EP 240: The Power of Focus: How Devin Elder Escaped Corporate Life Through Real Estate

[00:00:00] Hello, and thank you for joining us today on The Gentle Art of Crushing It Show, where we focus on learning and sharing with our listeners all there is to know about how to create success in our lives. This show stands on the shoulders of giants. Our mission is to empower and inspire our listeners to create the life of their dreams whilst having a blast in the process. Let's celebrate life together. Welcome to the show.

[00:00:26] All right. Welcome back to The Gentle Art of Crushing It podcast. My name is Randy Smith and I'll be your host today. And really excited to have Devin Elder with us today. Devin is the founder and CEO of DJE Texas Management Group. They're a vertically integrated investment firm based in San Antonio. He's also the host of a really great podcast, the DJE Podcast, and he's the founder of the DJE Foundation, which is a 501c3 whose mission is to help improve the lives of DJE.

[00:00:58] And he's the founder and his family. He's the founder and his family. He's the founder of DJE. So, Devin, welcome to the show. Thanks so much for being here with us today. Randy, it's my pleasure. Thanks for having me, sir. Outstanding. Well, let's jump in with a question I like to ask everybody to kick things off. Can you give me your perspective on the state of the market and how that might be affecting passive investment opportunities or the passive investor as a whole?

[00:01:22] Absolutely. I was having a conversation with one of our lenders out of New York in the past couple of months and we see a lot of deals hit our desk, but not as many as they do. Right. They have a bigger portfolio than us. They are their national footprint. So I always like to ask, what are you guys seeing out there? And this is probably in the last six weeks. And their answer is, well, it's the land of the haves and the have nots.

[00:01:45] You know, if you're out of capital and you're facing charities or you're facing loan extensions or you're facing rate cap purchases, these are a lot of things kind of impacting multifamily right now. It can get pretty tough out there for the for the folks that have capital or some staying power. Tremendous buying opportunity. And so, you know, I don't want to be the guy screaming blood in the streets and all this stuff. We never want to see anybody lose an asset or investors get wiped out on equity.

[00:02:15] But there's two sides of the transaction. And so I think, you know, as an operator, we can't wait for markets to rebound and sell some stuff. I would I would like to have sold some stuff in 2024 and market just not really delivering that on the buy side. We're seeing some really, frankly, incredible basis on on assets. You know, 50 percent of what they would have been a couple of years ago.

[00:02:42] And so, you know, I think the opportunity is there. The of course, the herd kind of moves together. There's a lot of fear in the market, too. So raising equity is more challenging than it was a couple of years ago. But the prices are in some cases, not all cases, in some cases are very compelling. So I think for the patient passive investor, it's a good time to look at getting into deals with a good basis and a good story.

[00:03:06] And then for for deals that they're already in or operating, some of it is just kind of hang on and ride it out. I think the thesis specifically in multifamily investing has always been in the 12 years that I've been involved is, hey, we're looking at a three to five year hold. You want to be in a position that if you run into a rough economy in the middle of that game plan is just to hang on and not be a forced seller in a down market.

[00:03:33] So that's kind of our strategy on some of our assets where, you know, OK, we're not really able to sell this right now or at least not at a price point that we like. So we're just going to kind of continue to operate it. Fortunately, these assets are often generating hundreds of thousands of dollars a month in revenue to kind of cover your at the very minimum, cover your bills. So I think there's two camps, right? There's the deals you're in and it might be just kind of a hang on and get through, which isn't great, but that's the market we're in.

[00:04:01] And then on the on the buy side or getting into a new deal, I would suspect your audience is probably seeing some really good basis on some new acquisitions. And I don't know how big that window is going to be. I think 2025 presents some opportunities. There's a tremendous amount of capital on the sidelines. And so I don't subscribe to the thesis that, you know, everything's going to be on sale and there's going to be this extended period of discounted deals.

[00:04:31] There may not be right, depending on what the market does. But that's the high level kind of from my perspective is is I think there's some good basis plays to be had here in the next call it 12 months. Yeah. Yeah. No, thank you for that. And I would agree completely with you what I'm seeing from my standpoint. And I like to hear kind of your your cautious approach or maybe it's just more of a level headed approach to the passive investor that there are some deals that are struggling.

[00:04:59] But the beauty of real estate is if you hold on to those assets long enough and you're you're positioned in such a way where you can hold on to those long enough because of your debt or your reserves, then, you know, everything's probably going to work out just fine if we can sit tight for, you know, two, three, two, maybe three years. So, yeah. Thank you for that perspective.

[00:05:19] That is there's a lot of people out there that are running around like chickens with their heads cut off that there is screaming about like the world's coming to an end to everybody's living the money. And we've just not seen the banks want to push it back or take those assets back, which ultimately put investors in a hard position. So, right. Well, very good. Well, let's let's kind of take a step back if we can. Devin, can you tell the audience a little bit more about yourself than I did in the very brief intro?

[00:05:47] You've obviously been operating in space for 12 years or so. So you've got quite the story. Tell the audience who we're getting to listen to today. Sure. Yeah, I was born and raised in San Antonio, Texas, where we are headquartered now. So even graduated college from University of Texas, San Antonio. So I'm San Antonio through and through. I had a 10 year corporate career at a couple of larger employers in San Antonio.

[00:06:11] So I got to experience some marketing and operations and leadership roles in a couple of large organizations that a lot of that served me very well. I think I was pretty hot to trot early in my career to kind of get on a career path. What I found from my particular circumstance was I didn't really have any heroes in the organizations that I worked at.

