Ep #1,097 - The Brutal Truth About Real Estate Right Now

[00:00:00] Welcome. So I hope you're having an absolutely extraordinary day. Now, if not, I hope you decide right now to make it amazing because frankly, it's just a decision. So let me ask you a question. Are people born successful? Let's say the people that are the best in the world at what they do, are they born that way? Do they just wake up and say, I'm going to be a great athlete or a great business person and it magically happens? No, of course not. And so I want to talk about a strategy, a very effective strategy on this week's Own Your Power Clip called Acting As If.

[00:00:30] Acting As If You're Already That Persona That You're Hoping To Become. If you're in a job that you don't love or you just don't have the freedom that you're looking for, the freedom to spend time with those that matter the most. And if you know that, for example, buying multifamily is your path to get that freedom and escape the job you don't love. I've got super early bird pricing for my virtual bootcamp. It's coming up July 13th and 14th and I don't sell anything there. The price is ridiculously reasonable and it comes with just incredible bonuses.

[00:00:58] Now, the time for procrastination is over, my friend. Go right now and get your tickets. I promise you'll be very glad you did. You'll leave that virtual bootcamp knowing how to find deals, evaluate deals, finance those deals, raise all the money you need to buy your deals, and you'll learn how to perform due diligence so you don't make a mistake.

[00:01:16] Text the word bootcamp to 72345 right now or go to rodsbootcamp.com right now. Don't miss this opportunity. Again, text bootcamp to 72345 right now or go to rodsbootcamp.com and I'll see you soon. All right, let's get to it. Welcome. This is the Lifetime Cashflow Through Real Estate Investing Podcast. This is where you'll learn strategies to help you achieve lifetime financial freedom through real estate investment.

[00:01:45] Your host, Rod Khleif, has owned over 2,000 homes and apartments. And he brings experts in all aspects of real estate investment and management onto the show. Now, here's your host, Rod Khleif. Welcome to another edition of Lifetime Cashflow Through Real Estate Investing. I'm Rod Khleif and I'm thrilled that you're here. And I am just so excited to interview my guest who's a good friend, a hoot, and a brilliant freaking investor, Holly Williams.

[00:02:15] Welcome to the show, sweetheart. Hey, welcome. Welcome. Welcome to you. Now, I am just thrilled to be here. I recently moved down to this area, so I'm excited to be down in the promised land. That's right. You're in Lakewood Ranch. You're right down the street, and you're in the flowers and butterflies and green now. Life is good. Instead of cold, life is beautiful. It's so freaking beautiful out there right now. Watch the alligators swim by, you know. Doesn't get any better than that. Start going to name them. Doesn't get any better than that. That's right. Absolutely. Absolutely.

[00:02:45] So, listen, I know you're a huge investor as an LP and a GP, and we won't even think about how many thousands of units. But why don't you tell us a little bit of the background, you know, where you started and why real estate, and maybe bring us current. So, I knew about real estate. Mm-hmm. And my husband and I actually have a four-family house in Brooklyn, and we ran, and I've done some single-family homes.

[00:03:10] But I didn't really realize that you could invest passively in other private investments. I was an accredited investor for years and didn't even know what that meant. By the way, for those of you that don't know what that means, an accredited investor is somebody that makes $200,000 a year with the expectation of it to continue. Married, they have to make $300,000 a year expectation to continue. Or their net worth is a million dollars without their personal residence.

[00:03:39] Now, they are talking about relaxing those. But anyway, we won't go down that rabbit hole just yet. So, if you live in New York City, or married, and you don't make $200,000, you know, you're living in a third-floor walk-up with the bathtub in the living room. Right? And so, you know, I didn't know what – I thought I was the only one who didn't know. And I had a 30-year career in advertising and data were for Nielsen. Oh, no kidding.

[00:04:07] All the data providers and canter, you know, all of that. And AOL in the early days. So, on the analytical side or on the sales side? Well, the sales side mostly. Sales side, okay. Yeah, right. Sold advertising, you know. Okay. So, I was early to the AOL thing and the internet thing. Oh, my goodness. AOL with the disks and everything else. I'm telling you, you've got mail. Yeah, that's right. Right. And so, you know, I started reaching out.

[00:04:32] When Joe and I found – when my partner and I found this project in Houston where I happen to have grown up, I was amazed when I called my friends and colleagues in advertising and said, hey, and explained to them what I was doing. They're like, Holly, I've lost money in a land deal. You know, that's not for me.

[00:04:55] They didn't understand that when they invest in a REIT through Ameritrade or whatever, they're investing in the secondary market. And none of the – most of, most of, the people running it don't have skin in the game. You know, they probably are sitting up in the market for the spreadsheet.

[00:05:20] And very often they're more knowledgeable on how to sell than analyzing the actual investment. Right. That's correct. And, you know, and also they're taking their fees no matter what. Right. They get paid regardless. No matter what. Well, what private syndication does, or at least how I work, is I don't get paid. And if the deal doesn't work, I can tell you that many – a few times with this real estate market –

[00:05:48] we'll get into the current real estate market, I'm sure. Right. Sure. But we have foregone – we haven't made any money. We've given it all to investors, right, because, you know, this is a challenging market right now. Right. But thankfully, you know, I've been conservative enough to where we're not underwater or, you know, but a lot of syndicators right now are in trouble. Oh, there's a lot of trouble out there.

[00:06:14] I mean, I can't tell you how many deals I know are being marketed for the debt right now, so that means the people that put equity in are done, you know. And, you know, it's – I'm seeing tons of those right now. And, you know, there's a lot of – there's a lot of – you know, a lot of pain. Yes. So why don't you speak to why that is? Yes. I think that a lot of – Because they hear it from me. I want them to hear it from somebody else. Well, it started – you know, there was a lot of hype. Right.

