WS1978 Building a Predictable Passive Investment Portfolio | Tom Dunkel

In today's episode of the Real Estate Syndication Show, we continue our conversation with Tom Dunkel of Bellrose Storage Group, delving into essential strategies for passive investors aiming to craft stable and lucrative portfolios. Tom underscored the importance of defining clear investment objectives and introduced the SAFE methodology (Sponsor, Asset, Financials, and Exit strategy) to guide investors through the volatile economic landscape. Highlighting the significance of informed decision-making, continuous learning, and strategic networking, Tom shared insights into navigating the realms of alternative investments for long-term success.


Key takeaways:

• Define Your Investment Goals: Cash flow, growth, or capital preservation? Knowing your goals is crucial for selecting the right investment opportunities. Don't be afraid to pass on deals, even from trusted sources, if they don't align with your strategy.
• The SAFE Method: Sponsor, Asset, Financials, Exit. Use this framework to thoroughly evaluate potential investments. Download Bellrose Storage Group's free e-book for a comprehensive list of questions in each area.
• Take Action Despite Uncertainty: Don't let fluctuating interest rates or inflation paralyze you. Actively seek out deals that meet your goals and leverage the SAFE method for informed decisions.

To discover more about Tom Dunkel, Bellrose Storage Group, and their investor network, consider visiting their website at www.belrosestoragegroup.com. Additionally, if you're interested in expanding your wealth through real estate, the Real Estate Syndication Show offers numerous strategies and can be a valuable resource. For those ready to begin their investment journey, https://lifebridgecapital.com/ is the place to start.

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Transcript

Tom Dunkel: find deals that match your goals, run through the safe method. It really is that simple, but you've got to do something. I would say that's one of the things we really like about the safe method is we think it gives someone some very easily followed steps so they can break that inertia and move forward.

Whitney Sewell: This is your daily real estate syndication show. I'm your host, Whitney Sewell. We're continuing our conversation today with our guest, Tom Dunkel. You know, he's the managing director and chief investment officer at Bellrose Storage Group. But today we're going to dive into even more steps that, you know, as a passive investor, ways for you to build a predictable portfolio. And I love these steps. As many of this, I wish I had known years ago as well. And this could, again, a few of these, they seem simple, but most people don't do them, unfortunately, and then they end up losing 50 or $100,000. And that's hard to swallow when you could have just taken one of these steps and prevented that. Tom, welcome back to the show. Looking forward to diving back in. I want to remind the sponsors to listen to yesterday's segment where Tom laid out a method that I feel like is could save many passive investors thousands of dollars. And I think it's so valuable. And I mean, just a very simple thing that It's not done, typically. So I want you to go back and listen to yesterday's segment if you didn't. Today, we're going to dive further into their business and building a predictable portfolio and how they've done this. And Tom, welcome back.

Tom Dunkel: Hey, Whitney, so much fun. Thanks. This is great.

Whitney Sewell: Yeah, honored to have you back and continue the conversation. Well, Tom, you know, you and I briefly talked about it, but just these steps to building a predictable portfolio, how you've done that, how you recommend doing that with your experience. I'm all ears. I know the listeners are as well, but let's dive in there.

Tom Dunkel: Sure. Yeah. So yeah. So yesterday we talked about the safe method, SAFE, and that's part of our three-step plan, but it really starts before that, right? Before that, step one is as an investor, which is, I mean, that's what I think of myself as an investor, right? I've invested in lots of different asset classes over the years. We happen to be building a business in self-storage, but guess what? I still invest I still invest in multifamily. I still invest in short-term rentals. I still invest in other stuff. We just happen to be building a business in self-storage, which we love. When you're starting out, when you're building that predictable portfolio, number one thing is you got to have your goals. What is it that you're trying to accomplish with your investing? Some people are more cashflow oriented. They're trying to get out of their nine to five job, or maybe they're at a point in their career where they're wanting to leave the workforce entirely. Those are going to be cashflow investors. They're looking to replace their income, they're looking to gain that financial freedom where their passive income is exceeding their monthly expenses. Or there might be someone like my son who's 21. He's got a long runway in his investing career, so he's going to be more growth And he has a great career he's heading into. So he's going to be making money, but he's probably going to be more interested in like a growth perspective. And then other people are maybe a little bit skittish about what's happening in the world and wars and all this other stuff. And so they might be thinking, hey, I really just want to put my money someplace where it's going to be safe. So capital preservation might be a big goal for them. But at the end of the day, Whitney, a lot of these It's a combination of things that might shift and they're going to shift over time. So you need to maybe start out with some goals today, but you got to revisit them once a year and just make sure that they're still relevant goals to what you're trying to accomplish. A lot of investors, especially high net worth or accredited investors that we work with, they've already achieved a certain level of success. And those investors, a lot of times they start out stocks, bonds, and mutual funds, they're doing their 401k, they're doing their mix of growth and funds and value funds and all this stuff. Well, the wealthiest investors in our country are investing in alternative assets. So maybe about half or less of their portfolios are traditional stocks, bonds, and mutual funds. The other half is self-storage, multifamily, office built, hotel. So they have this whole retail strip centers. So they have about half of their portfolio in alternative assets and they get a lot of diversification that way, right? Diversification, easy for me to say, is super important. The wealthier you become, the more money you have, and you really want to spread that around so that it stays safe. And then also tax efficiency is a big one, right? So for your high earner, Commercial real estate is a fantastic vehicle to help protect your income. So you got to go through those different aspects of investing, decide in step one, what are your goals? Uh, step two. Yeah.

