before we get started, if you could share with listeners a little bit about your background,

Brent Bowers 2:45

you know, I started out in real estate in 2007. And, you know, some say that’s the best time to start. Some say that’s the worst time to start. When I was in that position, I thought it was the worst time to start, which was 2008 was happening. Now, what I know now doing knowing what I know now I know it was actually the best time to start. And my problem was I threw in the towel too quickly. I got it in my head between my ears, that I was not going to make it because I saw others getting out of the business. So you know, I changed my course a little bit. I went back to school, I joined the military so I could pay for the school and they would pay for my schooling, and was pretty much out of the country until 2013 doing you know what the military told me to do. And that was deployed in Afghanistan. I lived in Germany when I wasn’t deployed, and pretty much took a break since about 2013. And then started doing something called House hacking when I got back to the States, and then started buying rentals, and then slowly found my way hole selling houses. And then I stumbled into the land. And what’s so cool is, you know, the CR e PN podcast, there’s things out there that educate us on how to buy commercial real estate because now I have a tax problem. And that tax problem that comes from all this money I’m making in land, I get passive income payments every single well actually, I’m paid every single day for land, sometimes multiple times a day, because we have a little over 100 notes, paying us on the land, we sell our finance, and we take that money and buy cash flowing assets, buildings, apartment complex, commercial office building, things like that. So I’ve actually just keep, you know, just stumbling into this stuff. And it’s usually because of a problem. It’s because of a problem I’m having. So with commercial real estate, there’s nothing better to depreciate in cost segregate and use the tax loopholes that the IRS gives us. So that is a really quick me in a nutshell. But a lot of my business has become has has come from problems I’ve had. So that’s me.

J Darrin Gross 4:57

I love it. iron your shirt, their land is that a logo for you the that’s a great shirt for you if that’s you?

Brent Bowers 5:06

Yeah, that’s the land sharks. Absolutely.

J Darrin Gross 5:09

Okay, gotcha, gotcha. So, okay, got the shark? Yeah, the fin and the mouth there. That’s awesome.

Brent Bowers 5:14

You got to go to YouTube to check it out.

J Darrin Gross 5:16

Yeah, definitely good to go check that out. What you know, it’s funny, the the, you started your introduction, they’re kind of just kind of telling them your tale. They’re about the the timing 2007 2008. And I haven’t, you know, read the tarot cards, or I don’t have a crystal ball. But it seems like all the the people that are talking are kind of looking at the current situation, we’re recording this in May of 2022, that there’s a there’s a lot of economic indicators that suggest we’re on the precipice of of a similar type of event, potential event, I guess it’s some sort of correction, just based on, you know, the the money in the system and an inflation, blah, blah, blah. And what I think is kind of cool is, is that, you know, one thing about all these economic cycles is that they are cyclical, there’s the up and the down. And, and, you know, like you were saying that that was the best time to get in, but you kind of throw in the towel too soon. And I’m just kind of curious, if you were to kind of use your hindsight, and kind of, you know, look back and some lessons you learned, or share what if you could share with us some of the lessons you learned and how you think you might be able to apply? Or, or, if you’ve given it much thought about what potentially is coming and how that, you know, what you’ve learned will potentially play out.

Brent Bowers 6:46

Yeah, and going back to 2008 2009, when I bought that first rental property, it was at the absolute height of the market. And then 2008 in the 2008 happened and things kind of really just slow down, it almost stopped there. It’s almost like when you fall off the ladder, you’re gonna lay there for a minute. And I learned this from a gentleman named Matt Valera. It’s like you, you lay there for a minute, and it’s like, what is broke? And then that’s the same thing with, like, the economy, you know, when that happened, I feel like things just kind of like stood still a little bit. And what we’re seeing today is really, I mean, I think it’s a little different. We’re not really dealing with the subprime loans, or you know, if you can breathe hot air on the glass, you get a loan type thing, because that’s what it was in 2007. Now we’re dealing with we’ve gotten so used to having 2% 3% equity, or three and a half percent loan on a rental property, can you believe that? Like, it’s just unbelievable. And now rates just went up to like, What 5% And people are freaking out, because now they can no longer afford that $500,000 house, they can only afford the $400,000 house because their rates just went up. So that’s going to stop those sales from happening so quickly, because now less people qualify for it. So as more you know, time goes on the market, things start to slow down when they sell it like it went from like six days sold in one market that I’m in to now 12 days and then it’s just going to increase now the moratoriums are over on the foreclosure or I don’t know they might still be going it’s like back and forth. I’m so confused with these moratoriums now, but as the moratoriums end, more inventory will come and I’m talking about real estate as a whole. I’m talking about land, I’m talking about houses talking about for plexes triplexes. And I’ll tell you, I have an office building, which sucked going through COVID Trying to rent that thing out, but we’ve just had to shift, but so we got interest rates, we got moratoriums ending, and builders are building like crazy. So what does that tell you? Like I think that tells me prices are going to come down a little bit because we’ll have a little bit more inventory, less buying power with the interest rates, like literally going from like 2% to 5%. So sellers, it might turn in to you know, more of a I’m not saying it’s gonna turn into a buyers market, but it might be more of an even playing field.

J Darrin Gross 9:14

Yeah. No, I I think that there’s a good case to be made for that. Like said the you know, one of the challenges I think that we all have is that our memory of the last one is what we’re looking for for the next one. And like you just indicated I don’t think it’ll be the same and we don’t have the subprime and we don’t have all the fog a mirror kind of mortgage situation that we had before. So that that will be different, but I think that you know, just some sort of a slowdown to where the maybe the the frenzy is not as hot. Maybe it gives buyers at least a little bit more flooding with sellers That kind of thing, and maybe perhaps a little less competition on every deal. Like, if you don’t buy it within, you know, you know, right away kind of thing. But I think that the the other side of that thing that I’ve come to recognize is that the opportunity is in the change in the marketplace, when the marketplace changes, that’s, that creates an opportunity, because there’s a mindset that everybody has of this as the market and then all sudden changed. And we’re in if you recognize that, that’s the opportunity and you you’ve been in the market and you’re sharp, and you know, you know where you need to be. And relative to what things are, I think that’s the, that’s the opportunity there. And hopefully, that’ll create some opportunities for all of us. If you’re, you know, in a good position, but

Brent Bowers 10:44

Opportunity comes with a change, right?

