Paging Financial Freedom
This podcast is about empowering doctors and their spouses to break free from the golden handcuffs of medicine by building wealth through real estate and smart financial strategies. Through our personal journeys and hard-won lessons, we share practical tools to help you create more freedom, flexibility, and control over your time and future.
Paging Financial Freedom
The Godfather of Multifamily Lending Predicts What's Next
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In this episode of Paging Financial Freedom, Dr. Daniel Shin, surgeon and real estate investor, and Lila Kaplan, former Wall Street professional and certified financial planner, welcome Paul Peebles, nationally recognized multifamily lender and underwriter at Old Capital, for an in-depth discussion on commercial real estate cycles, lending, and today's multifamily investment landscape.
Known throughout the industry as the "Godfather of Multifamily Lending," Paul has spent nearly four decades financing apartment communities across the United States, personally structuring more than $9 billion in transactions through Fannie Mae, Freddie Mac, HUD, CMBS, life insurance companies and private lenders. Drawing from his experience through multiple economic cycles, he explains how history continues to repeat itself and why understanding past market disruptions is essential for today's investors.
The conversation explores the Savings & Loan Crisis, the 2008 Global Financial Crisis and the recent correction in multifamily real estate caused by aggressive bridge lending and rapidly rising interest rates. Paul explains why many syndications struggled after 2022, how financing decisions often determine investment outcomes, and why today's market may present one of the most compelling buying opportunities in years.
Key Takeaways
02:30 – Paul explains how he became known as the "Godfather of Multifamily Lending."
04:00 – Lessons from the Savings & Loan Crisis and how deregulation reshaped commercial real estate.
09:10 – The 2008 financial crisis, subprime lending and the biggest mistakes investors made.
13:35 – Why today's apartment market mirrors previous market corrections.
16:45 – Why Paul believes today's pricing may create one of the best buying opportunities in years.
17:00 – How AI could impact different multifamily asset classes.
18:30 – Why apartments have historically remained more resilient than office, retail and other commercial sectors.
21:00 – Can investors recognize a real estate bubble before it bursts?
24:15 – Why fixed-rate debt often outperforms bridge loans across market cycles.
25:10 – Paul's advice for physicians considering passive multifamily investments.
29:20 – Warning signs investors should watch for before the next real estate bubble.
31:30 – Why projected IRRs can be misleading and how investors should evaluate syndications.
35:20 – What lenders actually look for before approving a multifamily loan.
39:30 – Why Texas continues attracting businesses, population growth and multifamily investment.
46:00 – Paul's advice for doctors investing their first $500,000.
48:20 – The legacy Paul hopes to leave through investor education.
Daniel, Lila and Paul also discuss artificial intelligence's potential impact on housing demand, why multifamily continues to outperform many other commercial asset classes during downturns, how passive investors should evaluate syndicators and operators, and why discipline, liquidity and conservative underwriting remain the keys to long-term success.
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Connect with Paul Peebles!
• Connect with Paul Peebles on LinkedIn: https://www.linkedin.com/in/paul-peebles-b09289b/
• Paul's email: ppeebles@oldcapitallending.com
• Learn more about Old Capital: https://oldcapitallending.com/
• Attend the Old Capital Conference: https://oldcapitalconference.com/
Links from the Episode:
🔗 Apple Podcast: https://podcasts.apple.com/
🔗 Spotify: https://open.spotify.com/
🔗 Dr. Daniel Shin’s Real Estate Platform: Cereus Real Estate
🔗 Lila Kaplan’s Real Estate Investment Firm: Silverback Equity Partners
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Stay Connected with Us:
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Welcome to Paging Financial Freedom, a podcast about doctors and spouses and the journey to financial freedom through real estate and tax savings. I'm Dr. Daniel Shin, a surgeon and real estate investor. You might know me on social media as the Darwinian doctor or the founder of Sirius Real Estate.
SPEAKER_02And I'm Lila Kaplan, former Wall Street professional, certified financial planner, and the person on a mission to retire my orthopedic surgeon husband in the next five years. I specialize in apartment investing, helping doctors and their families build true financial freedom beyond their W-2 incomes.
SPEAKER_01If you're interested in achieving tax-efficient financial freedom through real estate, you're in the right place.
SPEAKER_02Let's get started.
SPEAKER_01Welcome back, everyone, to another episode of Paging Financial Freedom. I'm Daniel Shin, and we've got a very special guest today. Lila, do you want to talk to us about him?
SPEAKER_02Yeah, so I am extremely excited to have Mr. Paul Peoples on our podcast with us. So Paul Peoples has been arranging real estate financing since 1987. That was a long time ago. As a national underwriter at Old Capital, he's personally structured and closed over $9 billion in transactions across every major capital source. Fannie Mae, Freddie Mack, HUD, CMBS, life companies, and private lenders. His relationships with actual decision makers aren't just on the resume. And that is why one out of three, uh every three multifamily deals in Texas runs through him. So, doctors, you know how we always talk a lot about passive income and paper losses. But today we're going to go straight to the source. So our guest has funded, well, I already talked about funding more multifamily deals in Texas than almost anyone alive. If real estate syndication has a godfather, this is him. So let's welcome Mr. Paul Peebles. Yay. I wish I wish I had sound effects.