Whitney Sewell: Those are something that, uh, I feel like, uh, you know, as I've grown as an entrepreneur, like they changed of course. Right. Or even through different business cycles, you know, things like that. But even for my, uh, more recently I've tried to have even goals for my family. Right. And even, you know, personal goals and think through that, uh, not just corporately, right. Or even as a passive investor. Right. But, but I love how, You know, even when you're investing in a deal, you know, not only are you thinking about those things in safe method, which we're going to talk about again, but we talked about in detail yesterday. It's like, what are your, I love it. Like, what am I trying to accomplish here? Cause that's, even if the deal is great, the sponsor is great, all those things, it may still not achieve what you're trying. The best thing for you, for you. Right. That's great. I love that.

Tom Dunkel: And hey, maybe you're saving for college. Maybe it's retirement. Maybe you're trying to get that vacation home. You got to keep those things in mind as to what is it you're trying to accomplish through your investing. For sure. Okay. Step two, ready? Ready. Step two is go and find deals that match up with your goals in step one. For example, this is actually a really good example. I have actually a really good friend of mine who I trust with money and anything else, but I don't invest with him because his deals aren't structured the way that matches up with my goals. I like to go out and find other sponsors that are doing things where they're structuring deals that line up better with Michael. He passes the sponsor test, no problem. But the way the deals are structured, I actually like the asset. It really is the financial aspect that just doesn't line up with what I'm trying to do. But there's all different kinds of asset classes out there. There's multifamily, there's self-storage, there's short-term rentals, and there's so many ways that these deals can be structured. Some of them are geared more towards a backend kind of profit split. So if you're a growth-oriented investor and there's not a lot of cash flow, maybe it's a development deal. Development deals a lot of times could be good for someone who's looking for long-term growth and near-term tax efficiency because there's going to be a lot of losses in those early years that can be written off your taxes. I'm not a tax expert, so check with your tax expert, but that's typically what a lot of people are doing there. Then they get their big hit at the end when the property is sold or refinanced. If that matches up with what you're looking to do, perfect, go find more of those deals. I'm actually, so I'm 56, I'm looking at riding off in the sunset pretty soon, which I don't think I'll ever do by the way, but I keep trying to convince myself. But I'm starting to look at, hey, I want to start replacing my income or start building up my passive income more than where it already is so that I can have the luxury of going and working from Key West. or Scottsdale or something. But it's just you got to go find and it could be work, right? This is where the work comes in with alternative investments. You got to get to know different sponsors, different asset classes, so you can find those deals that are structured the way that match up with your goals.

Whitney Sewell: Is there a place like you would recommend somebody that's a brand new past investor to even go and meet some sponsors or somebody like that?

Tom Dunkel: You know, there's some great conferences. I've never been, and I'm embarrassed to say, because I should have been going to this, but the Best Ever Conference, the BEC is out in Salt Lake City this coming April, and I just can't make it. And I couldn't make it last year. But anyway, that's a great event where syndicators, investors, different sponsors are all kind of coming together. And I got to make a point to get out there next year, but it just hasn't worked out. But the Best Ever Conference is a good one. Hunter Thompson puts on a great event that I was just at in Phoenix called Raise Fest. That's a great spot for investors and syndicators as well. And then if there is a particular asset class that you're really interested in, go find that industry event. So for example, in April, I'm going to be speaking at the ISS, the Inside Self-Storage World Expo out in Las Vegas. So that's another event where it's focused in on self-storage, but there's going to be investors there, there's going to be sponsors there, there's going to be operators there. And so it's just kind of a nice mix of those different folks that can get to know each other on a personal basis and maybe get some deals done.

