Managing Wealth and Navigating Real Estate: Insights from Richard Wilson, Founder of the Family Office Club

Get ready to join us on an enlightening conversation with Richard Wilson, the mastermind behind the Family Office Club and Billionaires.com. His incredible journey from high school entrepreneur to family office consultant, and ultimately to a capital-raising guru will inspire anyone with a spark of ambition. Richard's unique perspective on navigating the volatile capital markets and structuring deals is a goldmine for those seeking to make their mark in the business world.

In the heart of the podcast, we delve deep into the 2008 recession, exploring how Richard's nimble business model helped him weather the storm. You'll discover how an unprecedented housing shortage has paved the way for a new generation of savvy investors. Listen closely as Richard unravels the secrets to identifying high-yield opportunities in diverse asset classes and the critical importance of adding value to investments.

As we traverse these uncertain times, we discuss how the pandemic has reshaped the real estate market, necessitating inventive financing strategies. Richard highlights the untapped potential in the medical aesthetic space and champions the idea of consolidating numerous medical practices to supercharge exit potential. Lastly, you'll gain exclusive insights into Richard's Billionaires.com project and his innovative strategy of delivering value first in securing interviews with billionaires. This episode is a treasure trove of wisdom, whether you're intrigued by real estate investment, capital raising, or the mystifying family office space.

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Get in touch: richard@familyoffices.com

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Transcript

Speaker 1: 0:00

And I have a quote that I like to say. It's like, as entrepreneurs, we have to think we're going to make twice as much money in half the time or we'll never get started. Yeah, that just goes to show you it's like um, sometimes working for free or nothing like while you learn, can you know, pay so much?

Speaker 3: 0:16

The goal of this show is to help health care organizations scale by leveraging real estate strategies and interviewing high level healthcare executives who are actively in the trenches in order to pull out lessons learned along the way. If you'd like a free site selection analysis from our team, or you'd like to learn more about how we're acquiring real estate through our fund on the blockchain, visit us at wwwreuniversityorg and drop us a line that's RE as in real estate universityorg.

Speaker 1: 0:42

Hello and welcome back to another episode of helping healthcare scale. Today, our guest is Richard Wilson. He is the founder of the family office club and billionairescom Now. They have helped structure and source over $500 million worth of transactions to date, and I've been following Richard for a long time. He's got a great YouTube channel and they host a lot of fantastic events, and so I'm just, richard, I'm excited to have you on the show. Awesome.

Speaker 2: 1:05

Yeah, I appreciate you having me here Awesome.

Speaker 1: 1:06

Yeah, I'm just always curious how did this come about? Like, how did you get started on this path? Because it's so niche of helping and gathering family offices and helping people invest. Where do you think you can trace it back to?

Speaker 2: 1:18

Yeah, growing up my dad had his own business and he was raising capital for nonprofits for like hospitals, universities etc. And so I'd go to meetings where he'd pitch donors to like endow a chair at a university or help build a cancer wing to a children's hospital or something like that, and it'd go out to people that had a good experience with the hospital, that were known to be donors in the community, and then help them design that campaign. And so I grew up around that I had started six or seven businesses before I got out of high school and then really worked in college. I started a business that made some money, but were the businesses successful in high school?

Speaker 1: 1:55

or was it like? You learned what not to do, or a bit of both? Mostly learned what not to do. I also learned some skills.

Speaker 2: 2:03

So, like my dad bought me a network marketing company opportunity and I called everybody in my high school directories parents and then sold them long distance telephones and I think two people bought for me, so you could call it a failure.

Speaker 1: 2:19

I hope you do a failure real quick.

Speaker 2: 2:21

Yeah, exactly. And in college I worked in the Alumni Association's donor division in their call center and it would call out to 100 plus people a night and what I learned there is that I could produce five times the donations of everybody else in the call center If I just called on the engineers and the business people and not the liberal arts degrees.

Speaker 3: 2:40

And so.

Speaker 2: 2:41

I would just make my software skip the people that were not from the business or engineering departments and I like, blew out the charts and that was the lesson learned, and a lot of my life has been successful from seeing something and being like, okay, I'm just going to put 100 different actions into it and tell something works. So high school I learned how to make websites, programming and HTML like in a notepad before a dream weaver in front page and WordPress existed by calling all the computer related companies in the yellow pages and one Indian fellow's name was Naranjan. He gave me a job and taught me how to make websites for local Indian business owners and if I had a cold, called everybody in the yellow pages, I would have never gotten that job, and a lot of my success is having that type of mindset to everything we've done, including the family office space.

Speaker 1: 3:30

Wow, it's fascinating that you get to hear first hand your dad pitch these nonprofits and just seeing, like how that shaped you, because I think asking for money, raising capital is one of the least coveted jobs that there is public speaking, raising capital and so I think that, like there's two types of people either people who think that they're too good to do this, that they can just do the hard way, or people that are too scared to do it. They're both like I think both of those people are wrong, because if you look at most successful people in the entire world like I've been listening to Elon Musk he asked for money from Tesla, he asked for SpaceX, he asked for money for X by Twitter, steve Jobs for Apple, bill Gates, one Buffett raise money for his fund. You just go by through every single person.

