Our guest for today has co-founded a staffing firm where he was a finalist for Michigan Entrepreneur of the Year, two years straight. After selling the staffing firm to a publicly-traded company, our guest began investing in real estate, founded multiple investment and development companies, appeared on HDTV, and eventually built and managed a successful multifamily development.
Let’s dive right in and learn from Paul Moore and how we can get into a multi-family deal.
[00:01 – 12:38] Opening Segment
[12:39 – 23:03] Finding The Ways To Lose Money
[23:04 – 31:45] Compressing Cap Rates And Loving Real Estate
[31:46 – 37:22] Believing in the Jockey!
[37:23 – 41:53] Closing Segment
Tweetable Quotes:
“I thought, man, I'm a full-time investor now, but I really wasn't an investor at all. I was a full-time speculator and I lost a lot of money and I made a lot of money as well, thankfully.” – Paul Moore
“look for intrinsic value that greatly exceeds the extrinsic value.” – Paul Moore
"make sure you quit early, make sure you don't keep going when you know you're on the wrong path." - Paul Moore
"Well, a great commercial real estate operator can see what a property. Could be before he acquires it." - Paul Moore
Resources Mentioned:
Connect with Seth! See the links below:
Go to their LinkedIn, and Facebook pages to connect. Visit their Website and Podcast.
LEAVE A REVIEW if you liked this episode!!
Keep up with the podcast! Follow us on Apple, Stitcher, Google, and other podcast streaming platforms.
To learn more, visit us at https://invictusmultifamily.com/.
**Want to learn more about investing with us?**
We’d love to learn more about you and your investment goals. Please fill out this form and let’s schedule a call: https://invictusmultifamily.com/contact/
**Let’s Connect On Social Media!**
LinkedIn: https://www.linkedin.com/company/11681388/admin/
Facebook: https://www.facebook.com/InvictusMultifamily
YouTube: https://bit.ly/2Lc0ctX
Our guest for today has co-founded a staffing firm where he was a finalist for Michigan Entrepreneur of the Year, two years straight. After selling the staffing firm to a publicly-traded company, our guest began investing in real estate, founded multiple investment and development companies, appeared on HDTV, and eventually built and managed a successful multifamily development.
Let’s dive right in and learn from Paul Moore and how we can get into a multi-family deal.
[00:01 – 12:38] Opening Segment
[12:39 – 23:03] Finding The Ways To Lose Money
[23:04 – 31:45] Compressing Cap Rates And Loving Real Estate
[31:46 – 37:22] Believing in the Jockey!
[37:23 – 41:53] Closing Segment
Tweetable Quotes:
“I thought, man, I'm a full-time investor now, but I really wasn't an investor at all. I was a full-time speculator and I lost a lot of money and I made a lot of money as well, thankfully.” – Paul Moore
“look for intrinsic value that greatly exceeds the extrinsic value.” – Paul Moore
"make sure you quit early, make sure you don't keep going when you know you're on the wrong path." - Paul Moore
"Well, a great commercial real estate operator can see what a property. Could be before he acquires it." - Paul Moore
Resources Mentioned:
Connect with Seth! See the links below:
Go to their LinkedIn, and Facebook pages to connect. Visit their Website and Podcast.
LEAVE A REVIEW if you liked this episode!!
Keep up with the podcast! Follow us on Apple, Stitcher, Google, and other podcast streaming platforms.
To learn more, visit us at https://invictusmultifamily.com/.
**Want to learn more about investing with us?**
We’d love to learn more about you and your investment goals. Please fill out this form and let’s schedule a call: https://invictusmultifamily.com/contact/
**Let’s Connect On Social Media!**
LinkedIn: https://www.linkedin.com/company/11681388/admin/
Facebook: https://www.facebook.com/InvictusMultifamily
YouTube: https://bit.ly/2Lc0ctX
How to Lose Money with Paul Moore
Anthony Vicino: [00:00:15] Hello and welcome to Multifamily Investing Made Simple, the podcast, it's all about taking the complexity out of the real estate so that you can start taking action. Today, I'm your host, Anthony Ticino of Invictus Capital, joined as always by Dan.
Anthony Vicino: [00:00:28] What are you drinking right there, Dan? Is that look like vitamin water? Krueger is vitamin water. C I'm getting a little bit weirder and weirder as we go deeper into this podcast with the nicknames.
Anthony Vicino: [00:00:39] I'm trying to get to stick for you because we've got to find one. But how are you doing today?
