MFREE 100 Full Episode with Michael Pouliot: Is it time to rethink how long you're holding your assets?

In this episode of the Multifamily Real Estate Experiment podcast, host Shelon Hutchinson, also known as Hutch the Marine Investor, interviews Michael Pouliot, founder and CEO of Eon Capital Partners and Chief Investment Officer of Carbon. With over $1 billion in real estate acquisitions, Michael brings extensive institutional expertise and a passion for educating future real estate entrepreneurs. The discussion covers a wide range of topics, including Michael's early experiences in real estate, key lessons from his Wall Street career, and his investment philosophy focused on workforce housing and housing-related transactions. Michael also shares his perspective on navigating current market cycles, the impact of tariffs and inflation, and how technology and innovation play roles in property management. Additionally, Michael emphasizes the importance of mentorship and education in raising the next generation of real estate entrepreneurs.

00:00 Introduction and Guest Welcome

03:05 Michael Pollard's Real Estate Journey

06:09 Lessons from Wall Street

11:19 Investment Philosophy and Market Evaluation

16:21 Navigating Market Cycles and Challenges

21:38 Distressed Assets and Scaling Opportunities

28:02 AI in Property Management

29:14 Educational Content and Mentorship

33:26 Real Estate Strategies and Opportunities

42:21 Aligning Investor Incentives

45:57 Focus Round and Closing Remarks

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Email me at:
hutch@hsquaredcapital.com

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Transcript

Michael Pouliot: 0:00

With real estate or really any business, you can create something out of thin air, based on what suits you. And it's gonna take you a while to get to maybe your ideal state to, wherever you want to go. But just know that, just keep on working at it and, you can carve out whatever niche is appropriate for you, that you want, as long as you just keep taking action and you just, just keep getting up.'cause you're gonna get knocked over, quite a bit. But that's, all part of the process. Yeah,

Hutch The Marine Investor: 0:27

man. Don't quit and don't die.

Michael Pouliot: 0:29

Don't quit. you can only lose if you stop.

Hutch The Marine Investor: 0:31

No, a 100%, man. Welcome on. Are You Multifamily Enthusiasts? Welcome to another episode of the Multifamily Real Estate Experiment podcast. I'm your host, Shalon Hutchinson. If you're in real estate, you know me as Hutch the Marine investor. And look, today we have an exciting guest for uc. Most of us, we hear this thing about, um, main Street and Wall Street and a bunch of a BC Street and one two Street, all, all those things, right? And you tend to hear those things as one or the other. So today we want to capture, capture someone who have experienced both world, right? So I'm excited to welcome someone that bridge four Generation of Real Estate Wisdom with Next Gen Private Equity innovation. Michael, Michael Pollard is a CFA and A-C-A-I-A. He's the founder and CEO of eon Capital Partners and the Chief Investment Officer of, um, of Carbon. It is a, it's a middle market. Private equity firm, you know, so with over$1 billion in real estate acquisition and over 1 million square feet of office and mixed use project on this belt, and$400 million plus in housing related transaction, Michael brings some serious institutional expertise to this space. He is also the host of the Deal Flow Podcast, and he's a super passionate advocate for educating the next wave of real estate entrepreneurs, you know, so Michael, I want to welcome you to this episode of the EY Podcast. Thank you Hutch, for having me. I am, I'm excited about this, uh, podcast. Yeah. Man. I am too, man. So it sounds like you had some, you got a busy morning where you choose to be here, man. So we are, we absolute, yeah. Can't miss out on a podcast opportunity. Yeah. I love

Michael Pouliot: 2:28

getting on podcasts.

Hutch The Marine Investor: 2:29

Yes. So, Mike, I wanna ask you this first question though. do you have a favorite real estate quote or philosophy or mantra that drives you?

Michael Pouliot: 2:40

I, I don't know if I have a specific quote that I could say off the top of my head that I wouldn't butcher. but I would say, a philosophy or a mantra would be margin of safety, which is a Benjamin Graham and I. philosophy, who, and then that was taken by Warren Buffet and, I think it's, something that a lot of people think about, but, margin of safety when you're buying real estate and you're dealing in real assets, margin of safety is really important. Whether that's about having good reserves, about buying at the right price, about, capitalizing your deals appropriately with the right type of debt. so margin of safety is really important concept, and I think if you apply that. In your acquisitions and in your management. you you can weather a lot of storms.

Hutch The Marine Investor: 3:27

Absolutely, man, that, that goes for the passive investors as well, right? Mm-hmm. One of the things that I typically talk to'em about is their, their risk tolerance and their risk capacity, you know, us. That, that's really important. Okay? So margin of safety. Alright man, I appreciate that. So now I want to dive right into it, man. And I want to ask you, look, Michael, you, you, you are a fourth generation real estate entrepreneur. Great. You know, what was it like growing up on the job site and, you know, how did you, how, how did that shape the way you operate today, especially now that you've worked, you know, you work with on small projects$25,000, you know, to real large project, uh,$25 million deals. I. Sure.