[00:06:43] A lot of people were making lots of money. And a lot of people got into this that didn't have a lot of experience. Right. And the government or the Federal Reserve, whatever, has not helped us at all. No. Never – even – I mean, I know people – I know syndicators that bought no rate caps. Right. Are you kidding me? Oh, I know. No.

[00:07:09] So even when the getting was good, we were buying rate caps. Oh, sure. No. But the rate caps we were buying were like $100,000. Oh, hey, listen. Now they're like $1.5 million. Oh, yeah. No, let me give you an example of a rate cap. So, guys, a rate cap is where you pay to make sure that your interest rate doesn't go up more than a certain percentage over a period of time. And back in 2020, you could get $100 million rate cap, 3% for $20,000. It's crazy. Same rate cap for one year.

[00:07:39] Forget three years. That was a three-year rate cap. For one year, it was like, I want to say $2.4 million for $100 million. Right. So, and I remember early on when this thing collapsed, I was looking at an asset in San Antonio where the guys, the gentleman selling it, it was a smaller deal, but his reserve payment went from $8,000 a month to $80,000 a month. I mean, hello. You just can't. I mean, that's a small deal. Right. But the point is, yeah. Anyway, continue.

[00:08:08] And lenders, oftentimes, they'll work with the people that are really having trouble. Like, I'm about to default on the loan. And those of us who are cash flow positive, but not like we were. Right. And not, you know, we may have to have a small capital call or something like that, but it's a struggle. Right. They're wanting people like us to come to the table and buy down the debt. Right. You know, so, okay, so, you know, you're cash flow positive.

[00:08:36] You're meeting all the DSCR criteria. Right. You know, criteria, but now we want a 1.4 or 1.5. Right. They want to raise the debt service coverage ratio. By the way, guys, the debt service coverage ratio is, you know, in our world, in the commercial real estate world, the lenders look at the property's ability to service the debt. They're not looking at your personal income. And so the average debt service coverage ratio a lender likes to see is 1.25%.

[00:09:02] So to give you a quick example of what that means, let's say the debt payment is $100,000 a year. It'd be an annual calculation, $100,000 a year. And then the net income is $125,000 a year. So $100,000 in debt, $125,000 in income. That's a 1.25% debt service coverage ratio. So, yeah, so now lenders are saying they want more than that just because they have the ability to do that. Yeah. That's right. Even if you've never been late. Right. Because they want to hedge their bets against the ones that are having trouble.

[00:09:32] Right, right, right. So we've done preferred equity where we've gone out and we've done a promissory note. Right. I saw that. I saw that. But all of – there's a difference between any kind of promissory note or preferred equity. We've done a couple of capital calls. Mm-hmm. But that's almost always been to pay down that debt. No kidding. Because the lenders were wanting – you know, so you're buying equity. Yeah. You're paying for equity. Yeah.

[00:10:00] I have seen a lot of these that capital call is just to stay above water. Oh, no, just to float. No, I'm in some deals with an ex-partner that we had to do capital calls just to stay afloat. Right. And so, you know, and I will tell you, investors are burned out on capital calls. They are burned out. Completely burned out. So, you know – Although I've only done three of them.

[00:10:25] And I'm in a – right now probably 15, you know, 10 or 12 or 15 deals. I've lost kind of track. We were able to sell someone. Oh, you were able to sell some? Yeah, we're selling a bunch right now too. Right. Terrible time to sell though. Well, it was an okay time to sell. Yeah. And we were in three years into it and still delivered, you know, 1.3 equity multiple. No, that's just great. Yeah. Great. I mean, given the time – But you got out of a challenging deal. I'm assuming these were deals you needed to get – They're all challenging.

[00:10:55] Yeah, they were all – Every one of them. And, you know, where I wanted you to go with my question about why they're challenged is it's not just the bridge debt. It's inflation has made – all of our expenses go up crazy. I mean, forget just tax and insurance, which have – insurance gone through the roof. Yep. But just payroll, you know – And finding somebody to get on the payroll. Exactly. Even finding somebody, exactly. It's like they don't want to work. You're at where you're at. But –

[00:11:22] And even if you're down the street, they still don't want to work. Right. Right. I mean, I had a – my partners are in Louisville, Kentucky, two of my great partners. Right. Great market. Markets – The rents are going – I mean, we're getting rent increases of like 5%, 6%, 7%. It's expenses. Well – Yeah, I had an investor go buy the property just to look at it early on. Right. And there was a note on the door. We've gone to lunch or whatever. Oh, no. Okay. Oh, yeah. How are you going to rent a new apartment? Well, now we're talking management.

[00:11:52] We're going to talk about management companies here in a minute. But it's like – It's the expenses. It's the expenses. Even on supplies. Supplies have gone through the roof. You know, I remember seeing these funny emojis – or not emojis, but graphics on social media where it showed a pile of lumber and somebody said, this is my retirement fund or something, you know, because lumber went through the roof, you know, and things like that. But – We're doing so much better in rents than we are – So on the revenue side, we're doing great. Right, right. And we have moved.

[00:12:21] So what we're finding is in some units – like we don't need to do as much of a renovation to get the rents up. Right. No, we've done deals where we had planned to do a bunch of it, and then the rents – we're getting the rents, so why spend the money? But we need to fix the stairs. Right. And we need to do – so we've got to move that money from, you know, the apartment – you know, from renovations to CapEx. Yeah, needed CapEx. Right, needed CapEx.

