Real Estate Mogul Reveals How He Bought $2 BILLION Of Apartments

0:00 i'm very excited about this how are you i'm doing good man thanks for having me all right let's just jump right into it in 2008 2009 global financial crisis happens that's when you started gelt i believe correct that's when we got uh did you think the housing bubble is bursting now's a good time to invest in real estate and i should get in and it was like a master plan or was it like ah i need to do something this is interesting let me get started it just happened to be a good time how much of it was intentional versus uh serendipitous so the intentional part was um my cousin was out in a city called bakersfield california two hours north of la and they they got hit by the housing bust even first before la started dropping and we he said wow these like four unit buildings that previously sold for 500 grand we could pick up for 150 grand so they were 25

0:45 cents on the dollar-ish and i'm like it's a no-brainer if you could rent out like two of the units you're cash flowing three of three or four units you're cash flowing like a pig so sort of like you know we didn't plan on building a huge enterprise but we started with one and it seemed like a good opportunity and they were like oh this is pretty cool then we did another one and another one and just built on itself you know what were the mistakes you made in the first one everyone makes mistakes in the beginning what were the things that you look back now you're like man i was so dumb i didn't know x yeah i think some of the most important lessons we learned early on were a just because something's cheap doesn't make it a good investment so these buildings were in the roughest parts of town it was all we could have afforded back in the day and you know it was great learning experience cutting our teeth you know renovating these dilapidated buildings leasing them out but the

1:31 tenants were really rough on the units uh we dealt with a lot of uh vacancy issues section eight kind of tenants it was just a different ball ball game and then we started you know buying in little higher quality areas and on paper the returns didn't look as good but they actually were much better the returns because of the quality of the tenants and the underlying real estate at what point do you say hey we want to go from just buying things that we can afford to like let's go build an actual business here and raise capital and like operationalize this yeah i mean it was a full year we we bought the first four plex and then another one and then we brought in one investor and then another and it was a year of buying these little four unit buildings and a full year later i spoke to a few different people in the business and they're like you could create a real sizable scalable business doing this

2:16 like real estate syndication business so we went out and we bought a 78 unit building and people ask how did you make that jump essentially i brought on two gray hair partners that helped me one um being my father he helped us qualify for the larger loans because we didn't have the balance sheet we couldn't qualify he helped us by his law firm did all the legal work and then he helped us with his reputation uh by bringing in family friends to invest with us or clients of his firm and then we brought in another gentleman named adrian who had a lot of experience running larger multi-family properties so we put together a little group of eight people we went and bought this uh 78 unit building in bakersfield at the time it was like 3.9 million we raised 1.3 million of equity from around eight people uh our like acquisition fee we just rolled back into the deal didn't really take any money out and that's how

3:01 we learn just with good mentors and partners and you know just kept rinsing and repeating one deal at a time how much harder is it to do a four unit acquisition for 78 unit acquisition so i always tell newcomers it's the same amount of time and energy to buy and renovate and oversee a small building as compared to a big one in some circumstances the bigger ones are actually easier to operate because they have on-site professional management and the maintenance techs on site and it's it's um more efficiently run actually and you can make more money you know the bigger the property versus the smaller ones so uh we we've just been over the years pushing the envelope trying to buy larger and larger properties um and it's it's it's worked yeah and how did you think you said it was about 3.9 million uh you raised 1.3 million in equity and then took out debt for the rest how did you

3:48 think about the ratio there and why that specific ratio yeah um we uh you know we kept it at the time you could have got higher leveraged loans just because the cash flows were so great and prices were pretty depressed um we always stress test the deals and we're like okay what happens if rents drop you know 5 10 15 20 um what happens if occupancy drops you know from 96 to 88 or whatever and you know when does that break even point occur and then when you're in the negative and we're very conservative we raise a lot of extra money up front so if there is a time when there's downturn and like we had in 2020 we've been doing this now 13 years we've never had any months where we actually had we're in the negative until uh covet hit and then collections started suffering on two or three properties we

4:34 were in the negatives but instead of going to investors and being like we need to you know cover the mortgage payment we had ample reserves in each bank account to to fund that you know for extended period of time um but uh i'm rambling on a little bit well when you think about that it's interesting right like you go and you raise extra equity up front what does that do to the financial return does that improve the return or is there it lowers it a tiny bit but what we my pitch to investors is it's capital preservation i never want to take a permanent loss of capital in the game of compounding it kills your returns by having that permanent loss right so instead of hitting a 15 irr i'd be happy with a 14 irr and just consistently not ever having a zero you don't want to it's a it's different game than the vc game where you actually want zeros you want to take the highest risk and