Michael Pouliot: 4:05

Yeah. Uh, thanks for that question. So, uh, yeah, I started, being familiar with real estate, uh, as a, you know, kind of a day laborer. Um, and I would, you know, work on my father's job sites. My grandfather would pick me up, uh, early, early in the morning when it was still dark, and we would go pick up a couple other folks, um, that were working, you know. Day shifts basically. And I would be part of that crew, uh, essentially digging holes and leveling ground and laying down, um, you know, plumbing and, um, going and, and grabbing and goffering around, like getting toilets and stuff from commercial outfits. And, uh, you know, I spent my summers and my holidays doing that. It was great pay, uh, you know, uh, cash, great cash pay, uh, at that time compared to what I could get. From a store, which, you know, at a store or something, I maybe make four or five bucks an hour about, uh, doing this. I could make, you know, 15, 20 bucks an hour. So for me, that was fantastic. Um, and, um, and yeah, I, I think what I. What I learned from that experience was probably that I didn't necessarily love the, uh, that part of the business of being on the site and kind of being part of like the, the ground game. And, uh, that's, you know, from that experience really learned that I, I. Had more of a knack for and more of a, an appetite or interest in more of the financial side of these transactions and really thinking about hiring the right people to go and do these projects and executing them with a fine attention to detail. More of a big picture type of thinker. And so I was really thinking about how to put these projects together and then how to find people who are more engineers, more, you know, detail oriented to actually. Execute the construction, the project management and things like that. Obviously it took time to get to that point, but, uh, those were, those were a couple things, uh, that I learned, uh, from, you know, long days on the job site.

Hutch The Marine Investor: 6:04

So that, that is amazing journey, man. Like, you know, planting a seed for, for something beautiful to grow. So you got, you got involved, you know, with the construction aspect of, of real estate, but also. You, you saw a really bigger picture that, that you can add a, a ton of value and that kind of brought you to more so of, the financial world that a lot of people know me. So you spent some time, you know, on JP Morgan, you know, fixed income trading desk and, and consulted for some big heavy hitters like Goldman, Sach, and, and Merrill. Right. So what specific lessons from Wall Street, um, still influence how you structure your deals and leads in today's environment?

Michael Pouliot: 6:45

Yeah, so yeah, I, I, so yeah, I had that early experience. Uh, and uh, then yeah, I went and then got my undergrad in finance, uh, in Boston and then. Was, uh, you know, in, it was, it was, I don't know, it was kind of before software engineering became like the, maybe the sexy thing to do. And it, it was still in this world, and at least for me and growing up in the Northeast, that like finance or law, uh, or, you know, were kind of like the things to do, uh, at least. That was what was attractive to me. And so I went, uh, finance, I went into finance and, uh, yeah, worked on Wall Street, uh, for, uh, mostly in fixed income, uh, working with ultra high net worth individuals to, um, build their portfolios and, um, helped them manage their money, uh, mostly, uh, for JP Morgan. Um, and you know, the things that I learned from my Wall Street career were primarily. About, uh, a couple things. So I had a, a number of really great bosses. I, I don't know that I recognized them as great bosses at the time, but now looking back, I, I feel like I've, I learned a lot from them. I think there's a difference, you know, I don't know if I would call them my friends, but I would call, I learned a lot of lessons from'em, and, and some of those, you know, one of them in particular. Um, you know, was, uh, having like an intense level of paranoia, uh, relative to your work product. Uh, and so we had this sort of two strike rule, uh, at JP Morgan that, you know, if you, you made one mistake in a client meeting, you'd get, uh, a warning, your second mistake in a client meeting, you would be fired. And so, um, you know, that level of standard is something that we try to instill in, um, you know, our teams, it's a little bit. It's a little harder now to do that, uh, with folks. Um, it, it, it seems, uh, but, uh, but we, you know, we were held to an extremely high standard, uh, very high stress environment. and just making sure that everything that we did, there was a maker checker system to it, that nothing went to a client without. Uh, being thoroughly reviewed because at the end of the day that if it's your draft, you are the one that's responsible for it. And so that, whether that's a, you know, an Excel model or a PowerPoint presentation or a, a memo of some kind, or even just a statement that you make, uh, that's your draft, that's your words. And, and that's important. Um, and then the second thing I would say. Was around just recognizing, you know, most of these days that I had were, you know, 14 hour days, uh, where I was working, you know, getting in early before the trading, you know, before the traders. So I would be in at seven, uh, and then, um, staying till seven or eight, but then I had a two hour commute on either side of my day. So it was a pretty long day. And, uh, sometimes that seven o'clock at night became midnight and that was, you know, definitely, frequent. Uh, and, but what I learned from that was, uh, anything can pretty much be accomplished, in one day, no matter how long that day is, especially when you're working with computers and you're putting together, a memo or a presentation or something like that's in your control that's right in front of you. there's really no excuse to leave the office or leave that work until it's done. and, and that was just like a requirement. So we would get assignments in the middle of the day and they had to get completed, by the time we left because they were due by the time we got in the next morning. So whether you had to stay till eight to get it done, or 8:00 AM the next morning, you just had to get it done. So the confidence that I think that develops in someone is really important. Recognizing that no matter how big the work effort is, almost anything, especially if it's in your control, if it's just a work product on your computer, it can be accomplished in the day that you. Get it started. and I think that gives you a lot of confidence to be able to go out there and, get an enormous amount of, work completed if necessary in a short period of time. Yeah,

Hutch The Marine Investor: 10:36

man, that is an amazing point of view because I think a lot of us, we always think about we can do that tomorrow. Tomorrow. Tomorrow and, and tomorrow never come, you know? But to your point, you know, I, I've seen a lot too, even in my own experience, right, where if I have a timeline, so if the boss tells me, you know, as a, as a young marine growing up, the boss tell me, I got this report, or I have this, um, award to write up, and I have like three weeks to do it, it will get done in three weeks. Right? However, that same award, if you tell me that needs to be done by the close of business today. That will be done by close of business today. So, and the, the same is true about the, the, the goals that we ex, we established for ourself. Those things that we want, the incremental things we want to accomplish, if we set it that we will get, we will get this done in this timeline, this timeline, this timeline. And okay, what if we shrink that timeline and we can ex actually expedite our goals and we can actually put our life on a faster trajectory. You know what I mean? So. We, we were talking about, you know, me submitting my retirement, um, paperwork, you know, for 18 months from now. And, you know, I got 18 months to retire. But however, what if I shrink that right? And all the things that I need to accomplish, I get it done within six months. You know, so the next year can be really focused on that transition, um, portion, you know. So yeah, to your point, man, um, we can get a lot of stuff done as long as we set. Short deadlines. Alright, so I wanna talk about some of the investment philosophy in deals, man, you know, so with hands-on experience in, in everything from, single family home, you know, to, to millions of square feet in office development. Um, how do you personally evaluate, um, opportunities, um, that you're pursuing in today's market?