[00:12:48] And lenders are difficult about that too because they see you varying from the plan and that sort of thing, even though you really don't need to do – we're still getting the rents. Yeah, no, we had that happen on an asset in Houston. Yeah, it's a long story. But I don't think investors – and they shouldn't. They don't have to understand everything. Right. But I'm not sure that investors really understand how –

[00:13:14] just to get the lender to move the money from the – it's obvious that we need to fix the stairs, right? And it's an – it really isn't – Oh, no, it's a pain. No, it's not even a pain. It's just hard work. Right. It really is so – Well, that's what I mean. Yeah, yeah, yeah. I mean, it's so many – It's so much – It's so difficult. So much communication. It's so difficult. And then the right hand doesn't know what the left hand's doing at these lenders.

[00:13:40] And, you know, we've got – we're waiting on an almost million-dollar payout on a fire we had on an asset. And the lender's just dragging their feet. It's just – you know, I think they're making the spread on that money right now. Correctly. So they're hanging on to it as long as they can. And, you know, it's kind of ridiculous. We've got roofs. Yeah. Same thing. Yeah, roofs. A million dollars we're going to get on the roofs. Right. But we need – where is it? Yeah, exactly. They're holding on to it. They've gotten it from the insurance company, which is the case in our deal. But it's like, hey, where's the money? Hello.

[00:14:09] Show me the money. And then he was talking about privatizing Fannie Mae. Oh, yeah. That sort of thing. And so there's a lot of uncertainty and volatility both on the market side and internally just managing those costs that are going up. Sure, sure. Managing those people. Yeah, the average expense ratio was 50%. It's pretty hard to get that right now. That's right. I mean, because, you know, everything has gone through the roof. And so, you know, and that's impacting these deals.

[00:14:39] And we're going to see a lot of distressed assets on the market. And I will tell you, I think we're going to see some significant bank failures as well, small and regional banks that are holding this commercial debt. I've got my money. I don't know where you've got your money, but I've got my money in a bank that spreads it out over 80 banks. So there's never more than 250. Sure, that's exactly right. Same for you? Yeah, so never more than 250 in any bank. Correct. You know, at least we have the FDIC. If that goes down, then we may all go home. I just don't – so there's a lot of uncertainty.

[00:15:07] And whenever there's uncertainty – There's fear. Fear. Yeah. And, you know, that goes right back to mindset. Right. And understanding – Which is what I love to talk about. Right. Yeah. And the universe is, I believe, on the side of good. Sure. I really do. Sure. And I think that there's always a way to make it work as long as you were responsible on the front end. Mm-hmm. I mean, we bought – the last deal that I was involved in that we bought was in 2023.

[00:15:38] Wow. It's been that long. No. Well, the end of it. Like, right at the end. Yeah. Same here. Same here, actually. Same here. Exactly the same. That was the last deal we bought. Right. Because I'm not going to buy something that's not – No. And, you know, it was – I'll tell you, though, not to completely derail the conversation. Right, right, right, right. I know. My ADD. I am very – Both of us, I think. I'm the worst. Right, right. We'll be scared. I have four and a half stars on my podcast instead of five because I interrupt too much. I get too excited. You can interrupt anytime. I know. I know. But, you know, but I'm very interested in senior housing.

[00:16:06] And I am going to start raising money for senior. I've got a deal coming up right now. You know, I was going to do this like 10 years ago and just never pulled the trigger. And, you know, I'm looking for – at alternate asset classes at this point until, you know, we see a reckoning in the multifamily space. And I think it's coming. Like I say, these deals that are being marketed for debt that still don't pencil out, you know, debt plus fees. They're being marketed for the debt plus the fees to close. And they still don't pencil.

[00:16:34] So, you know, these lenders are going to have to take a haircut. And they haven't yet. But I think it's coming. Do you think it's coming? I think they're going to start taking haircuts. I think that if the treasury yields don't come down. And I think that if you need another million dollars every six months to buy the rate cap. Right. You can only do that so many times. And that's the reality of it. The catchphrase is extend and pretend with these lenders.

[00:17:03] We've seen lots of deferrals, lots of loan mods, you know, on these struggling assets. So, yeah. So, it is lots of fear. Now, you know, I thought maybe it would happen faster. Me too. Everybody was talking about how 2024 would be the end of it. Now that's the end of 2025. Right. We have an administration that's doing, that understands real estate. Yeah. So, that's a good thing. Well, that's a very good thing.

[00:17:31] But I don't still don't see. He's talking about getting rid of the head of the Federal Reserve to hopefully, you know, I don't know when that's going to happen. I don't know the timeline on that. The United States are, we're really at a standstill because, I think, because there were so many competing things you have to get over. I remember the internet in 1990 or so when AOL started and I was getting advertisers, right? Right.

[00:17:59] And I remember sitting in Detroit, the top marketing guy at Ford, just like the top, the guy, you know, whatever. The guy. Uh-huh. And he looked at me and said, Holly, you're crazy. No one will ever buy a car on the internet. So, remember. Well, you know, and Blockbuster said no one will stream. They'll always come pick up movies, right? And, you know. And they had a chance to buy Netflix. They sure did. They sure did. And they screwed that up.

[00:18:29] Parker and Gamble had a chance to buy diapers to get, you know, whatever. And Kodak, I think, had a chance to get into digital cameras or digital film or maybe it was Fuji. I don't remember. But anyway, yeah. And they fought it. Yeah, they fought it. They fought. They were doing everything they could to lobby against it. Right. And so there's some of that that, you know, I call it bunker mentality. So when people sense a sea change. Change is scary. It's very scary. Change is uncomfortable. It's uncomfortable.