5:20 you know invest in companies that are out there and and maybe other people don't see something and sure a lot of them are going to go to zero but and that's why you do it as a as a portfolio you have a lot of them 20 30 40 whatever angel investments if you see in real estate it's like you know you're not going to hit the 100x 000x but you're going to have you know over 10 years 3 x 4x maybe 5x and if you bought an 09 you know some buildings could be a 10x with cash flow and equity appreciation but also also all the tax benefits which a lot of people don't understand using depreciation and the ability to 1031 exchange and we're going to get to taxes in a second before we do that uh talk to me about what the average return looks like so when you guys go by now you guys are buying hundreds of units in a single property is this something where you

6:06 guys go in and say hey our down the fairway you know a great deal looks like we buy x number of units and it's a three x return in five years like how do you think about this is what we're looking for yeah um our strategy's changed a little since inception so like 09 10 11 we were buying a lot of buildings that were older built in the 60s 70s that that's where we saw the opportunity um over the years we found it it was hard to hold those buildings long term they were just getting really old and had major you know plumbing issues and you know big repair big-ticket items where and now in the last few years we've been exchanging those into like 2010 and newer buildings primarily that we could hold longer term that does they don't have those capital needs plus the return profile like um we're pretty similar between the newer ones and the older ones so we're taking the time to prune the portfolio sell off

6:52 a lot of those older buildings exchange into the newer ones and also geographically we're heading back to california where you know the the headlines oh you know political risk people are leaving yadda yadda but risk adjusted now the returns are actually higher there than in other markets like a phoenix or vegas why why are there people people are scared that you know and right now phoenix is on fire and rents are growing but it's always been historically a very boom and bust market same as vegas you know uh when it's uh vegas relies on the gaming sector you know for the economy and phoenix has diversified a good amount and there's ton of people moving there but you know it's if you look back historically during the last recession rents dropped 20 in phoenix from peak to trough and there were buildings that were you know half vacant um they had an immigration bill passed around 100 000

7:38 people left the the city it was uh blood in the street and that's when we when we went in there no 9 10 i'm sure we'll be back into these markets when there's a you know the next correction it's a cyclical it's going to happen again at some point i don't know when and how but you know yeah when you look at uh buying one of these properties how much of it is uh hey we just want to buy the property we want to get the cash flow the tax benefits and then the capital appreciation versus uh i think you guys have also built other companies that service uh firms like yourself but also service properties like how do you think about almost like the empire building aspect of this yeah so i am pretty always thinking and opportunistic and curious and um we did other asset classes so like we were into the mobile home park space for a while

8:23 uh we bought eight mobile home parks we bought an rv park in in monterey that did really well um what i've learned over the years is really focus and you know if you focus it'll just compound and your energy and everything will be on that one thing so we did well on those mobile home products for the most part but it just took away our energy from our core business of you know buying apartment buildings uh building apartment buildings we also started doing self storage which was actually done really well we're probably going to continue just you know doing that a couple deals a year every year on that front as well um but i've learned that concentration and focus is really important we did start a company called demusso i think you're alluding to so we saw a big need in our industry to help help the property managers and landlords go 100 digital collections of rent right now you know people have a checkbook

9:10 sent sometimes just to pay one check a month rent otherwise why even have that checkbook there's so it's so antiquated so we're helping our our our management companies and other ownership groups like ourselves help transfer them to digital age and go 100 uh digital collections we're active on 350 000 units so gelt is a customer but we have a lot of the other top 50 uh like property management companies as customers and we're processing north of five billion a year in rental payments and that company's growing really quickly i'm not involved in the day to day but we helped seed it i'm on the board and um we just saw a need in our space to do that opportunity yeah i had um chris from fort on and one of the things that he said that i just stuck with me was he's like you know look i spent a lot of time company building right like i'm an investor and when we buy real estate uh you strike me as very