Whitney Sewell: Yeah, best ever. I've been to every one of them except the very first one. I know Joe really well. I've known him a long time. Joe Farrellis. Yeah, I also recommend it. It is a great place to meet sponsors, for meeting sponsors. It really turns out more uh, high level sponsors, I would say than most say your real estate conferences will, you know, uh, it's not focused as much on say the beginner newbie type investor, you know, so a lot of, um, you know, a lot of active, you know, bigger name sponsors will come and we've sponsored it a few years and whatnot, but, but, uh, great event. Uh, so couldn't, yeah, I couldn't agree with you more. I've, I've enjoyed being there and speaking there numerous times as well. Um, but, um, all right, uh, step three,

Tom Dunkel: Step three, all right, so you've figured out what your goals are, you've gone out and you've identified some opportunities that look to match up with your goals. Now, step three is to implement the SAFE method, which we talked about yesterday. S-A-F-E, S is for sponsor. You got to ask a ton of questions of your sponsor. And if you want to grab this ebook off of our website, feel free to do so. It gives you a list of all the questions. It certainly isn't exhaustive, but it gets you started to think about what do I need to be asking in these four areas. One is sponsor. Who are you handing your hard-earned money over to? A is for asset. What is it that you're actually investing in? If you're investing in a syndication, a lot of times you're going to be buying membership interests in the LLC that owns the apartment building or that owns the self-storage facility or that owns the short-term rental. So you just need to know what it is that you're buying. F is for financials. What are the projections look like? Are they reasonable? What are the tax implications? What are the returns they're projecting? All those kinds of things. And then E is for exit. How do you get out of this thing? If you participate as an investor in a syndication, your money's going to be tied up for a period of time. And you're probably not going to be able to get it out of there until that exit happens. So you need to know how long your money's going to be tied up and what needs to happen for you to get your money back. So that's just, if you wanna listen to more about the SAFE method, download the ebook and or listen to the prior episode, because we went into a lot more detail there.

Whitney Sewell: Yeah, no, that's great. How many steps were there, Tom? Were there 23? Is that what you said? I'm just kidding. I'm just kidding. Only four, only four steps.

Tom Dunkel: All right, step four. Oh, and just back to the SAFE method real quick. There are tons of opportunities out there for alternative investors. So if you're going through the safe method and you're starting to get answers that you don't like, Just stop, just stop and go find the next opportunity. Because once you start going down this rabbit hole, you're going to be like, wow, there are tons of opportunities out here. There's a gazillion apartment operators and self-storage operators and all these different operators in these different asset classes. So don't ever feel like there's a scarce amount of deals out there. So just be willing to say, you know what, this deal isn't for me and go find the next one. So I think that's it. You don't have to rush into it. That's right. Don't rush into it. Definitely not. Okay. Step four is pretty simple, Whitney. Just go do it. Go do it, people. Okay. Get your goals, find the deals, do your homework and go do it. This has been life-changing and not just for me, but for investors and actually family members in particular that we work with. Quick short story. So my dad passed away in 2004. And then a couple of years prior, they had the big stock market crash when the internet bubbled. So my parents were trying to retire then and my dad passes away. So now here's my mom with her nest egg basically cut more or less in half. And at the time, CDs were paying nothing. And so here's my mom, really trying to figure out like, how do I retire? You know, dad's not here. I don't want to be working till I'm 80 years old, right? So it was around about that time. So when I got fired from my corporate job in 2006, like we talked about in the prior episode, I started learning about alternative investing and lending and rental properties and self-storage and apartments, stuff like that. So through what I've been able to learn, Now, fast forward, it's been 20 years now since my dad passed away. My mom is still alive and kicking and cranking and very sharp. In fact, she's a wicked smart investor. She has learned, I guess through me, how to look at these deals. So like my mom, she's ruthless now. Like she won't do a deal unless she's getting like 10% or more and she wants her cashflow payments every month and she wants that security. So she does a lot of private lending. and such. So now she has a great lifestyle. Money is not a problem for her. And she thanks me all the time. And of course, she's my mom, so I would do anything to help her. But we take that same kind of thought process and philosophy so that we can help others in our investor community as well.

Whitney Sewell: Love that. I appreciate you mentioning even helping your mother do this, right? You know, as you've learned so much and yeah, congratulations to her as well and making sure you're doing it right. Yes, we're doing it.

Tom Dunkel: She was, you know, 60 something when she started. Now she's elite. She's in her late 80s and she's still, uh, She was on our investor webinar last night. We were pitching our latest self-storage deal. She was on the webinar. I was like, hey, hi, mom.