J Darrin Gross 10:46

Well, it certainly, I mean, if there’s, if there’s no other lesson to learn, it’s the you know, the ups and the downs, that’s what creates the opportunity, you know, it’s the, if you’re, if you’re only buying when things are up, and then you’re selling and things are down, you’ve got it all wrong, you’ve got to, you know, it’s in the down cycles, where you really make your money kind of thing. And, you know, just to be conscious of that, and to, you know, be aware of what’s going on and, and not not that everything’s going to crash and burn and everything like that, but there’s clearly signs of a slowdown when everything’s going up and cost and, and it’ll be there’ll be an adjustment, however, that, you know, that’s just the nature of things. There’s only and if you there was something I read the other day, and I was like, it’s always kind of shocking to me, it’s like, I think it was like 40% of Americans don’t have $1,000 in savings, you know, kind of thing. I was like, wow, you know, it’s that’s a pretty a pretty scary number. When you think about it, I couldn’t survive any kind of like, an enemy. You know how rare it is. But it just would you realize that how many people are basically they have no cushion, kind of thing.

Brent Bowers 11:57

And then I have a car loan too, and a house payment, and then they don’t even have the $1,000 in savings. They’re big trouble.

J Darrin Gross 12:03

Yeah, yeah. And so anyway, you know, that being said, if the cycles, if the markets changing, and the costs are going up, and they don’t have any kind of savings, they have no room for error, anything which to me, will, will create more opportunities, if you do have capital to deploy. So. But anyway, I wanted to just kind of touch on that just again, it was more of kind of a reflection point just based on where you started and where where things are and stuff. Let’s talk about your your land investing and, and how your, I guess kind of your journey, you started off saying that you you invested in. And I can’t remember the little bit of the story, but single family rental or something like that, and you were you’re overseas and and if I remember, right, there was like the pain of coming back to somebody destroyed your place. And the you know, there was just that it wasn’t a good fit based on where you’re at kind of thing. And that’s when he kind of threw in the towel. And then you ended up in that in the land thing that but help help us understand kind of, you know, how you got into land. And, you know, what you’ve seen and where you are now as to how your how it’s working 100 notes getting paid daily. That’s a pretty good story right there.

Brent Bowers 13:26

Yeah, Darrin, you have a magnificent memory, holy cow that you remember that from like a year and a half ago. So yeah, you know, I built a team around the land business. So how I came into land was, you know, once again, I had a problem on my hands. I had just paid almost, I think $5,000 Roughly for some mailers to go out for a bunch of single family homes and Colorado Springs. And then our battalion commander told us, Hey, you’re going to the field for two and a half weeks, you can’t bring your cell phones. So I now had a huge problem. I had just went into debt on AmEx, to pay for these mailers. So I spent money I didn’t have sent nets and mailers to people that are going to hopefully return a phone call or call on that mailer because they want to sell their house. And no one’s going to be there to answer the phone. So that problem caused me to lose money. And yes, we miss out on some leads. But I also had did two things with that one, I hired someone to help me start taking those phone calls and meeting the sellers, you know, because I just surely couldn’t do it. And I was working almost 1213 hour days on bass as an Army officer. And then I was also still searching for answers listening to podcasts like CR EPN, things like that and just trying to educate myself. And I shared a little bit about this on the last one we did together. But I heard about this guy buying land at Crazy discounts and flipping it overnight. And I was like wait a minute. I I’m currently right now, mailing the tax delinquent list. And I’m filtering out the mobile homes and the office buildings industrial, I’m only focused on one little niche that single family homes. And guess what? It seemed like everybody else was focused on that one as well, too. We’re all fighting over the dirty stinky old cat pee houses that have foundation problems, and Colorado Springs. And like, I would have to go to a meeting. And I would like rush off base on my lunch break, if the seller can meet me at that time. And I would rush there, and I will rush the appointment. And if I didn’t get that house under contract, good luck, I was never getting it. Because, you know, it’s you have to be a very skilled salesperson, to get someone to write a contract with you with like, and within about 15 minutes like that is that you got to create rapport, you got to learn about the problem, see how you can serve the seller, because most sellers are not going to sell their house at a discounted cash price, unless you are going to provide them speed, or convenience, or serve them in some type of, you know, like creative way to allow them to rent the house back. So that night that I heard that man talking on that podcast about land, I went and called my virtual assistant, I said, Hey, you now we scrub that all the land, can you please put that back in there and send me an Excel spreadsheet as soon as possible, because I want to mail all these landowners a postcard. So I mail them a postcard and mail 687 postcards out to people that were behind on their taxes. And I thought I was mailing just a regular old tax delinquent list. I was actually mailing the county held tax lien list. What that means for anybody listening to this is basically in Colorado, you had pretty much to list, you have the list of people the list of people that their properties, you can buy the tax lien on make a return on investment. And after three years, you can you know, it’s becomes deed eligible and you can foreclose. And then there’s the other list that the tax lien investors don’t buy the tax liens on because the property suck. Like they’re not accessible. They’re not buildable, they’re blah, blah, blah, they’re they’re landlocked, you name it. So I mailed the sucky list, like the land that no one’s mailing any offers to or even buying their tax liens. So when these guys got a postcard from me, it was like, you know, when the rivers dry up, and there’s little puddles left and the fish are starving to death. And one little cricket jumps across, it’s like explosion of Puranas, basically. And that’s what happened to my phone. And I was hooked. Like I did two deals within about a week’s time. Each one of those deals I bought the first one for $285 sold it to a realtor for 5000 next day, I was like, Holy crap, this works better than that guy was saying on the podcast. And then the second deal, this is where my brain was broken. Like my mindset changed my paradigm shift like Stephen Covey says, the second one, I bought for 500 bucks, and then sold it on Craigslist the next day for $500, down, and 400 a month. And I was hooked. That’s where my passive income journey began, because I’d already had rental properties. And I pretty much at that time still hadn’t made a profit on any of them. But my passive income started and eventually financial freedom because it only took like, 10 of those to cover my expenses. And then my geography freedom. And that’s where I was like just gung ho, I would buy any parcel of land, as long as I can get it for a discount, and sell it for a little more. And seller finance it.

J Darrin Gross 18:39

That’s awesome. So literally that fast, you shifted the focus from the single families to land. And you mentioned that the list was like there’s two sides to the list. In Did you also send to the the, the the back tax properties, or if I understood right there was the the properties that were inaccessible that were you know, nobody wanted, which are the sounds like those are the people that were calling you. And then you had the others which were the the county tax lien, the you know, kind of thing where there was more of a process. Did you get calls from those people as well?