SPEAKER_00That would be fun too. So uh Daniel, thanks for uh having having me on. And Lila, always a pleasure. So uh let's let's jump into it.
SPEAKER_02Yeah, let's rock and roll. Okay, Paul. So you've become known as the godfather of lending in Texas. How does someone actually earn that nickname? And do you love it or hate it?
SPEAKER_00Uh a little bit of both, I would say. And it's it's a carefully craft crafted name just because as the godfather is in the movie, uh everyone kind of came to him and and almost kissed the ring to a certain extent, and he pretty much knew all the players, and that's a little bit where what I do is I kind of know all the players in Texas. Uh, and I'll tell you a little bit more about my background in a second here, but also too, where as the godfather would say, where all the bodies are buried. And so I've seen a lot of these transactions over my history that I can kind of give some insight on. So anybody asks me, I can kind of tell you that we've we've done a lot of these transactions over a period of years, whether it's been once or five times, I can kind of tell you what the history and the background is and why it was successful or why it I fell apart.
SPEAKER_01And has it always been in Texas or has it been other places as well?
SPEAKER_00So I grew up in the western suburbs of Chicago. I graduated from the University of Iowa. I moved to California in 1987, and then I became a kind of a junior real estate banker in 1987. So uh uh I've been doing this, as Lila says, for almost uh 39 years. So a long, long time.
SPEAKER_02Yeah, I couldn't do the math on that one. But so let's take us back to when you first multifamily low. What was the market like then and what made you fall in love with this asset class?
SPEAKER_00Well, I I I kind of want to give everybody kind of a sense of what has happened in the last say 35 or 40 years. I want to kind of go back. I mean, it's important to understand history. A lot of the people on this this this call uh are professionals in their job of what they do, and I want to try to give you some insight a little bit historically on what happened uh say 38, 39 years ago. And I think that will give you a perspective about really about what's going on today. So if you give me a second, yeah, I'll give you kind of a second, I'll kind of run by it. Hopefully it'll be fast, but it may be not that fast. But again, uh I've done this for a long period of time, and so I want to bring up uh a time back in 1987 that we had the savings loan crisis, and I had a the a front row seat on the savings loan crisis, and that's where interest rates uh uh shot up because we had this huge amount of inflation. S and L's were stuck paying high interest rates to their depositors, and that the only income coming in was these low rates on these home loans. So uh what happened was is that the savings loans, like like a lot of the industries back in the early 80s with the Reagan administration, became deregulated, deregulated. So the rules mean they got looser in the deregulation. So like AT ⁇ T uh was split up and there was like, I don't know, seven or eight baby bells type of stuff. The same thing happened with the savings loans, is that they wanted to find out if uh if they could pay higher deposit rates because a lot of the people were pushing their money over, if you can remember this to Fidelity and their money market accounts, and interest rates weren't at 5 or 6% today, but deposit rates were at 11, 12, 13%, and then prime rate was at 21%. So uh the rules were loosened up during the deregulation, and savings loans were allowed to make riskier investments to kind of win back those losses uh with that uh offset. And lenders they found out that started to do things that they weren't allowed to do before. So if you think of a savings loan was kind of like Jimmy Stewart and Wonderful Life, they took in deposits from your Aunt Mary and they gave it back out to uh the community. Well, with the deregulation to pay higher deposit rates, they had to get into more, say, more riskier ventures, whether that was land development or uh airplane leases or office and retail or even oil and gas uh rights, that they were uh investing taxpayers' deposit money into these crazier things. But in 1987, so they were doing that for about six or seven years, but in 1987, uh uh the tax reform battle cry was uh we're going to stop people from using real estate just to avoid taxes. And so why? It's because partnerships during that period of time for the for the five or six years, uh they were set up to lose passive money. So again, active income uh was not was not was in play that you could offset your passive losses against your active income, and that's maybe a lot of what your parents had done at that period of time. So the government said no more easy tax shelters, and that you just couldn't use real estate losses to offset your regular uh income anymore. And so the tax benefits disappeared in 1987, and a lot of deals were made uh that couldn't couldn't survive. So that so that helped kind of trigger the real estate downturn of the 1980s and early 1990s. The FSLIC, which you've never heard of, which is the Fed uh Federal Savings and Loan Insurance Corporation, now it's the FDIC, they stepped in to protect the depositors and the U.S. created the OTS and the RTC, the Office of Thrift Supervision, the Resolution Trust Corporation. Their job was to clean up the messiness. And they took over the failed banks and savings loan, they sold off a bunch of loans and FIREA, which is the Financial Institutions of Relief and Reform Enforcement Act, that was the savings loan bailout, made sure that that didn't happen again with taxpayer dollars. So from 1987 to 1993, uh there was no lending, no development, no construction or of new buildings, and the market started to get cleared out, and uh then it eventually came back, and so there was a huge gap in construction. So if you take a look to buy multifamily properties, you would see properties that were built in the 60s, 70s, and 80s up until like 1987, and then from 1987 to 1992, there was no building going on, there was no lending at all. What the you know the banks were not healthy, they were not putting more money out uh in that period of time. So from 1992, then to almost today, then there was a resurgence uh in real estate uh business. I want to kind of reflect. So that's one that was a shock uh in the to real estate and to the investors. And I want to give you another shock, and this is something that because if you're a little bit younger, you'll start to remember this. This was the shock of the uh GFC, the uh Hey Paul, can I just interject there?