[00:06:37] There was there was folks maybe making good money, but I I didn't necessarily want to model their overall life picture. And I didn't want to be there in 10 years. So that sent me on this entrepreneurship journey. And, you know, I'm a big fan of modeling. Right. I think the key to success in anything is to find somebody who has achieved the exact thing you want to do and copy them exactly. That's an oversimplification. It's not easy to do, but it is simple to do.

[00:07:07] So I started finding mentors and models in real estate that I could copy, joining masterminds, paying for coaching, those kind of things. And this is not a blanket endorsement of every real estate coaching program out there, certainly. But I am a big believer in hiring consultants, hiring mentors and shortcutting that assuming you're serious about it.

[00:07:30] So I did that early on. I started buying houses while at my corporate job, married three kids, a nice six figure salary or six. It was six figures was nice at the time. I don't know how much, you know, that purchasing power that is today, but at the time. But I had discovered, read all the entrepreneurial books, Kiyosaki and Tim Ferriss and, you know, a hundred others. Gotten pretty fired up about creating my own little empire.

[00:07:58] Started going out and buying houses where you could get short-term money at 12%, renovate it and refinance out. It's kind of the Burr method that's been popularized. So I did that many times and, you know, to make a very long, arduous journey short here, my goal was to have cash flow every month in excess of my bills. And this wouldn't set me up for life, but it would set me up with a foundation to exit my corporate career.

[00:08:26] So that took about two and a half years of really burning the candle at both ends. I mean, I would go out to the job site while it was dark out, check in on the progress of a house that was being renovated. I would go to work. I would go to Starbucks at lunch and meet the escrow agent for a house I was buying or selling, sign docs. I would go back to work, get off at 530, go back to the job sites for about two and a half years. Just absolutely going, you know, full tilt.

[00:08:54] And I think that that sort of focus was required to escape, to achieve escape velocity out of that kind of that comfort of, of a nice corporate salary. And I think, I think one more promotion in the corporate world and I would not be an entrepreneur. It would have just been the next level of comfort where it's like, man, I'm, you know, in my thirties, I'm not going to give this up, but never made it to that next level was uncomfortable enough to become an entrepreneur. And so that was how that started.

[00:09:21] And then I, I had also gotten into multifamily real estate investing at the time, also with a group of mentors and started to explore that world. I transitioned my capital raising abilities from these single family, $100,000 projects into getting in a multifamily. Okay. Maybe now it's a $2 million equity. And I'm not going to do it with one partner. I'm going to do it with 15 partners. Right. And so made that transition, liked it.

[00:09:48] And, you know, I've gone from a 75 unit to 130 to 250 to today, where just to rapidly accelerate and fast forward, we managed 2,500 units of multifamily. And so I'm a family in San Antonio, Texas. And we've got a team of about 70 folks between corporate and accounting and marketing and the management company, along with pretty substantial investment in rural land and some flex industrials.

[00:10:17] So that's been the journey. I think the, the, the concept I had when I was working my job and building this rental portfolio was after I'd done that for a few years and achieved some success, I thought, what could I do if I had my full bandwidth available to commit to this? I'm committing to this at night, weekends on my lunch breaks, and I'm seeing some success. What if I had all day, every day for the next five years to do this?

[00:10:45] And so made, made the leap, started, started that. And the company really kind of hockey sticked after, after that. And I would say we're still going at a, at a very good clip. I work, I work a ton. I love it. I find a lot of meaning in it. I work all the time. I'm married. I have three children. We of course carve out time for some amazing adventures. You know, we can talk about that, but.

[00:11:11] But I like to work a lot and, you know, it's really rewarding for me to kind of have the platform now with my company to be able to execute on all these big projects. So I think I found my calling with, with entrepreneurship. It's not for everyone, certainly, but it is for me. And the, you know, the, the W2 job just wasn't providing that variety, that stimulation and, and that upside that I was, that I was looking for. And I found it in entrepreneurship.

[00:11:38] Are you interested in real estate investing, but don't know where to get started or think you don't have the time or money? Are you stuck in your W2 because the golden handcuffs make it hard to walk away? If this sounds like you check out impact equity.net and schedule some time to talk with the founder, Randy Smith. Randy went from massive income to leaving his W2 through passive income, and he can help you do the same. Yeah. Yeah. Gosh.

[00:12:07] Well, that is, I mean, that's a story I hear a lot. Yes. In this space. It's, it's, people are, are usually either cut out for corporate America or they're not cut out for it. And they figure it out pretty quickly. Right. When you look back that two and a half years that you spent kind of burning on both ends, looking at it from today, it seems like it's worth it. But I'm sure at points you were questioning and other people were questioning why you were doing that.

[00:12:35] I'm curious, what do you say to the folks that are kind of still sitting in that W2 position and they know they don't want to be there, you know, for 30 more years? And maybe they don't want what their vice president's life looks like. Right. What kind of advice do you give those folks? I think it very much depends on personal temperament. Like I said, entrepreneurship is not for everyone.

[00:12:57] Um, and as somebody that is signed, that is paying the payroll checks now for 70 people on payroll, um, you know, be careful what you wish for. Right. So I'm not discouraging entrepreneurship, but your employer is taking a tremendous amount of risk on you. And they're covering a lot of stuff for you, hoping they get some productivity out of you.

[00:13:19] So I've kind of gone from a, you know, maybe a disgruntled employee many years ago to, you know, a business owner going, these guys don't know how good they have it. Right. I'm taking care of that insurance and they get paid like clockwork and they don't have to take any risk. So it really just comes down to temperament, you know, and I think ultimately it's, what are your goals for your life? And if, if your W2 is not getting you on the track to those goals, maybe it's time to look at something different.