Michael Pouliot: 12:16

Yeah, so, um. We, so primarily now at this point, we, we focus on housing. Okay. Uh, so we really think about housing and, and primarily that's workforce housing. So we're not doing, while we've, I've I've worked on a lot of, you know, spec luxury homes that are millions of dollars individually. Um. Right now. And, and for the last, uh, bit of time, at least the last five years, really been focused on workforce housing. Um, and, uh, whether that be single family or apartments, but, but in that space, uh, in, in primarily growing markets, uh, throughout the United States. So if I think about what. Uh, our philosophy is, or how we think about making investments, uh, in that space. It starts with the area. So it definitely starts with the, we're looking at the demographics of the area. We're looking at the schools. We're looking at the crime, the population growth, the migration trends. We're primarily looking for places that have stable or improving. Population, which typically leads to or follows job growth. Um, and then we are always looking for with the types of properties that we, um, invest in properties that have great schools because we feel that. Places with great schools attract families. Those families will stay in those communities through the duration of their children's education. So you tend to get stickier tenants that want to stay longer. Uh, we primarily work in the rental housing space, so, but I would say the same things apply if I was in the for sale. Space. I want to be in places where people are moving, where, you know, a household formation is strong, those sorts of things. And, and you know, the availability of data now you really can tell exactly what's happening in real time and, um, take advantage of those trends. It's not a guarantee that I. Just because, you know, we're in an area with good population growth, that we're gonna have a good investment, but it's a good tailwind. Um, and you have to offset that with, uh, supply. So typically what we find is the builders, everyone's looking at the same numbers. So we're all looking at the same numbers and say, Hey. Florida, it's great in Florida because so many people are moving there. And then builders will build and they'll all build at the same time, and then all of a sudden we've got 10 times as many houses as we need, right? So we have to be cognizant of, of what everyone else, uh, you know, reflexivity, uh, right, like everyone else's behaviors, uh, and, uh, affect, uh, what you should be doing. Um, and so we're all part of this same like system, so you have to be careful about all of that. But, you know, we're looking at demos, we're looking at supply, uh, we're looking at population growth and changes like that. And then we're overlaying that with the, um, you know, how friendly the area is to landlords, uh, and tenant, uh, relationships, uh, how the state is involved in the, in the housing sector in that area. So that typically means that we're right now investing. Uh, in the Southeast as well as Texas. So kind of going from Texas through the panhandle, down to Florida, mostly from i4, so sort of Disney World North through the space Coast, up through, um, um. They're basically all the way through to the Carolinas. Uh, and that would be our primary, uh, space. Although I really do enjoy, uh, and think there's a lot to be said about the Midwest, uh, I think that that's something that's typically overlooked. Uh, even though it may not have the same level of migration trends or population growth. It has strong incomes, um, and, uh, a great workforce. And a diversified economic base. So, and it has the only fresh water in the United States that we may have in the next 50 years. So, uh, I think that's something, uh, the Great Lakes are an asset that we undervalue that may become more valuable as the country changes, uh, over time. Interesting. Um, so, um. Did that answer your question? That that's happen? It definitely did. That's like the beginning. There's more to it, but we start there.

Hutch The Marine Investor: 16:11

Oh, no, no, definitely no. So I, I usually just call it a hype, right? Um, you know, when you invest, invest in the place, you wanna look at the hype. So you wanna look at the, the home prices growth, right? You, you want to look at the, the income growth, you wanna look at the population growth, um, and of course the employment growth as well, right? Make sure that the diversification of jobs is there. But to you point, man. Um, the, the market has cycles, right, just like the stock market has cycles. The housing market has cycles as, as well, and it's really important to pay attention to what market cycle that you're purchasing a property in, regardless of what, um, type of property you're buying. And also the projection of what environment you're gonna be looking to sell that asset in. And also the quality of buyers that will be available potentially, um, will be available as well, you know? Mm-hmm. So, you know, a great, great philosophy, man. So, so navigating, I wanna talk about some navigating the current cycles, you know. In recent years, interest rates and inflation was a thing. Now it's tariffs amongst other things. Right. So if you're a developer, right, and you get in a lot of your supplies from different countries, right? Tariff might be a concern for you. Um, are you seeing or having an impact or projecting an impact in a real estate developments? Um, in the, in the coming months and years?