Brent Bowers 19:20

Oh yeah, I figured out how to mail those guys as well because first Her name is Cindy. She didn’t send me that list because she still didn’t understand why I wanted that tax lien list because tax lien investors had already paid those back taxes. I was like, please just send me the list. I am going to buy the land from these people and get the let the taxes caught up. That way they don’t lose it. They make some money. And I will keep taxes caught up. So finally she sent me that list two and I mailed that and then I just mailed the entire county list like I eventually just started mailing the entire county landless but I never once took my I never I’d already built them. Gene for the house buying. So we just kept doing that one too. And we just kept growing and growing. I mean, my team is nine people now, which is very small, actually. But it’s perfect.

J Darrin Gross 20:11

All virtual? Or do you have people local? Or how are you? So we’re

Brent Bowers 20:14

We’re all virtual. Several of us are in Colorado, couple in the Philippines, one guy in India. But yeah, we we actually rented out our office, we had a beautiful office, we renovated it. And one thing happened during COVID, we learned that we don’t need offices. So we rented it out. And that’s another cash flowing asset coming in every month.

J Darrin Gross 20:37

It’s awesome. So, so you started almost by accident, you listen on podcast, you shifted gears from the single family into the land. You got to immediate success within just a week or so you’re you’ve got two deals. Are you still focused on Colorado, specifically, specific county? Or do you? How wide is your your focus? And how did you did you? If it is wider? Then how did you go that? Or how did you navigate that? From the first to where you are now,

Brent Bowers 21:14

We first started in the backyard. And it was actually one county and I could drive that whole county within like, several hours, you know, three, four hours. And then I expanded to the actually two counties over because someone said, Hey, man, we’re doing really well, because the land business is a very small niche. And there’s not a lot of people in it. But I heard from a friend that was doing very well in another county. He’s like, Dude, you gotta come on. And so I did, I started mailing that. And then I realized, wait a minute, the cash buyers list, the buyers lists of people that I’m serving in this particular county, are now asking me for land in the next county over. So we started mailing that one. And then it’s funny what happens, realtor, start finding out what you’re doing. And then you get on a few podcasts. And then you all of a sudden you’re buying land in San Bernardino, and then Pennsylvania. And then I’ve got my father involved in this and we’re buying land in Florida. My dad’s done over 50 Something land deals now. He’s done manual labor his entire life. And this guy is like the flip King on a five by five mile radius, a one one area of his county, like he could tell you what’s going on in every single road. So he no longer does manual labor.

J Darrin Gross 22:28

Well, that’s awesome. That’s awesome. So when you you said, like you started in your backyard? Was it basically just more people asking you to go, you know, to different counties? Or to expand your territory? Or? Or were there any parameters that you identified that were key to the success that you were having in your own backyard?

Brent Bowers 22:51

Yeah, I wouldn’t say I’m a super detailed or calculated person. It was you mentioned that it was I saw the demand was there. And then number two, I had the buyers asking me, so I’m not one that goes out and creates a product and says, you know, I think people will like this, though. I want to see where the demand is. And then I get a product that they’re looking for and asking me for and then I fill that demand. So I’m kind of lazy, I don’t like to create, I like to feel

J Darrin Gross 23:20

I mean, a lot easier just to sell to somebody it’s asking than trying to give in somebody that no, this is really good deal you could buy kind of thing. So that’s great. So talk a little bit about the, the, you know, the the, I guess the aspects of the land, you’re you’re buying and selling is it? Is it bare land? Does it have a structure on it? Is it acreage? Is it a city lot? Is it?

Brent Bowers 23:49

Yeah, it’s vacant, raw, unimproved land, I would say 99% of it. Now do we get the occasional parcel that had, you know, a house burned down at one time since so it’s already got a septic or sewer hookup and Water and Electric? Yes. We’ve done very well building on those parcels. You know, I’ve teamed up with a guy named Dan hammer cost. And we’ve started building together and we’ve done really, really well where I could have maybe sold the land quickly to a builder or developer or someone that wants to build their home and made $20,000 on it. We either order a modular home or build a stick built house on it and literally make 90,000 So there’s because there’s a huge demand right now, you know, the National Association of REALTORS says we’re 6 million houses short across the country. And then you look at the inventory and it’s only a couple of weeks. And now I remember I was just talking about interest rates going up and foreclosures I’m being very careful with what we build. I’m building houses that if I get stuck with it, I now have a beautiful rental. And they’re not massive houses. Which there’s a lot of money that too, by the way. So what are the parcels of land And look like, you know, a lot of times, I break it up into two categories, you got the rural stuff, the stuff that I love for cash flow. That’s the stuff on the outskirts of the city. And then you got the stuff that’s like in a neighborhood where there’s already sewer lines running by and Water and Electric. That’s the stuff that we call infill buildable lots. And that’s the stuff we sell to builders or developers. I just bought three lots down the street for me. And there’s a guy named eco son home builders, and he’s got a lot of demand right now to build his houses, what the builders need land. So I just listed the parcels with him, he put them on the MLS, he put his beautiful model home pictures, and now we’re gonna sell them to someone looking for a brand new home without a power bill or a water bill because the solar panels are going to cover their electric and then they’ll have a well, so it’s a really cool deal. So you just team up with guys like that, or build it yourself.

J Darrin Gross 25:56

Sweet. So the purchase price, you know, you mentioned like a couple 100 bucks. Is this? Is that the the net net price of the the property? Are you finding? Is there owner financing? Or how are you describe a little bit about the the in and out of the I guess the money side of this? I know you’ve talked about it, but I’m just kind of curious, is it? Is it predicated on you come in with cash? Are you getting a loan? Are you are you owner financing? What’s the what’s the

Brent Bowers 26:30

I mean, I’m sure I could have gotten a loan from that guy for $285. And you know, I didn’t have to at that point. And really, it’s funny how it worked out. I was so afraid to buy the land and spend $285, I lined up a buyer first. And she agreed to close on Wednesday with the title company. So I told the seller, I would pay him on Tuesday. So that way my money wasn’t locked up too long, right? Cuz I was like buying, you know, we had just moved across the country with the military, I had diapers to buy, we just had a verge baby, I was broke in 2016. Man. The second one is 500 That one actually wrote the check for before I found the buyer because I was getting a little bit more confident. You know, you get really cocky when you start winning. You know, Tony Robbins says when when we lose money, we ponder when we make money we party. So we learn a lot more from our failures. So about the 10th or 12th deal that I’m using my own cash for I’m not even getting financing. They did start costing more and more and more though, I think the next one was $1,300. And the fourth one was from a bank, I actually got under contract for 25,000. But here’s how I sold that when I didn’t even need, I didn’t even need a loan, I went out and put signs up all over the place. And I said 44 acres 38k phone number, and I put 30 Something signs out, I started getting phone calls. And it was literally, you know, a gift from God. Basically, these people had just sold their ranch in Texas, and they’re driving around Colorado looking for somewhere else to buy. And they saw my signs popping up while they were driving around. So no, I wasn’t getting loans at first. There’s some things I’m doing now bigger deals. We just bought one for 1.2 million. We’re working on another four and a half million dollar parcel that we’re bringing in partners for you know, that’s a you know, totally different but yeah, I I wish I was still plucking those, you know, $285 parcels out to make five grand, but you could spend, I mean, I’ve found that bigger deals take just a little bit longer. But there’s way more money. There’s way more zeros at the end of it.