[00:13:49] And, you know, don't let anybody tell you entrepreneurship's easier or walk in the park. I think there's maybe some influencers out there that are creating some of that, uh, sentiment that, Hey, we'll just buy a business with an SBA loan and roll them up. And we're just going to be cash flowing and having kicks on the beats. Right. It can be that. Um, but it can also be exceptionally difficult. So to answer your question, I think it comes down to temperament. You know, if, if you're, if you're willing to take the risk and be the entrepreneur, the, the rewards are, are, are unparalleled.

[00:14:17] But, um, I think the key takeaway there is if you do commit, you must be all in with every fiber of your soul for a many years. Yep. Yeah. I think, um, and I was probably guilty of this as well as I had this idea that, um, you know, this four hour work week ideology that you see everybody talk about.

[00:14:39] Um, is this magical, uh, euphoria or this, uh, you know, rainbows and unicorns world where people could just work four hours and they're going to make more money than they possibly ever thought they could. Um, that's, that's certainly not been my experience as an entrepreneur. Right. Uh, you know, spending 10 or 12 years interviewing entrepreneurs while I was in my W2, that definitely was not the experience of any of those folks. Right.

[00:15:04] Um, I heard somebody say that you work a ton of hours for very, very little money for a lot of years until you can work just a few money, a few years making a whole lot of money for those hours that you're putting in. Yeah. Um, yeah, I think for the entrepreneur, that's just shy of that. Um, the message I keep hearing is don't, don't quit before the magic happens or, you know, inches to gold, that type of analogy.

[00:15:30] So, yeah, it's, I think it's good for a certain type of, uh, group that really enjoys their job. They're making very good money and they just still want to have access to commercial real estate for part of their portfolio. And that's really where, where folks like yourself come into play, where, um, they can stay in the W2 and passively invest in opportunities in folks like, like you and me that are working 80 hours a week on these projects. Sure.

[00:15:59] Um, and get almost all of the same benefits and advantages that they do, uh, to doing it themselves. So now you, I would imagine you've worked in, you're working in the syndication model and you have, uh, passive investors that come alongside for all of your projects. Can you tell the audience what type of projects you're working on?

[00:16:18] Um, what are the kind of, some of the, uh, some of the specifics of those deals, not deal specific, but like what type of structures do you use and, and what kind of benefits could they get by working with you? Sure. We, um, we try to keep it pretty simple. So we're, we're primarily in three asset classes, rural land, industrial, and multifamily, the industrial, we're not syndicating, uh, cating those deals. And we're not, we're, we're building out a portfolio, but that's, that's kind of it.

[00:16:46] This is not an evergreen pipeline for us. So I'll kind of exclude that for multifamily. It might be familiar to what you've seen with your audience. We do a 70, 30 split investors own 70% of the deal to your point about being able to participate and get most of the benefit. Well, investors own 70% of the company. So, you know, that's pretty, pretty good deal and not a, not a, um, atypical syndication.

[00:17:10] So we'll go in, we're usually looking for a seven pref for two investors, and then a 70, 30 split after that. And we're targeting a 15 to 20 IRR on the deal on a three to five year hold. So probably pretty similar. If you were to look at a multifamily syndication, um, to what you've seen, I have always not liked complex waterfalls and structures, things like that. So we keep it really, really simple. Um, so that's kind of the multifamily syndication business.

[00:17:39] If I had my way, we'd be buying a deal a quarter and selling two a year. You know, last 2024, we got into a couple of deals, um, didn't sell any. So a little bit slower year. That's everybody, but that's kind of a normal cadence for us. We buy, buy 250 units a quarter, sell a couple and just have slow and steady growth over, over time, net positive growth. And then we do rural land deals. So we'll completely different business model, but one I've fallen in love with, we'll buy large tracks, rural land.

[00:18:09] Maybe 500 acres. We'll subdivide into smaller parcels, which creates a lot of forced appreciation. And if we do launch deals like that to investors, we just do it as a short-term debt offering. 12, 18 months. They're making 11, 12% on their money. There's no lender. We just kind of get in and out on these deals. And those have been attractive to investors that are like, Hey, I don't know if I'm along for a five-year ride on the multifamily stuff, but I can get 11, 12% on my capital.

[00:18:38] Get it back in a relatively near term. People have seemed to like that. And so that is an evergreen model for us where we're just going to, we'll keep buying land in Texas for the next 20 years. Yeah. And you got plenty of land in Texas to go after, I guess. Right. So that's interesting. So you're doing 10 or 12%. Is it into a fund model or is it? We have a, we do have a fund. But this, if it's one-off land deal, we just do it deal by deal.

[00:19:07] Hey, this is deal A. We're buying this. It's 500 acres. It's an 18-month hold in and out. Okay. And so that, and that's not providing cashflow throughout the whole period. It's just if. We actually treat it like it does provide cashflow. So we, we do a 10% distribution. And what we do is we essentially escrow it on the front end, like a construction loan said, Hey, we've got debt service costs on this deal. We're treating investors like the bank. The bank's going to want to see interest reserves. We do the same thing.

[00:19:35] We pay higher than the bank, but we need, we are in the business of providing investments. So if the deal works for us to pay investors 12% and we can, we can continually have a new product to launch a new investment product. That's a win for us. It's another menu item and it's a good return for investors. And frankly, I'd rather give the money to our investors than, than to the bank. So that's kind of the way that we've approached that, but we do escrow the interest payments upfront.

[00:20:05] And then as we sell parcels that can recapitalize the company and kind of get through that, that whole period. But yeah, people like it. It's a 10% annual distribution and then a point or two on the backend. Interesting. Okay. No, I like that model. I've, it, it, it sounds like a development deal. Um, I guess it's a value add deal. They're all value add deals to a certain extent. Um, and it's, is it first position? It is. Loans. They are. Okay. So this is really not very risky at all.