9:56 similar as well like there's a lot of other things other than just like is this a good deal or is it not there's fundraising there's organization there's hiring there's all these things talk to me about that aspect of what you do on a day-to-day basis like where do you spend the most amount of your time yeah it's a great question so in the beginning it was just me and my cousin we had to do everything ourselves but even from then we sort of delegated well he was more of the called the inside guy dealing with the actual construction of the property in rehab and dealing with the contractors and i was more the outside guy dealing with the brokers and fundraising and the lawyers and so we had good division of labor from the beginning and then we just kept hiring up one person at a time uh where we needed to to where we weren't the best at that and it wasn't the best use of our time so we hired asset managers and then accounting people and acquisitions and just kept growing where we had holes

10:44 and where also our time wasn't best spent so a lot of people get stuck in micromanaging and doing everything themselves and but it limits the type of organization you could build so today you fast forward to today my role 100 is just fundraising pretty much at when we're buying a building at the end you know we have uh the investment committee we discuss my partners and i but ultimately i'm really just involved in fundraising i'm not involved in the uh asset management you know operationally uh i have a partner that oversees the staff um i have a partner that oversees like construction management and i i'm pretty much focused on just fundraising for these deals real estate is very capital intensive you gotta have a lot of cash to buy it you're popular on twitter uh that's the first time i ever came across you uh is uh talk to me about the fundraising strategy like what

11:30 like what where have you found success and what hasn't worked yes so man i mean when we first started my cousin damian and i were in the car listening to napoleon hill think and grow rich and like we're figuring out how do we raise our first hundred thousand dollars to buy these little four plexes and it was like wow we you know we didn't know we had never raised money before but raising money is really an art and i think i keep learning every day and how to master that art i think you know we started with family friends and then clients of my dads and my sphere of influence you know you start with your circles like i'm in la i'm in the jewish community i'm in ypo i'm in tiger 21 i'm you know and now twitter opens the audience to the world right so i've been meeting people from all walks of life

12:16 and in different parts of the country that i would never have gotten in front of and i'm not salesy at all i just like to talk about what i do you know educate people and if they're interested in participating then they could reach out to me and and we have a lot of people that have reached out from those kind of mediums you know linkedin twitter i go on podcasts like yourself and i meet really cool people like that i become friends with from that what is the normal process look like so you guys uh identify a deal you say this is interesting do you have to fundraise before you go put the loi do you like just walk me through like how do you actually acquire it and then what does the timeline and sequence look like from a fundraising standpoint yeah so the process is you know we we get my acquisition guy we look at like 100 deals out of 100 deals we'll maybe offer on 5 to 10 and hopefully get one you

13:04 know awarded to us once we're awarded a deal we're negotiating a purchase and sale agreement um we simultaneously are doing all of our physical inspections lease file audit due diligence we're putting together the offering memorandum once that's done we send that out to the investor base so it's literally an email blast that goes to we have around 14 or 1500 current investors and then i have another maybe 3 000 people that are that have voice interest that just haven't pulled the trigger yet um once we send that out it's sort of like a first come first serve commit and then um usually we we call the funds within a few weeks if anyone's late past the deadline we then open it up to the waiting list um to make it fair for other people that didn't get to get in but you know we're a little too slow to commit and then we close on the transaction usually around 60 days from

13:50 inception from signing the contract to close um i'd say you know we we it's a little scary raising money deal by deal because we don't have quote-unquote like discretionary committed capital like a fund would so we take on some risk but we have large lines of credit and our own cash to backfill if we ever are short um on a raise which typically doesn't happen anymore but it's still could theoretically and uh our deals are getting bigger and bigger so we we um we have to keep ample you know liquidity to be able to do that just in case why not raise a discretionary fund it's a great question so i think a fund with tax paying people i don't think real estate is a good vehicle to do a fund i think for like vc and private equity for real estate i think it should be done deal by deal because you never really if you do sell you always want a 1031 exchange and roll

14:37 that over to avoid to defer paying the tax i think um if you're in a fund it's like a 10-year lifespan and then boom you have to sell all the assets why sell these golden geese lane golden eggs real estate's like a generational kind of thing you want to you know i'm not into the never sell camp because we do sell occasionally but don't sell ever and return money but then you have the the capital gain tax plus something called recapture so all the money you've been saving in in um taxes over the years from the depreciation comes to a head and then you got to pay that out so like let the money compound without the tax man getting his pound of flesh right and that way we could do this doing deal by deal in a fund you know it's a 10-year thing and um it would make it easier fundraising like getting committed capital and then calling it over time and stuff but and then also on a fund you have to deploy the capital within a