[00:18:58] And I will tell you, AI, you want to see some change? I know. I'm going to tell you, there are going to be millions of jobs that are going to be gone where people had better, you know, figure out something because they're going to be replaced by AI. Look what they said, though. Matt, you better put your resume out, bud. I know. We're not going to need you anymore to adjust the market. So it's like, you know, but they said that during the Industrial Revolution. Right. They said that the Internet was going to enable, you know, cut jobs.

[00:19:28] And it's grown jobs. Right, right. Jobs that we never even dreamed of. I remember when they were giving Jeff Bezos shit because he wanted to sell books online. I mean, look where that went. Look where that went. And Barnes & Noble fought it. Look where that went. But, you know, I really believe that our industry is going to change if we could just hang in there because blockchain is going to change a lot of things. Yes. And make it easier to do what we do.

[00:19:58] I think that people are really starting to understand that this is way more complicated than it needs to be. Yeah. Our business? Yeah. Yeah. I don't disagree. Getting the loan, buying the record. Oh, that stuff. Yeah, that stuff's ridiculous. Our banking system. That's what I'm talking about. Oh, that's crazy. You know. You know, how complex and how many trees they have to kill. How many trees they have to kill to get stuff signed. Right. I mean, it's ridiculous, honestly.

[00:20:24] We got down to the wire and Fannie said, oh, we're not going to do any more loans for the rest of the year. No kidding. Like a week before we were. Wow. Yeah. Yeah. Because they were afraid that, you know, they were going to be privatized or whatever, you know, whatever. You know, so I think there's uncertainty. People are just frozen. Yeah. Or a lot are. I think you're right. I think you're right. And, you know, I got just kind of, I'm waiting. I'm still very interested in multifamily, obviously. It's my wheelhouse.

[00:20:54] My students, I don't know, I'm going to brag for a minute to you because you'll appreciate this. My students now own 260,000 units that we know of. Good for you. Yeah. Thank you. I've been teaching seven years. I'm very, very proud of that. It's way more than that because a lot of people don't respond, but we count with that. We know for sure. Well, listen, I. You know, you're helping a lot of people. Oh, thank you. You know, because people just don't. We have no financial education in our country. Don't get me started on that. And we have lots of embedded.

[00:21:23] I mean, when I was in grad school, the banks provide. Wall Street provides the education for the MBA. Mm-hmm. Yeah. It's like medical school. Medical school. Right. The drug companies provide the education for the doctors. That's very true. And so I think that people are starting to realize that and starting to realize that you really have to do.

[00:21:42] I mean, we don't have a lot of attention span, but you've got to just take things and look at all sides of a situation and critically think about what's really going on when somebody tells you something. Yeah. No, I agree. And, you know. That was a very generalistic statement, but were you referring to something specifically in that? I was referring to just what the, you know, bought, you know, the Jim Cramers, you know, the C, our media. Oh, God. Oh, God. Don't get me started on that. That I spent 30 years in. Oh, my God.

[00:22:11] And I'm also referring to, you know, I. You want to go political? Should we go political, too? I mean, let's blow this up. Well, I've got a couple of friends. I invested with them almost every time, you know. Right. Right. And some have turned out right in the long haul. Right. But the investment wasn't that fabulous either because I really didn't. You didn't dig in. You didn't really. Yeah. You didn't. Yeah. You didn't do all the homework you could have done. Hey, we. You know. Right. It just gets in the way.

[00:22:41] And, you know, I've invested with people that I trusted. And, unfortunately, I've got, you know, big partnership going down right now and dealing with the fallout of that. And it's a mess. But, you know, it happens. And I teach this stuff. So, you know, I mean, you know, don't feel bad if you're listening and you've had a, you know, partnership fail or, you know, a bad business relationship. Because, again, I teach people how not to let that happen. And I'm in the middle of one myself.

[00:23:10] So, you know, there you go. And it's how you recover from it. Yeah. No, for sure. And, I mean, you have partnered with some really top shelf guys that I have a lot of respect for and like. And they're friendly. In fact, they've been on my podcast as well. Yeah. And who will crawl over broken glass. That's right. Before we will let anybody lose money. Right. Right. I mean, seriously. Same here. Same here. And, you know, Wall Street's not going to do that. No. No. No. They don't care. And they're spending distributions, too. Oh, yeah. That's what I think, you know, and a lot of it's just.

[00:23:40] Almost, you know, think about your personal life. You know, they were talking about in New York City reassessing all the houses and doubling the tax. You know, if they did that, our taxes would double. Well, my husband and I started saving a little more money. Yeah. Because what are we going to do if the taxes double? Well, New York's already overtaxed and overregulated. Don't get me started. Don't get me started on that either. But that's what you do. So when we're in a multifamily situation and we know that the rate caps and we know all

[00:24:09] this is coming, it may be a year and a half away, but we need to build up more reserves as fast as we can so that we're prepared for that. Because you don't want to lose money. Right. Yeah. Same. Yeah. That's the name of the game. You know, and when I stepped into this particular partnership to step into asset management to do what I could to rectify it, you know, I noticed just how bad some of these management companies are. Oh, they're so bad. So terrible.

[00:24:38] And so terrible. And I was dealing with properties in seven states and, you know, and what I noticed was it doesn't matter if you get a very well-recommended management company, huge management company, everything depends on the on-site staff. Everything. Everything. The whole, you could have a terrible management company with a great on-site staff, they'll do fine. You could have a great management company with a bad on-site staff. And that's what I saw a lot of because we had to bring in new management and they're just

[00:25:08] terrible. They're absolutely terrible. Their accounting is terrible. Their marketing is terrible. Their oversight of the on-site staff is terrible. And what I've come to realize is that the most successful, in my view, in my experience so far, operators are the ones that vertically integrate and self-manage. Well, that is what we're doing. That's what you're doing. Yeah. We're done. We've got three properties. Right. Good for you. Same here. I'm moving towards that in the markets that I'm in.