Dan Kreuger: [00:00:45] Me, I'm doing great. Yeah, I can't say that any other nicknames have been winners yet, but maybe our guest today has some suggestions on that. We can see, you know,
Anthony Vicino: [00:00:55] I'm a big proponent of this idea that we fail our way to success. I just got to keep trying. I'll get there eventually.
Anthony Vicino: [00:01:00] So but you mentioned our guest, and this is actually going to be a fantastic episode. We have a bit of a legend in the studio that the virtual studio with us, so to speak. So today we're going to be talking with Paul Moore.
Anthony Vicino: [00:01:11] And so let me just give you guys the lowdown on this guy. If you're not familiar with him. After a stint at Ford Motor Company, Paul co-founded a staffing firm where he was a finalist for Michigan Entrepreneur of the Year, two years straight. So that's a trend. That's not just a fluke. That was two years running. After selling the staffing firm to a publicly-traded company, Paul began investing in real estate, founded multiple investment and development companies, appeared on HDTV, and eventually built and managed a successful multifamily development. Paul Coast to podcasts, including The Art of Investing and How to Lose Money. I love that second one. He is also a contributor to Fox Business in bigger pockets, producing live video and blog content on a weekly basis. Paul is the author of The Perfect Investment Create Enduring Wealth, from the historic shift to multi-family housing and storing up profits. Capitalize on America's obsession with stuff by investing in self-storage. Paul is the managing director of three commercial real estate funds at Wellington Capital. So guys, guys, and gals that are listening to this is from that buy. You're not already excited because there's a whole wealth of history and knowledge to plumb. Then you might be a little bit numb inside. But that's OK. We're going to try and bring you back to life support. Come through the curtain. Welcome to the show. Why don't you just take a second to introduce yourself to everybody?
Paul Moore: [00:02:32] Why in the world would you want to talk to somebody who teaches people to lose money?
Dan Kreuger: [00:02:38] That's a good question. I'm fascinated by the title. I'm curious.
Anthony Vicino: [00:02:42] Yeah, well, it's great to approach. Right. Like, if you know what not to do, then you just avoid that. And then by extension, you define success. Right.
Paul Moore: [00:02:52] You figured out our secret. Yeah, that's exactly. I mean, look, guys, I got I sold my staffing firm and I started I thought, man, I'm a full-time investor now, but I really wasn't an investor at all. I was a full-time speculator and I lost a lot of money and I made a lot of money as well, thankfully.
Paul Moore: [00:03:14] But the hits and misses were so uncertain and unstable that over the years I finally got sick of that. And I thought, man, I don't want to go on in my 50s. I know if you're watching, you probably think I'm in my 40s or my 70s, but you probably would guess that I didn't want to go into old age, you know, hitting and messing and maybe being completely broke one decade and then having millions in the bank another decade. I wanted something more stable and predictable. But along the way, I actually going circling back on the How to lose money topic. I would go to these conferences guys and I would see these amazing speakers on stage talking about all their successes. But I would talk to people in the breakout time or lunch and they'd say, man, I'll never get there. I'll never be as successful as that guy. You know, as I'll never have the connections and Anthony and Dan had and I'll never get you to know, and I'll be like, wait, those guys up there are just as insecure. And they've had the same pains and losses and failures that you and I have. Well, when I actually got on stage, I found out that was absolutely true. They did. They had tons of losses and pain and failures and mistakes and their families were anyway. So I, I thought, you know, wouldn't it be amazing to talk to people about how they lost money on the road to success? And that's what we've done.
Paul Moore: [00:04:45] We've interviewed two hundred thirty-eight amazing entrepreneurs, investors, business owners. We've heard their failure stories, their pain, their insecurities. And I think it's given people hope. It gives me hope to know when I talk to someone like Gino Workman about the pain and failures he had on the road to success. And so that's what we've done with our podcast.
Dan Kreuger: [00:05:07] It's so valuable, too, because it's very reassuring. Kind of like you found out in real-time that, you know, that the struggles you're going through are just part of the process. They're not a problem. And I kind of found that myself when I was reading Shutterbug's The Phil Knight story. You know, if you've read that book, it's basically felt like he was on the brink of disaster for the entire meteoric rise of that company. And there's another book that I'm not trying to steal the book recommendation here, but there's another one that's pretty related to this. And it's called Mistakes Billionaires Make, which I like quite a bit because it's basically just a collection of how people lost their fortunes and some. Made a maximum didn't, but there are some amazing lessons to be learned and there are definitely some trends, you see, so that's, I think, some of the best information you can get there as opposed to just success stories.