Whitney Sewell: That's fun. That's fun. Wow. I'm sure she's proud. All right. Well, Tom, we'll jump to a few final questions and dive in and get your take on a few other things. But as everyone wants to know, what's going to happen? right over the next 6, 12, 18 months? And, and, you know, what, what do you predict? And, and, you know, I say, I know none of us know, right? Nobody knows for sure. However, what we believe is going to happen affects what we do today. And so what do you think is going to happen? What do you predict, you know, the next 6, 12 months for the economy and real estate and anything in between?

Tom Dunkel: Sure. Well, you hit the nail on the head, Whitney. I mean, I don't know, you don't know, nobody really knows. But what we can't do is just do nothing, right? We can't sit still and stuff our cash in a mattress because cash in a mattress just declines in value over time. And it does nobody any good. So don't do that. So just look for the, get your goals. find deals that match your goals, run through the safe method. It really is that simple, but you gotta do something. And so I would say that that's one of the things we really like about the safe method is we think it gives someone some very easily followed steps so they can break that inertia and move forward. I think that rates, let's talk about interest rates, right? I'm not an interest rate predicting business, but I feel like inflation is going to be persistent. In fact, we just saw a headline today from the Wall Street Journal, the inflation numbers came in higher than what they were expecting. Not really what I was expecting. A lot of people are saying, oh, well, rates are going to be dropping and cap rates are going to be going up and real estate is going to be doing great. Well, I think, yeah, long term, yes. real estate's going to be doing great. This year, 2024, I think it's going to be a tough year. I think 2025, there's going to be a little more stability in the market. And that's really what we need, especially after 500 basis point increase last year. I mean, man, it just threw the real estate industry across the board, across asset classes, just really into a wild and crazy time. And it We can't have that. What I don't want to see is rates coming back down 500 basis points because then property sellers aren't going to sell. I'm just hoping we can just get some stability, but we're still bullish on self-storage. All the demand factors for self-storage are there and increasing. Same for multifamily, you know, I think, you know, our population is growing, people need a place to live, and they need a place to store their stuff. So I do, I am bullish on multifamily, and self storage, and we have some niches within self storage that we're excited about as well.

Whitney Sewell: Nice. I appreciate the detail, Tom. You know, Tom, what would you say is your your best source for, say, raising capital or meeting new investors right now?

Tom Dunkel: You know, we kind of have a two-pronged strategy. Obviously, we've been at this a while. We've raised over $65 million from private investors over the history of our companies. So we do have a pretty solid, what we call our warm list of investors. But I would encourage syndicators out there to use what we call cold outreach, right? So get out there on social media, build your personal brand, identify that investor avatar that you're going after and speak to them, speak to them specifically. Because if you do that, you're going to get a lot better results. You're going to find your people more so than just blasting general messages out there. I think the more specific you can be, the better. We're starting to see those results here. I'm just a dumb finance guy, but the last couple of years, I've been trying to learn more about marketing and social media and that sort of thing. And, you know, we're learning, you know, sometimes you win sometimes you learn right so we're learning what to do what not to do. bunch of people who have raised a lot of money, just like off of LinkedIn, for example, or off of YouTube. So one of the things I'm looking to do is really pick a platform and just kind of go deep in that platform. Because it's, you know, it's already a full time job to do that. So to try to be everywhere on every platform, which, you know, we do have a presence on on each platform, but I think it's important to pick one and go deep with it, you know, something that resonates with you and your message you're trying to get out there.

Whitney Sewell: What are the what's the most important metrics that you track could be personally or professionally?

Tom Dunkel: Well, you know, our metrics for capital raising are, we look to add two new investors to our investor database every week. And I think we've been crushing that goal recently. So I think we're going to be bumping up that KPI, that key performance indicator. But yeah, we're always tracking for capital raising, we're tracking how many investors, we are looking at our interactions and our analytics on social media and those kinds of things. But at the end of the day, it's Am I raising the money that I need to close on these deals? Thankfully, the answer has been yes. I think that boils down to just a lot of things. We have a fantastic team here at Belarus Storage Group. We do a lot of nurturing and educating of our investor list in between deals so that when a deal does come up, we're ready to rock and roll. and just treating them like people, trying to just help them. Like we talked earlier about helping out my mom, we try to really keep that purpose front and center.

Whitney Sewell: Love that. What about some habits you're disciplined about that have been proven success for you?

Tom Dunkel: I'd say I've been a lifelong learner. I've always just been curious about things and wanting to get around the right people, go to the right events and things like that. That's really helped to propel me personally and propel our businesses. We were talking earlier about joining different masterminds and such. I haven't tallied it up recently. I did this a couple of years ago, but I've spent well over $300,000 of my own money joining masterminds, going to conferences, trying to get around the right people because all kinds of great magic happens when you're around those people that are just really achieving and it rubs off on you. You want to be around those kind of people.