[00:25:36] Because no one is going to care about it. That's right. When you're renting an apartment, you know, you can't teach enthusiasm. You can't teach caring. Right. No one is going to care more about your stuff. Because I care about investors. You know what? Because I'm invested in all of them, too. Sure, sure. Are you kidding me? Right. Let me tell you. I mean, I know I look like I'm 30, but I'm really 63 years old. Oh, geez.

[00:26:06] So I don't have, you know, it's a curse that I look like I'm 30. Yeah. You know, seriously, it's, I don't have a lot of time. You know, my investors are like that. I mean, I got into this because my parents ran out of money. Oh, no kidding? Yeah, pretty much. Yeah. I mean, they had a little, but no. And you grew up in New York, too? No, I grew up in Houston. Oh, Houston. No kidding. Oh, wow.

[00:26:31] And I came to New York to work for Arbitron, the radio ratings company. Oh, no kidding. Of New York. And I got up here and I just loved it. Yeah. Well, I don't look as good as you, but I'm 65. No, you're not 65. No way. Yeah. But anyway, so management companies. Yeah, I, it's been a nightmare to deal with these companies. It's our biggest problem. It really is. And so, you know, as you get into this business. They're part of the reason for expenses. Yeah. Sorry to interrupt. Oh, no question.

[00:27:01] As you get into this business, guys, you're going to discover that, you know, they need a tremendous amount of oversight. Like I just visited an asset that we have in Nashville and basically I told the management company, you need to fire the whole team here. They've got to go. And so they're gone. We've got a new manager in there. And the same thing happened with an asset in San Antonio. Had to fire the team, had to fire both regionals for that matter. Both regionals had to go. You know, by the way, when you work with a management company, there'll be onsite staff, onsite property manager.

[00:27:29] They'll be an assistant, maybe leasing agent, maintenance supervisor, maintenance porter. But there'll be a regional manager that manages those onsite managers. And the regional may have seven or eight properties that they manage. But by the way, on that front, if you're going to hire a third party property management company and you're listening to me and you've got an asset, I've got a fantastic book on the questions you should ask and the due diligence you should do called How to Hire a Third Party Property Management Company. And it's at my link tree, rodslinks.com.

[00:27:59] It's one of the free books there and it's really good. I'm very proud of it. You do a lot of good things. Thank you. For people. Well, I appreciate that. I mean, you really do. And, you know, you look at the people you want to work with are those people. Yeah. Right. The more the more. And so I think that you find that in private investments and you don't. Oh, you don't find that in the stock market or in these REITs or things like that because their secondary gain is fees. And if you didn't grow up wealthy. Right.

[00:28:29] You don't know. Right. You really don't know. No. And, you know, financial advisors are going to push you to their book of business, you know. It's not even their fault. This is what they know. No, no. That's exactly. That's how they were trained. No, that's exactly right. Doctors, same thing. You know, I'm very big into natural medicine and, you know, supplementation and exercise and all that stuff. And, you know, doctors are trained by the pharmaceutical companies, just like you said. And so they're wonderful people, but they're going to prescribe things.

[00:28:59] They're going to give you pills rather than tell you to eat better and get off your ass and go work out. Right. So our industry has changed and back to management companies. What worked for them, you know, when the getting was good, five, six, seven, eight, nine, 10 years ago. Right. It isn't working now. And that's the, you know, it's the emperor's clothes. You know, the water's going out and you see who's naked in these management companies that don't know how to manage properly. We had people. This was last week. I just have to tell this one story. Yeah.

[00:29:29] Five tenants wanted to come in and rent apartments, but they didn't want to move in until June 1st. Right. And we're like, we've got an occupancy problem. Right. And they sent them, no, we can't do it. Can't honor the price. I mean, are you out of your mind? Oh, good Lord. Are you really out of your mind? We've got an occupancy problem. You can't make these stories up. And I got tons of these with management companies. And like I said, I've had to clean house. I mean, we'll talk a whole podcast about that.

[00:29:56] And, and, and, and, you know, I go and I visit these assets and I'm like, are you not seeing what I'm seeing here? You know? And, and just, just crazy, no attention to detail whatsoever. Right. And that's what makes the difference. That's everything. That's everything. If the, if the asset looks good, it's clean and it looks good. And, and when they, when somebody walks in, they jump out to, and with a big smile on their face to help them lease and build rapport. You're great. That's right. That's it.

[00:30:25] And, and, but you know, they hire these slugs. They don't train them. They don't motivate them. They don't empower them. And they're not sure what the, what they're even up against. Right. You got a secret shop too. That's another thing. You send people into secret shop and see how they're doing. And that, that tells you a lot. But you know, we're, we're, we're, we're sounding very negative about the business right now because, because she and I are commiserating because we've, you know, been at our butts kicked this last year or two. But you know, we're obviously still very bullish on the business. Here's the deal, Rod. Yeah.

[00:30:55] And what I love about this business. Yeah. All the things that we're talking about, first of all, people should be on the lookout for. Well, sure. Number two, because we had no idea. Right. That they were as bad as they were. Right. Right. And then this is fixable. Well, it is. Yes. I told my investors, you know, both those assets I went and visited. Hey, now we know what the problem is. Now we know where there's an occupancy problem because the place looks like crap. The breezeways were filthy. I had them all pressure washed immediately.