Anthony Vicino: [00:05:55] Yeah, it's funny that it's so clear that we're partners because I have written down here mistakes millionaires make. That's the thing that I keep coming back to. And it ties in well with Nassim Taleb when he talks about the negative, which is it's easy to know what to do by focusing on what not to do. So instead of saying I want to be rich, if you just tried to answer the question, well, how would I go broke? What would I have to do to go broke? Like we can figure that out pretty easily. Well, just don't do that. Figure out what it would take to go broke and then don't do those things, but do the opposite. Yeah. Paul, I think it's so powerful to take these superhero figures that we see upon the stage or read about in the book. So, Jeanneret, I think you get traction, right? Yes. And so, like, see these superhero figures and say, like, wow, they struggled to it wasn't it didn't it wasn't easy for them. And they're still struggling to this day.
Anthony Vicino: [00:06:49] So would you say is of all the people that you've talked to, those 200 plus episodes, like what are the recurring themes that you hear week in, week out from these people who have done incredible things?
Paul Moore: [00:07:02] Well, you might think this sounds ridiculous, but I'm going to give you two. One is always to persevere, never give up, keep on going, keep on pushing through, and persevering like Phil Knight. And then it's the opposite, make sure you quit early, make sure you don't keep going when you know you're on the wrong path.
Paul Moore: [00:07:27] Make sure you cut it off early. We had a gentleman who was telling us, you know, he said he started the show by saying, hey, how do you make a million dollars in the restaurant business? Start with two million. And he basically said that if he would have quit, he knew the first month he was on the wrong path. And if he would have quit right then he'd only lost maybe one hundred thousand dollars instead of like a million. And he kept pressing on. And that's the same thing I did with a wireless Internet company in North Dakota. If I would have just quit after a few months, we could have preserved, you know, three hundred ninety six thousand in invested capital. But instead, we burned not only the three hundred ninety-six thousand, a lot of that was mine, but also we burned up a lot of time and focus that was lost over trying to make that work for years. And so, you know, I think that the difference is if you know you're on the right path and you absolutely know in your heart of hearts and your people around, you're saying this is a thing that's worth pursuing. You keep going. But if you realize something's fatally wrong with your original logic, that's when it's time to cut your losses and go quickly.
Dan Kreuger: [00:08:47] Yeah, that's I think it's so important to realize that you could also get back in, right. If you realized that there was maybe a mistake in your logic, you can enter the business again, but you can't get back that money you lost. Right. So that's another kind of key thing to remember that just because you exit something because it's the wrong path doesn't mean you can go back. You can't go back at a later date when you've got your ducks in a row.
Paul Moore: [00:09:11] Yeah, it's like investing in cardboard. OK, I don't want to brag. I mean, like so I invested in cardboard when it was six cents a ton and now it's up to nine cents a ton and I got two tons of it. And so they, you know, they said they made a special deal. If I started in my garage, I'd get a penny off. So you can do the math on that.
Anthony Vicino: [00:09:34] So it was and is like during Christmas time, Paul is the guy to go to because you've got the boxes.
Paul Moore: [00:09:40] Yeah. I mean, six cents on this so far. Hey, on a percentage basis what you did pretty good was pretty good.
Paul Moore: [00:09:47] Absolutely. So so I understand, Dan, that you're a new dad and I thought I would just give you a little dead joke there, but it kind of failed.
Dan Kreuger: [00:09:57] Oh, that's what dad jokes are supposed to do. So you hit it exactly where we need it. I'm going to keep that in my Rolodex for when Collins grows up. She'll probably hate it. But that's the whole point right now.
Anthony Vicino: [00:10:10] You know, you mentioned something so interesting, this dichotomy between perseverance and recognizing when you just need to cash out and get down and quit early like this idea didn't quit early or fail quickly and often.
Anthony Vicino: [00:10:25] Right. And that's the whole learning process, the trial, and error. But it's so hard because you don't always know if it's because that's what you're doing is inherently difficult or if you're just not cut out for it. So this is one of the things that and I talk about sometimes is like, how do you know when you're on that right path and you just need to stick it out a little bit longer versus recognizing you might have gone down the wrong path, to begin with?
Paul Moore: [00:10:51] You know, I don't always know how to answer that. I mean, you know, we hear that thing, you know, what's that saying? I'll probably butcher it, but it goes something like this. Don't do what makes you money or don't do what you think will bring success, but do what makes you come alive because the world is looking for people who are. And I don't forget the rest. I mean, it's people who are alive or people who are walking full fire. They were designed and created to be. And if everybody did that, they would be better off now. I also looking over at my bookshelf here and a book by a rabbi called Thou Shalt Prosper.