Michael Pouliot: 17:21

Yeah, so we find that. That's certainly a concern, um, relative to projects, new projects that we're doing right, where we have large budgets, there's material costs, we are typically, um, getting our supplies overseas or if we're not getting'em overseas directly, they're certainly coming from overseas indirectly. So we will be subject to material costs going up. Uh, over time, um, but we have some flexibility as to when we acquire these materials. Uh, most of our business plans are multi-year, so we can delay certain projects to wait for some of the noise. Of the political environment to, to change. Uh, and then again, most of our book of business, most of the properties that we own, they're, uh, not, it's not that they're not susceptible to those challenges, but we just don't have as much capital improvements to make on those projects, right? So we don't have to spend the money and therefore not be so subject to it. So yes, maybe we have to replace an HVAC here or there, et cetera, on a regular schedule, but we don't have a huge amount of, uh, budget to, to allocate. So when we have new projects. That's where it's most concerning or most affecting us, is if we have a double of material cost that's gonna affect our project cost by 10%, 20%, which may eat up all our contingency, but that also assumes that we actually move forward with a hundred percent of the materials at this exact time versus, you know, um, linearly acquiring them over the next couple years. So that's, you know, we, we have a few different strategies that we can use to do that. We can also stockpile you know, stuff that's already here. Yeah. Put them in containers, we can, you know, there's a substitution right of materials. If we thought, hey, this is gonna be a lot, this is gonna be 30% cheaper, all of a sudden it became 30% more expensive, we can go back to the original plan, which would've been just to buy from North America, for instance. That makes sense. Which again, I think is part of the. Maybe perhaps the goal of some of these tariffs is to get people to, uh, substitute, uh, uh, a good that maybe isn't a, from another country to, uh, somewhere that's maybe closer to home. Um, and, um, so some impact there. Uh, outside of tariffs, I would say that, I was just talking to a broker yesterday and he was telling me about, um. Kind of what the composition of buyers looks like today. Uh, you know, I think that the market is starting to change. Mm-hmm. There was a time in 21, 22 where you had the syndicators and a lot of hot money were bidding prices up, uh, doing deals that potentially unstable or unsustainable valuations. Uh, those folks obviously are, or maybe not obviously, but are not necessarily big buyers in today's market. Uh, and, and the liquidity was very thin for quite a while. There wasn't a lot of buyers for property and there weren't a lot of sellers either right after, after 2022, and, you know, the last 24 to 36 months, it's been not a lot of buyers, not a lot of sellers, or at least maybe there were buyers and sellers, but they could never, they could not agree on price, right? Of what, what the price should be. Um, and so now what I'm seeing and what I'm hearing from the brokerage community is over the last six to 12 months, some of those folks that were big buyers in the 2015. 2018 space are seeing opportunity and they're starting to come back. Right? And those are buyers that were in the business for 10, 15, 20 years, right? They weren't new to the game in 2015, but they had longstanding relationships with these bigger brokerage houses and they just stopped buying as. Prices moved up in 2020 and 2021, and now, uh, they're starting to come back. They're starting to see value. They're starting to think maybe we're at peak cap rates and, and cap rates are gonna start falling, and we're seeing positive leverage. And so you're seeing the. The programmatic investors are in the, in the market. They're always in the market by definition, you know, uh, buying or selling based on their fund mandates. Then you have, you're starting to see these family offices and these longer term holders come back and provide liquidity into the market. And so, uh, it, it feels very, and, but at the same time, you're also still dealing with. Almost the first wave of distress from the 2021, 2022 debacle. So a lot of the, you know, properties that need to have a reset of basis are that's gonna happen. Either it happened last year or this year, or next year. So that's sort of cresting. And the new cycles beginning. And I think we're probably, you know, in the first third of the game here, uh, which I think is a great opportunity for people who are well capitalized, uh, have, you know, high conviction to go out and acquire property even despite all of the, you know, noise that there is in the, uh, political environment, the economic environment. As long as you're in it for the long term and you're, uh, considering margin of safety, as I mentioned in the beginning.

Hutch The Marine Investor: 22:13

Yeah, that's awesome, man. Which leads me to the next segment, which is, you know, innovation distress and, you know, scaling opportunities, right? So you have done hundreds of millions in housing related transaction, you know, with the focus and distress, you know, turn and turnaround deals. You know, what is the biggest mistake investors make when chasing distressed assets and how do you avoid them?

Michael Pouliot: 22:33

Yeah, so I think it's right there in the sentence that you said, um, you can't really just, uh, uh, chase distress deals, right um, you sort of let them hang themselves, uh, and let them bleed out. Uh, and then they are just there for the picking. So I think it's about developing relationships with those who are closest to those deals, whether that be lenders, uh, possibly property managers, or even other sponsors who may be in a rough position. Uh, we found that a strategy that we're employing right now, uh, that we've been trying to employ for the last 18 months, but we've been early, uh, but it's now starting to come to, um, you know, come, come to fruition. Uh, is start, start, you know, having conversations with sponsors who. Did perhaps buy at a pretty high price and and have debt that. Uh, is too expensive and, and has too high of a basis and come into those deals and, and replace those sponsors. Bring in some fresh capital, renegotiate with the lenders. Uh, and so that's what we're starting to see. Uh, a lot of, I think existing sponsors are realizing that rates are not gonna go down significantly. They're not gonna see a 20% increase in the value of their, of their properties. Uh, now, basically right now, uh, or over the next 12 months, and they're just ready to capitulate and move on from the project. And so, um, and that, you know, that requires some tough conversations with those sponsors, with the, with the debt holders. Um, and so we're having those conversations right now. Across a number of different transactions in different areas with either the current sponsor or the lender, depending on how far along the process has gone. Right. Uh, and seeing how we can come into that opportunity. We're vertically integrated, so we have our own property management company, and so we can come in, we can take over the day-to-day operations. We can, we have a discretionary fund, so we can bring in and, uh, write a check to, um, you know. Deal with deferred maintenance, things that maybe the existing sponsor couldn't do because their debt restricted them from taking on additional, you know, draws. So then we could recover the asset operationally, take over the property, wipe out the existing gp, maybe hopefully recover some of the LP dollars from the old transaction. Uh, and then also make the lender whole. So, uh, I don't think everyone comes out feeling great about the how it goes, but we have to move on from the. Those transactions into a better market environment. Um, and, and I think that's part of what's happening right now.