[00:31:23] You know, on the other asset, trash everywhere. I'm like, come on, you know, and, and, and no one would lease here with that's any good. Thank you. Same thing. So, so, and so, you know, that's. You have to, the message is. You got to keep an eye on the ball. If you need to go pick up trash. That's it. I was picking up trash. That's right. You've done it too. You've done it too. It's, it's, that's, that's part of this and it's not all. But you got to find these staff, onsite staff that take ownership.

[00:31:52] They care about it. You got to show them how to do it. Yeah. Show them how to do it. Then you praise them and you validate them and you make them feel good about what they're doing and, and, and, and they'll, they'll walk through water for you. I mean, they'll walk through fire for you. That's right. They really will. Yeah. And that's, and a lot of, you know, it really comes down to managing people. I have a friend who's an orthopedic surgeon and he says, it's not, it's not the knee replacement that's the problem.

[00:32:17] It's, it's all the people management of everybody that's got to be around to help me replace the knee. That's exactly right. You know, every business is nothing but systems and, and people. You get the systems right and you get the right people. Success is inevitable. That's why it's so important to have business experience. And that's, that's been more valuable to me than anything else is that I've, I've been in business before. And that's one of my requirements too, to invest with people that have been successful in

[00:32:46] business and why I, you know, I have a, you know, I have a daughter that's in college and I want her to go work for a big company. You know, I really do because I think it's really important to understand how they all work. Yep. It's great framework for being your own entrepreneur. If you, if you work for a successful company that knows what they're doing. I was listening to a fantastic interview on Tim Ferriss. You know, I listened to two, I listened to two podcasts. I listened to Tim Ferriss and Joe Rogan. So I get both sides of the aisle.

[00:33:16] Okay. I'm definitely on one side, but on the Tim Ferriss side, I suspect we're on the same side. I'm certain we are pretty much any business person is, but, but you know, on the, on the, on this Tim Ferriss show, he's interviewing the guy that started Expedia and Zillow and Glassdoor, which is the employee rating service. And I mean, just a brilliant interview about, you know, business strategy and people hiring

[00:33:44] and, and yeah, by the way, guys, I, I, I would absolutely recommend that interview. I think it's episode 806 because I sent it to like three people. But anyway, yeah, I mean, and, and the other thing is, is in this or any business is that continual learning process, that continual growth process. Right. And, you know, not just, I mean, yes, staying on top of what's happening. Like you, I'm sure you get every possible research paper that comes out like I do, you

[00:34:11] know, CRE daily and, and, you know, broker specific things. And, but it's, it's continuing and you were, you were at one of my events. I did. Yeah. And you're continuing your growth. I went to one of your beginner. Right. Right. Right. And I love the workbook. Thank you. All of that stuff. Thank you. And you, you never, and I met a couple of really great people there as well. Sure. And so you never know. I've never gone anywhere or listened to a podcast where I something didn't jump out. You didn't pick something up.

[00:34:40] And we, we met at the other, I mean, that was the event that I did my three day, but also we met at, you know, Dan's event, Dan's conference and where I was on stage doing my little dog and pony thing and you were there. So you said, you said you're in the audience. You said, we got to, we got to exchange numbers or whatever. That's right. That's right. When I was done speaking, I remember we met. Yeah. So, I mean, you, you, you subscribe to that continual education piece as well. Yeah. So let me ask you this.

[00:35:07] Talk about some, some seminars that you've had. I don't call them failures. I call them seminars and I've had big ones. You know, I lost $50 million in 2008. I don't know if you knew that or not. Oh, I know. Yeah. Yeah. So, so talk about, I mean, we all, I mean, you're, you're in the business. I'm in the business. We've got a menu of options with that question. Right, right, right. But talk, talk about something that might add some value if you, if it comes to mind, you know, where you, you know, had a, had a seminar and, you know, and a learning experience. Yes.

[00:35:34] Well, when you say seminar, you want to hear how I learned in the real world? Well, I'm, I'm talking about a setback really, but you, that you, that you recovered from. I'll tell you one setback. We sort of already touched on it. Okay. But one setback was a property we had in Houston and Harvey flooded. Oh God. Places that no one had ever, nothing had ever flooded. Right. And about half of this 500 unit, you know, complex was, was uninhabitable. Oh my God. You know what we did?

[00:36:04] We worked very hard and helped the residents get in other places or whatever. Wow. And then when the insurance finally, we suspended distributions, but when the insurance finally came through, we had a brand new asset and there was a housing shortage in Houston. Perfect. So a lot of this, you know, you, a lot of this, you cannot give up. There is always a way. Yeah. And, and talk to people.

[00:36:31] I tell people don't take advice with anybody for any, you know, anybody that doesn't have more experience than you find people that you want to want what they have and you do what they do. Get around people that know more than you. That's how you learn. That's exactly right. I had formed a mastermind years ago. It was called the multifamily boardroom. I, I, I got tired. It was like herding cats after a while, but there was probably 40, 50 billion in assets in there. I've been in on as well. Yeah. And they're fantastic. And you, you, you pick up these little nuggets and you know, if you're playing tennis, do you want to play somebody better than you or worse than you? I mean, hello.

[00:37:01] It's the same thing in any, any business. So guys, you're listening, get around people that think what you think is hard is easy. Go to the meetup groups, go to the real estate investor clubs, go to these events like my event and other events that people have. And, and, and it just accelerates your learning process. You know, if people ask me how was the best way to get into this business, multifamily and they're young, maybe they don't have a lot of experience. And I tell them to go get a job at a management company. Sure. To go manage one of these things. Sure.