Whitney Sewell: Yeah. I appreciate you even being willing to share the investment of that. Right. It, cause it, uh, a lot of people will, uh, believe all they can just do it without, you know, without making that kind of investment. And there are ways to meet people, but oftentimes people operating at that level that you want to push you are, are willing to pay to be in those rooms. Right. And there, there's a, uh, adds a hurdle, right. Um, for sure to who gets to be in there.

Tom Dunkel: Yep, yeah I know there's some mentors of mine out there I've followed Darren Hardy for a long time and he says you should you should be investing 10% of your earnings into your education so go into the conferences go in the masterminds etc. You know, there's also a different way to think about that. It's like, let's say if you want to be making this much money, then this is 10 percent of that. So, you know, this should be how much you're investing so that you can get to that that level. So, you know, there's different ways to think to think about that.

Whitney Sewell: Love that. That's challenging. I appreciate that. That's going to make me rethink maybe some of my goals right there.

Tom Dunkel: Right. Yeah. Yeah. Yeah. You got to buck up, man. You get it. You got to do what you got to do.

Whitney Sewell: What's the number one thing that's contributed to your success?

Tom Dunkel: I definitely being around being around the right people. I would say, I mean, if that's that's probably the biggest thing for sure. Because when you're around the right people, you know, the ideas are just going to start flowing. you know, the connections are going to happen, the energy is going to be there, you know, the business is going to take place, you're going to attract the, you know, the money and the financials and the additional people. And that's just, I think it just helps you to kind of snowball and leapfrog and all those other all those other metaphors. But if you can get the right people around you and get a niche where you can get really good at something and get really educated and go deep in that niche, I think those are the, I know you asked for one, but those are the three things. I gave a whole 50 minute talk last year at RazeFest in Louisville. I was on stage, that was my giveaway was, you know, get around the right team, find a niche, get educated. Those are the big things, the common thread in the businesses that I've built that were successful. And it also tells me why the businesses that failed, failed because we didn't follow those three things.

Whitney Sewell: And how do you like to give back?

Tom Dunkel: Whitney, I love doing stuff like this. I hope the listeners out there are getting something out of our talk in these last couple episodes. But at this point in my career, I feel like I've learned a lot. I've made a lot of mistakes, but I've also achieved some pretty cool stuff. And if I can just help somebody out there with a little nugget here or there and help them make their lives better, that's really, really important to me.

Whitney Sewell: Tom, I've enjoyed spending the time with you over these couple of segments here and learning from you personally. I know the listeners have as well. I'm very grateful for your time and experience, your willingness to share and desire to give back in that way. So, you know, just even going through those, the steps to building a predictable portfolio, I think is so helpful to any investor that, you know, yesterday's show and today, both these segments, I feel like are just, are full of stuff that, man, I wish I had known before I started past investing. Right. Uh, you know, years ago, I mean, I do a number of these things. I'm like, man, if I had just thought about that one thing, I may have, you know, been in a better position today. Right. Uh, and so great content, uh, very knowledgeable. I appreciate you very much. And so I tell the listeners how they can get in touch with you and learn more about you, but also the, I know you all have a deal that may potentially still have some room. We're not sure.

Tom Dunkel: Sure. Whitney, this has been a blast. Great, great interview. Thank you so much. Yeah, so I'm Tom Dunkel, Chief Investment Officer here at Belrose Storage Group, B-E-L-R-O-S-E, just one L, belrosestoragegroup.com. You can find me all over Facebook and LinkedIn, maybe even Instagram. But yeah, we are a value-add self-storage shop, so we have some great deals. We have one going right now, which in less than a week, we're already 50 percent committed, so that'll probably be full very soon. But we have another deal on the pipeline. coming up after this one. So if you go to bellrosestoragegroup.com, you can learn about me and the team. You can see some of my other podcast episodes. You can see our investment thesis and how to get started with us. But more importantly, you can register and become part of our inner circle investor network by joining our portal. And that's where we are able to inform investors when a new deal comes up. So when a new deal comes out, you'll get a notification and then there's a webinar and then we're kind of off to the races raising money, but they do fill up pretty quickly. So we encourage folks to pay attention to their email box and we'll give a call or maybe a text message here or there to remind folks as well.

Whitney Sewell: Just so the listeners or any attorneys listening know, it's a 506 C deal. I did confirm that before.

Tom Dunkel: 506 C. Yes, that's right. Yeah. Compliance is very, very important.

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to lifebridgecapital.com and start investing today.