15:23 certain amount of time and you're gonna be you're gonna be doing deals you probably shouldn't be doing it you're in a fun business versus like real estate business let's talk about the tax benefits of real estate so when you go and you acquire one of these large apartment complexes uh what are the benefits you get up front in terms of you make the purchase and within some you know 60 90 120 days what are the benefits yeah um you have something called depreciation and what we do is um cost segregation accelerated depreciation uh you pay for a report like i think we use cbre or other firms and they'll you know break down the components of the building into different 10-year lifespan this and it accelerates the depreciation so you create really large losses in the first year and you could use that you know those losses to um offset any income from from real

16:10 estate income if you're if you're not a real estate professional if you're a real estate professional you could use those losses against any income so i always always recommend if someone could qualify as a real estate professional they should talk to their cpa and figure out if they could do that what is the uh definition of that the biggest uh hurdle is like the hours you have to spend like over 700 hours a year but i know people that have married you know real estate professionals and then like they they use the losses from the real estate against their spouses uh you know income from whatever they do and it's um you know it's a pretty effective way to save money and it's legal yeah what is the uh depreciation that you get from use these cost segregation studies and for this they don't know the doors okay we're going to appreciate that over 10 years rather than 30. we're going to the windows the doorknobs like all kinds of crazy stuff if you buy something for let's say 100

16:56 million dollars what is the percentage usually that you can get depends on the location how much building versus land you can't depreciate the land but a real life example we bought a building in ventura uh california it was around 12 million dollar purchase price it created losses in the first year of around three million dollars which means uh you could use like if you have three million of income if you're a real estate professional you could use that three million of losses and it wipes that out completely um and uh or or if you're not a real estate professional you could use it against other real estate uh income yeah so and that flows through to our investors like let's say you know an investor puts in five percent of the money on a deal they get five percent of those losses on their k1 and we've had deals for many years that are still showing losses the first year you create that huge loss

17:42 with that cost egg but then it's i think it's over 27.5 years if it's like a multi-family kind of building it's a on a straight-line depreciation schedule and uh yeah it's pretty pretty wild so right after the first per the initial purchase you get the cost segregation so you get the big bonus depreciation and then what are the tax benefits as you continue owning that property yeah it's it's it drops from that first year but it's still like you know the the over 27 half year um you you know and if you spend a lot of money doing the rehab and stuff you you could write that off also so it's um i've had buildings five six years that even though they're throwing off you know seven eight nine ten fifteen percent whatever cash flow they're still showing losses because of that line item it's a phantom expense you're not actually spending it but you expense it and um eventually yeah when you sell a building if you take the cash you'll

18:29 have to all those savings of the taxes over the years is called recapture you then have to pay it but if you exchange and don't take any money you know roll 100 of the proceeds into a like a like size property uh it's like same size or larger you have to replace the debt essentially and and the equity and yeah you you just keep kicking the can down the road and then when you pass there's a step up in basis for your errors and stuff which is pretty so this is this is the game this is the game man the rich play this game and like you know anyone with that's an accredited investor you're saying you're saving money you know i recommend parking money in real estate with with uh good sponsors you could buy your own properties too we have investors that purchase their own properties and invest with us there's no right or wrong explain in more detail the 1031 exchanges i think a lot of people don't understand uh how much of a

19:14 game changer this is yeah i'll give a real life example so uh six years ago we bought a large property in denver for 74 million it was like 500 some units and um we just sold it uh in january of this year for 141 million so it was a huge gain the investors i don't know maybe 4x plus uh net of fuse and stuff they they had the opportunity to roll that into a brand new building we bought uh in downtown long beach that was in lease up and um yeah you know most investors will roll with us uh into the next opportunity and they didn't pay any taxes on that and over time you know our goal we could pull out uh principle through refinancing events which uh when these loans loans come due you have to pay it off so you either get