Speaker 2: 4:16

The richest people in the entire world have all raised money For sure, and they all need more money for their ideas, like to make the boring company or Neuralink, or like SpaceX it's not a cheap company to run. So being able to navigate capital markets and be sophisticated that way, I know how to structure deals, conduct due diligence, smell out when somebody's not aligned with you. Those are all really critical things and sometimes you have to learn those things the hard way. You know in a conversation, not if this person's not real or this person doesn't believe what they're doing or this person's not serious, and be able to save your time and cut that off early.

Speaker 1: 4:50

Yeah, absolutely, and so it's cool you got to take a look at that firsthand. So then, what was it like? What happened that got you into the family office club? Was that something that like? Was that the names had the same the whole time, or has there been an evolution?

Speaker 2: 5:04

Yeah, so basically I was doing risk consulting and it was very boring, but I made a lot of money, like at age 21, 22. I got out of that Oregon State University and again I called everybody in the Portland, oregon Chamber of Commerce, bottom of a cup of coffee. One person went to Oregon State where I had gone and she said oh, I'm sorry, I'd love to hire you but I can't. You need to have seven years of experience or be a CPA to do this risk control consulting work. And her team members were making 150,000, 200,000 a year. And I said I'll do it for free and just don't pay me until you think I'm worth it and you can fire me in the first hour if I'm horrible and I'll make it worth your time. And so she said all right, give me a chance, come in on Monday next week. And I made $100,000 my first year out of my undergrad, which was more than my professors were getting paid. That have taught me a month before when I graduated. But I created that good luck. And so that taught me. Like, okay, who else is going to pay me that much money now that my MBA is done? Nobody wants to pay me that much, but if I put meat on the table for commercial real estate deals or capital raising, then I just get a piece of the meat I bring to the table. It's just meritocratic. That's how I'm going to be able to do it and enjoy my life and not be bored doing risk control consulting.

Speaker 2: 6:14

So I moved to Boston, started taking psychology of influence classes from Harvard through their ALM division, studied psychology of influence really deep there and then applied at capital raising companies. They all told me they wouldn't hire me. Got hired by one by working for free two days a week and worked for free three days a week until they started paying me to work there full time instead of doing the risk control work. And then, when raising capital, I found there was something called a family office and I was calling on wealth advisors and institutional investors. The institution said no, your product is too small. It was like a hedge fund product. Come back to us when you're managing 100 million plus. The wealth advisor said, oh, some of our clients are not even accredited. We can't invest in hedge funds.

Speaker 2: 6:54

So I was like man, I wasted my time who am I supposed to go after? And I found something called a family office and I said, oh, what do you guys do? And I got on the phone with just one of them. He told me what they do and I said, oh, I should just be only calling on family offices. What am I doing? Waste my time with institutions, wealth advisors?

Speaker 2: 7:08

So I set out to get good at that and I said, ok, how do I educate myself? How do I read articles, blog posts, books, etc. And there was like nothing on the industry. I'd read some articles from journalists who had never worked a day in their life in the industry. So I learned just by talking to family offices and sharing everything I was learning on my blog. And the blog just took off, got 100 hits a day, 500 hits a day, 1000, 3000 hits a day.

Speaker 2: 7:31

And at age 25, I got on the front page of the Boston Globe. At age 26, I started Family Office Club and I spoke 200 times in 15 countries and then started hosting my own events and we bought FamilyOfficerscom, we got a Wiley book deal, we grew our LinkedIn groups and now we have six million followers on social media and we've done 250 live events and I've written 13 books. So it's just been like a lot of hard work since for 16 years and, just like listening, learning oh, this is what I learned. And then, like more people are attracted by sharing what I learned, and instead of trying to charge consulting dollars and sell my soul by the hour to people to teach them what I've learned, I just put it out there on YouTube and podcasts, like you do.

Speaker 1: 8:14

Pay it forward and then you build credibility and hopefully someone wants to do business with you and do deals with you. Yeah, I think that Exactly the old dart doesn't think that works.

Speaker 2: 8:23

People tell me like, oh, you can't meet ultra wealthy families via social media, and they're sitting in my office because of social media and digital assets, so like they wouldn't be in front of me if it didn't work. So I'm like, okay, you keep on believing it won't work and we'll keep on doing it and growing.

Speaker 1: 8:38

So so okay, yeah, a lot of impact, but real quick. So you're, when you started working with these companies, essentially pro bono. Were you just getting like an allocated pro-rata share of the general partnership based on the amount of capital that you brought in? Like, when you say working for free, were you getting, were you earning anything at all, or really just?

Speaker 2: 8:55

nothing Definitely at all at the beginning. Yeah, just absolutely for free, because I'm just going to get in one way or another. And today, all right, I'll just cold call and I'll just call 50, 75 investors a day. When you see it's worth it, you can start paying me. And then the offer they made me was a base salary plus some commissions. But because I was not licensed through a broker dealer, when it came time to pay commissions I really never was able to get paid on those as promised.