[00:20:34] You've got a track record in doing this. So you've shown that you can buy, um, cut these things up and make a pretty nice profit. And your investors get a great place to put 10 money at 10 or whatever percent. So that, that is fantastic. Yep. Is it, um, is there a liquidity option to it or is it, or is it held for the whole time while you have the product? It's held for the whole time. Yeah. We just kind of set the expectation that, Hey, we're going 12, 18 months here.

[00:21:01] If that is not enough time for your liquidity, it's not the right deal for you. You know, it's, it's intentionally kind of from the outset is a short-term deal, which is attractive to some folks versus say equity syndication. That's usually multi-year. Um, so that's, that's, we kind of set the expectation up front that, Hey, expect to have this money, a liquid for this 12, 18 month period. Okay. Yeah. Very good.

[00:21:30] Um, and then, so your value add projects, those are traditional value add where you're buying 70, 80s, 90s, doing some exterior renovations, interior renovations, 2X equity multiple on the back end. Exactly. Yep. Um, it's a vinyl plank, two-tone paint, plugs and switches, countertops, backsplash cabinets, a rebrand, maybe redo the office and amenity area. Um, you know, cure any deferred maintenance, um, tighten up operations.

[00:21:59] I mean, just the classic play that you've seen that you've seen a hundred times. Love it. Love it. Yeah. Well, no, I think cookie cutter is great. I'd love to, I'd rather see somebody doing the same thing over and over and over and over again, then try to get creative and do something new. So, um, so with that, I think you mentioned you had 2,500 doors. You've been doing this 10 or 12 years. You've, I'm guessing you've got a number of exits as well. Um, what does that track record look like? Yeah, we do have an, uh, on the land side, we've got dozens of exits.

[00:22:29] Um, these are typically one to $3 million projects. So we're, we're constantly cycling in and out of those. On the multifamily, we've got, uh, four or five full cycle exits that we like to point to where our, our average annualized return target. We've always kind of put 17 out there lately. We've transitioned doing a range. It kind of bothers me when I see, um, an 18.244 IRR target.

[00:22:56] I'm like, just cause the model said that there's no way you're going to stick the landing on that in five years. Uh, but I, but I get it. So we've targeted 17, we've hit, you know, as high as 20, 30 IRRs on some of these exits. Right. But we, we try not to, um, we don't advertise that on, on deals that we're going into. We say, Hey, we're targeting sort of that mid teens average annualized return. Yes. Here's deals that we've done in the past that are over-performed that.

[00:23:25] I think it's really important to point to projects where you've gone full cycle on a similar asset class. I mean, I think that's kind of the number one thing for a sponsor to have now takes years to get there. Um, and so for newer sponsors, you got to figure something else out. But, um, I think that's one of the most important metrics to say, Hey, we're buying 150 unit deal in San Antonio, Texas. Look at this 130 unit deal. We did with the same business plan and here, here were the results. So, uh, really helps everybody to be able to point to those.

[00:23:55] Love it. Love it. And is San Antonio the primary market where you're buying all your assets or? It is. Yeah. We've got one in San Marcos, um, which is just up by 35, uh, take me about 45 minutes to drive from my office downtown to get to it. Every time we've looked in other markets, it's just, it's a different cast of characters. The nice thing about San Antonio is it's kind of slow and steady. It doesn't get crushed in a downturn. It doesn't have huge run-ups like other, like a, like a Phoenix might, but it doesn't

[00:24:25] have these, these colossal downturns either. And it's kind of a, I mean, it's, it's seventh largest city in the nation, but it just kind of feels like a smaller town. So, you know, there's five brokers that I'm talking to, right. That sell all this stuff and we go back years. Yeah. So just kind of having that. And then there's 350 assets in the market that we would buy and we know them all, you know, and it's like, oh, this, this one came back around. Yeah. Uh, you know, our regional manager used to work there three years.

[00:24:54] You know, we're looking at a deal right now. Regional manager worked there four years ago. Great. Tell me, you know, so, um, being okay with San Antonio and having that sort of home court advantage has been really nice. Past we're not trying to buy, you know, 20 deals a year ever, right? We just want sustained growth cycle through these deals, return capital, go out and do it again.

[00:25:23] So San Antonio has been the market. It's done well for us. Um, and we want to, we want to keep buying here. And so now I believe you guys are vertically integrated on property management and construction management as well, or, uh, we sub out some of the construction to GCs on the larger projects. Some of it will handle in house. Okay. And I, I'm sure you didn't start as a vertically integrated group. So can you talk about that transition?

[00:25:49] Cause there's, I think there's plenty of operators out there that can use third party property management in that is actually better than in house at times. Um, cause property management's a difficult business with low margins. And, um, I think a lot of people think they can do property management until they do property management and they found out pretty quickly that it's much harder than what they thought. So what was kind of the mindset behind bringing that in house when you did and how, how quickly did you do that? Yeah. Uh, you know, it was, it was more out of necessity.

[00:26:19] We had about 800 doors at the time. Um, uh, a couple of the assets were the, were the third party management group. And we just got to the point where there was information we didn't have like payables stacking up or bills, not getting entered. And then some liens starting to get filed. And we were like, man, we weren't even aware of these bills. Um, and so, you know, certainly other people have been in that situation, but at that time

[00:26:48] I'm looking at, okay, 800 units at a thousand bucks a month, uh, rents 3% of revenue to the management company. I'm going that could support some payroll. Right now that the properties themselves pay the staff payroll, pay the property manager, pay the leasing agent, pay the maintenance. So that's born by the property. So you're really then looking at the corporate level, accounting leadership. And at that point I said, you know, we could just take the whole portfolio in house.