J Darrin Gross 28:45

That’s awesome. On those larger deals. What kind of timeline do you find between acquisition to disposition? And I assume if you’re if you’re developing the land, that’s obviously a whole nother kettle of fish here. But are you? Is it I mean, you’ve been talking about buying on Tuesday sell it on Wednesday? What kind of timeline? Are you dealing with these larger deals?

Brent Bowers 29:11

Yeah, the larger stuff that we put on the MLS and it depends what area it is. There’s certain parts of Texas where we can sell this stuff and like 12 hours, Florida, you know, 3030 days, but our development stuff, that’s the stuff we’re sitting on. That’s that takes a lot more time. You know, and then a lot of times we will get it under contract with a due diligence period. So we can start working with the city start talking to the engineers to do the drawing. So that’s like more like a six month you know, just it’s sometimes it takes us six months just to buy it. Because if I go and buy a piece of land like we’re looking at another deal that we could put almost 300 RV lots on and that that price tag is a little higher. Now if I just went and paid that price without having the stamp of approval on engineer plans from the city, that’s totally gambling. And I mean, you might do, you might get lucky, kind of like I was in the very beginning of my land business till I started making big mistakes, because I got cocky, but you learn you learn the hard way. So I would say the answer your question, it’s it’s all over the place with acquisition disposition just depends. There’s so many variables.

J Darrin Gross 30:31

So, in the introduction there have mentioned that you do coaching. Do you tell me a little bit about your, your program your students? What are you? How are you working on?

Brent Bowers 30:44

Yeah, so I’m fortunate to be a wholesaling Inc coach, I am their official land coach, we have a course that we put together, that is the action steps of how to build a land business that will serve you and your family and others, just like I did, just like I started out, because I just assume everyone starts out just like I did, no money, no time. So that’s the way the course is built. And the it’s all about revenue in the first position. Like I don’t talk a lot about CRMs. And starting an LLC, none of that stuff, I want to get money in your pocket, like within 30 days. And then we start worrying about building the business blueprint. And then it’s weekly, weekly coaching calls, they are recorded, we’re on there every week. And then we have a support group so you can get your answers. I’m sorry, you can get your questions answered daily, because I can tell you exactly what to do. And then you’re going to get a little roadblock. And then you’re going to have a question. So that’s where I found that a lot of these, I went to so many seminars there and I read so many books, but what would happen was I would fizzle out because I’m like in my own little like playground here, like getting kicked in the stomach all by myself and no one else to talk to. And the biggest thing about our weekly calls is, we’re always sharing wins. Like, like, you got to start with a win first before you ask the question. And a lot of times these wins, I just made $200,000 Last month, or blah, blah, blah, you know, you name it, I just sold my first parcel. And I just got a parcel under contract for 45,000. Hard to have a buyer for 90. Like things like that. That’s what I needed when I was just starting out. Maybe it wouldn’t have taken me from 2007 to 2013 to keep you know just swinging the bat swinging the back swing the bat.

J Darrin Gross 32:28

That’s awesome. You mentioned your dad’s doing this now How long has he been doing it?

Brent Bowers 32:33

Ah, he’s she’s I would say two and a half years now is the probably the first land deal we did together. And it’s funny one of the the buyer that purchased that parcel of land, it was this Latino couple we couldn’t even understand, like, we couldn’t even understand each other. Their child was translating, and they just paid their parcel of land off in Indian town, Florida. And we’re super excited because that was like, one of the first ones we did together and we just changed those people’s legacy.

J Darrin Gross 33:04

That’s awesome. That’s awesome. So Brent, your students. In the success you you mentioned everybody’s having in the success calls that I’m curious how much of the success that your your students are having? Would you relate to a system you have that you I’m assuming you have a system that you introduce people to versus just their umption or their want to, you know, their their drive to succeed?

Brent Bowers 33:30

I love it. Yeah, every every student that comes in wholesaling, Inc, student or land shark student, we all want to make money. But that motivation goes away as we make mistakes and spend money and we’re not getting the phone calls. We don’t do a deal within you know, 45 days and the next shiny object comes around or our mother in law says why are you doing that? The problem is, is like we all go back, we all regress to the mean, we all go back to our old habits. But the systems we build with land sharks, it’s a community. And if you stay plugged in, you listen to the wholesaling, Inc podcast, you hear the winds that are constantly happening. And I was the reason why I know this so well is because I was one of those students back in 2016. Every single day on the way to work, I would still listen to the whole selling podcast. And I just wanted to hear that John and Sally, that Korean carry Rhema that Brent Daniels was still having success because even though I had had already I had already had success in real estate already and multiple properties by 2016. It still was not solidified in my mind that I could do it. Yeah, maybe they can do it. But every single day I needed that motivation. It’s like taking a shower. We got to still bathe every day. If we don’t want to stink sometimes multiple times a day. It’s like working out you can’t just go to the gym once a month. So What is that? And two is a system that you plug into, and we show you what to do when to do. We’re not We’re not educating you. We’re directing and giving you action steps and then we’re there. The system to when you hit the roadblock, when you hit the probate problem, or the financial or the legal issue to walk you through, okay, yeah, we’ve been there. Here’s what you do now, type thing. So it’s 100% of systems, and not just someone just wanting to make money because we all eventually want to make money. That’s why we that’s why we go to your YouTube channel or listen to this podcast.

J Darrin Gross 35:36

And another curiosity of your students. How, what’s the average time it takes for somebody to get their first deal?

Brent Bowers 35:46

Yeah, I want to say the average, you know, I wouldn’t say it takes about four months or so for most, have I had guys get make money in 29 days? Absolutely. has it taken some a year? Absolutely.