Speaker 2: 9:20

And so when the blog started taking off, people from like newspapers would call and they would ask for me. And I was 25, 26 years old instead of my 50 year old boss. My boss was like why do you want to talk to my intern, basically? And they're like oh yeah, because I read his blog poster, we've been reading his website, or whatever. And then he was like I think I'd delete this website or quit this job. And I was like, all right, I quit. And before I got another job offer, the website was making more money than I was getting paid as a capital raiser. So then it just all took off from there.

Speaker 1: 9:48

Well, okay, yeah, that just goes to show you sometimes working for free or nothing like while you learn, can pay so much. Because a lot of times we just we think we want to get paid. And I have a quote that I like to say as entrepreneurs, we have to think we're going to make twice as much money in half the time or we'll never get started.

Speaker 2: 10:05

Yeah, exactly, I think you have to be long term focused and I don't think you can stress that enough with family offices right, and remove all the upfront friction, make it good for them, add value to them first, and then a lot of good things will happen. And that's what we're doing at billionairescom is the exact same thing. I just keep on applying the same strategy. It sounds like a broken record but two different niches. Because it works right, it stopped working and I would stop using it.

Speaker 1: 10:32

No, that's great. Okay, so you started this in 2007, which was right before the great financial crisis. So what was it like when you started? How does it compare to now? And at the time, I feel like we're just starting to see the writing on the walls, but there's still a lot of people saying, hey, we're going to go up and up and up. Can you help us move that moment?

Speaker 2: 10:52

Yeah, it's interesting Right now inflation is so strong and we printed so much money that can't get stuff back into the system. It just creates some really weird dynamics going on right now. Back then I just didn't really choose to participate in that recession because I was starting, my business, had to make it work and I was working 14, 16 hours a day, working every weekend. I would put out two to four blog posts a day on what I was learning, interviewing people, et cetera, and I didn't have the overhead of real estate assets that I own now. I didn't have the 25 employees I have now. I didn't have a family and a mortgage and all that stuff, and so I had the luxury of starting in June 2007. We had seven figures of revenue our third calendar year in business but, like through the recession, I was super light and agile because I didn't have all the baggage of floating rate debt on real estate assets or something like that. So I think that was partially why it didn't really affect me and our business kind of took off during that period.

Speaker 1: 11:50

Yeah, it's fascinating. So June of 2007, because it's like in 2006 is when the real estate started to. You can see chinks in the armor, but it still kept going on and going. It wasn't until 2008 that you saw the real estate market start to correct, continue to correct all the way to 2011. So it took three years. Then you had the stock market start to correct. Really. That hit bottom.

Speaker 1: 12:14

I think it started to correct before real estate. It was like, sorry, when it started to take, real estate kept going up, flat towing, and then it falls to, but the stock market bottom in 2009, or 2009, because it's like we talked about off camera. It's a leading indicator and so really I think it's a great case study. But one of the things it says history doesn't repeat itself, but it rhymes, and then you have the task of trying to figure out where is it rhyming and where is it not. And then so like, in particular, like people have been calling for a real estate recession since 2017 and I falsely Plain the real estate recession in 2020, because I was like, okay, the recession, this sucks, but hey, let's grab some rock bottom real estate prices not realizing that arising?

Speaker 1: 12:51

how much rising tide lifts all boats? 2020, obviously we had a huge fiscal stimulus and it kept the real estate market going up and up, and it's residential and Commercial. And then even today, the problem is right now you got people who are locked in with 28 years left on their mortgage at less than 3%, like the. At like 42% of homeowners Don't have a mortgage. Get a 38 whatever. 58% have an Blended rate of 3.7 or 3.9%. So the problem now that created is nobody wants to sell their house and the lack of inventory is just keeping prices extremely elevated and there's a huge shortage. And just curious, yeah, how do you? I know people are still predicting all the time hey, mortgages are too expensive, it's gonna crash, but at the same time, we have a huge lack of supply. So I'm just curious your take on that whole thing.

Speaker 2: 13:41

Yeah we're seeing a big decline in some deals. So not all deals are created equal. Places like Scottsdale that are landlocked by tribal lands are gonna act differently than Dallas. You know we almost bought a house in Dallas. It's gone up 15 20%, said we bought a house in Scottsdale and it doubled since we moved here three years ago. So different markets are different, of course, different countries different. But we think that even right now, the average piece of real estate we're buying it 22% below what they listed it at, and they listed it after rates started going up, so it probably would have been listed higher before, maybe not, you could argue. And we're seeing rescue deal offers to people who have floating rate debt and now all their LPs will get wiped out unless the family office comes in cap recapitalizes them. We're also seeing people that used to raise $60 million a year only raising 10, 15 million this year. Just bunch of stuff like that.