Hutch The Marine Investor: 24:59

Yeah. I think it's, it'd be really cool if everyone had a crystal ball back in, you know, the 2019, 2020. Right. You know, because I think we had a lot of good operators. Just maybe their long-term projection or midterm projection was not consistent with what really happened in 2021, 2022. You know, so, you know, to your point, these properties are in a lot of cases are really good properties in good markets with good fundamentals, right? However, because of the increase in debt and the inability to refinance these property in a traditional sense, it makes it really challenging for the property to cash flow and then additional to not having cash flow. They're not able to execute the business plan, which drag on their reserves. Right. And when you start bleeding all the reserves, then you come to a point where it doesn't make sense to hold onto this property and they find somebody who can provide, um, new capital to revitalize that business plan. You know? So it's a great idea. So you mentioned that you fund, right, which lead me to my next question, right? As a fund manager and, you know, tech enabled operator, you know, how do you think about, you know, buying versus building? Operation infrastructure to scale. And what role does ProTech play in your decisions?

Michael Pouliot: 26:15

Yeah, so, um. I, uh, my, my business partner at Carbon Cody, uh, is really responsible and spearheaded our, our vertical integration building on our property management division, our construction, uh, division, uh, so that we could take over these assets and we found that I. Just by taking over assets, our, our properties from our third party managers to bringing them in house, uh, within six months we see a 20%, 30% lift in the property performance. Just because we control, the incentive structure, uh, we ensure that the right people on the right seats, we can be more proactive in hiring and renewals and, um, doing just a number of different things that. That we want to be able to do, uh, that we may not be able to do or influence through a, uh, a third party who has slightly different incentives than we do, uh, potentially, um, in, in some cases. So, uh, I think they do their best. They work, uh, as agents and they, you know, have their own incentives. And so, you know, we, we, I can't blame them for being, uh, you know what they are. Uh, but we find that, you know, our first foremost, most important thing is that we have to protect the money that we bring, uh, into the deals from our LPs. Uh, they're our, one of our primary customers that them and the tenants. And so it's really important that we do our very best to, uh, oversee and, and run those properties. And we feel like. First party management, if that's a term, uh, makes a lot of sense. And so to that end, you know, there are several PropTech things, I guess, uh, we're doing, uh, I mean I, you know, we're using, uh, voice and text-based ai, um, where, where it's appropriate. Um, so that would look like, um, primarily. When there's off hours. So people are still more interested in talking to a person, right. If they can. But if we're not in the office, then they'd rather talk to a robot or text with a robot than to get no response at all. That makes sense. So the speed to lead is always a critical component of every sales process. We think of our, you know, sales is very important, right? You want to. Lease new units. You want to get better and better pricing. You wanna provide an excellent customer experience along the way. And so if we can provide 24 hour customer service, whether that's, you know, eight hours a day with our people and then another 16 hours for folks using robots, then we'd love to do that. And it's very cost effective and, and very effective for us. So that's how we do that is primarily through text and voice-based ai, uh, either answering the phones. Dispatching phone calls out using robots or texting. Uh, and then the same with, uh, R&M, so maintenance requests, things like that. That's all digital. So as much as we can put, um, you know, digital, reduce friction, allow for seamless communication and constant updates. Yeah. Making sure our tenants and our residents are. Aware of what's happening, um, at our community, uh, when rent is due, when a repair is going to occur, those sorts of things. That's all very important. Outside of that, you know, it's still very much a physical business, so there's only so much that we can do. Uh, you know, I guess eventually we'll have, uh, Android robots walking around doing landscaping and, uh, cleaning the pool and things like that. But for now, I'd say most of the AI PropTech execution is a, around the software and the leasing and the maintenance requests, that sort of thing.

Hutch The Marine Investor: 29:42

I got, I got you, man. And a lot of folks will be coming to your point, a lot more used to, you know, dealing with, with AI to get them to, to, to accomplish your thing, you know? So next segment I wanna focus on, you know, education and mentor, you know, and lifting up the next generation of entrepreneurs, especially real estate entrepreneurs. So you give away a ton of educational content, you know, which, which is rare for someone. Um, it's usually rare. right. However, that's actually one of the things I like about real estate environment is that in some cases we become more core competitors than we are competitors, you know, so. Um, why is it so important to you, or, I mean, to understand why it's important to you and what's your message to Aspire, um, real estate entrepreneurs looking into 2025 and beyond?

Michael Pouliot: 30:30

Yeah, thanks. So, um, you know, we have a, uh, uh, well, through our, uh, private equity firm we put out weekly. Blogs on a number of topics that are, that affect the real estate business as well as we have a weekly newsletter. I do a daily podcast. You mentioned one of them, which is the Deal flow podcast, right? That's a interview style like this one that we do weekly, but I also have a daily news podcast that I do that's a short five to 10 minutes every single day, uh, on commercial and, and residential news among other executions that we try to provide value. To our, our, you know. Listenership or readership or whatever you wanna call it. Yeah. Uh, but again, most of that is focused on LPs that can write fifty, hundred, you know, million dollar checks. That's, you know, a very small segment of the population. And so, um, we also have a community free community called, uh, inside of school called the Deal Maker Fast Track Free Community, where we provide, uh, uh, endless. Maybe not endless, but a significant amount of resources to help people, uh, getting started, going from that zero, uh, to that first deal. Uh, and not necessarily by writing us a check, but by going out there, finding the deals, analyzing the deals, and profiting from those deals, whether that's through wholeselling, right, flipping contracts, or if it's flipping and flip, uh, fix and flipping, or if it's turning, uh, properties into rentals. My first property was a$25,000 single family home row home in Philadelphia. Uh, using the BUR strategy. And even though, yes, now we're doing$25,$50 million transactions, I'm still using the Bur method. I'm still, it's the same frameworks. It's the same concepts just with another zero or another. Few zeros on it. Um, and so I, I think that, you know, everyone has to start from the beginning. And so our goal with the community is to get people, uh, involved in real estate. It's definitely changed my life. It's allowed me and my my family to, uh, you know, have the life that we want. We live in Boulder, Colorado. Uh, get to enjoy the outdoors and, uh. Talk to you, uh, which is great. And, um, and so I would encourage anyone who is just getting started or just wants to learn more about real estate, uh, to, you know, uh, go out there and educate yourself, whether it's in our community or somewhere else. It doesn't much matter. The information is out there. Knowledge is not the barrier anymore. We, you know. Even if you just wanted to use Chat gpt, you could get all the basically the same information outta chat gpt as you could get in my community. It may be that we organize it, hopefully, I, I hope we organize it in a way that's impactful for people. Right. But, uh, something I say, we, we run a live workshop every other week and I'm, this is, I. Actually our fifth, our last day, I have to, after this, I'm gonna go do day five of, our workshop. But I say knowledge without action is useless. goals without action are wishes. Yep. so you really have to think about, it's not the knowledge that's the gap anymore. in today's society with all of that's available, you have to take that knowledge. You have to get out of, learning mode at some point and go out there and, swing a hammer or, Buy something or, have a conversation with a person. and that's where business happens. That's how real estate happens. It doesn't happen in a workshop necessarily, or in a, digital community. You have to maybe start there for a little bit, but you gotta get out of those communities eventually and, go take action. So that's our message inside of our community, is go out there and take action. and most of what you'll learn, is gonna be from, doing that.