20:00 a new loan or sell the property we'll get a new loan and pull out cash hopefully get a bigger loan than the previous loan and those um dollars also are tax deferred then it's uh uh refi proceeds loan proceeds it's not considered income so that way is another way to get money and principal out i know people that have had buildings 30 years that you know like they pull out so much money on these things and and they still have the asset and they sell the asset yeah i i have a mentor that bought a building 30 years ago for 3 million dollars maybe put 600 grand down him and his investors and now every year the property throws off three million dollars it's pretty remarkable plus you know he's pulled out millions and millions of dollars it's the ultimate long game for for preserving wealth and growing wealth safely uh risk best risk adjusted returns in my mind why do they have the tax code like this

20:46 that's something i i don't i can assume it's just because the voting people you know the people with the money they lobby for this it's it's is it that or is it because they actually want to incentivize investment or those are the two same things right it does incentivize investment for sure and this type of investment um i i just look i legally take advantage of of whatever is legal tax wise you know push the envelope and make sure it's kosher and legal and this is all in the tax code and you know we're doing it yeah one of the messages that we have for people almost on a daily basis is like uh there's this thing in america where people are like oh the tax people you know the rich people aren't paying taxes they're not paid and it's like hold on a second there's not two tax books there's not like rich people get one set of rules and other people get a different set of roles it's the code is there for everyone to use

21:32 correct now there are things where hey you got to own a business well okay people figured out if i own a business i get certain things or i got to own real estate or you know it's not just if you are a w-2 employee you have all these things available to you you have to put yourself in a position to benefit from certain rules but the rules are there and so you said it earlier it's like rich people are doing this like go learn how to do it and then you can do exactly what they're doing like the rules are available to you as well right yeah for sure um they make it a little tougher though for like we only can work with like accredited investors right so you have to earn i think it's over 250 000 a year or have a net worth of a million dollars excluding your personal residence there's still millions and millions of people that will qualify for that but um yeah it makes they make it harder i think some you have to go through certain procedures to be able to accept money from non-accredited investors which some sponsors do and stuff but um

22:20 definitely you know once you become accredited it opens the doors to that but yeah to build wealth you know i think naval had a great threat on this you know talking about how to create wealth and it's literally owning equity you know creating business investments you know it's it's tough when you're uh w-2 for sure to to um you know you pay a lot in taxes and but everything if you were able to save you should be invested in over a long period of time if you if you do the math and compound it market you know eight to ten percent kind of returns if you invest in indexes it creates wonders over a long period of time talk to me about the current real estate environment like obviously we had a zero percent interest rate environment mortgages et cetera was so cheap they were trying to incentivize people to go borrow and uh invest or spend capital uh we now have kind of swung the other way

23:06 and uh we obviously have over you know five five and a half percent residential mortgage rates uh what are you seeing in the market changing maybe between you know summer of 2021 and now summer of 2022. yeah so i mean real estate you can't just lump it all together but like from what we're looking at multi-family 200 unit and up denver and west stuff we're buying prices are off around 5 to 10 and it's not because the fundamentals are slowing down like rent growth is i've never seen rent growth like this i mean we're seeing in some markets it's like 20 year-over-year rent growth um the problem is the interest rates have risen so quickly it just puts a damper on on the returns when you do your modeling and um yeah we're borrowing at now around four and a half percent on a ten-year fix whereas it was like sub three percent you know pretty recently um does that change your

23:52 appetite to go buy things that big of a difference yeah we're more cautious now um we if we are buying like we're buying one deal now we're buying it with only uh 55 loan um so very conservative you know leverage amounts um we're doing we're still selling and exchanging but on new cash we're sort of very cautiously optimistic now it's like i think the inflation thing is a real story that should be how does that impact uh either assets you already own or assets you're looking at like so if there's high inflation that's probably driving a lot of the rent growth right yeah but eventually people aren't going to be able to afford these things and like the the cap rates will will rise too and that puts a damper on values so um i think uh

24:37 we've had a double whammy over the last 10 years of cap rates compressing uh which means it's like multiples the multiple's expanding and uh rents and rent's growing but now i think you're gonna see the cap rates started popping up a little bit uh along with interest rates and um if rent growth slows a little bit there's gonna be some you know issues especially with some of these borrowers that are doing these um short-term like variable loans that are high leverage and stuff it do you think that uh there could be a re um do you think that there could be a recreation of the 2008 2009 crisis where there's like over leveraging the system and prices go down and everyone's screwed or do you think we're not there i don't think it will probably be at that level but um you know on on the uh single fam because people generally on single family for example are putting more down payment and they're um you know