Speaker 2: 14:36

Cannabis flows are down 90%. Cartas said that private investor flows into companies are down 60% this year and since Israel went to war I think there's less flows coming in. And the problem is when people want to buy new assets, they want to pay less, so there's less debt, and then when they go to buy something, they want to pay less because there's less debt there and just there's less cash Sleshing around. People's money are locked up in some properties. People aren't just liquid. All these things, I think, are impacting the market, and the more that people's rates Float or life events happen and they need to move from a job or something, the more it's going to hurt the economy. Then I think so. I think it's gonna come to a head as these rates that are floating or need to, we'll start floating a year, two years from now, but right now we're being pretty aggressive on offers on anything we're doing.

Speaker 1: 15:24

Yeah, I want to talk. Yeah, I want to talk a little bit more about different realistic apartments. But first just curious, like how are you guys getting deals like 22% below market? Is it just like good negotiation? Are you bonding with the sellers? Yeah, you're right now with lack of supply.

Speaker 2: 15:37

Yeah, we only buy for our balance sheet. We're only buying super ugly motels and that nobody wants. We're usually the only buyer at the table. We're turning them into apartments, so that's our Department conversion division, and then we have Airbnb assets. For both of them we offer all cash or cash seller financing. We don't deal banks at all. 27% of homes that got under contract don't close because the banks messed them up. And with commercial deals, banks are horrible to deal with. So our anti-bank and by offering all cash we have surety of closing, or by saying, hey, you be our bank, let's not let this third-party bank mess things up for us. And then we have a 12th page agreement instead of 180 page agreement and there's no points at closing. There's no floating rate and we usually get the same rate as a bank or lower. So like we've gotten five, five point five percent Lately seven or eight percent flat rate debt with no point.

Speaker 1: 16:31

So eight percent is high, but for a investment loan there, you probably know better than I what they 11% right now for something like that.

Speaker 2: 16:39

Yeah, it's a weird stuff because we got 32 quotes on a recent deal and after 32 we gave up or like forget this, we're just gonna have the seller be our debt and instead of 11% Floating rate for this like ugly motel, we'll just get seven or eight percent from the seller. Even though it's high, would rather get five and a half. Six is what we aim to get and that's what we get offered. Those are the numbers we hear most often with seller financing, but it's way better than what the bank was offering.

Speaker 1: 17:04

Yeah, and if they're talking to their buddies who sold their places, seven or eight percent would have been awesome two years ago, right. And so they might still be thinking oh, like this guy, he's, he only got five percent on his, I'm getting seven, right. So I'm crushing it. But really everybody's benefiting.

Speaker 2: 17:19

Yeah, exactly to win. Then they get to sell at a higher price. Someone approached me yesterday to buy one of my assets in downtown Scottsdale and they suggested a price that I know is not realistic for our asset. And they said oh yeah, we only want to put the 40% down. 60% seller financing and typically when you sell our financing people only want to do 25 to 33% seller financing maximum. It's usually a three, five or seven year term. A seller financing and your monthly payments might really hurt your cash flow during those five years Because it's not over 30 years. It's like the whole loans paid off in that five-year period and so it's yeah, if you overpay by a bunch, happy to give you a good chunk of seller financing, but you're not gonna want to overpay, so probably this is not gonna work yeah.

Speaker 1: 18:03

Yeah, so you just passed on that deal.

Speaker 2: 18:05

Yeah, I was passing that because it wasn't like a very credible offer and would like the amount they put down to be 50% or higher and most people we work with they want to help us put down 75%. We tried to only put down 66%, so just depends on the deal and the cash flows of it.

Speaker 1: 18:22

Yeah, so you put down 75% of the value and they're only seller financing you that 25%.

Speaker 2: 18:28

Yeah, that's typical, the typical arrangement, and the most would love for them to do it over seven or ten years. They want to do it over three. We get them to go to five to seven.

Speaker 1: 18:36

It's pretty much how the conversation you don't do like the amortize over 30 but balloon at five or whatever.

Speaker 2: 18:43

We haven't to date. We have had some where we delay all payments for 18 months Because that's where we're turning the property around and then that way we're not having any payments go out until it's cash flowing. But many times if we're buying a cash flowing asset then we don't do that. We'd like to have low debt and our goal with our Airbnb pocket of assets is to double our investors money and the upside. Above 2x, we get the keep. As the GP that's our only fee is like. Above 2x, we get to keep the the upside, and so for us we want these properties to be debt free and five to seven years and then we can hopefully get lower rate debt at that point.

Speaker 1: 19:20

Okay, we finance. Refinancing is in the model, just not wide streets are high.

Speaker 2: 19:24

Yeah, exactly. No, I love a cheap debt. Yeah that's cheap, then you should be using. It. Maximizes your cash flow.

Speaker 1: 19:30

Yeah, 11% interest rate, even at 8%, you have to at that stage calculate whether or not your house is going to appreciate or the piece of real estate is going to appreciate that more than 8% a year. Because it's going to appreciate by less than 8% and you're paying 8% and you're under water. So it takes away the rush to buy something If it's going to appreciate what is housing going to appreciate by the other next three, like five years, but it's not going to have a rush to get in if your interest rate is 8%. But what about subject two, where I'm for everybody who listen to?