SPEAKER_01Because I want to bring it home because you know I remember this. You know, believe it or not, I was alive when this was happening, and my dad had just started a career in commercial real estate before all of this went down. And I remember it it it had very real consequences. Like essentially his income, you know, his industry, obviously, it just went completely dead, and he had to completely switch things around, and the finances for our family just went down the tube. So this is, I think, what actually created the financial scarcity and like trauma that I lived through that pushes me to kind of succeed these days financially. So I just wanted to interject. It had really real consequences.
SPEAKER_00A hundred percent. People that can remember this are uh the 2007-2008 artwork are to a so certain extent traumatized because of it. But it was uh it was kind of the the subprime mortgage debacle. So it was a financial instrument that really was one of the reasons I why they it caught caused this. So the if you go back to the early 2000s, uh the housing market was on fire. And and then you know there was a normal 20 or 25% down home loans, and Fannie Mae and Freddie Mac were doing like record business. But when they created the subprime uh loans, because even though it was record business, they wanted to bring in even more business. And so a lot of investment bankers started these type of subprime loans, and you're pretty much familiar with that. That uh this these were the low credit scores, the no-down payment, those ninja loans, the no income, no jobs, or the no income, no asset type of stuff. But the the thinking was is that they wanted to help people buy the American dream by buying a house. So people believed that real estate only went up, and so if you bought it today in three years from now, you could refinance it or sell it or wherever you do, they were people were able to get it. But those mortgages were were packaged up. They weren't on somebody's balance, not a balance sheet of of a of a bank, they were packaged up and sold throughout the world. No no banks held these loans on yeah, they were securitized. I mean, Lila, you know this, you worked for one of the largest banks in the country. And uh in you know, people thought, well, buy a house today, take part of the American dream, sell it in a couple of years, and then it would be a win-win scenario. And the government was all for that type of stuff up until about 2006 when the home prices started to flatten out or even began falling. So many homeowners owed probably more than their houses were worth than adjustable rate mortgages. Again, you'll hear this adjustable rate mortgage stuff uh that were mostly all subprime loans that had rates that had moved and or jumped up, and borrowers couldn't refinance, and millions defaulted, and foreclosures kind of flooded the market. Looking back, there was probably just too much optimism about the rising values and they lost the lending standards that were there for a long period of time. And loans that were not supported by the homeowners' real income, not the ones that they no income, no job, no income, uh no asset on there. But when they saw what the real income is, they couldn't support it. Uh and so I would think this the equation was is that you know the big takeaways is that easy money, which is the subprime lending, plus the rising prices, plus the risky lending of the underwriting was a bubble. And so values in California, if you lived in California, I just use that as an example, fell by 41%. Sacramento, Modesto areas of those neighborhoods became ghost areas, and it took almost seven years for the economy to fall back to what it was even. So, but imagine you were in a time machine and you were able to go back to 2011 and buy those properties in 2011 and what that would look like today.
SPEAKER_02I think about that all the time.
SPEAKER_00I think a lot of people think about what would it take for me to uh yeah, go back. And so uh, you know, I would tell you that I think that's really a little bit about what's gonna go on in apartment investing and ownership today is it it directly pertains to uh to financial instruments. So the financial instruments that the subprimes were those those loans that caused this problem is a little bit how it was for subprime for these non-recourse bridge loans that a lot of people, I mean a lot of people, I mean like 90% of people that bought apartments used in 2021 to 22, 23. So it was it's was kind of crazy because in in 2021, uh we had a very healthy apartment investing market, everything was great, and there was more transactions done with Fannie Mae and Freddie Mac, but they wanted to fire it up just like they did in the subprime business. So they created this uh bridge program, and the apartment, you know, the apartment lenders uh they created the subprime mortgage, and it was less cash into the deal, and the borrower used a pro forma, which is kind of the what the future is, what we project the future to be in values and and NOI. And so uh they thought the same thing that we'll give them three years, and in three years the property will be worth more, they could sell or they could refinance and it'll be worth more. Well, what they didn't think about is because these loans were tied to adjustable rates, that of the 11 interest rate increases with the Federal Reserve and what they did to those adjustable rates. So value started to not uh go up, they started to be flattened, and then they started to fall. And so things that they had never considered about uh that ate into their their uh their their equity was partnership liquidity, they just didn't raise enough money to to think about interest rates going up on their mortgage, uh what that annual debt service was. They weren't thinking about higher uh taxes, higher insurance. So it kind of was, as they say, the perfect storm. And so uh values have fallen. And I would think the values here uh across the United States have fallen on some of these assets between 30-35 percent. So I'm starting to see a replay of what it was in, say, California to what it is in the United States. Uh California single family, multifamily today. Values have come down, and now 2021 really wasn't the time, but today in 2026 and 2027, now is the time to come back in or at least consider it to take a look and get yourself educated with the help of our two two hosts here about a little bit about what's going on. So my my thinking is is that uh now is the time to consider investing some of your money into multifamily at these price points. Now I'm off my soapbox.