25:24 financially more secure in oh six or whatever and everyone in their mom was able to get a mortgage you know so i'd say i'm starting to see houses sit longer it's going to lead to price cuts the inventory is low though so that'll you know help also the soften the blow but definitely mortgage payments have doubled like you know i was lucky enough i refined my house and i locked rate right before this run-up but it's it would have doubled my mortgage payment if i didn't do you know have luck of locking in time and um you know plus the stock market being down is double whammy people have less perceived wealth i mean it fluctuates but right now if they were worth a hundred dollars it's now they're worth 80 or if they were in a lot of the tech heavy stocks maybe they're worth you know 50 60 on that 100 so it's definitely wealth is down there's a lot of real estate folks uh that i've talked

26:11 to or you know i i hear their various um kind of thoughts don't buy your primary home rent and then go buy the investment properties how do you think about it is that good advice bad advice is it case dependent like when you're starting like i always tell people our investors if they don't own their home yet i think owning a home is a good you know thing and and uh you know certain countries it's there's more renters versus homeowners and at one time i remember the stat was like i think we were up to a 69 percent uh home home ownership before the 009 recession it dropped to like 60 for every point of drop in home ownership it was like a million new renter households that were formed i think it's crept up a little bit but um yeah i always recommend you know it's it's stability having a home and you know

26:56 it's generally people's largest investment because it's a forced savings right they pay the mortgage down over the years and it appreciates in value and i mean it depends where the home is at and stuff but like in certain parts of la or probably all la would have been a great investment over the time um it just depends like you know if you need the cash to you know do other things with but um if you have the cash and you have the you know amount of money to service the debt and then some buy buy a house i think it's okay you mentioned 10-year fixed rate uh debt earlier is that what you guys normally target yeah so that yeah primarily ten-year fixed um we could get a little longer term probably but um the negative thing is they have these big prepayment penalties on the loan so um but we're very conservative shop so

27:43 like we've been doing those since inception and when we went to sell buildings the the buyers they didn't want to assume those loans because they were above market interest rate now um yeah we locked in a rate at 2.99 that's way below market so it is you know people would assume that and it'll add a lot of value to the purchase i think but we did it really just to have sanity and know for 10 years this is your mortgage payment and like you know and it forces you to hold long term when you put on slap on those long-term fixed rate loans and i think real estate the way to create that wealth is holding buildings long-term and you know playing the long game versus flipping you know when do you know to sell um we sold for different reasons so the first few years we sold to create a track record um we did return capital to the investors versus exchanging nowadays

28:28 we only try to exchange we have that track record um we sold because some of the buildings are getting too old and have major you know capital needs and we'd rather exchange into newer buildings and what other reasons to sell if the loan's coming due and we feel like it's a good time to you know place the money into something else we'll sell um but typically yeah try not to sell to too often i want to ask a couple of questions you tell me if you can't talk about it or don't want to uh when you go to get a loan how many financial institutions do you talk to do you make them compete with each other like how do you optimize as a real estate investor to make sure that you're getting the best we always go through a mortgage broker for sure um yeah typically so if uh the investment sales team is like let's say cbre we have contacts at

29:14 cbre that that are they handle you know the mortgage brokerage and farming it out you know making the different lenders compete to try to get the best you know price terms uh etc um yeah we always you we feel like that's a cost that's that's worth paying so you guys go through a broker you don't do it directly correct yeah why you go through the broker um just because they make the lenders compete you know we we and nowadays a lot of the loans we were getting were agency fannie and freddie but now we have life companies involved in the mix banks debt funds like a lot of different you know lending institutions and um they really you know make them compete and we get the best uh best value you know for doing that when you look at a deal what is like the one or two metric you think are the most important to pay attention to yeah we're into you know something that's an ideal

30:01 deal for gel we we want to see it cash flowing from day one or able to have meaningful cash flow fairly quickly through some kind of renovation program uh we model conservative rent growth uh typically we're not a pioneer and we're not the first one to you know upgrade units in a certain market we have comps that show that you know if we upgrade the unit this is what the kind of rent we'll achieve um and um yeah and we uh we do it with moderate leverage we try to you know hit like a two and a half to three x equity multiple over ten years is sort of like the with a conservative underwriting that's what we're trying to hit um we've seen a lot greater than that just because of the market um but uh yeah i think i think during tough times you're gonna see you know who are the real players and who could withstand the tough times and versus the people have