Speaker 1: 19:56

Subject two is essentially where you like assume their mortgage, but it's not an actual official assumption. They are. You start servicing their mortgage and you can get a professional company to certify that. But you're not notifying the bank in any way because it's not changing hands. But like, you get the deed to the house, you contractually agree to service their debt and then they give you the deed and the title to the property. So it's all legal, it's all legit. You're just not triggering anything you know from the bank If you guys try to utilize any of those methods.

Speaker 2: 20:24

Yeah, we have. We've made offers on that where we would love to do more of those, and we have seen other people get deals like that done in multifamily. We haven't got one done like that yet, but we have a client that acquired a 3.9% piece of debt basically subject to and I think that the deals are getting done now are like rescue capital deals big preferred equity deals save the LPs from getting wiped out. Deals, seller finance subject to and so if you're good at negotiating creative deal structures, this is a great time for you, because we did seller financing and use strategies hey, we'll buy your cabin in Park City and we'll close in 17 days, all cash, waived, inspection, but we want this price and at the top of the market before the market went down. This is before they raised the raise even one time.

Speaker 2: 21:15

The market is super hot. We got a 23% discount on a Park City house because the seller had a broken sale. They were frustrated, they were outside the country and we just negotiated super hard and said no, it's all cash. There's no way we won't close. Escrow money non refundable, no inspection, let's do it. And if the roof need to be replaced or foundation fixed, it's fine. We still were good.

Speaker 1: 21:36

So you've calculated for that in your offer, right? Like, even if you have to replace the roof, you're getting a 23% in the last thing, so that'll still pay for itself.

Speaker 2: 21:44

Yeah, it was like the 1.25 listed cabin. We got it for 1.03 or 1.05 and it's worth 1.55 now. And what's interesting with investors is that they say that cash flow is temporary and basis is forever. But with investors my experiences they would like to see cash flow and if the equity goes up or down they're like they don't really believe it until you sell because maybe you'll go back down. They like the cash flow in their pocket. If there's any way to structure a deal where they're getting cash flow, they feel good. They sleep at night. In their mind sometimes they'll say something like oh, this property is only cash flowing, you know, 7% or something. It's too bad, it's not going better. It's more up 50% in two and a half years. So it's pretty damn good in my book, but in their mind they don't even like compute that part of the equation. So it's interesting to deal with smaller private investors, as much different than like a family office viewpoint when they're running their own deal and how they measure the success.

Speaker 1: 22:38

Yeah, and IRR. Really, you're calculating IRR at that stage, like internal rate of return, which is very difficult because of those factors. There's so many factors. How much debt payout have you had? So not only have you had appreciation, but you've had principal pay down in addition to your cash flow, and if you did a cost seg and now you got a tax write up, there's so many different benefits outside of actual cash flow, but it does get difficult to calculate, yeah For sure. Yeah.

Speaker 1: 23:01

So the other thing, too, about real estate and because we were with a lot of healthcare groups specifically, a lot of dental groups in particular, and real estate is just so segmented, and so what I mean is you mentioned multi-family and like, personally, I never had an interest in the multi-family because when I started getting like popular back in 2020, 2021, it just seemed to me so saturated. But now you're seeing so many distressed assets, it feels like this is a great time to get in and for us and the deals that we're doing, which are dental, yes, so credit worthy, tenant backed, that they're doing a good job of paying the rent and so it's not distressed and it's like I can sell people who have the 2.9% mortgages. They're not distressed. They can just sit on it and wait, and then whether they sell it they're not doesn't really matter to them. They got a great deal.

Speaker 1: 23:46

It's if you got the current worthy DSO or MSO or any large healthcare operator as your tenant. When they were recession proven 2008,. Their pandemic proven 2020, and now their inflation is hurting. But so far they're proving to be inflation resistant, and so it's. Look, I don't have to sell right Like I can just sit on this asset, and so that's keeping prices. Elevated cap rates are like 6.5, 7%.

Speaker 1: 24:09

I think we've seen cap rates move 75 dips, so they're gone from 0.25 to 7 on when you got a 10 year lease, and now it's interest rates are eight and a half. So we're either going to and then if you have debt coverage ratio 1.25, that means you have to have 25% above your debt service then you're putting that huge chunk of equity Like it used to be 20%, now it's 40, 45%, sometimes it's half, and so that just totally kills your IRR. But that's just so different. Like retail, healthcare is just such a different animal than multifamily, and multifamily is just so different in office. Like office is struggling in a lot of places too. So it seems to me like we're bottoming out.

Speaker 1: 24:46

In multifamily it may be an office Industrial seems to be holding strong, but I don't really see that as much. But it's just it's so segmented and then it really like what we're trying to just guess is are we, is this asset class going to remain here? Are we at the bottom? Five basis points is small, but it's not nothing. So it's now the time before it's going to start to get worse. I'm just curious to see your take on that and similarities between now and 2008.