J Darrin Gross 36:02

Hey Brent, if we could want to shift gears here for just a quick second. In the in mentioned it before we started, but you’ve been on here before, it’s hopefully, you know, the drill. By day, I’m an insurance broker. And I like to ask my guests you know about risk. And as a an insurance broker, we try and, you know, do some risk manager, we try and assess the risk can determine what to do with the risk. And there’s a couple different strategies we typically try and employ. The first is we look to see if we can avoid the risk. When that’s not an option, we’ll see if there’s a way we can minimize the risk. And when we can’t avoid or minimize them, we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is. And as such, I like to ask my guests if they can come take a look at their own situation, could be their clients, the market? You know, interest rates, however you want to frame the question the answer. But if you can take a look at your situation and consider what you can what you see as the biggest risk. And again, for clarification, while I’m an insurance broker, I’m not necessarily looking for an insurance related answer. But if you’re willing, I’d like to ask you, Brent Bowers, what is the biggest risk?

Brent Bowers 37:26

I think the biggest risk is me dying. And my children and my wife getting taxed to death with this real estate that they’re probably going to sell because I didn’t set up a plan with trusts properly. I didn’t have proper life insurance, like it talks about this, this great book that I read called, become the Rockefellers and using a whole life policy to, you know, be your own bank. So I think that’s a huge risk. And it’s like, I’m just recently learning about these things and implementing these things, to where I can fund this policy for, you know, maybe I get a chunk of money 10 20,000, I can fund this policy, and now my, it’ll pass to my family tax free. And then oh, maybe I need that 20,000 Later, I can borrow like 90% of it at two or 3% interest. And that 20,000 is still making the 6% interest with the dividends and all this stuff. So I think that’s a huge risk. Business owners not having that and talking to you there and about that sort of thing. Because the Rockefellers set it up to where it passes on. That’s why they still have money six generations later, and the Vanderbilts don’t really have as much money as they used to. So that’s a huge risk, taxes, and death, to the things that we’re all pretty much guaranteed.

J Darrin Gross 38:56

Here, the unavoidable death and taxes. So that’s good stuff. Right? Where can the listeners go if they’d like to learn more or connect with you?

Brent Bowers 39:06

Well, I got a great YouTube channel. If you go on YouTube, and just search Brent Bowers, I talk about this stuff five days a week. I’ve got a video coming out five days a week, and I’m sorry, I just got really excited when you ask that because I’ve been pouring so much time and effort and airplane flights to build this YouTube channel. So I just asked that. Please subscribe. Even if you don’t like the content, just still subscribe.

J Darrin Gross 39:32

I will make certain that that happens for me anyway. I always enjoy Yes.

Brent Bowers 39:36

God to your channel. Yeah, no.

J Darrin Gross 39:39

return the favor. Brent, I can’t say thanks enough for taking the time to talk today. It’s always a pleasure. And you you bring good information. And I appreciate that. Hopefully we can do it again soon.

Unknown Speaker 39:54

My pleasure. Thank you. God bless.

J Darrin Gross 39:57

All right. For our listeners. If you liked this episode, don’t Forget to Like, Share and Subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks, CRE PN Radio.

Announcer 40:14

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Building Technology Internet of Things with Marc Pégulu – CRE PN #355

Marc Pégulu 0:00

General Purpose of Internet of Things is about collecting some some data, process the data and then act. So you build an intelligence based on you know, objective set of data, you may compare them to certain profile of usage or an expected usage and from which you can make more intelligent decision, whether it’s about routing, or it’s about automating some operations in, in, in a building. So, when it comes to, you know, commercial building, there are different type of applications, which could be, you know, in the category of having a reduction of the operating cost of the building. That’s one key type of applications. And the second one would be, I would say, relative to the wellness of occupancy or in that case, for instance, and commercial building wellness of employees. And because there is a strong relationship between this notion of wellness and of course, the motivation and as a consequence the efficiency of employees.

Announcer 1:05

J Darrin Gross 1:24

Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.

Today, my guest is Marc Pégulu. Marc is the Vice President of Internet of Things product marketing and strategy for Semtech Wireless and Sensing Products Group. And in just a minute, we’re gonna speak with Marc about the IoT of things with commercial buildings, and how low raw sensors are being deployed to help builders, owners and residents overcome some of the biggest challenges for smart applications with commercial buildings.

But first, a quick reminder, if you’d like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment, we’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. And you can find us on YouTube at Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest, Marc. Welcome to CRE PN Radio.

Marc Pégulu 2:56

Hi there. And thank you very much for having me with your podcast. And I look forward to our conversation today.

J Darrin Gross 3:03

Well, I’m looking forward to our conversation as well. Before we get started, if you could share with listeners just a little bit about your background.

Marc Pégulu 3:10

Yes, my pleasure. So I’m an engineer by nature. You know, I came up like any engineers quite interested in solving problems. My speciality has been wireless and sensing from day one, I’ve been working in several companies in the semiconductor industry on sensors of connectivity. And with Semtech we thought that there was a huge, I would say opportunity to bring a new type of connectivity. It was back at a time in around 2015 People were starting to speak about this kind of World of Internet of Things or IoT. And we say where you know, we think that this type of market will require something new, something entirely low power, very low cost, the type of connectivity and this is where we come with this technology named LoRa, which simply stands for long range. And then we worked very closely with the ecosystem to build an alliance called the LoRa alliance to promote an open and free communication standard.

J Darrin Gross 4:26

Now I heard the LoRa is long range. The The other thing you’re talking about the last part that didn’t quite get that what was that you’re saying is for

Marc Pégulu 4:37

The low power, probably the low power part is very, very important. So what’s one of the key element and the other part is about having an open communication platform so you need you know,

J Darrin Gross 4:49

Okay, open so an open platform

Marc Pégulu 4:51

Is like yeah, like Wi Fi. For instance, you know, you want a protocol which is open so that anybody can can work separately and have a level of interoperability

J Darrin Gross 5:02

Now that that’s, that’s definitely music to anybody who’s trying to, you know, connect things, I find that everyone’s got their own platform, and you’ve got different entry points and, and nothing can speak to each other. Yeah, that’s the, that’s the point where sometimes I want to just undo the whole computer thing, because it’s like, I thought this was supposed to be single entry input, don’t just put it in one time and use it. But that’s great. So let’s talk a little bit about the Internet of Things in commercial real estate, what are some of the the points that you have identified, that can be controlled or measured or can can integrate with the Internet of Things? Yes.