Hutch The Marine Investor: 34:01

That is awesome, man. Now, here's the thing. And the same, conversation towards, sharing knowledge. So you talked to, you've spoken to brokers sponsor, PropTech leaders on the Deal Flow podcast. Can you tell us, briefly about one conversation that completely reshaped the way you think about real estate?

Michael Pouliot: 34:21

I. Completely. That's a big, that's a big, maybe not completely, but Okay. Not completely. Okay. Improved. I spoke with a guy, early on and I, so just last week I was talking to this, one of the students. Uh, they wanted to start doing land flipping. Uh, and I've got some friends who are in the, like the land business. And I did a podcast with a guy, uh, based outta Florida, uh, earlier this year, uh, that is doing this at scale. And, uh, you know, I just, listening to him, uh, it's just, uh, interesting to see that there's so many opportunities out there to create. Any size business in real estate that suits you. And I think that was something that was interesting to me is just, you know, whether you're just starting out or this particular gentleman was, you know, had 3000 units of development going at the same time and over all these different projects. He was doing these land deals where he would put them under option and then he'd find a builder and he would take his equity and roll it into the deal and. He was just doing it at a very high level and, you know, big, big projects, um, 50, hundred million dollars each. And, um, he was able to do, you know, a lot of these projects at the same time.'cause he wasn't actually doing any of the physical construction. He was sort of just like putting the deals together and kind of putting the different pieces together, the engineers and the surveyors and then the sponsors and the equity and, and then just getting a little piece of the deal by putting it all together. And I thought it was just really great because he. Was, uh, he was such a deal maker himself. Mm-hmm. And, uh, but he'd been working on it for 15 years, right? He didn't, he didn't, you know, in a, in a year or in a month get there doing it at that scale. So I think it's just, you know, with real estate or really any business, you can create something out of thin air, based on what suits you. And it's gonna take you a while to get to maybe your ideal state to, wherever you want to go. But just know that, just keep on working at it and, you can carve out whatever niche is appropriate for you, that you want, as long as you just keep taking action and you just, just keep getting up.'cause you're gonna get knocked over, quite a bit. But that's, all part of the process. Yeah,

Hutch The Marine Investor: 36:29

man. Don't quit and don't die.

Michael Pouliot: 36:30

Don't quit. you can only lose if you stop.

Hutch The Marine Investor: 36:32

No, a 100%, man. So, you know, um, that leads us to getting towards the end of this podcast. And before we get into the focus round, I've got two more questions I want to ask you, man. And it's about real estate in today's right. So the contrarian play, right? What is one real estate strategy or niche that you think a lot of people are not paying attention to? That it has massive potential over the next 12 to 18 months?

Michael Pouliot: 36:59

Yes. So, uh, it's almost like you Yeah. Like, we did not plan these questions. In fact, did not, I had said that. I don't wanna know what the questions are in advance, but I, uh, because I just like to say whatever I think at the moment. Right. And so, so for this particular, we recently did a, uh, an article, I think earlier this year. I can't remember exactly the date. Um, talking about the perception of vintage, uh, plays in housing. And so right now we're seeing a lot of. Folks move away from 60s, 70s, and 80s vintage properties, right? Yep. And move into nineties, two thousands and two thousands, tens because they're looking at those and they're saying, well, they're getting older. You know, there's a lot of sponsors got burned because they didn't think about the plumbing and the electrical and the roofing issues that you can encounter in those older properties. And so, as someone who's done thousands and thousands of units. In that vintage, I think that now is actually a fantastic opportunity to take advantage of what I see as a big discount for that perception risk. So it's not an actual risk. You're paying a lot more right now to buy newer property on a price per square foot basis. On a revenue basis. On just on the, on the perception. That newer is better, and I don't necessarily know that that's the case, especially if you do a great job on your due diligence, you ensure that that plumbing is in good shape, that electrical's been upgraded, and you know your product is in a good position because those properties still have to house the workforce Housing of America, right? Mm-hmm. The people. Are not, a lot of people are not able to afford$2,000,$800 rents. You need to have a product out there that provides$800 to$1,400 product, and that product is the 70s and 80s vintage. So right now we're finding opportunities where we can buy those properties at the same prices as we could in the middle 2010s, uh, price per square foot, but incomes are 50% higher, revenue is 50% higher. And so we're finding a lot of opportunities there. We're able to get a really great cash yield out of those properties. And we don't have to compete with all of these other, uh, folks that are all sort of on the same bandwagon of, Hey, I want to go up vintage. So, uh, I think there's a, there's a strong, uh, opportunity now. As the market shifts, as we get to a hotter phase of the market, that perception discount, uh, gets eliminated and people don't care as much about vintage right? When the money gets really hot. We did a kind of a study on this and we found that. Um, you know, a lot of that perception discount goes away when the, the market gets really hot, like 2021. Mm-hmm. And so during those times, that's when you actually want to go to the newer vintage because you're not paying up for that vintage relative to the older vintage. Uh, but when the market is cooler like it is today, uh, there's a significant discount that's not explained by. Expenses, NOI revenue or any other financial metric, it's completely based on the perception and the flow of funds, uh, and the herd mentality. And so we're looking to, you know, try to go against that. And, and that's what we're doing now,