[00:27:17] Wasn't quite big enough. Um, but this was in 2020 and I said, you know what, let's, let's launch, launch the property management company. Um, again, to your point, not a business I would opt to get in with a blank slate, but we've actually been able to run it with 10 to 12% margins and we're, we've, we've grown. So it's a legitimate business now that generates a couple million dollars of revenue a year and decent margins. And we've got a great team. It's been a, it's been a lot of trial and error getting there and swapping some players out.

[00:27:46] But at this point I much prefer having the management company to third party. Uh, but it was started out a necessity just saying, Hey, we've got to, we've got to let this third party management company go on these two assets. You know, is this an opportunity to maybe just spin up a brand new entity and, and do it? And it was, and, uh, it's been good. And now I, now I wouldn't have it any other way. I mean, everything is, we only manage our properties.

[00:28:12] Everything from due diligence to disposition is, is radically improved by, you know, I could, I could send a Slack or text to my VP operations right now and get, you know, the real answer on anything, anywhere, portfolio. Uh, and then to have it as another business line, I've got a ton of companies, but to have it as like a, a company that's, that's big and producing revenue now. And it's, it's another, uh, it's another entity that's cash flowing. Hey, you know, that's, that's great.

[00:28:41] So wouldn't, wouldn't recommend it unless you've got a portfolio to, to do it on. But, um, you know, in hindsight, it's worked out well for us. So now when, when you sell the assets, um, I know on the acquisition side, quite often people, uh, or operators will actually keep the onsite staff when they're buying acquisitions. So when you sell these, do you end up losing, uh, employees as well? Or do you see, does that fluctuate? Or do you try to pull them to put them to new acquisitions that you're doing? How does that work?

[00:29:11] It's very tricky because it's, it's different when it's your company. And it's, you know, if it's third-party management and you're selling an asset, okay, we're selling to you guys figure it out. It's much more personal when it's an employee that's been with you for a couple of years. And so it's tough because I don't think people appreciate how difficult buying and selling real estate is. If they're not in it every day, maybe like you and I are, um, just cause we ha, uh, got a contract to sell a deal.

[00:29:40] I don't mean we're selling. I mean, there's, there's 90 days in there. There's a hundred days of a lot of variables. So, you know, it's like, Hey, sometimes like, Hey, let's not, let's not freak the staff out because we are entertaining offers on this property. How many times have we been, have we had offers that didn't result in a close most of the time? So that's tricky.

[00:30:03] Obviously what we want to do because we do have 90 to a hundred days to close is we really want to find a spot for you on another asset. We're already moving folks around internally, you know, so a leasing agent gets promoted. She's going to go run this new asset where she's going to go run another asset. So, and so is having another child. She's dropping out of the workforce. We're going to backfill her with a nut. So we already move around.

[00:30:28] I think the key to kind of employee management or one of them is having enough portfolio to where if you sell an asset, they can be absorbed by other assets. Yeah. Um, that's the ideal is that we don't lose anybody that wants to stay. Um, and having a big enough portfolio to be able to move folks around, uh, works, or sometimes maybe somebody will come from the property side to come work in corporate. You know, we just want to keep good people employed. Um, sometimes a sale is an opportunity to say, Hey, this employee wasn't so great.

[00:30:57] And so they're, they're not staying on board. Somebody else that's got a track record and done well with us. Yeah. We're going to find a spot for them. Yeah. It actually gives you an opportunity to kind of, uh, force some turn as well. Uh, which I think is healthy for an organization. It's not always comfortable for the person that where the turn is occurring, but yeah, there's always a portion of the, of the employees that it's probably time for them to move on. So, yeah, that's interesting. Well, let's, um, let's, if we can, I'd love to get your perspective on the market,

[00:31:27] where we're at in the cycle. We got a little bit of that early on, but I'd like to hear your thoughts on the maybe next three to five years, maybe, maybe even longer, if you could share that. Sure. I mean, it's, uh, it's anybody's guess on, on where rates are headed. We've got a new administration starting next month. So we'll, we'll see what happens there. Um, arguably. Do you mind if I dig into that a little bit though? I'm sure, you know, with the, um, the yield curve, like, so rates have dropped, even though,

[00:31:56] um, rates like the short-term fed rate has dropped and, uh, the long-term rates have actually gone up like 80 bips since that's occurred. And there's a lot of speculation as to when we're going to start to see those start to align again. Do you have any specific thoughts about that or? I don't, I just, you know, I, and I, what I like to say is I never saw 11 consecutive rate hikes coming over that short of a time horizon.

[00:32:20] And so for me to make predictions about 2025, 2026 and beyond, I think is a, a fool's errand on my part. So it's, it's tough to say, you know, everybody's watching the 10 year treasury and, and watching what that's done sort of this year. Um, so, so we'll see, I would think just painting with a broad brush that the, you know, the shock of the last two years, you know, has been not necessarily absorbed, but normalized by

[00:32:50] the market. I mean, that was a very disruptive set of rate hikes over a very short period of time. It's caused a lot of pain in the market, uh, two sides, every coin, right? I mean, we've touched on it at the top of the show. I think it's, it's just going to create buying opportunities for those that are long-term, uh, players or they have the, the, the capability to kind of stay in the game and it will wash out a lot of others and create some, create some buying opportunities.