SPEAKER_02No, I mean that that was great. We definitely remember some of the history, and it's always no, you know, good to know the history, or else it dooms to repeat itself, right? Um, but Paul, you you have seen a lot of full market cycles at this point. Um what if you had a crystal ball looking into the future, what is the next storm that's coming?
SPEAKER_00That's a good question because I think a lot of people are consensus in the last, say, six months, which they didn't see six years ago, is AI and what the impact's gonna have on real estate. Uh it's not so much the real estate, but it's the tenants that are in in our buildings and what the impact's gonna be on that. A lot of the people, a lot of the properties that uh a lot of people buy when they first get into multifamily is the B and C quality assets, kind of the older assets, maybe less amenities. They were class A high-quality assets back 35 or 40 years ago, but now they're like a little older assets and a little bit more of a uh a suburban or an urban area. They're not way out there. So they're not the the uh uh inner city properties that are class A buildings, but they're the kind of the older property that people that maybe served your breakfast this morning at the restaurant, cut your hair, fix your car. These are the working class workforce housing. Those people I don't think AI is gonna have an impact on. I'm more concerned of the people that are moving to the class A, that they're the engineers, the technology people, the the coders. That is more of a concern that I see is what what the impact's gonna be in the class A stuff.
SPEAKER_02Yeah, I mean, we're already starting to see that. You know, they're they're not hiring the junior level employees. I think there was uh some stats that came out recently that there's more unemployed college students than high school students, something crazy. Um, so yeah, I totally see that. Um, but from a lender seat, you know, sometimes you see you see basically everything, all the numbers, raw, unfiltered. Um, what actually makes multifamily survive some of these downturns that really wipe out other assets?
SPEAKER_00Well, different asset classes. Let's let's kind of define that versus multifamily. So if you have an office or a retail or a warehouse, again, a very economy-centric uh uh assets. So offices, as you can imagine, when after COVID happened, those were very difficult to fill and bring people back.
SPEAKER_02Stellhardt.
SPEAKER_00Stellhardt in Denver, at least. It's still it's still challenging. We were all concerned about what the the impact on the retail side with Amazon uh and some of these digital uh stores that have popped up. I mean, it really has been the dominant source of people how they buy uh their groceries. I mean, you know, why why did Amazon buy Whole Foods? I mean, it was a perfect compliment because maybe their retail was starting to decline. So those assay classes are you know very uh focused on the economy and and how just like we were talking about jobs, but somebody always needs a place to sleep at night, feed themselves, relax in, jump in a pool, have you know, live their life. I mean, if they're working, they're working eight hours a day, possibly off campus, but they're spending 14, 12, 14, 15 hours at their residence. So wherever that is, whether it's a house or it is a multifamily property unit, they need someplace to stay and live their life and have a family and do stuff like that. It is still difficult to buy a house. Whether you need 5% down or you need 10% down or 3.5% down, people just cannot get enough money for a down payment, especially since these values have gone up on these houses. How much how much income do you need to be able to buy a house? So the property types that we talk about with multifamily, you know, we reset the market once a year when that rent uh lease comes up, and that's what we like. So when you do a lease for an office building, it's usually five or ten years, and you kind of know what it is, but we we mark to the market in rents. And for the last, say, ten years, rents have gone up. Now they're pretty stagnant right now, but our belief is the fundamentals are are gonna come back right now in the future.
SPEAKER_01So, Paul, if I can just kind of summarize, I mean, you've you've outlined three different kind of real estate cycles at this point that we've actually lived through a lot of us uh listening. And uh the the answer sort of as to why what actually kind of broke the camel's back is slightly different each time, but there are similarities, right? So the thing that kind of is frightening though is that 2020-21, uh there were people sitting around, you know, in podcasts like this and uh fund managers having calls with investors, and all of the data supported making an investment. You know, you we were in a bubble, right? You couldn't see that it was gonna pop soon. So looking back now with some hindsight, uh are you are you starting to get a sense of what can tell us um when that bubble is or if we're in a bubble or when that bubble is gonna pop? You know, I just was wondering your thoughts about this now that you've really seen it all.
SPEAKER_00So, Dan, you're absolutely right. All the the the metrics. Of all the data that came in in 2019, 20 and 21 were that values were going to continue to rise on multifamily because NOI was going to continue to rise. And it wouldn't have been a problem except when you had all these people get these subprime mortgages, not on homes, but on apartment buildings, because these subprime mortgages were only for three years with two one-year extensions on it. But if we go back to 2021 or so, we had interest rates that were at 3.5%. So people took out these loans at 3.5%, but they didn't focus in on farther out that that 3.5% on a $20 million loan could be 9.5% because their interest rates went up by 11 times with the Federal Reserve. So you really couldn't model that, that it was going to go up. You just had to take the good data that you had where interest rates were for last 10 years. So you look backwards at if you if you looked at that, they were they were just pretty much flat. So if you remember, deposits were only paying 0.05%, less than 1% on a CD. So why put your money there where you could put it into uh an asset like a multifamily property? But nobody really could prepare for what happened with inflation and what happened with the feds raising their rates. So that was kind of a kind of a thing that we could we could not predict.