Speaker 2: 25:10

Yeah, yeah, yeah. The medical space we really like to work with a lot of doctors and dentists and then the operating business side of our balance sheet. The only operating businesses we're investing in are medical and dental practices the actual operating businesses, and they sometimes on the real estate under their practices. But we definitely see it as like a spectrum, so like we could say that a certain area is healthy, but then some person might be struggling and if you can add more value to them, you might get still an amazing deal even in a good market, like we did in Park City and so now there's just more variety out there to pick from, so you can find some really ripe fruits and multifamily or medical office or mobile home parks, because it's just a little bit harder to raise capital, it's way harder to get debt. So the spectrum of the best deals you can get possible now are way better than what they were before. I know that for sure and in my opinion they're just going to get worse because the Fed will just keep raising rates until they break the economy. If they fail to do, we'll have runaway inflation and the dollar will be worth nothing. I doubt that's going to happen, but inflation seems to be continuing and the economy seems to be chugging on forward. So a lot of unknowns out there. But in my mind it's a battle of like how many people have floating rate debt and how bad is that going to damage what they're doing? Because everybody's costs are going up and to travel somewhere, to buy a piece of real estate, et cetera, everything's costing more at some point. That's going to add up to a big change.

Speaker 2: 26:34

So I encourage my clients to focus on plain offense in one or two areas where they can create value and force appreciation, and then you can be basically adding value to the property aggressively. So even if the market goes down by 20%, you added 50% value and you're good. If you can't add value to something, you can't force the appreciation, then it's dangerous times to be investing. It's not a good time to invest. It's just a pure momentum play. They're like all right, let's buy this, cross our fingers, hopefully rents go up, hopefully asset values go up. I think that's a dangerous game to be playing in general, and especially right now. Yeah, it is interesting in its heart.

Speaker 1: 27:08

There's not always a way to get 50% value out, especially when we do the value and we're doing a sell these back. It's just created in the lease. If we can get them to sign a 10 year lease, we can add value, but it caps out there. But reading your email it's interesting. You said capital closer down. The number of investors with exits occurring is down due to debt challenges and those with capital are now being rewarded with 20 to 50% better offers than N21. So does that kind of signify a bottom cube?

Speaker 2: 27:37

I agree with I think it's Howard Marks, and he's a billionaire, founder of Oak Tree Capital and he said in his book the most important thing. He said that he doesn't try to be smart enough to predict what the top or the bottom is. But he says you need to be smart enough to stick your head out the window and know which way the pendulum swinging. And right now the confusing thing is that inflation keeps growing but the pendulum is swinging down to more hard times. I've never seen it as hard to raise capital as right now. Over the last 16 years.

Speaker 2: 28:07

It'd be fair, I didn't have the network, the connections, the conferences, all the books, social media. My experience is it's never been this hard, but I wasn't in the thick of it as much. Right now, 20, 50 times a day, we get pinged by someone who has a deal, is raising capital for this or needs rescue capital for that, and so we hear it from the investor in the capital razor side all day long right now. So we're much more in tune, but definitely more than during COVID and more than during 2010, 11. But the good news is, when it's harder to raise capital, then you need to find new sources of capital and people come to family office club and greater numbers. So our business has been growing lately. And when banks pull back, family offices step in and they start doing more bridge loans, hard money loans, rescue loans, preferred equity. So it's good for the family office segment, right, because that's when you get the best deals done is when things are rough.

Speaker 1: 29:00

Yeah, that's true. I have heard a lot of people switching into, like debt funds providing debt, fixed rate of return or fixed interest rate, rather than taking these ownership, because at least debt is you're not going to get wiped out, or at least you shouldn't like equity.

Speaker 2: 29:12

So also I've been seeing, because it's harder to raise capital. We're trying to innovate a bit and use a strategy and maybe some of your listeners could take or investors could request. Like one of our medical practice deals is a med spot that we're capitalizing and we already have collateral. It's preferred note already have collateral behind it. But we're also looking at, okay, how do we structure it so I don't only just invest alongside the other LPs, I invest in front of them.

Speaker 2: 29:36

So let's say, I put up 20% of the capital needed If things go wrong. I don't take a 20% haircut with everybody else, I take 100% haircut, lose all my money and then the investors get damaged after 20%. So if they get back 80% of their money, if we get back 80% of the money as an investor pool, I lose everything, they lose nothing. If we lose 50%, then the first 20% is on me and they'll lose only 30% and then that way they know I really believe in it versus just, oh, yeah, I'll take a little bit of risk with you. It's a different equation, right? It's more confidence in your deal when you do that, I think. So we're trying to come up with new structures like that for our medical practice deals, but also real estate deals.

Speaker 1: 30:12

When you say you're investing on the front end, like that are you? Are you the GP? And then you're investing like as 10% of the LP, like are you both, or these deals that you're strictly on LP? On what kind of deals really?

Speaker 2: 30:24

like in the medical practice side or not. We don't have a fund and it's not GP LP. We just capitalize medical practices. We're usually joining their board or buying 20 or 50% equity into the medical practice, helping them with their marketing, helping them connect with other doctors, have had exits in the space, build out their advisory board and then we can help them with capital if they need to. Maybe a third of them don't need any capital for anything. Half of them do need some capital over time and so when we capitalize the platform, then we have outside investors coming in and we structure like a gross revenue, royalty, structured note or some sort of preferred return like that, and so it's just me participating at the same time as the investors on some of this.