[00:33:18] I think, you know, longer term rates, we could, we could play guessing game on, on where that's going, but I think, um, what we're looking at is population, right? Cause I, I think, you know, I have an answer for everything I tell investors is I get an answer for anything you asked me except for population decline. You know, if our market starts losing people over time, I, I don't know what the answer

[00:33:43] is for that if we've got apartment buildings, um, and, and people are leaving the area, uh, that, you know, I, I don't know how we combat that. So as long as population net migration is positive, I think that that generally bodes well for, for housing. And all things point to net immigration into Texas, uh, for many, many years to come. So not, not a concern from anybody I'm talking to, certainly in Texas, that's for sure. That's right.

[00:34:11] Um, and actually a question I didn't ask early on was, are you, are you guys a, uh, floating rate debt house or are you a fixed rate? We've done both, you know, the, the floating rate, um, stuff obviously, you know, caused a lot of trouble over the last couple of years. Some of those products are nice that the, in that they've got your, some of your future funding included in it, right? So you've got your rehab dollars baked in there, all things being equal.

[00:34:38] I would, I would, we've got, we've got some fixed debt at a three and a half percent for 10 years on some stuff. You're going, yeah, I would like all that, please. Sure. Yeah. Please sign me up. That would be nice to have. Um, now, you know, we recently refinanced some of our flex industrial product and I took a floater on it. I'm like, you know, this is a five-year deal. Um, if I fix it now in the sevens, you know, I'm going to refinance out.

[00:35:05] Do I think they're going up materially from here, from, from late 2024? I don't think so enough to say, give me a floater on it and maybe we'll write it down a point over the next year or whatever the case is, um, for the multifamily stuff. We'll look at it. You know, the, the price of, of the rate caps, which is an insurance policy against a rising rate, you know, those are fluctuated so wildly. We were buying them for 20,000 a few years ago. They went up to a million. Now they're a couple hundred thousand.

[00:35:33] So I think, I think floating can make sense, um, in a couple instances, one, if there's not a huge shock to the system, like we saw during the 11 consecutive rate hikes that, that can, that can. So where are we now in late 2024? Are we going to see a similar rate shock to the system in the next handful of years? I don't think so. Um, but you're buying your rate caps, which is an insurance policy for two, three years.

[00:36:01] Where you've effectively got a ceiling on the rate. And if, if that could pencil for your deal, I think that, you know, I think those are okay. And then there's some flexibility on, on those, obviously any real estate deal best would be to have no debt. I just talked to a guy on my podcast. He's doing a, uh, hotel in Spain said, man, walk me through that. No debt. I said, that's the way to do it. If you can get and no debt that's in the, on the spectrum of things, that's the best. Um, a lot of them.

[00:36:31] You know, we need some debt. We need some leverage to, to get the returns up. So to answer your question, we do both fixed rates preferred, but the other thing on some of the fixed rate debt for consideration for investors and sponsors is the exit costs, right? You might be able to get really favorable agency financing fixed rate debt, but your exit costs are almost prohibitive in some cases. So you've got to factor that in there.

[00:37:00] The nice thing about floating rate debt in most cases is you're paying a point at exit. So you can kind of get off the merry-go-round anytime it makes sense. And if you're doing a value add deal where you've got a game plan in year one to create force some value, you do want the option to get off in two years if, if you can hit your numbers. So I do like that flexibility. Um, and it's just another tool in the toolbox. And we, we're fans of using loan brokers that are in this every day and looking at all the

[00:37:28] lenders out there and advising us on which, which loan product to go with and kind of walking us through that process. And do you see, and not to belabor this, but do you see like, do loan brokers, are they, are they generally all offering the same type of solutions? Or do you see loan brokers that they just simply focus on fixed rate or they simply focus on floating or they like the five year?

[00:37:55] My experience is that, you know, their job is to have relationships with, with 500 banks or to have a database of 500 banks and relationships with 50 or a hundred. And those are, those are going to be constantly changing. So what my goal for a loan broker, if we're using them as you need to be a master of everything that's happening in the market right now. And if there's a new product we don't know about or a new lender in the marketplace, it's going to get us better terms. You know, you seek them out and get this deal done.

[00:38:22] So my experience is that they should have exposure to the whole suite of financing products that they can advise on. One final question before we kind of go into kind of some of the fun questions here, but if you're in a fixed rate loan, well, let me back up. There seems to be this trend we're seeing a lot of people that are doing this infinite return model where they do a cash out refi at year five or year seven, and then they continue to, they continue to hold for 10 years plus. Right.

[00:38:52] If you're buying, if you're buying with fixed rate debt, does that, is that option essentially off the table to do a cash out refi at year five or year seven? Can you do like with the same lender, do a cash out refi or? Yeah, you could. I mean, if the value is there and you want to go through the refinance process and expense, yeah, sure. Interesting. Okay. Yeah. Personally, I'm liking that model more and more for my own dollars because certainly when

[00:39:22] I got started, I loved the two-year turns, double your money as fast as you possibly can. But now as I'm getting a little more sophisticated, a little more seasoned in the space, like having defined a new deal every X amount of years, if we've got a cash flowing asset, why don't we hold on to that cash flowing asset and just continue to live on it? So. Yeah. And that's, that's where the majority of the wealth is built over a longer horizon, right? Right. You're not paying the taxes on it.

[00:39:49] If it's performing well, especially if you have your capital back. Yeah. Don't. Absolutely. Yeah. If it ain't broke. Yeah. Okay, good. We're definitely in alignment on that. And certainly with your, your flex industrial, I'm sure that's what you're doing with those things as well, I would imagine. Right. Okay. Well, very good. Well, this has been informative. These conversations always go longer than what I initially tell them. So I apologize for that. Oh, we're good. But I do have a few other questions I'd love to ask just to wrap it up in kind of a fun way, if that's okay.