SPEAKER_02I probably need to read my history books, but has there ever been a period where the interest rate went, you know, in such a steep incline? So it's very unprecedented period for all of us.
SPEAKER_00Yeah, look at yeah, go on chat GPT and take a look and see it, make a comparison, because you're not gonna you're not gonna find that. Now, you know, we did have interest rates rise over a period of time back in the the 70s, uh and go in the 80s during the the uh into the Carter administration going into the Reagan administration, we had prime rate at 21%, but it was over a gradual period of time. This one was like in a matter of like 18 months, and they were just trying to put the brakes on the economy as as quickly as possible to to knock inflation off. But you know, that was kind of the trigger effect, but and then people got into these these loans. If they had done fixed rates for Fannie Mae and and it was a 10-year or a 12-year fixed rate, we probably wouldn't have had this issue because they would have locked the rate in and they would have been fined for 10 or 12 years. And you can survive a lot of cycles over those 10 or 12 years, but if you do an adjustable rate and that has a a short maturity on these loans, you can't solve a lot of problems within within three years. And that is where there's an advantage today if you're new to multifamily investing, is that you're almost like going into Modesto or Sacramento or parts of Orange County and buying the real estate in 2011-12 at these lower prices, and that's our our thesis for you to just consider it.
SPEAKER_02Yeah, and we have a lot of you know physicians on our podcast who have invested in syndicated multifamilies and some not. So, what is your advice for somebody that's just coming into this after hearing what has happened in the last five years where people are getting capital calls? Um, now a lot of doctors are a little bit more weary about putting their money into these type of investments. What are your thoughts behind that?
SPEAKER_00So uh the people that are it's like they're in traffic. Uh a lot of cars, they can't, a lot of them that invested in these deals in 21-22, the money is is locked up. And they're there's uh they can't get off the highway, and if they get off the highway, they they're that asset may be not uh not there. It may have gone in for closure because the maturity came, they the sponsor couldn't refinance the deal, or there wasn't there wasn't enough interest of putting more money back in the deal to try to save the deal. So those sponsor and those lit the those partnerships are probably pretty much over there in the trash, to be honest with you. It is the ones people that are coming in today, those are the ones that I'm more concerned about because they're not buying it at these high prices, they're buying at the low, lower prices. And then my my philosophy has always been is look at the sponsor, who the operator of the property is, see what their track record is. Even if they've had a problem, everyone's had problems recently. But even if they have not had a problem, uh see who how they manage the asset, how how much liquidity they're bringing into the deal, how much additional uh uh excess capital they have to keep in a rainy day fund. Make sure you understand where the property is located at. Michael Becker's rule number one don't buy in the hood, so to speak. Buy in good areas, buy in in thriving areas, up and coming areas, even if they're older assets. Uh, but but look at where the property is and look at where the schools are. I think uh, you know, keeping to some of the basics in real estate, I think you'll be fine. I think that we'll go through it this thing again here in about 15, 20 years or so. Kind of the same thing in the term terms of the timing, but today is something uh at these prices, and I'm you know, I'm convinced that these prices are good, but they may be getting even better here in the future.
SPEAKER_01So we might not be at the bottom then. Correct. So what what would push prices down even further, do you think?
SPEAKER_00Uh again, a lot of these loans that were taken out in 2022, 2023. The maturities are coming up right now. They do have a uh break the glass uh emergency like you have in a lot of your hospitals that that calls the fire department to come in. They can get uh a one-year extension or they may get a second-year extension, but it takes money to do that. And a lot of these partnerships don't have the additional capital. So right now they're just feeling the capitulation to the market, and they're starting to say, well, I'm I'm just tired. I don't want to, I don't want to put up with this anymore, even though we've lost, or you know, we'll try to sell this deal. Uh it it may come to the point that they're just like, I want to sell it and I want to get out of it. And so that's where you can come in uh and try to take a look at it.
SPEAKER_01Yeah, I feel like we're in this maybe 18-month time period where we're gonna see some of the best valuations maybe of our mid-adult life. Um the so the the question for you though, which is again taking from your experience, so after 18 months, right, the the deals are gonna come, they're not gonna be as good. They're gonna come back to normalcy, and they're just gonna be good deals at work, right? And then at some period after that, we're gonna start getting to that other part of the cycle. What warning bells should our investors look for, or us as fund managers look for to kind of tell us that we have to start being careful and thinking about maybe different places to put our capital?