Paul Moore: [00:11:32] He says the opposite. He says that Jewish people and that he's Jewish, he's a Jewish rabbi. He said there are on average more successful because, in his opinion, they don't do what makes them come alive. They do. They fill a need in society. They find a gap and they fill that gap. And then when they get really, really good at that thing, whether it takes, you know, five years or 20 years to get really good, then they get joy out of being a master craftsman.
Paul Moore: [00:12:02] So those are, again, two opposite ways of viewing the same question.
Dan Kreuger: [00:12:08] Mm-hmm. This reminds me of perspectives, right?
Anthony Vicino: [00:12:11] Yeah, it reminds me of first so good they can't ignore you by Cal part, which is turning that piece of advice that you should follow your passion, follow your passion. And you'll never work a day in your life if you love what you do or something like that. And he turns it on its head and says, you know, a lot of people don't start there. They actually start by getting really good at a thing. And through that competence and through that feedback cycle, they start to feel joy when they do that, things that are a little bit turning it on its head. They're it's like working out.
Dan Kreuger: [00:12:39] It always sucks at first, but then you get into it, right. Mansome, some kind of thing.
Anthony Vicino: [00:12:44] And as I get older, I find working out harder and I love her. So suppose that's true. We've gone completely off the trail of real estate. So let's pull it back and let's do let's look at our weekly bad investing advice because you have this really long breadth of experience and knowledge. I'm guessing from your podcast How to Lose Money. You have some really good gems of bad investing advice that we should follow if we want to fail. So. So what's your number one piece of advice?
Paul Moore: [00:13:15] I'm actually going to hit this on in terms of multifamily, and if you guys hate this and want me to want to edit it out, you can you know, another one. But guys, I'm serious. Two and a half years ago, I was actually at a conference that had nothing to do with multifamily investing, but it had everything to do with big-time investing and things like that.
Paul Moore: [00:13:40] And they brought a guy on stage who was one of the most famous apartment investors in the world. And they got him on stage. And I was like, wait, what? Was he on the agenda? No, he wasn't on the agenda. I was in the audience and they pulled him on stage and he said, hey, he said, invest in multifamily at any price. It's always going to go up. Just get in at whatever price you have to pay. And I literally guys, I literally was waiting for the punch line. I thought he was kidding. He's probably selling his portfolio. So I was saying that. Well, he probably. But, you know, seriously, guys, I think that was terrible advice. If you look at Warren Buffett, he would never say that. If you look at some of the great investors like Howard Marks and Benjamin Graham, Warren Buffett's mentor, they would say look for intrinsic value that greatly exceeds the extrinsic value. They'd say a lot of things, actually, but this is one of the things I want to talk about today, and that is the power of looking for intrinsic value in any investment. I do not believe trees grow to the sky. I do not believe that every investment will always go up. I definitely don't believe it's different this time. That's a lot. And so I don't believe you should get in a multi-year effort into multifamily at any price. That said, with the way the government's printing money right now, it may work out for him. I don't know. I hope it does. But I've also found that Hope's not a great business strategy. Do you mind me asking who that was? Well, we actually throw people under the bus right there. All right, here's what I'm going to do.
Paul Moore: [00:15:24] I'm going to say this very clearly. I don't have the exact quote. If I had the exact quote, I would be happy to read it and say all that. But since I don't have the exact quote, I'll just tell you that was an approximation of what he said. It's gone all over the Internet since he said it. I found out about a week later it was gone all over the Internet and was quoting the exact quote, and it was our friend Grant Cardon.
Anthony Vicino: [00:15:48] Yeah. So makes perfect sense. We talk about Uncle G on the show quite frequently. So let's let's get away from there, from the top, from a from an investor that I don't necessarily agree with what he says and tied to something that you talked about there. You know, you mentioned Warren Buffett, you mentioned Howard Marx, who, by the way, guys, if you're not subscribed to Howard Marx's memos from I think it's OK, you guys are doing yourself a real disservice. Just one came out today or yesterday, really a free resource. But Charlie Munger, Warren Buffett's partner, said something to the effect of the only intelligent investing is value investing.
Anthony Vicino: [00:16:29] Right. And it's this idea that you need to be looking like you're pointing out there, the difference between the intrinsic and extrinsic value and looking for the delta where you can go in there and you through your actions or through your efforts can realize that value. And that's why Dan and, we're such big proponents of value add multifamily. And if I had to guess, Paul, I would hazard that you're probably in a similar vein there.