[00:40:19] Sure. Yeah. All right. Well, knowing that we are geared towards the newer, newer passive investor, is there a specific educational resource that you like to suggest to the new passive investor that's either just getting started or trying to continue that education journey? Well, I think the most important thing is to shake hands with people that are doing it. So that might be a meetup in your area, right? That's kind of the gold standard. I mean, the gold standard would be your father's a successful real estate investor and show you everything for 10 years. Of course. Yeah.

[00:40:48] I didn't have that. A lot of us don't have that. But outside of that, you know, there really is something big about shaking hands or breaking bread with somebody that's done it. And, you know, your local meetups can be a great way to do that. Obviously, the podcast universe is amazing. You take advantage of all this windshield time or downtime. I mean, I cannot understand how I consume dozens of hours of podcasts in a week. I'm extremely busy. I work 12-hour days.

[00:41:15] And yet I'm still like, hey, I've listened to all my podcasts and they're all two hours long. How did I do that? The podcasts are great. And also just repetition, especially if you're new to this. Some of these concepts can just seem so foreign and overwhelming. Once you hear it for the 10th time, you know, it helps. And then look at real deals, right? Get on your list. See what deals Randy Smith is putting out. Read the OM. Watch the webinar. Review this.

[00:41:42] You're going to start to realize after you've reviewed 10 of them that, boy, there's really a lot of similarities. There's a prep and a split. Business plan's kind of the same here. And so just exposure to actual real deals, I think, is very helpful. And, you know, look at a bunch of deals before you, you know, ever pull the trigger. Just get acclimated. So, you know, I think, and then specific books. I mean, there's your Amazon bestseller and commercial real estate.

[00:42:10] Whatever that happens to be is probably a pretty good spot to be if you're a book reader. But you've got all those resources and you've got more resources now than ever before to start tapping into this stuff. But I would encourage anyone that's interested to actually go out and shake hands with somebody and get to know somebody in the space. And that's just going to something about meeting in person connects us in a way and kind of makes it more real for you. I couldn't agree more. Great advice.

[00:42:37] And oddly enough, I've not heard that in the 200 plus interviews that we've done. Nobody's ever said that. There's always a book or a podcast. But great, great advice. Just get out and meet people. No better way to learn the business than to get in the field. Go walk some properties, even if that's an option. Absolutely. Good stuff. All right. So you mentioned podcasts. Any favorite podcasts you care to share with the audience? Doesn't even have to be real estate related.

[00:43:02] I'm currently loving there's an all in podcast and I love listening to economics. I never thought I'd be that guy, but I'm that guy now. Right. Any podcasts that you're loving lately? Well, you know, when I started out, I would not want to start out, but I was earlier in my career, I'd listen to Joe Fairless podcast. I would listen to any multifamily real estate investing podcast, Rod Cleave, those kinds of things. What I found now at this point in my life is I'm, you know, I'm living that every day. So I'm not, you know, trying to get into that.

[00:43:30] I remember the old capital podcast was really, really good. I used to listen to that a lot. So those are good ones. Um, uh, your podcast course. Um, we've got a podcast, DJ podcast. So, you know, you can, you can find those and it was so instrumental to me going back to that two and a half years when I was working and burning the candle at both ends, I actually stopped associating with anybody at work because they would, they would complain about stuff with no intention to fix it. It drove me bonkers.

[00:43:55] So I would literally go to lunch by myself every day, AirPods in sit at the lunch counter at Chili's and just consume a real estate podcast. So, you know, hundreds, thousands of hours of that, um, you know, I think really, really, um, was, was formative. Now I listened to podcasts to disengage. So I'm going to be listening to podcasts about, uh, comedy about what really, how did the pyramids really get there?

[00:44:23] I mean, just bizarre stuff that just really makes you, makes you think. So I've, I've gone down a rabbit hole of just the most bizarre podcast or just comedy to just turn it off. Right. Give me some noise that, and so I, I use that now as more of, um, uh, disengagement device because I'm so engaged at work. And really at this point I was, I'm big into learning and I, and I'm, I'm a lifelong learner.

[00:44:47] What I find now is running a company with close to $400 million in assets, 70 employees. There's no better learning experience than every day. You have it every day. Yeah. Yeah. So, you know, I, I had done a bunch of masterminds early in my career. Now the thought of flying to Las Vegas for a weekend to talk about asset management on multifamily, I'm like, dude, I'm doing this all day, every day. So, uh, so it's more about, you know, disengaging on the podcast stuff for me these days.

[00:45:17] Love it. Love it. Very good. All right. Well, uh, due diligence, we talk a ton about, uh, are there due diligence questions you think past investors should be asking that maybe they, they aren't. Yeah. I mean, never seen a bad deck, right? Never seen a bad pitch deck. So just know that, right? I wouldn't take it at face value. Know that every assumption the, uh, the operator is making is an assumption.

[00:45:41] So, you know, I think it's, it's easy early on getting into real estate to, you know, got the model and all the models working. And it's like, Hey, you know, there might be some surprises with insurance or taxes or rate hikes or whatever that, you know, it's more important to be nimble and have cash and a good team to be able to ride out whatever's around the corner than it is to perfectly. I've seen pro formas, you know, from these guys in New York, 60 month pro forma by month,

[00:46:11] every line item. So you've got, you know, you've got your common area utilities monthly line item modeled for 60 months. I'm telling you that's going to be wrong. Uh, so I would say, you know, understand that there's never a bad investment deck. Um, but the number one question, and this is fairly obvious, but dear sponsor, thanks for sending me this deal. I'm considering investing in it. Can you show me a deal very much like this, that you've finished, right?