SPEAKER_00So when I first started in the market uh back years ago, there was no uh subprime mortgages, and all of a sudden subprime came in. Back in 2014, 2015, 2016, that there was subprime to a certain extent in multifamily, but it was a small percentage. Then all of a sudden it it gained to be about 80 or 90 percent of the market, used the subprime for multifamily. Now we're back into doing really uh Fannie Mae and Freddie Mac transactions, locking the deal up for fixing the rate for 10, 10, 12 years. Uh if we start to see the subprimes come back in again, and you start to see some some uh uh bubbles in the market that we start to see these these values go up tremendously, then I would say, well, I think we're out of it again. So so look at at when we saw the values rise so much, that's where you know uh you should have gotten out.
SPEAKER_02Yeah, and I definitely am very weary about seeing, especially online nowadays, you know, if once you're into real estate investing, your algorithm on Instagram and Facebook basically feeds you these deals. And I see constantly um, you know, sponsors promoting 20% IRR, 25% IRR. And I'm often thinking, are they really getting these deals? And I'm just missing out.
SPEAKER_00So the answer is no, it's not. It's all a bunch of marketing, and as I say, it's complete crap. And you know, what you should be focusing on is somebody that could give you an annual rate of return of maybe five or six or seven percent. I mean, don't put all your money into multifamily, but put it, put it, buy a hard asset. Buy a hard asset that's gonna pay a rate of return on your money. If you, if you, if we went back to prior to 2010, we didn't have these syndications. We had three rich people buying these assets, and they wanted to hold these deals for 10 years. And so, and then when the the jobs act changed that it made syndication uh uh a way of put buying these properties, a lot of money came in and inflated the values. So we had steady appreciation on multifamily, but when the when people started to do these syndications, it it just went ballistic higher. And now we're starting to see them come down to normal levels what it should be. So, you know, don't get uh into uh a relationship with somebody that's promised you 17, 18, 20, 22 percent. There may be some of those deals out there, but pull the covers back and kind of see exactly what how they're gonna do it, and then you know, have conversations with with uh YouTube folks and kind of have them walk through it with them of are you seeing what I'm seeing type of stuff? And is this uh even realistic? I'd say going back to AI, a lot of the stuff on these offering memorandums and these business uh discussions we've put into uh into AI, and you can see what the questions you should be asking uh some of these general partners. So in you know, in something that is that we haven't had in the last say ever, is that you're you're almost doing a forensic search about are these real assumptions or not?
SPEAKER_02Yeah.
SPEAKER_00And it again goes back to people that have done it for a long period of time and then know these areas, and then kind of focus on people that that are operators that only go to one area. I don't like operators that kind of skip throughout the country, that they go to Utah or they go to Nevada all of a sudden or Florida. Get into an operator that only knows this one or two areas and that they could build the relationships not only with the vendors, the the uh in the cities and the investment salespeople, you know, get make sure these vend these uh sponsors have like two silos, two or three silos, and that's it. Because they they they're just not gonna know the community enough to protect your your money.
SPEAKER_02Yeah, that's totally true. So then, Paul, when a syndicator comes to you uh with a deal, um, what's the first thing that you look at that most sponsors don't even realize you know is being scrutinized.
SPEAKER_00So so remember, I'm the lender in the deal. So I'm the largest partner in the transaction, whether it's 70 investor, as you always said. I'm the biggest investor in the deal. So I want to make sure that I understand is of what you're putting out there, not only to your your your investors, but also to us that you can pay us back. Because my my upside of the deal is X, where the investors may be 12, 13, 14, but I only have maybe four and a half, five percent, because that's what my interest rate is four and a half, five percent on my money. And so I have limited upside but unlimited downside because if you default and I have to take the deal over, I have to pay the taxes, manage the asset, you know, pay the insurance, I have to operate the property as if you would. And I don't want to buy the property at a too high of a price. So, what I'm asking right from the beginning is you know, let me take a look at your performa. And I don't I just don't want to see your performa, but I want to see one or two other property management companies' performas that are in the area, that they kind of know what this is to manage the asset. Because they're they put in a writing about what you want to achieve, and you have to find out is this achievable? So I'm gonna compare your performa to what the management company's pro forma is and kind of see if if are you both on the same page? Because if I have too too much of an optimistic pro forma by the operator, I'm like, that's not gonna work. So again, that's probably their number one thing. Two, I'm looking for an operator that has good liquidity net worth themselves, whether it's one person or three or four people in the group, I want to find out and I want to understand what they're through a resume, their business resume of real estate of what they've owned in the past, how they structure the deal. I don't really care about what their rate of return is to the investors. I just want to make sure that that if we lend you, you know, $10 million that you're in a position to pay us back and also hopefully pay your investors a rate of return on their money.
SPEAKER_02So I'm curious, have you ever declined a deal? Uh I do it every day. Okay.
SPEAKER_00I do it because it the structure is not right. Or it is a deal where uh, you know, it it doesn't make sense for uh us as the largest investor or or the uh the limited partners that put money into the deal. So we're so we're gonna be be the limited partner's biggest advocate, making sure. So I mean one thing that I'm always concerned about is that you've you know who is the who is the controlling person in this deal? Is it the general partner that puts money in and then raises a bunch of money? And are they are we buying into the a pirate ship that all of a sudden the pirates take over and throw the captain overboard? So I kind of want to understand who the controlling person is and on the deal. And so the more that the equity investor can put into the transaction, the more comfort level I have, and the more comfort level the limited partners have, too.