Paul Moore: [00:16:55] Yeah. You know, commercial real estate, very powerful. And most of your listeners already know this, but for the few that might not be top of mind on this, the power of commercial real estate would be commercial level, multifamily self-storage, mobile home parks, medical offices, retail, hotel, etc. anything commercial. The power of it is that you can force appreciation. And the reason you can force appreciation is the value is not based on the same type of formula that your house is. If you've got an appraisal on your house, you'll see that they show three or four comps, comparable houses. They check the square footage and they check the house value when it's sold, how much it's sold for. Compare it to yours, do a little bit of math and they'll come up with a value. The problem with that is if you don't know that, you might like. I flipped dozens and dozens and dozens of houses, but my son and I flipped one together and we decided to just really do it up. We're going to just really, really go crazy on this. My son didn't know necessarily about that. He was like twenty-two at the time. And so he went a little overboard on the improvements. And the bottom line is this, if you have half a million dollars in a house that is in a three hundred thousand dollar neighborhood, you're probably not going to get your half a million out of it. We did get our money out of that one. But, you know, if if you didn't know that comps drove this, you could be in trouble.
Paul Moore: [00:18:31] But in commercial real estate, it's based on a value formula. And that value formula, of course, is the value of the property is then why the net operating income divided by the rate of return, also known as the cap rate? Now, the cap rate is the capitalization rate, and that is the unleveraged return on investment for this asset at this time, in this location, in this condition. And so it used to be that the cap rates used to run eight to ten to even 12 percent. And that's, in other words, the expected return on investment. But now, as we know, they're running anywhere from typically four and a half to six percent. We've even seen lower than that. Now, the lower the cap rate, the higher the value of the property. That means you have to pay more to get this income stream. Let's reverse engineer this. If you can increase the numerator or if you can somehow decrease or compress the denominator, you can increase the value of that property. And when you add leverage into the equation, you can dramatically increase or decrease the value of the equity that is in that property. And that's the magic of commercial real estate. Now, the intrinsic versus extrinsic thing is this. Michelangelo said the sculpture is already embedded in the stone. All I have to do is chip away the superfluous material to get there.
Paul Moore: [00:20:04] That's kind of a bold statement. But what he was saying is he can see a sculpture. You can see an image in a stone before he starts chipping away on it. Well, a great commercial real estate operator can see what a property. Could be before he acquires it. And so if you can get a multifamily property, let's say as we did once where the utilities were all paid by the owner, you can add meters and you can meter out those individual apartment units and then pass those utilities back to the tenants. Then you can significantly increase income, but really dramatically increase value. Or if you can add Internet or cable and charge the residents and do profit sharing on that or tenant insurance or just the simple thing of filling units and raising rates. I mean, if you can fill 15 units at eight hundred twenty-five dollars a unit times 12 months, that's going to get you a certain amount of increased value. I think I did the math on that. The idea that it was one hundred forty thousand a year, and increased income. That's great. But how much value does that add or divide? One hundred forty-eight thousand a year. Excuse me, but by, let's say, a six percent cap rate and that's a two million dollar plus value you added to your multifamily facility. So if you can find a property that's just been under marketed and let's say the owner is just kind of absentee and I have 15 vacant units in a market like St. Paul, Minneapolis, where it should be full near campus, will fill those units and you can add two million to the property value. Now, if that's a seven-million-dollar property where you had three million in equity and four million in debt, two million dollars is an additional 66 percent return on investment. In addition to the cash flow, in addition to metering the utilities and getting the Internet and cable, you can force appreciation and finding the intrinsic value means looking past the current numbers to what could be.
Dan Kreuger: [00:22:19] That's the most powerful concept in this business, I think it's when when when we're able to effectively communicate that concept. What you just did an excellent job of, by the way, those very concise, yet still comprehensive. It's such it seems too good to be true. I guess most people when they hear that for the first time the like. Is this real? I mean, is this legal? How how does this work? But it it's fantastic because you can hedge off so much risk, like you mentioned, in the single-family house or anything under five units. You're relying on cops. You're kind of hoping the market's going to go your direction. But if you can take ownership over that value and it's in your control, a lot of the risk is hedged off that you normally see in the real estate space.
Paul Moore: [00:23:04] It really is amazing. And, you know, I mentioned compressing the cap rate. Now, that's a little harder because the cap rates based on seven factors, and a lot of those are exogenous like they're the national interest rates. You can't get the feds to compress and cap rates for us are doing a great job.
Paul Moore: [00:23:23] Yeah, but it could be the interest rates. It could be based on the local economy, the supply, and demand, the number of other competitors in that area.