Marc Pégulu 5:46

So the general purpose of Internet of Things is about collecting some some data, process the data and then act. So you build an intelligence based on you know, objective set of data, you may compare them to certain profile of usage or an expected usage, and from this, you can make more intelligent decision, whether it’s about routing, or it’s about automating some operations in, in in a building. So, when it comes to, you know, commercial building, there are different type of applications, which could be, you know, in the category of having a reduction of the operating cost of the building, that’s one key type of applications. And the second one would be I would say, relative to the wellness of occupancy or in that case, for instance, and commercial building wellness of employees, and because there is a strong relationship between this notion of wellness and of course, the motivation and as a consequence, the efficiency of employees. So, we try with the Internet of Things, indeed, to bring this kind of birth world of technology to a simple way enough so that it makes sense for people, it makes sense for corporations and we see is already a key element of what we are doing together with with the ecosystem. And of course, I would be happy to give some examples of type of applications if you want to,

J Darrin Gross 7:15

I was going to ask if you could identify some of the points that you’re monitoring or that you’re able to control.

Marc Pégulu 7:22

So, the typical typical examples would be for instance, anything related to air quality, and it’s especially important for indoor operations. So, how do you determine air quality in general you measure different parameters such as temperature, humidity, but also some specific gases like co2, and all of these you know, there are a lot of correlations between those different parameters and what you can call air quality has been seen during the last two years or so, with all the consequences of pandemic with COVID where it has been proven that you need to renew the the air quite often and the industry came to a realization that actually did not have enough sensors to properly make a determination as whether a specific home got the hair renewed, often enough. So, now, you know if you have a very cheap way to deploy sensors and collect regularly this data you can bring I mean the expected level I would say of feedback and and safety for for employees to air quality is a big one. Then you have things like customer satisfactions, right so which could be for instance about a feedback you know, you you collect a feedback with a traditional red green, yellow smiley face type of button, that’s fine but it could be also when you go to the restrooms you want to notify that you know something is not right and you would like to cause the cleanup company so all this kind of information is just you know to make sure your time at the office or in the commercial building a little bit more pleasant or so when you come to a place right you know, it’s nice to know that you can pack in Fiat directly to the right place to park but even better. So, this is what we call smart parking. And smart parking is based on some Proximity Detection sensors which basically you know, will give real time information as well as our place is occupied or not. And you could before even entering the parking get access to within permissions and be directed exactly to the right this may be your last one because there are a lot with be related to anything which is related to building damage. So I take the example of one of our office actually at Sam tech here in in San Diego we got leak damage during the time of pandemic. So know people from time taking the building and then we discover Like a few weeks later, that actually the tenant above us a leak. And we had a whole flow of kind of damage. And that’s super expensive from an insurance point of view, where what if you had? And now we have because we learned our lesson, what if we had some leak detection sense of everywhere in order to be alerted immediately? And, you know, to mitigate the risk and the cost for everyone?

J Darrin Gross 10:25

Yeah, that last one you touched on, I’m very familiar with insurance companies are really kind of keying in on that, you know, recognizing, whatever forget to call them water bugs, or whatever. But there’s, there’s a way to detect if there’s water where it shouldn’t be and then to turn off the supply to, again, to minimize the damage. It’s going to ask you, you know, on the on the air quality one, is that something that that has always been a point of measurement, or is that something that really kind of grew during the pandemic has that been something you guys have dealt with

Marc Pégulu 11:01

It’s grew significantly during the pandemic, I think temperature definitely and humidity have been constant measurement measurement point, but the co2 or ozone gas monitoring is new. It came up with, you know, it was, it was a little bit before the pandemic, but the pandemic bring, I think, the real value, immediate value, I would say to everyone, because it was short term and high risk immediately. But we we’ve seen that also in schools, for instance, we see a lot of schools now deploying those kind of co2 sensors, in order to make sure that the kids are being in a proper environment to run. And I think people are starting now to integrate this type of information to their daily life, and how to, you know, how to best use I think this is normally information everyone should have. We never paid attention to that before. But I think it’s going to be more and more, I would say, in in our way of, you know, thinking about how we should live, right?

J Darrin Gross 12:01

Yeah, no, I get it. And it makes complete sense. I was just, it’s kind of interesting, some of the, of the data points that are being collected and or the just the awareness of it, and even how, you know, the proper levels affect one’s experience, and where you can feel, you know, more alive, awake, and you know, you can affect one’s just enjoyment of the situation or the space by having, you know, better air quality there, as opposed to perhaps they didn’t even know they had poor air quality. Yeah,

Marc Pégulu 12:40

I think people didn’t know. And they, they think we see a trend or so you know, curious about as, you know, as a citizen to be a little bit more empowered. And I think empowerment comes or so can be helped with knowledge. So if you’re not aware of certain things, actually, you feel a little bit more empowered, and you know, you have a voice, your voice matter. And I believe corporations are integrating this more and more. You know, everybody, we hear that all the time, right, the first asset of a company is its employees, and being able to deliver, you know, this clear message to the employee that the company you’re working for, is taking care of that for you know, they may give the gift. Right, right. And definitely, we see a lot of impact, positive impact and motivation of employees.

J Darrin Gross 13:35

Right. Now, the the kind of curious, is the drive or the interest for these products? Is it coming from the building owner? Is it because it coming from the the the control industry, meaning like if it’s the HVAC industry or or the construction industry, or is it coming from the the tenant occupier, expecting these things to be present?

Marc Pégulu 14:06

I think that’s a very good question. And once we think that it comes now, because it’s related to the people and the occupants, it’s more the tenant actually, which is driving this kind of consideration. So maybe I can take the example of some some companies like Capgemini, which is a pretty large consulting service company is using our raw technology actually, for the building. We live we have about 400 buildings worldwide, pretty large specifici. And, you know, what’s driving them is for instance, optimizing the occupancy of the building. So it’s both about making sure that you know, there are not too many offices which are left unoccupied, but also making sure that if you need a meeting room, the meeting room is available when you need it. And when is not no conflict. And the the figure that, you know, he’s on the first case about occupancy, they could save six significant money, right they have a yearly budget of 300 million euro. And what they can save is, you know, you’re only 45 million, so it’s, you know, a bit more than 10%, the kind of savings, so which is very significant for a small amount. In that case, it was 6 million, your whole kind of investment to equip the building. And you get an immediate, I would say a payback on that. But this is a tenant in obviously, for themselves, because they want to optimize their space. It drove I would say this aspiration to reduce the cost and implement IoT technologies. For others, when it’s more related to wellness or health safety. Again, I think it’s company companies and tenants were basically making certain level of promise and our safety promises to their employees, and they have to deliver. So they’re asking, working quite often with, you know, the owner of the building to make sure that the building is properly equipped as well to to accommodate those kind of technologies.