SPEAKER_01Can I ask you a question about Texas, given that that's your sort of region of interest there, Paul? Um, Texas has undergone incredible growth recently, uh, population growth, industrial growth. Why is that happening, A? And what are some of the hottest places in Texas that you're excited to lend on?
SPEAKER_00Two great questions. And again, I came out of California back in October of 92. So I was transferred here with the bank in 92, and I was living, I managed the bank from Los Angeles County up to Monterey. So I was in God's country right on the beach. And all of a sudden, uh, this was right after the savings loan, and the and the my banker bank said you're going to Texas. And I was like, what did I do wrong here in California? It's I don't know, I have never been to Texas before. I'd stopped by uh the DFW airport, but you know, looking back after I've been here for 34 years or so, it was the best thing that could ever happen because like when you look at your paychecks and I look at mine, I don't have that thing called state income tax on mine. And so uh it is really a business climate, I think, in Texas, and it's been that way for a long period of time. And so uh state income tax is probably one of the drawers of trying to get uh wages higher for people, you know. They try to take more home. There is it is if you buy a house a little bit more expensive, or you buy a piece of real estate with property taxes, maybe a little higher, but you're trying to keep a higher quality of the schools together, too. But you see it probably that what some of the it's the top top 10 areas of the country for the Fortune 500 people to build their corporate headquarters here in Dallas, Fort Worth, Austin, or San Antonio, or even in Houston, which is you know, it we don't have exposure here in the Dallas Fort Worth area to the energy. They do have it down in Houston, but it's a very diversified economy. So, I mean, we have big corporations that that uh are part of the fabric of Dallas, and uh they continue to grow. So when I first came here uh to Dallas, our our population was here, it is up here. We have a every day they we have uh a 747 that comes in from all parts of the of Cal of the United States, especially from California, especially from Chicago, especially from New York, that comes in and lands here, and when it goes back out, it's empty. So we continue to see uh three or four hundred people a day coming into this area, and that over a period of time that just grows. And so uh, you know, we have that Texas triangle, and so we're a big believer in the Texas Triangle. And if you've ever driven from Dallas out to uh to Santa Monica, California on the 10. So you go from Dallas to Santa Monica. This is how big the state of Texas is. The halfway point is you're still in Texas.
SPEAKER_02Yeah. My husband has driven from the east to the west through Texas, and he said it was so boring.
SPEAKER_00I would never do that again. That's why we fly.
SPEAKER_02That's exactly what he said. He said I would never do this again.
SPEAKER_00No, but but but areas of Texas that I do like, especially uh uh you know, we keep we keep building uh uh computer chip manufacturing facilities up in Sherman or up in uh Van Alsteen and all the way down to Taylor, Texas, which is just outside Austin. Austin has really been overbuilt. Too many multifamily properties, the market is incredibly soft. They've kind of stopped building apartment buildings, but there's still a lot of inventory. Kind of the same today up in Dallas, but we can absorb it because we have so many jobs where 8 million people versus Austin being a third of that. So uh areas that I like is kind of central Texas, whether it is Waco or it is uh northern Austin, like in Georgetown area. I definitely like everything kind of surrounding the Dallas-Fort Worth market. Uh San Antonio, I would be a little bit more apprehensive of San Antonio that's more of a government town. They have a lot of military there, military hospitals, uh, a lot of call centers are based out of uh San Antonio. Uh so you're not gonna see valuations rise in San Antonio that much or as quick. So stick to the major metropolitan areas. And if you want to take a, you know, go to a tertiary market and you want to go out to Tyler or Longview, uh, stick maybe towards East Texas on the northern section of East Texas. And those are probably the areas that I would I would off the top of my head that I would kind of recommend are what we're seeing for uh values to be stable or go up.
SPEAKER_02Yeah. And Daniel, you just went to Waco, right?
SPEAKER_01I did. It was my first time in Waco.
SPEAKER_02Um did you see Chip and Chewanna Gaines?
SPEAKER_01I did not. It was actually a really short trip because I I flew in from Memphis to Dallas Fort Worth and you know, got in a rental car and just drove down there. We had a pretty tight timeline, but you know, I saw the uh development that is going up there that I'm raising capital for. I I saw Baylor University, which was which was a really nice institution. Yeah. Uh and it it it does seem like it's really benefiting from that Austin to Dallas sort of pathway. It's it's within that sort of triangle you mentioned, Paul.
SPEAKER_00So if you if you take a look, uh if if you went back in my shoes back to 1992 when I moved here, if you drove from Dallas to uh San Antonio, wide open spaces, ranch land, nothing, nothing. Today, it is community after community after community. So people are moving to Texas and staying pretty much on that 35, which goes from Minneapolis, Canada, all the way down to Laredo, southern Texas, and they stay next to that center part of the United States major highway. And so I would tell you to invest in into those areas, and then we have these large interstate highways. We have 20, which then eventually turns in 30, 20 and 30, that eventually turns into 10 that goes all the way to Santa Monica or goes all the way to Atlanta. Uh so we have these center parts of the United States that meet right in the Dallas-Fort Worth area. So, you know, if logistics, this is the place I would imagine this is the place it's to be. And I invite everybody who's not familiar is, you know, come to come to Texas. If you're gonna put $100,000 or invest some money, come to Texas and spend a week in in San Antonio, the Riverwalk. Go to Austin, come see, come see a Cowboys game or a Mavericks game or come to see what Billy Bob's in Fort Wertha is all about. You know, and some of the best universities are here. University of Texas at Dallas, uh, UT down in Austin. So we have these major universities in Texas, and uh people keep coming here. And so now it's time to turn off the switch. Stop coming to Texas, stay wherever the hell you're from, but put or bring your money to Texas. And this is the time to do it.