Paul Moore: [00:23:37] And so there's a lot of factors that condition, of course, the economy in general, inflation, all these factors. But there is a way to compress the cap rate. There's actually a number of ways to do it. One way is to pick up mom-and-pop-owned assets and make them all unified in their operation, basically franchise the properties, put them all together on a portfolio and then sell to a larger operator. Now, when you do that, that portfolio sale means that often the cap rate gets more compressed than it would be selling to somebody else because an institutional buyer will often pay even more. In other words, they'll pay out a lower cap rate for these properties because they would rather write one check for, say, forty million dollars, then ten checks for four million dollars. And so if you can put together a portfolio, that's one of several ways to compress the cap rate that's in your control.
Anthony Vicino: [00:24:40] Yeah. To bring this to bring this back. You know, Dan and I, we talked a lot about the fact that we love multifamily and value add specifically because of those three levers that you mentioned that derived the building's value net operating income that's really derived from our revenue, our expenses, and our cap rate.
Anthony Vicino: [00:25:01] And so we can control two of those three. And you just suggested a way that we could even control that third factor of cap rates. But even just looking at controlling revenue and expenses for every one dollar of increased value, we're able to add to a property at a five percent cap rate that equates to twenty dollars of downstream value-added. So if we go in there and we add one dollar in a wide, then we know that that's worth about twenty bucks on the back end. And that's a really crazy, crazy concept when we start going in there. One of the difficulties, though, Paul, is that a lot of people, think it's going to be very easy to go and, you know, increase the revenue or decrease the expenses. And overlooking that operations are actually pretty, pretty difficult. Thanks. So what was your advice to the investors out there who are underwriting? And like I know I can realize its value, I can offset this electrical in this utility, or I could increase the rents. Do you have any advice on the operations side for these investors to say, like, here's how you would go and implement this on the ground level? Because it's one thing to say here's the plan and it's another thing to go and actually execute the plan, right?
Paul Moore: [00:26:13] Yeah, well, I don't know if I'm going to answer your question, Anthony, but I'm going to answer I'm going to give a slightly answer, a slightly different question. And see if this gets close and then ask it again, if I missed a lot of people I talked to, dozens of people I talked to a year, probably even a dozen a month, say that, you know, I'm a full-time dentist, I'm a full-time doctor, I'm an I.T. person, but I love real estate. And I want to do this on the side. And I want to tell you and again, I'm probably going to irritate some of your listeners, but that is almost certainly a sure recipe for either failure or an incredible amount of hassle that you will not like. And I'm even talking if you're flip, you know, you're doing this with a duplex, I mean, or a fourplex. It's very hard to be obsessed with your full-time job as an I.T. professional or whatever, where you're growing your main source of income and on the side, you know, sort of even semi casually being successful at real estate. Because in this market, guys, in this market, we've got incredible competition. You've got people who have been doing this for decades. You're competing against its sort of like my friend who thought he could or with literally the back of a napkin, he could go up against Wall Street's computers and options trade against them and win because he thought he had some kind of a secret way to beat them. And he lost everything. Of course, he did, because he's going up against professionals. It'd be like trying to start a competitor to Amazon in your garage. Seriously? Well, I honestly believe that most of these investors would be so much happier and so much wealthier if they just picked a fantastic syndicator and if they did all the due diligence they needed to do to find a great syndicate or invest with them and let them do the heavy lifting. And I've got mounds of evidence to say that this is true.
Dan Kreuger: [00:28:26] And we've said very similar things on our podcast before. And I usually said something to the tune of it's it's a full-time job. It's pitched as a passive income vehicle. And it can be if you're partnering with somebody who is treating it as a full-time job. But there's got to be somebody in that seat, whether it's you or it's an operator that you're investing alongside as a partner, somebody has got to have that be their full-time job. Because to your point, even if it's a duplex, even if you've got a property manager managing that duplex for you, you're still going to be getting phone calls. You're still going to have to make decisions. You're going to have to come up out of pocket to pay for things. And it's like you said, it's best-case scenarios. It's going to be a headache. Worst case scenario, you're going to lose money.
Paul Moore: [00:29:10] So, yeah, it's very true. And even with that, I still think that there's that intrinsic versus extrinsic proposition. I've got a friend who is in southern Minneapolis and he actually finds houses that are for sale. Let's say, for example, it's four hundred thousand dollars for the house. I was driving around with him and he was pointing this house out. I was like, you've got to be kidding. Four hundred thousand. That's ridiculous. He said, no, it's not. Let me tell you why. Because if you rent it by the bed, there's six beds in there. That's seven hundred dollars per bed because it's close to campus right per bed. That's forty-two hundred a month. Now, does it sound bad? I said forty-two hundred a month in rent. What would that rent for if you just rented it as one house? He said fifteen hundred. So that guy knows the difference between the intrinsic and extrinsic value. It is possible to do that passively. And he's got investors who do. But you still got to deal with the toilets, tenants, and trash even with a good property manager, as you said.