J Darrin Gross 16:18

No, I appreciate you going through that the you find that predominantly, this is a commercial office, space wareness application where the market is, where are you finding it in different asset classes as well?

Marc Pégulu 16:36

We see a lot of traction in the commercial building right now. I mean, offices, definitely. That would extend that also to factories, factories as a tendency and warehouses as well have a tendency to include also some other considerations like safety. So we see for instance, panic buttons type of, of things, as well, in association to the oneness, in operation of operational optimization of the building. So these are the primary segments that today we see.

J Darrin Gross 17:19

You mentioned in the office, they’re talking about, like the conference room availability, and that, you know, made me think just for a second, you know, kind of the whole on the hospitality side of things with like the Airbnb and how they’ve, you know, created all these entry exit, things that are no touch, opportunity, and you can schedule, you know, you’d go on a calendar and pick the address or the place you want to stay and put it on electronic calendar, and you’ll be in and it will give you a code prior to entry. And as soon as you’re out and somebody else will come in and clean it for the next person. And I mean, it’s all very low touch kind of thing. Given kind of the reset that COVID is in, I don’t know that the the the ink is dried, as far as writing the story on on office space, post COVID, I think that there’s still kind of a, some sort of a, you know, a hybrid that’s that we’re in right now. But but, you know, pre COVID, this the the shared workspace was was a big, big thing, kind of the WeWork model. did, I would think they would would your your technology, not even kind of offer for a shared workspace to really implement some controls there would that be? Am I thinking long term?

Marc Pégulu 18:55

I think keeping it right indeed, because you have, for instance, with see usage of the technology associated to some low resolution camera for people counting. So you can count how many people are getting in or out. So it’s about preserve presence detect in general, which is one of the key elements in the to you know, make valuable a shell the aesthetic shadow shell building. We think anything which is indeed, related to security system, so you mentioned that Airbnb, obviously, you know, there is a lock here, this is one of your key and toughest to enter the place you have rented. You need to make sure that indeed you have the place has been properly locked as well. So it’s very convenient for the owner of the press, actually to our first kind of monitoring information. And obviously the technology I mean don’t exist as a technology in itself. And I would say independently of the sensing and the control mechanism, what you mentioned about delivering a new card, and then three cards all the time to the user fits into that right fits into this big picture. Where the technology comes into play this type of fire to technology, while it’s between, you know, at some point, you need to communicate with your luck with new information. And this is where more or less, it’s, you know, it’s the most common way actually to communicate between the lock itself, and whichever intelligence deliver or selectors and you got to enter. So but it’s a good good example that you gave, actually, I would agree with you that we are returned bitter still early in the phase of a post pandemic, to properly understand how companies are going to manage shared workspace like we work and others, we do see that it seems actually that they took the time to properly reflect on how they should equipped the building of their offices in order to anticipate the back to office in in a safer way. And what has been blocking so far a little bit, the installation is just manpower work. So it’s just a simple thing to allow people to go to the office to install devices, but the business case is definitely here, the desire and the budget here. And we see now that as people are allowed to get back to office, so are the maintenance people capable of installing in a simple way it was it was devices. And as a user, of course, you want that, right, you want that your building has been equipped with this kind of flavor of, of knowledge to make sure that you don’t enter an overcrowded press, you want to know that the press, the Office of the meeting room is free, right when you get into that, and that, indeed, that the air quality has been renewed. And that’s a safe place to come and maybe to bring your customers together with you.

J Darrin Gross 22:06

So let me ask you this question, because this is the the question I’ve always had with doing all these things on my phone or you know, however, and I get get that the capability of all of it exists and when it works, it works great. What is the the concern? Or how do you compensate for the the what if a network goes down? Or there’s a there’s a gap somewhere or there’s some sort of a could be a cyber thing is there is there an effort to is there any redundancy built into these to where you know, you can avoid any kind of you know, downtime or non operational time?

Marc Pégulu 22:54

So, yeah, I think you bring up a few good points. So, the first thing is of course, we want to use as an interface what people are used, you know, which is a you interface with your smartphone. So all those technologies are compatible, because in the end, we see data processing and internet and you’re using this interface this interface is also used for crafting quite often. So what happens you know what could happen right the first the first thing is any kind of communication is extremely encrypted. So you want to make sure that the there is no data privacy kind of concern. So that’s the first element then most of the information which is communicated is is a sensor information. So it gives you an additional information. It does not necessarily for instance, lock you out of a building or something like that, but it gives you an additional information remember what we spoke about and governmental information. But if you don’t have this information, you know you may not be happy. But you know, it’s it doesn’t prevent you save from using the premise Sam for early detection or something if it doesn’t work, why it means you know, you may have some risk for given you know, given time until this is repelled. But the good thing is that you are you’re alerted that something doesn’t work. So we see you get it and the reason why you get this information is like you pointed out it’s very easy to build a redundancy with this type of technology. So I started we started by saying you know we are working on this technology of Loja which is long range. And this is really important. Now because there are things you can and things you cannot do with short range technology. And building redundancy with short and short Tange technology. It’s very complicated because it means you need to install an infrastructure or dense infrastructure which is absolutely not compatible with economic concepts. With loha Actually, you are in studying almost like it’s like a Wi Fi hotspot except that you get a super long range something like 20 or 30 times longer range than Wi Fi And it enables, you know, with a few gateways in the building to cover with redundancy every corner of the building. So even if a gateway goes down, that’s fine, actually, you know, you will get another gateway. And interestingly, so let’s imagine you you lose, you know, power into your building, where actually your sensors which are battery operated could be received by what we call the lower one public network. So one of the elements which is already important for us is that we offer the possibility to ecosystem to deploy your network as a private network, like Wi Fi in your building, but also as a public network. So you have companies like, you know, mobile network operators, or cable network operators who are providing local one technology from outdoor to indoor. So your device can be received or so as an information as an encrypted message by outdoor hotspot router, or gateways, which don’t belong to your building, but you know, you can, you can subscribe to this service, my building is down, okay, I want to know what’s going on into my building. Okay, I can work, for instance, with a company like Comcast, to get my low one data and understand what’s going on, even if everything is is shut down in my building. So this is very, very powerful in terms of consultancy.

J Darrin Gross 26:24

Got it? So let me ask you, does this work better? Or can you do it in both new construction versus like an existing building? Upgrade?