SPEAKER_02Well, speaking of going to Texas, I know Paul does these um old capital bus tours every other month. And it's been an incredible experience for a lot of new investors. I was part of that. I would say I'm not new new anymore. A little bit more intermediate now. Um, but if you guys are interested in these bus tours, we can definitely share it in the the um podcast notes. Um, Paul, can I ask you some rapid fire questions? All right. So, best piece of advice you ever ignored and later wish you hadn't.
SPEAKER_00Uh probably the best advice which I ignored was to buy single family homes uh back in 2008, 2009, right when the things were were collapsing. And I was like, uh I probably will not do that. And I wish I listened to my wife who said, uh, let's do that, and now I look like a freaking idiot. So yeah, that that's that's what is that's what it's like, and that's what it's like in multifamily today. Go ahead.
SPEAKER_02Okay. Second one. If a doctor came to you with $500,000, what would you tell them to do with it?
SPEAKER_00You know, I'm a big believer in not putting all your eggs in one basket type of deal. And I would say, you know, put some, you know, diversify a little bit and have multifamily being a percentage of if you're gonna stocks, bonds, and cash, of course, stay where you're at to a certain extent, but put a hundred or two hundred thousand dollars uh into one or two deals. Don't put every don't put your 500 grand, don't even put 200 grand into one deal, put a put a hundred, two hundred thousand dollars, divide it up between two or three deals, and then uh but spend some time. You know, back in 2020 to 2021, there were so many doctors that just were a fork that they just were putting money in and they didn't know the operator, didn't know where the money was going to. I talked to a woman uh last week that went on to Realty Mogul and put a bunch of money into deals that they never knew, never knew the operator, never really got financials. Uh, and then all that money is is gone. So know who the operator is, spend some time where that property is gonna be at, just like Daniel. Drive to see where your money's going to. You're saying, well, I don't need to do that. I'm telling you, do it. Do it, go and and and pick one or two areas and then find out who those operators are in the area and figure out do I want to put more money into that deal down the road if they bring me another deal in in around that area. But stay in concentrated areas. You know, that's why doctors create specialties. Stay in your specialty. Stay in the areas of whether it's Waco or it's Dallas or or it's it's uh Indianapolis, Indiana. Just know your those areas.
SPEAKER_02Okay. Last but not least, so you've built uh an amazing career. Um if you look back 20 years from now, what do you hope your legacy in this industry will be?
SPEAKER_00You know, I don't want to see anybody lose any money, and a lot of people have lost money, but a lot of people lost money in the single family business uh in 2005 to 2010, 11 or so. Uh, you know, so my you know, I could have quit uh a long time ago because I I own with my partners 10,000 apartment units, and we do about a billion and a half dollars worth of real estate lending a year. But I'm in it into it because I want to be relevant to people that are thinking about putting a hundred thousand dollars into uh a deal and not and not to do it with um you know not not to do it willy-nilly, but to actually understand it. So that's why I would when uh Lila said to come to the old capital bus tour and spend all day with us, and we're gonna educate you. We have nothing to sell, we don't make any money. In fact, that it freaking costs me money for people to come in. But you know, we get a bus and we have it uh we'll show you what what's going on out there. Uh we'll we'll educate you a little bit more in depth in what we're doing right now. Uh build those conversations with with Lila and with Daniel just about what's going on in the market. Be active. Yeah, be active in what's going on in this business. Last thing I'll leave you with: if you are gonna be around and you want to get a little bit better information, come to the old capital conference, old capital conference, sometime in September, September 24th. It's really a kind of a two-day two-day deal. Uh go to oldcapitalconference.com, look it up, come join us. Uh that's your personal invitation to come. I know Lila will be there. Hopefully, uh Daniel will be will be there too. Uh, but if not, we'll miss them. But we really bring in all some of the key players in real estate and the vendors so you can get up the speed as quickly as you can to understand what really what the hell's going on. So that would be my advice.
SPEAKER_02Yeah, and it's gonna be at a really cool venue as well. So definitely, you know, come and hang out.
SPEAKER_01Perfect. Well, I think that's a great place to stop there. Paul, thank you so much for spending an hour with us today, you know, really educating our listeners, uh, given your experience. It's it's been great. Thank you so much.
SPEAKER_00You're welcome. Good luck on your investing, everybody.
SPEAKER_02Thanks for tuning in to Paging Financial Freedom, where we help doctors and spouses like you take control of your finances, invest smarter, and build a life by design.
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