[00:46:40] You, you got it, you did it, you finished, and it did what you said it was going to do. And that's obviously biased towards more experienced sponsors. And everybody's got to get started somewhere, but. But, you know, that's the number one thing for me. If I'm going to invest passively in a deal and I invest passively in a lot of deals, it's, you know, is this a brand new idea you had? Or is it, you know, I feel much better about we're doing our third XYZ deal. Oh, okay.

[00:47:09] And we sold the first one or we sold the first two. Here's what it did. That's an entirely different level of comfort. There's very hard earned, right? If somebody's pointing to, uh, you know, a vineyard that they developed and sold and it did X and they're doing another vineyard, just as a stupid example, I feel a lot better than some guy had an idea to do a vineyard. And so I think it's the number one thing. Can the sponsor point to a similar project that, um, that's done? Perfect. Perfect. I love it. Yeah.

[00:47:39] I agree with you. Like everybody's got to get started. They just don't have to get started with my money, right? There's plenty of good opportunities out there. Um, that's, uh, on the other side of the spectrum, I kind of take issue with people on LinkedIn that say you shouldn't invest with anyone that hasn't been investing since, uh, you know, since 1985. And it's like, well, okay. I mean, I know you're going to say that because it's to your advantage that you've been in business for 40 years, but that, that means literally 90% of the operators out there don't make that threshold.

[00:48:08] I get it. So I don't want to be that guy. That's, that's saying, uh, uh, poo-pooing new sponsors, but, uh, I love what you said. It, you got to get started somewhere to maybe just not with my capo. That's what I'm friends with. And honestly, those guys that have been doing it since 85, they probably don't need my money anyways, honestly. They're the guys, they're the guys that oversubscribe, uh, with the conversation at the country club. That's it. That's right. Yep. So, all right. A couple of fun ones here to wrap it up. Uh, you and I are both in a group called GoBundance.

[00:48:37] So we talk a lot about GoBund, or I'm sorry, uh, bucket list items. Do you have a recent bucket list item you've checked off your list or when you're hoping to soon? Yeah, I do. Um, it's not, it's not a singular item that, Hey, I've, I've got to achieve this. I've been blessed beyond measure, uh, enough blessings for a thousand lifetimes. Uh, but I, I would say that aviation has changed the way my family operates. So I'm a helicopter pilot, I'm an airplane pilot. And, you know, I'll just give you an example is like a mini, mini dream come true bucket list.

[00:49:07] And we have them on a monthly basis. Uh, last Saturday that my wife and daughter were doing cheer stuff. They're doing the girly stuff. My sons and I jumped in the helicopter, flew out to one of our ranches, hunted, had a great time. They got deer. We flew back and, you know, we're, we're back at the house for dinner. And that that's kind of an adventure that we might take a whole weekend under normal circumstances.

[00:49:33] And maybe because of that, we wouldn't do it because we have aviation and we call it the time machine. You know, we can do, I think I'm literally four X-ing the quality adventures I have with my family because of aviation. And so it's not a specific bucket list item, but having aviation in our lives has just allowed us to have so many adventures in this precious time while my kids are still, you know, in the house. So that, that's it for me. Fantastic.

[00:50:03] What a, what an amazing experience. Another, another go bro, um, at a, at a recent event brought us up to circle around the Grand Canyon and we went and had breakfast in Sedona. Oh, cool. And it's like, how, how does that happen? So cool. I love it. We're just going to run and do this in the morning. So yeah, very cool. All right. Final question that I like to ask everybody, cause we are a passive investing community. If you had a hundred grand that you had to invest today, but you couldn't put it in your own deal, where would you put it? Yeah.

[00:50:33] I would probably look for, um, you know, frankly for me, I'd probably look for a development deal. You know, I'm not looking for the cashflow, um, look and, and it's not a commentary on the development market right now. Just painting with broad strokes. You know, I've done some development deals where you're targeting a little higher IRR is obviously no cashflow, but, um, that's probably where I put a hundred grand right now. Or, you know, syndications to a multifamily. These are all syndications, a multifamily syndication that can be had at a good basis right now.

[00:51:02] You know, where you believe in the operator, the market and the, and the, and the game plan and they're buying it at, you know, 60% of, of what stuff was trading for recently. I think that makes sense too. So that, that's where I, that's where I'd put my a hundred K development deal or a good basis multifamily deal. Yep. And I think what you said earlier was key. You're not looking for cashflow. So you're looking to grow that capital, you know, the equity multiple on that piece. So yeah, very important point there. Yep. Well, very good.

[00:51:31] Well, Devin, this has been a lot of fun. We always go down past that I'm not expecting when we, when these things start, but this was a fun conversation. I feel like I learned a lot and just really appreciate you taking the time to spend with us today. Thank you. My pleasure. I enjoyed it. This is great. I appreciate the invite. Awesome. All right. To the audience, as always, we encourage you to continue your education journey and passive investing, but more importantly than that, we encourage you to make the decision to invest in your first passive investment deal.

[00:52:00] Both Devin and I are convinced that once you do, you'll just wish that you had started that much sooner. So again, thanks for joining us again today. Be sure to join us again next Thursday for another great episode. And don't forget to like and subscribe on whatever channel you're listening to. Thanks so much. Well, there you have it, ladies and gentlemen, another episode of The Gentle Art of Crushing It. It was an amazing episode. We know we sure learned a lot and we hope you did as well.

[00:52:26] We want to take a second and thank you so much for viewing or listening to this episode. And please just know that we only ask for one favor, and that is to make this life magnificent. Thank you and have a wonderful day.