Hutch The Marine Investor: 40:02

now that, that is a unique perspective, man.'cause, um, myself, as a syndicator, um, we are focused on buying newer properties as well. But I, I definitely see your point as far as, um, all the vintage properties, right? Plus also, you know, in, in today's. Uh, environment, there's so many new properties coming online, right? Um, that, that in some cases it makes more sense to buy those property. Reason being is that you're dealing with less, um, operational risk, and it's a lot, lot easier to manage because you're not dealing with all the upgrades and upkeep, right? So for, for the new event, but however, when you look at a, a value based, um, investment, you know, some of those older vintage property is definitely a good play.

Michael Pouliot: 40:42

So one more point I would say is like, uh, some would, I, I think that there's a, a reasonable, uh, barbell strategy where you can look for those attractive, newer opportunities. Especially the ones where you had sponsors who made new developments. They're busted now and you can buy them at a really good price relative to replacement costs. Mm-hmm. So I'm not suggesting that those properties aren't a good buy, but I think people should just be, uh, aware that there is a. There's a discount you can capture for older property that is not apparent, uh, in the market. And what we look for when I think about margin of safety, uh, is we look less on the going in cap rate because what a lot of people will say is, well, the going in cap rate for both of these sets of properties are basically the same, right? I can get a six cap to a six and a half cap for a 70s vintage as I can for a 2010 vintage. Well, why would I buy an older property, the same cap rate as a newer property? And I think the answer that we, we come out to is I can get that 70s vintage up to an eight cap mm-hmm. Through a value add. Whereas the, the newer property, I may only be able to trend that up to a six and a half, to a 6 75 or maybe a 7. Right. And so for us, we look at, okay, what is that yield on cost in year four year five. Um, and how do I feel about that basis? Uh, right, because that 70s vintage property, I might be at an eight cap and only be at$120,000 a door, uh, in four or five years. All in that newer property. You may only get up to a six and a half, maybe a seven cap, and be at$250 to$300 a door all in. And then I may be competing with. New construction or, you know, uh, maybe more difficult to cover my expenses or see revenue growth. So that's what I look at is, hey, if I could be at 40 cents the dollar relative to replacement cost, be it an eight cap, which should be significantly above the market cap rate, I. And, and the financing rate. I feel pretty secure as a long, and I'm also a long-term holder. I'm also looking to like, if I can never sell, so I also just never want to sell. Um, and so I'm only selling if my investors are essentially requiring it. Um, and uh, so, so yeah. So that would be the one other point I would make about that

Hutch The Marine Investor: 42:56

man. To your point, we didn't plan this podcast, but my next question is actually about, you know, fund strategy, right? So how do you think about aligning investors' incentive inside your fund structure, especially with LPs looking for income and growth.

Michael Pouliot: 43:11

Yeah, so income, we are right now and, are, always looking at cashflow. Cashflow is king. We, um, you know, and, and most of the deals that we're doing today either are, uh, loan assumptions where we're having really strong yield going in, or they're gonna be turnaround strategies, uh, where we're taking over deals like I had mentioned before. Those deals not a lot of cash flow to start. Right. Gotcha. We're coming into a deal with low occupancy, we typically have to make some sort of operational improvement, but we're gonna get to what we think is a much higher double digit cash on cash by year three or year two even. Um, for the deals that are more stable, where we're taking an assumption on, uh, or, or even new debt, we're looking at. For new debt, we're probably looking at that 5% yield right out of the gate. And then when we're taking on an assumption right now, we're typically seeing almost double digit cash on cash yields right into the deal, or certainly by the end of year one. That's how we're thinking about yield in today's environment and we're doing that through agency fixed rate debt, long term, five to seven year money, primarily, uh, with the expectation that we're gonna refinance that. At that end of that term and, and continue to hold that asset. Mm-hmm. Um, so far as growth, again, we feel like we're buying at really good basis in today's market. Wherever we are on the vintage curve, whether it's an older asset or a new asset, we feel like, you know, five years forward we're gonna be really happy about the prices we're paying for properties, uh, in today's market relative to a few years ago or even 10 years ago. Um, so. That is how we're thinking about margin of safety and growth, uh, is really, hey, we think we're getting a great value today. From a price per door perspective, we're getting paid to carry the asset on a month, on a yearly basis through positive cash flow. Uh, and then so far as hold period, we are long-term holders. We tell our investors, we underwrite and show a 10 year model in our underwriting. So we don't show a five year model. Um, in our, in our. Pitch decks or our materials, we're showing a 10 year model. Um, and what we'll tell investors are, or is, uh, that, you know, when we get to the end of our first maturity rate, whatever piece of debt that looks like, we're going to assess the market. If we feel like we can get a really strong exit at that point, we will, uh, you know, look at that, we'll talk to investors, we'll see what their interests are, and we will no matter what, likely 10 31 that into the next opportunity. Or recapitalize that deal with new investors who want to stay in. So, uh, from my perspective, a property I own, I know a lot more about than a new property I'm gonna buy. So if I know I'm in an asset that I like, then I'd rather hold that asset for the long term. And if the investors want liquidity, we can provide that liquidity without losing control of the asset. So I see the asset and the, um, the equity as two separate things, and I can hold the asset. While still providing liquidity to the investors through a refinancing or a, uh, you know, they can get taken outta that deal and put into another deal, and we can bring new investors into that. Uh, first, you know, that first opportunity with the recapitalizations, there's a lot of things we can do inside of the capital structure without necessarily losing control of the asset.