Speaker 1: 31:03

What size groups are you working with in the medical space? So Is there a revenue limit?

Speaker 2: 31:09

Or if they only have one location, they have to be really profitable or have collateral, because investors really would love to see two successful or three successful locations or more, with only once that a deal with somebody with one location and they had four x collateral behind what the investors were putting in. So we felt pretty safe. But a classic group would be like one we invested in to help them open up their fifth location. Now they have five, six locations and they're doing 25 million a year in revenue. They're doing 14 million. When we met them, this one is dental.

Speaker 1: 31:39

It's just referencing.

Speaker 2: 31:40

And we have another dental group coming online that is in the Midwest. They have eight locations. They're doing 10 million a year in revenue. They want to grow to 20 locations. So we're going to help them scale up. And then we have another group of 18 locations that's growing and in the med spa space, in the dental space, we're growing platforms to like a med spa MSO. Basically is what we're putting together and we have a number of med spas already joining that. So together as a platform we can exit it 10 times, even when on their best day with one location, they're going to get five, six times, even on their best day. And if you have two or three locations, maybe seven, eight, on your best day maybe nine, but they're not going to get 10 or 12 times even. We're building up a platform of those, whether we help them with marketing, capital raising or just advisory etc.

Speaker 1: 32:25

Yeah, it's interesting to me how fragmented the med spa spaces because, like I think urgent cares you look at as a guideline, like you, they're just way less I mean. So they got conglomerated really quickly. Hospitals acquired them. There's 90,000 locations in the dental space and so that's, I think, worth. Last I heard was like 40% had been conglomerated, merged into different groups and the med spa medical aesthetics a lot of those NSOs is there's not a whole lot of, there's not anywhere near as much groups or anywhere near as much market penetration in there. So that I think are the groups, then I guess you're rolling 10 together. But it also seemed like there'd be a lot more growing by de novo rather than acquisition, because they're just so few of them in comparison.

Speaker 2: 33:08

Yeah, there's. In some cities there's too many med spas and, just like dentistry, there's some that like struggle and really don't make any money. What we're trying to do is take once they've already gone full cycle, grown, exited and now they're sitting around saying I don't really want to manage a bunch of employees again, but I made my money as a medical practice owner. Maybe I could use my 20,000 hours of expertise in my brain and a little bit of my capital and be on the advisory board or invest into some of these medical practice deals and then we're getting like strategic insight and not just a checkbook, and so half of the capital that we bring into our medical practice deals are from doctors who have had an exit. And then they are asking due diligence questions alongside of me and they are a doctor.

Speaker 2: 33:48

They did sell their med spa when in scaled it up over 19 years and learned a whole bunch while doing that. Right. That really helps us move faster and move with more conviction in this space. But there's a lot of regulations, a lot of hurdles to working with medical practices takes a lot of legal work to navigate all of that, a lot of due diligence on medical licenses and I think, the smartest families. I know like you focus on one or two areas and get really good at that, and I think that whether it's sale, lease backs or mobile home parks or medical practices, when you've done it like 1520, 50 times, there's so many little nuances to it that if you don't focus, you don't learn all those nuances.

Speaker 1: 34:30

Yeah, I love. So Mozi is a guy that I follow. Talks a lot about just the power of focus and like focusing on those like that. One thing Obviously point like you get good at it. And look at all the guys we mentioned earlier yeah, they were singing, really focused to a point, but then they started adding stuff on. Even Bill Gates at Microsoft focus so much on software, but now look at Microsoft, right, like he's got so many different components.

Speaker 1: 34:52

Elon, I think you can't really look to him because he's just so crazy. He's got all these different things going on at the same time. He never sleeps. But yeah, it is an interesting dynamic. So it's like you, but there, but yes, absolutely there's so much power in that focus and you build relationships, you learn strategies and it's just, I think, what I see. A lot is, myself included, thinking you've mastered it when you have it like too soon. Oh, okay, let me do this and learn this strategy. Okay, great, now let me set it and forget it and go do something else, and really it just takes like you spent how many years of your life working for free, right? It just takes so much more time than you would imagine it with.

Speaker 2: 35:27

Yeah, for sure. It's weird Sometimes, like doing things the way that feels slower or has no payoff right now is what it pays off the most long term. So I think that's really important to communicate to people and, ironically, when people see you doing things that make no sense unless you're really doing something big long term, then they want to work with you and help you even more because you're adding value first, and then they feel like, okay, this person's gonna be around, they're not going anywhere, so let's work with them and align with them, and then people get out of your way and go out of their way to help you as well.

Speaker 1: 35:59

Yeah, no, I love it. So, yeah, how can you make yourself more, the most appealing to family offices? Right, because some groups that we work with maybe they are trying to raise capital. Sometimes groups take on private equity. Sometimes I've even heard groups starting their own fund. So you're an expert at this. So what do you think?