Anthony Vicino: [00:30:15] Yeah. What you're talking about there is recognizing the highest and best uses, whether that's your time, your skill sets, if you're a full-time dentist and that's what you're a rock star and that's where your time is best spent, go and maximize your cash flow there and then outsource to the professionals in the syndicators, the operators who are doing this full time because this is a professional game and casuals get crushed and you can't do it just part-time and do it. Expect to do it as well as the crews who are doing this full time. And the second part of that then is the highest and best use is that these professional operators, understand exactly what those nuances are of how they can maximize the income on an asset, whether that student housing or short term rental or long term rental or fixed. And they understand that. Whereas if you're just a dentist, not just a dentist, but you are a very careful mouth driller, then you don't know all those things in the same way that we don't know your industry ins and outs of it. So let's pivot this conversation down a little bit. Because Dan and I, 're strong proponents that you bet on the jockey, not the horse because a winning jockey doesn't get on a losing horse like Tom Brady doesn't go to a team that he doesn't think stands any chance of success.
Anthony Vicino: [00:31:37] Right. So you're betting on the jockey. How do we do that within this space specifically? Because there are so many choices.
Paul Moore: [00:31:46] Warren Buffett became friends with Tom Murphy through the 70s and he concluded whether he said it publicly or not, the time I don't know that Tom Murphy was the best CEO that he had ever met in America. And Tom Murphy called him in nineteen seventy nine. And let me set this up a little bit. Buffett says you should bet on the horse, not the jockey. But I don't believe he believes that if you really drilled down further into Tom Murphy called him in nineteen seventy-nine, said, Hey Warren, I've got a chance to buy ABC.
Paul Moore: [00:32:19] What you've got a chance to buy what. ABC yeah. The ABC.
Paul Moore: [00:32:24] You had a little broadcasting company in New York called Capital Cities and Buffett in a 15-minute phone call with no further due diligence that I'm in. I'll give you X. I think it was six hundred million, but I'm not sure. And so Buffett did that. And of course, he made billions and billions of profit off that when they sold to I believe it was Disney in nineteen ninety-six. And he did it because he believed in Tom Murphy, he believed in the jockey and that jockey picked a winner in buying ABC because he saw the intrinsic value in it. So we're trying all this together. And so I'm really glad that you asked that question. It is so important, so important to find the right operator, the right syndicate, or sponsor whoever it is. If you trust them and they've got their own skin in the game, they've got the track record, they've got the team, they've got the ability to find off-market, hopefully, deals or at least deals with intrinsic value. That's higher than the price. Then you have an opportunity to find a fantastic investment. So my advice to people is put your time and effort into finding the right people. Let them do the detailed math, pro formas, projections. And as long as they have that track record team and skin in the game, you can bet that it's likely you're going to do really well.
Anthony Vicino: [00:33:57] And it's so interesting with Buffett because Buffett is the jockey, right? We have people that are investing in Berkshire Hathaway. They're betting on him. And so it's important that we watch what people do, not just what they say, and watch how they behave. And I think Warren's a great example of that in this example. So then I know you've got a couple of things to say when it comes to betting operators.
Dan Kreuger: [00:34:23] Yeah, but I think you hit on a lot of them. They're probably set the track record and the team.
Paul Moore: [00:34:31] And as you say, their track record team, the track record, the team, the skin in the game, get in the game and pipeline. Do they have an opportunity to find off-market deals? Our favorite operator that my company invests and we invest in operators, by the way. That's what we do. And our favorite operator had a team of four people working the phones eight hours a day, five days a week, calling 100 to 150 mom and pop owners a day. And that's every one of them. So that means the group of them together called 400 to 600 a day.
Paul Moore: [00:35:08] And he had so much success with this wild success that he just told me the other day he was increasing his team from four up to ten people sitting there working the phones full time. And he's acquiring so many assets. And now when he does this, he's able to pick from, let's say each one turns up two good leads a week. That's twenty leads a week he's to choose from. That's eighty-something a month. He's able to, you know, pare down to the top two or three a month. He wants to buy. That, my friends, is a powerful strategy. It's very hard to find somebody executing that. Well, he is. And we just invested about twenty-three million dollars with him in fact.
Dan Kreuger: [00:35:54] And to your point, how do you compete with that if you are a dentist? Sorry, aren't they going to bring it back here? Because apparently, you're an anti dentate.