Hutch The Marine Investor: 46:22

Man, that is, that's phenomenal, man. You have multiple exit strategy, which is really good for investors. Now man, I wanna be mindful of your time. I've got a couple more minutes left here before we have to go prep for your live events. And I, I want just dive into the focus round, which is just focus acronym. Okay? What do you do for fun when you're not managing capital and recording podcasts?

Michael Pouliot: 46:45

we're, running live workshops or, doing coaching calls? Yeah, I would say, I, every morning, I for a walk for about two hours before my family wakes up and I live, in Boulder, Colorado, right, next to the Foothills So I get a great view and. These last couple weeks, there's been like a herd of, deer that have been grazing right near my house. And so every day I get to see them, doing their thing and I get to walk by before the sun comes up. So I would say that's, exercise, hiking, that sort of thing, getting outside, getting away from my computer and all of these, things that are buzzing around me.

Hutch The Marine Investor: 47:22

Man, that, that is cool. I just returned from Australia and they had kangaroos. Over there walking around like deer. I thought it was weird. I thought I had to go to the zoo to see kangaroos. You gotta be

Michael Pouliot: 47:30

careful, right? You gotta be careful. One of them might punch you in the face or whatever. Or kick you in the face.

Hutch The Marine Investor: 47:35

So we went close, take some pictures, but they were actually more scared of us than they trying to fight. Okay. Alright. There you go. So the, oh, opportunities, man. What, was one, career defining opportunity that changed your trajectory?

Michael Pouliot: 47:51

You know, it's always really hard, uh, to connect the dots on the, you know, going, you know, forward. Right? You only really see'em on the way back. Right. So I met my wife, senior year of college. And my intention prior to meeting her, was I was gonna fly, I was gonna go to Southeast Asia and teach English and travel. I. and backpack throughout, Europe or whatever. And, that probably would've taken me off of the path that I was on, which was ultimately landed me at JP Morgan. And then, into consulting and into real estate. It's like the butterfly effect. And I was, I met my wife a birthday party, that was a friend of a friend. I was almost not gonna go. And so the fact that I managed to get off the couch that night, to go to that party. Meet my future wife. and, and then, progress through the next 15 years. I think that was, that was probably the most defining, point of my life, was meeting my wife and, going to that party. and, that one thing changing. I probably would be in a totally different place. I. I don't know if that was business related, but that's awesome because

Hutch The Marine Investor: 49:00

it, set the foundation for almost everything else and to, to us having this conversation at this point about an amazing business. And we're happily

Michael Pouliot: 49:06

married now when we're three kids in fourth on the way, coming here in July. So we're, busy. Busy

Hutch The Marine Investor: 49:12

man. Congratulations, man. So we got three more questions for focus round. We got what? Two minutes to do it? Less than two minutes. Okay.

Michael Pouliot: 49:18

Alright.

Hutch The Marine Investor: 49:19

Now so communication. what's your number one rule when communicating complex deal to investors?

Michael Pouliot: 49:26

yeah, we have a one pager and we have a pitch deck. Okay. and I, we try to come up with the three to five most important things that we feel like, are gonna resonate with investors when we put those front and center.

Hutch The Marine Investor: 49:36

Keep it simple. All right. What is one thing you wish more passive investors understood? before placing capital?

Michael Pouliot: 49:45

Real estate is a long game, and you should not expect to double your money every two or three years.

Hutch The Marine Investor: 49:51

Last one to what do you attribute your success?

Michael Pouliot: 49:55

I think getting up every day and doing the work.

Hutch The Marine Investor: 49:59

Man, that's freaking awesome, man, Michael, it's been a phenomenal pleasure, man. Um, you know, how can our listeners, if listeners want to get into your ecosystem, what is the best way for them to get in touch with you?

Michael Pouliot: 50:10

Sure. So you can, uh, if you're, uh, an LP or you're someone who wants to get on our, uh, newsletter, I recommend you go to investwithcarbon.com. Uh, and if you are, uh, not quite there, but you wanna learn how to do it yourself, I recommend you go to skool.com. That's S K O O l.com. Uh, and then look up the deal maker, fast Track, uh, and you'll find our community. We've got, we just passed through 2000 members. We started this community in January. So we've seen some pretty tremendous growth in the last 90 days, and we're shooting to get to 10,000 by the end of June. Oh, wow. So, uh, hopefully some of your listeners can be part of that journey and it's completely free. Uh, and, uh, I do calls every single day in there. So if you wanna talk to me, uh, you can get me, uh, right there for free.

Hutch The Marine Investor: 50:55

Man. That is awesome, man. Michael, you know, thank you so much for sharing your journey from your, you know, job site, private equity, and all the insights in between. You know, you, you've shown that innovation, legacy and education can and should exist in the same ecosystem. You know, for the listeners, I want to thank you again for listening to another episode of the Multifamily Real Estate Experiment podcast. If you found value in today's episode. Feel free to leave us a, you know, five star ratings and a good review. Right. Until next time, you know, keep owning more of America. And this is Hutch the Marine Investor out.