Marc Pégulu 26:38

So you can do both? There is obviously no, no problem, I would say does it make a big difference? In general, if you do it in a new building, you can plan for it in a slightly better way. But where we see the business, I would say a putting us is actually in the retrofit, because there are quite a lot of buildings, you know, who have not been designed actually for these kind of new technologies. They don’t have, for instance, wires in order to connect sensors. And the only possibility is to install Wallace. But we operate in devices, they don’t have power, they don’t have cable, it’s so that’s the only way there is no no alternative. So that’s why we see quite vibrant demand in this type of retrofit Bonfield if you want in terms of building because, you know, you’re not going to deploy cable, it’s just too expensive. You want the lat Wallace is a very elegant way to get there. So both are possible. But you know, it makes sense that the market looks at the retrofit first for its base type of technology.

J Darrin Gross 27:47

Current given that this deals with some energy conservation, I would assume you you kind of fit in some of the funding sources that are available. Do you find that building owners that are looking to utilize you know, any, any of your, your your products? Or is there their funding available through any of these green initiatives that can help offset that the cost?

Marc Pégulu 28:18

Yeah, so totally. environment in general is one of the primary usage of IoT type of, of technologies. And NLG is quite often a primary driver, I would say, you know, quite often from an operation, expenses perspective, but also more and more for environmental concern, more and more companies now, you know, are working towards this kind of promise to be almost carbon neutral. And Semtech wants to, obviously, to encourage and I think we fit very well, with this notion of you know, we can help you deploy a better intelligence in a much more granular way, at a low cost with, you know, very, very low energy device, a battery operated device for all I can work for 10 years without any problem. So, that’s really important because, okay, not only you don’t need to connect to the power and you know, overuse, easy analogy. But also, you don’t have to replace the battery. So there is this waste management of a battery. Which means, you know, it’s not just about recycling the battery, but it’s also about sending somebody to change all those batteries. Imagine, you know, a building equipped with 1000s of sensors, if you need to get someone you know, every couple of months to change those batteries. If that customer outrights I mean fuel to get there and that’s just not workable. So, we he that’s why low power long range goes together, low cost for infrastructure, low cost of maintenance is very important and actually it’s so much low power that we to see in the very near future that NLGI investing is going to take over and potentially replace a lot of the of the batteries. The solar energy investing is about you know, using natural energy, which is number one on my mantle variable energy like light instance, in order to power your devices. And this is possible with this type of robust sensors, we see for instance, that even with say, no relatively dark office now, we can use very efficient solar panels to power you know, all all the requirements you need in terms of sensing and communication for for sensors. So, really important. So, you know, by giving this power of blinking sensors, everywhere, you can control light, make sure that lights is not left on, you can control the temperature to make sure you know that AC is not operating, while there is nobody in the building, all of that, you know, goes together. And, you know, in the end, this is really what we are trying to bring as a contribution as well and outside for better environment better social gospel value for the company, all the all the work.

J Darrin Gross 31:11

Is there any kind of a study you guys do like before or after, and kind of a, an energy savings or some sort of a cost savings estimates that as part of the sales process for the building owner to, you know, justify the the numbers or

Marc Pégulu 31:31

So, yeah, VCs indeed are something that are, I would say, technology user are doing. So Semtech, you know, as a technology provider, we provide one one piece, an important one, but it’s not the only one, which is a connectivity. But our direct customers indeed have this kind of study about savings of energy in different building. I don’t have one specific example right now, but I, you know, I on top of my head, as she you know, a lot of water savings in the range of 30% saving. And same for this kind of electricity saving. So, you know, this is the order of magnitude, the magnitude that we get quite often from a former customer when they make the study. And you’re right, we, this is important that they communicate in both terms to building owners or tenants. Because you know, nobody, you know, really care so much about the technology itself. I think in the end, they want to understand what’s the impact of that. And so we prefer, you know, to let our ecosystem where we say, you know, their specialist about the abdomen, they speak about that. And, you know, we’re here on the technology. So probably, they’re in a bit too harsh, but I would love indeed, to share with you as a follow up some detail, poor savings, and that he sees men by the ecosystem.

J Darrin Gross 32:51

And when I’m certainly just thinking about it, when you say 30%, I would think that’d be pretty easy to obtain, just based on controlling the temperature. You know, when during times when nobody’s there, we’re, you know, controlling lights and stuff. So makes a lot of sense.

Hey, Marc, if we could, I’d like to shift gears here for a second. As I mentioned earlier, by day, I’m an insurance broker. And as such, I work with my clients to assess risk, and determine what to do with the risk. And there’s three different strategies we typically try and consider to see if if we can’t, you know, mitigate the risk. The first we look to, is to see if we can avoid the risk. And if that’s not an option, then we look to see if there’s a way we can minimize the risk. And when we are unable to avoid nor minimize the risk, we look to see if we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And as such, I like to ask my guests if they can take a look at their own situation. Could be the technology could be the marketplace could be government, politics, interest rates, you know, however, however you would like to frame the question and answer with respect to the biggest risk. So if you’re willing, I’d like to ask you, Marc Pégulu, what is the biggest risk?

Marc Pégulu 34:27

So, you know, fall for what we talked about today, I would say for for us, the biggest or biggest risk would be having, I would say the wrong awareness or for low awareness about the technology and what it can do. We think that we have really a unique and huge opportunity in this law technology. We are extremely happy to have the opportunity to speak with you. For example, because you are helping us, I would say, to make sense to give a purpose to the technology itself. And this is the awareness I’m speaking about. Today, we are already, you know, willing to make sure that we are not seen as just, you know, new technology, you know, to always push the limit of the technology. We want to make sure that our customers and their customers understand that they have at hand now, technologies capable of bringing much more environmental friendly type of building and more social responsible type of building for their customers.

J Darrin Gross 35:39

Sounds good. Marc, where can listeners go if they’d like to learn more or connect with you.

Marc Pégulu 35:47

So I would really encourage them to connect is up to the Semtech website, or to some of our social media posting, which we do for instance, on LinkedIn Semtech , as as you know, is a sharing quite often some information I do share as well myself. And either way, I would be happy now they can contact me for some type of UI directly for my LinkedIn profile. I would be happy of course to share anything, you know, any answer any question that your audience would have.

J Darrin Gross 36:26

Right? Marc, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it thoroughly and learned a lot. And I hope we can do it again soon.

Marc Pégulu 36:37

Thanks a lot Darrin it was very inspiring for me also to put technology in the context of end users and knowing your background, as an insurance broker is definitely quite interesting for me.

J Darrin Gross 36:51

I appreciate that.

Marc Pégulu 36:52

Thank you.

J Darrin Gross 36:54

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