Anthony Vicino: [00:36:02] I did not realize that. I don't know, I can do this just fine, but just hey, I love dentists. I'm going to get so much hate mail from the dentist.
Dan Kreuger: [00:36:15] You are an audience member, but I'm glad you brought up the skin in the game thing, Paul because I think that's one of them. The biggest things we like to talk about when we're talking about the topic of vetting operators because it's so important to look at how people are incentivized, where they're making their money, and if there are there incentives aligned with you as the investor? And if they don't have skin in the game and they're just making money from an acquisition fee, you know, you could do the math there and see that this deal doesn't need to perform for them to get their paycheck. Right. So that's not a good alignment of interests. I think that's one of the biggest pieces. Obviously, the track record in the team is important as well, but really looking to see where their fiscal incentivize is a huge, huge piece of information.
Paul Moore: [00:36:59] Yeah, it's really true. I love that. And we actually walked away. As I said, we do due diligence, basically, full time on operators and we walked away from one once who had everything we liked. We have a twenty-six-point checklist of things we want to find and a great operator. And we walked away from one that failed on that one. And that was they had none, none of their own money in the game.
Dan Kreuger: [00:37:23] Yeah, yeah. And it's tough to justify that. I mean, if it's such a great investment, why wouldn't their money and, you know, right there, I can't see a good answer for it. So that's fascinating. So do we didn't do a book, Rayco, yet? I mean, we already talked about six books.
Anthony Vicino: [00:37:41] We've talked about so many books in this episode. But and yeah, we are at that time where we need we need the one golden girl. What's your what are your book recommendations for the week?
Paul Moore: [00:37:51] You know, I was going to give another one, but, you know, we had so much fun talking about vetting operators that I'm going to recommend this one.
Paul Moore: [00:38:00] It's the hands-off investor by Brian Burke. And if you are a dentist, especially by anybody making a lot of money somewhere and you want to find a full time syndicator, somebody to invest with, get this three hundred plus page volume by our friend Brian Burke, who is a multifamily genius. And he's got this book from bigger pockets. It talks about what you need to do to find the right jockey.
Anthony Vicino: [00:38:32] Yeah, I read this book. It's fantastic. Really, really deep dive into a lot of different aspects of underwriting and an understanding of what the proforma your operator has put in front of you, what it really means. And I think that's an important aspect of this whole business, is being able to speak a little bit of the spreadsheet lingo, understanding that I really appreciate it by going into detail on that aspect.
Paul Moore: [00:38:57] Yeah, I love that, too, and Brian puts his money where his mouth is, he Brian had a huge loss that he took personally on a multi-family. Actually, I think he ended up making it back. But I think spent six or eight years pumping 15000 a month into a Houston or Dallas area multifamily that he made a mistake on upfront. And he actually claims that the mistake he made was believing the old adage, you know, everybody needs a place to live. Well, anyway, he can tell you about that in the book. But at any rate, he has definitely got the battle scars after thirty-one years in real estate investing.
Anthony Vicino: [00:39:39] Yeah, let's bring it back again to talk to our buddy Nassim Taleb, who talks about if you've survived that long in the industry, you're probably doing something right. There's some reason why you've been able to avoid catastrophic failure. So there's a lot to be learned there. So I really appreciate your time joining us here today and just dropping so many knowledge bombs on us.
Anthony Vicino: [00:40:00] Where can people get a hold of you if they're interested in working with Wilens Capital and what is exactly that you offer them?
Paul Moore: [00:40:08] Well, as capital, we basically vet operators and we put together a fund, and people when they invest with us, they're getting a piece of a large variety of different operators, geographies, asset types, different assets, and different strategies. And so our PM says that we can invest in multifamily self-storage and mobile home parks. And so we are basically closing our third fund right now. We're getting ready to open our fourth fund, and that's what we do. People can reach out to me at Wellings Capital, Dotcom, that's w e l l and G.S. Capital dot com.
Anthony Vicino: [00:40:53] Fantastic. So congratulations on closing those first three funds and good luck with the fourth fund if you guys are listening to this at home, he's enjoyed anything that Paul's shared. I highly encourage you to go out there and check him out at Walling's Capital Dotcom and take a look at what these funds are offering, because it's like we've talked about before, it's all about the jockey.
Anthony Vicino: [00:41:12] And it's going to be very difficult to do a better job of betting operators than Paul and his team is doing, because that's all they do all day, every day. And they have a wealth of experience, leverage that doesn't lean on that. And with that, we will catch you guys next week at.