[00:37:30] And you'll learn more doing that on what's involved because a lot of it is hard. Sure. You know, a lot of it is just hard. It's, you think it's going to be like. It's not rocket science, but it's work. You got to do it. It's a lot of work. Yeah. It's a lot of work. And that's what makes the difference between something that's successful and something that isn't. Sure. I can tell you my students, you know, like I said, they've owned 260,000 units and, and, and the ones that, that are successful, aren't the smartest. They're not the ones with the most money.

[00:38:00] They're not the ones that live in the big cities. They're the ones that just go out there and kick butt and make it happen. That's it. I've invested in a couple of deals that have not gone well. And I will tell you that the operator, not immediately, but on the next deal or the deal, you know, they have made it right. Yeah. And paid back investors. I mean, I have one, one, uh, I know of operators that have said, okay, I'm going to give you your preferred return. It might take two years, but I'm going to pay you every month.

[00:38:30] Nice. You know, and, and that's, that's integrity. Yeah. And you can't say that to investors when they invest, you know, and, and, and all that. But I will say that, that, you know, it's not always, it's not, sometimes it's just not possible. You know, if you invest in something that's, it's, I mean, it could go bad. Nothing's ever guaranteed. Oh, sure. Sure. But you really have to work with people that have that. I believe this, this mindset. Yeah. Yeah. No question. And if you're in it for the money, forget it. Yeah.

[00:39:00] No, you've got to love it. Yeah. If you don't love what you do, life's, life's, life's miserable. I mean, but when you do love what you do, work is play and you never work another day in your life. I've worked a little bit, but yeah. Yeah. But, but yes. Okay. Fair enough. Fair enough. But that's how, when you love it, you push through the obstacles. You know, you have passion for it. People feel your passion and they want to work with you. You know, I moved down here to Sarasota. Right. Right.

[00:39:25] And, um, and I have some investors that live here and we, we've suspended distributions and some of them aren't going as well as they go. Right. And I'm like neighbor. Right. Right. And, and, you know, are you kidding me? I'm not, you know, I feel good about what I'm doing. Right. Because I'm telling you, it's going to be okay. It's going to be okay. You've got your preferred return. You're going to get that at a minimum. Relax.

[00:39:53] Are you going to get rich and be able to sail off to the, no. Maybe not. Right. But you're not going to lose money. Right. You know? And if you do, we're going to figure out how to sell pencils on the street. We'll figure it out. Yeah. We'll figure it out. You know? So, um, um, you wrote a book. I did. Yeah. Talk about that. Well, it's basically about the 10 myths of money. Hmm. One of the chapters. Is it on Amazon or anything?

[00:40:19] Or just hidden investing, hidden investing, hidden investing with the wealthiest. No, that we don't. It's about growing up wealthy and things that I learned when I was so shocked. I mean, I was so shocked that people that were so much smarter than me and so many had some, their net worth, you know, my net worth was a square root of their net worth. Right. And they didn't know what I was talking about. Yeah. Isn't that fascinating? It is just amazing. Yeah. Yeah. And they thought it was a scam.

[00:40:47] And, and, you know, I, one of my chapters is trust the extroverts, you know? Right. That's one of the things, you know, the air is safe at ground zero, right? It's just like the experts don't know often any more than, you know. Oh, no, that's absolutely correct. That's absolutely correct. And you should question everything as well. Yeah. Yeah. So Holly, what are some words, you know, I have a lot of listeners that want to do what we do. Okay. I teach them. I love that. And, and obviously get your butt to my bootcamp. Hello.

[00:41:16] But, but. That's right. Don't miss that. Seriously. Thank you. So what words of wisdom would you share with an aspiring real estate investor? What, what, you know, what, what might you share with them? What I love about real estate investing is that we talked about something is fixable, right?

[00:41:37] Well, it's fixable and we can fix this and not depend 100% on the whims of the market and what the banks are doing or what the president is doing or who's in office here and there. And, and, and so the more control you have over the situation. So it's very important to be able to raise, to, to, to have enough reserves more than you need. Right.

[00:42:07] Right. Oh yeah. We've, we're over reserved on the one we bought in 23. I mean, we just talked about it today. We've got 2 million in the bank on a 200 unit asset. So, I mean, that's some reserves, right? It's very important to, if you buy something that the occupancy is 90%, it needs to, it needs to still cashflow. It doesn't need to make a lot of money, but it needs to be cashflow positive at like 80%, 75%. That's right. Right. And it needs to also, you need to have a loan that's at least twice as long as, as the

[00:42:36] business plan basically. Yeah. Right. Agreed. Now, that's not to say that we can't run out of, you know, in a market. This, people that have been in this for 50 years have told, I mean, really all people who have said there's never been a market like this. Oh, it's crazy right now. So if you can navigate through this and deals are to be had. Oh, they're coming. They're coming. I tell people if there's ever a time to get in here, it's right now because they're coming. Yeah, for sure. I tell my daughter that. Yeah. Good.

[00:43:06] Good. Good. So Holly, I love to ask this question because I usually, I get the same answer, but I'm curious if I get it from you. So if you went back and told 21 year old self, like your daughter, for example, something with knowing what you know now, what might you do differently? Add value wherever you can.

[00:43:32] And that's the most important thing when you are working for someone. It's not about your career. It's about your boss. But how about real estate in general though? But, but yes, I agree completely with that first answer. You got to add value to your partners too. I agree with that answer. Absolutely. A hundred percent. In fact, that's how I built this podcast. My focus was just adding value. If you listen to the first few episodes, I say, you know, my focus is just to add value. I'm never going to sell you anything. Now I'm a liar because I sell everything. I got into this because I didn't understand because so many people didn't know about it. Right.