Speaker 2: 36:15

Yeah, one thing is to try to associate with the most credible people possible. When I talk to people who have raised billions of dollars, a high percentage of them associated with or came directly from a really highly credible group. So if you're not that yet, maybe there's a way to partner with a big gorilla in your industry. Maybe they could be on your cap table. One of my friends, jock, speaks at many of our events and he said $2 billion exits and now they do $25 billion in revenue in his third company. And he said that he loves doing deals with billionaires and he was speaking on stage at my event and then somebody said how do you convince the billionaires to work with you? He said I helped make them billionaires, so they're happy to back my next project and by having it, so that you are making someone an offer they can't refuse and your first interaction being low friction.

Speaker 2: 37:02

So, just like the example working for free for somebody, if you're trying to raise capital and you want to meet family offices, maybe approach them and introduce their son to another family's son or daughter. That's just like a next gen of the family office. Or maybe get them a new client or maybe help them out in some way related to what they said on stage. Whether that makes you money or not, maybe it's helping someone in their family get through a tough time or get into a college and you sit on the board of that university or your friend does.

Speaker 2: 37:30

Many times it's providing a structure to a family, an investment deal structure they've never thought of or pointing out a strategic choke point they could acquire. And by saying something to them that it's in their best interest, or reply, then it makes it so that the wheel starts turning Right. If you just go and say, oh, my value to them is my self storage deal is so amazing it's going to make them a lot of money. They're just going to see it as a sales pitch and see, hey, this person's just trying to sell me on investing in their deal and then that doesn't really get a lot of the resonance from it. You're not going to get a huge response rate from that. Typically, yeah, no, I love that.

Speaker 1: 38:02

So yeah, as we're getting close to our time here, is there anything that you'd like to talk about that we didn't get a chance to cover?

Speaker 2: 38:08

Yeah, one project we're working on is pretty exciting. I spent it took me 150 emails and 12 years to buy this asset here which is billionairescom, and it's a free website, it doesn't cost anything, there's no membership program. It's just me interviewing 100 billionaires and it's undocked, unfiltered. I mean I'm not interviewing a billionaire and writing up a fictional story about the rich man in Babylon, about it. I'm not interpreting and writing a summary. It's like big, exact words from Tony Robbins and Mark Cuban and Jeff Hoffman, and so I've interviewed 27 billionaires so far as of this recording, and every time I interview somebody, if I was introduced to somebody by a friend, I would mention their LinkedIn and their website above the actual interview. So, like with Tony Robbins, got interviewed to us by Harry Chlor, so when he sent out an email blast and posted on the website, we mentioned Harry. We thank him for that.

Speaker 2: 39:01

So if any of you are listeners or are billionaires, we'd love to ask them our three questions. We just have three powerful questions and this whole interview I've been talking about with you, austin, to remove the friction, remove the risk of a deal, add value first. So sometimes for a billionaire, we help one of the companies that they sit on the board of. In exchange, they answer our three questions, but some of them we buy 500 copies of their book because they're an author and we distribute that billionaire book at our events. And then they answer our three questions. And so we just try to also remove the friction by making it very easy.

Speaker 2: 39:32

Like I don't want an in-person interview with the video cameras, we don't need to have a phone call, we don't need to have a Zoom connection. I'm not going to follow up and pitch you a bunch of stuff. We literally just want the three questions answered. So I don't even need the contact details for the billionaire If your uncle is a billionaire, austin and he would answer our three questions and we're able to put it on billionairescom. That's all we want. It's just the genuine insights, and then that's how we'll get to interviewing 100 billionaires and have 300 insights from 100 billionaires in one location. And by doing that there's no way I don't learn at least one thing and there's no way that I don't get at least one new client or make one friend out of all those 100 billionaires.

Speaker 2: 40:08

And the thing is like most billionaires say no, they're private, they're busy, maybe they need to know me better. And so we get to talk to many billionaires more than what we can show on the website, because many of them don't want to be on a website, but some of them are happy to.

Speaker 1: 40:22

That's fascinating. Okay, and then if people want to reach out and learn more, what's the good resource for that?

Speaker 2: 40:28

Sure, our main website for Family Office Club is just family officescom, plural family officescom. My email is just Richard at family officescom If you want to learn more about our medical work or other stuff, like our 10 live events per year. Our big annual event has 1000 people at it and 120 speakers on stage over three days, so it's the biggest family office event in the industry.

Speaker 2: 40:54

It's called the Family Office Super Summit and it's in December in Fort Lauderdale, the 5th to the 7th of December and we'd be happy to have you join us if you weren't planning to already, since you have been in your podcast.

Speaker 1: 41:04

Happy to have you.

Speaker 2: 41:06

Yeah, it'd be awesome.

Speaker 1: 41:07

We'll expedite this to get this podcast out before that so that people can hear about it and hopefully get a chance to come too Awesome. Okay, yeah, that's great and thanks so much and it's been very insightful.

Speaker 2: 41:19

Yeah, appreciate it. Thanks for having me here.

Speaker 4: 41:22

If you need help finding the perfect location for your practice or you're ready to invest in commercial real estate, email us podcast at leadersreecom. That's podcast at leadersree, as in real estatecom, or go to leadersreecom and fill out our form. See you next time.