[00:44:02] And I watched my parents have to withdraw from the stock market when it was down and they got hosed. Right. Yeah. Yeah. And that's the whole reason I got into this. Oh, that's a lot of, that's happening to a lot of people right now, actually. Very. Yeah. But, uh, you know, if someone asks you how to get into this business besides your book, is there another book that you gift more than another? I would say go to as many of conferences like yours. Right. Right. That you can. Right. Talk, read as many books as you can. Right.

[00:44:31] But really you need to find a group of like-minded people that are smarter than you and have done this. Yeah. And, and then try to add value to them. Yeah. Great answer. That's, that's where my warriors, my coaching students are so successful because they do these deals together and they, and I tell the new ones, I say, figure out how you can add value. You're going to bring deals. You're going to bring money. You know, you're going to underwrite. What are you going to do to help them be boots on the ground? What are you going to do? This is a team sport. You can't do, you can't do one of these by yourself.

[00:45:01] They've heard, they've heard me say that a thousand times. This is a team sport guys. And there's so many different hats you can wear. So you just got to end and you play to your strengths. When you play to your strengths, again, you're going to enjoy it. You're going to be able to get over the hurdles and the speed bumps and, uh, and, uh, and, um, and you'll be passionate. Like I said, passion is so important. Um, let me ask you this. Did you have any fear when you first got started? I had fear all the time. Okay. So how do you get over the fear? I had fear. Last night I had fear. What do you do to get over the fear? Well, you have to have faith.

[00:45:30] Oh, I love that. That's a better F word. That it's fear with faith, right? Yeah. I mean, so yeah, I'm, I'm, I'm concerned. Let's call it that. Um, but I also look around at people that have been through what, whatever it is, what I'm going through, right? And they've gotten through it. Little thing. I mean, little things you just have to remember when, you know, there's a lot of things you

[00:45:58] didn't know how to do and, and don't be afraid to ask. That's right. And how to eat a whale one bite at a time. You know, you're going to get into this or any business. You just got to get started. But, and, and, uh, yeah. And getting started, you know, really can be, you know, finding what the, where the pain point is and going and helping somebody. Yeah. Yeah. And, you know, so the, yeah, that's the thing. And, and that's what makes this business so beautiful is that there's so many different

[00:46:28] places you can put a hat on and, and get started. What's your definition of success? I think being able to sleep at night most of the time. Yeah. Okay. You know, and it's never been, I've never had probably not ambitious enough maybe, but ambitious is a different, you know, that's really funny. That's really comical. Uh, that's comical coming from you. Not ambitious enough. That's really funny. But yeah. And, and I, I've always, I don't think I am.

[00:46:56] I think that, that, that I want to be able to go to as far as money financially, I want to be able to go order whatever I want to order. And if I really want to do something, I really do just do it. You're already at that place. Who are we kidding here? That's right. So that's why I'm, you know, I, you gotta be okay. And you know what? You're right where you're supposed to be most of the time. You know, 99% of what we worry about never comes to fruition. That's exactly right. Yeah. There's a book called Don't Sweat the Small Stuff. And it's all small stuff. Look at the Federal Reserve.

[00:47:25] They need to drop interest rates. I'm sorry, I don't know when this is going to air, but they need to drop interest rates. Hello. And they didn't drop interest rates because they are afraid of inflation. The tariffs are going to cause inflation. Are you kidding me? Oh, please. The tariffs. Wait, they haven't. How do you, hold on here. Okay. Okay. You said the word. You said the word. You said the word. So now we got to dig in for just a minute. So what are your thoughts on the tariffs? I don't know. Listen, I'm not an economist. Okay, but you have an opinion.

[00:47:55] But I do know that America, we need to start supporting our own. Hello. Hello. And we've been screwed forever by countries like China. Okay. And even Canada, I hate to say it, but we have. We've been screwed forever. Forever. And, you know, it's time to... And why are we helping countries that are doing better than we are almost? And don't get me started on all the money that went to Ukraine that came back to our military industrial complex. And, you know, I just came from New York, right?

[00:48:24] I'm sorry, but nobody wants to live in the subway or under a bridge. Thank you. We're not helping these people. No. No, but, you know, I heard about, you know, I was listening to Joe Rogan on this because he interviews people that are very ingrained in that whole thing. And the people that get all these billions of federal dollars to help homelessness, they don't want to fix it because they lose their jobs. That's exactly. That's what's happening. It's ridiculous. It goes back to the bunker mentality. Yeah, exactly.

[00:48:50] And it goes back to having faith that if you're successful at eradicating homelessness, hello, you can go and I was successful. Look what I did. Are you kidding me? You're going to be famous. That's right. Everybody is going to want to hire you to do anything. But that's the issue, though, because, you know, they're entrenched and they don't want to give up their big paychecks. Right. Well, listen, this has been a hoot.

[00:49:14] I'm so grateful that you're here in this town now and I got you close by and we'll have to we'll have to grab a meal sometime soon. And I'm grateful to all of the people in this business, you know, that have that have helped me and I learn from all the time. Yeah. Same here. Same here. Well, it's great to see you. Thanks for coming. Great to see you, too. Yeah. Thank you for listening to the Lifetime Cashflow Through Real Estate Investing Podcast.

[00:49:40] If you've enjoyed the show, please take a minute to visit iTunes and leave your comments. For more resources or to connect with us further, please visit our website at rodcleef.com. Tune in next week for our next show.