30:48 just been momentum guys you know in a uh recent interview with uh the hustle you mentioned this like flight the quality uh that you saw during cove explain that um i i think you're referring to uh like the property quality and stuff yeah like people like there was a flight to quality in terms of what people were looking for yeah um especially us i mean we saw a lot of uh struggles on the portfolio of the buildings that were more blue collar lower income um you know collections were lower in those kind of markets so we sort of peeled off some of these troubled buildings that that were having hard collection issues and also the deferred maintenance and capex needs and exchanging into a lot newer vintage buildings and better locations where collections remain a lot higher those people weren't as affected by covid with

31:33 job loss and um we also are trying to buy in more areas with higher barriers to entries like southern california as well when you have a deal how much cash do you try to keep in the bank uh and i'll measure it maybe in like months of covering a mortgage or if there is some sort of downturn et cetera is this something that you think of it somewhere like an individual hey we need three to six months of like a rainy day fund or how do you yeah we definitely keep a reserve like slush fund rainy day fund i learned that early on um from my mom actually who who did some real estate investment my parents own some properties and they're like you you always want to have that you know reserve so um it's not like a definite number it differs deal by deal we'll let it drop a little bit over time if the deal is really doing really well and it's in good shape but yeah we typically on these large deals

32:19 we'll keep you know at least a million bucks or so like you know in the bank sitting there so we have a lot of cushion and room to go before we have to do any capital call we've never had a capital call um in the history of our firm on some of the construction projects we've gone over budget and we've lent personal capital to the deal so we don't have to you know go to the investors and bother them but we've we've prided ourselves on never having a capital call and never losing a dollar of principle for the investors and we plan to keep it that way i love that uh i asked for questions from twitter and uh they did not disappoint us so i'm sure you know so i'm just gonna read through and we'll do kind of rapid fire here tyler hogue said how can you assess whether a real estate investor is any good when essentially everyone made money over the last decade yeah that was a great question i like that one from tyler um yeah

33:05 i think there's a lot of people that have made a lot of money just from you know leveraging up like crazy and the market's been good and but during the tough times coming up pretty soon here you're going to see you know who who who's uh whatever this buff is saying is you know swimming water goes out yeah when the water goes out so i think and there's some people that actually were you know in the wrong kind of asset classes not everyone in real estate made money most of people in multi-family did and but i know people that you know if you look at some of these office tower trades they they're trading for lower dollars than they were 10 years ago even like it just depends on the type of real estate you've been buying but we've had tailwinds and multifamily you know with huge rent growth and i think um definitely the more conservative shops like us that

33:50 are planning to be multi-decade and you know we're always prepared for the worst um we're going to be able to go through these tougher times versus people that are more transactional buying and selling and flipping and um so so far yeah those groups are okay but they could have a world of pain if uh you know things change with this it seems like it's happening right now omar morales asked uh is he a net seller or net buyer this year that's a great question so omar is my buddy here in bercadia here locally miami great guy shout out to omar the hardest working uh broker i know 28 years old very successful uh very curious love that guy um i'd say net seller probably we have a lot of properties on the chopping block um most

34:36 of them we're going to try to exchange though so that produces a buy but yeah i know some very smart groups that have a different structure they're more fun and stuff and they've been net sellers um especially in this very low cap rate environment they were selling stuff last year for like three caps and everywhere even in the midwest and stuff where historically you don't see a lot of rent growth so uh some of the smartest money i see are are selling right now yeah uh audi asked if you could go back in time and change one decision you've made along the way which one would it be and why it's a great question um the one that eats away at me the most is selling our phoenix portfolio we had 2500 units in phoenix we sold in around 2017. uh values have over doubled since

35:23 then and um i mean everything we then use that money to buy has gone up too but like phoenix has been on fire and that sort of burns me we'll be back in that market at some point but um you know that's the one that got away yeah that's okay you did okay yeah bijon mateens asked what's your opinion about fractionalized real estate investments through nft technology that's an interesting one i mean i i don't know enough to talk about that but i think there is you know real estate sort of industry that doesn't change much with technology too quickly um there are some interesting kind of prop tech companies out there and stuff um it's gonna be interesting to watch we'll see if that's is that the killer use case how's that gonna work i see a lot of like decks on people trying to do stuff like this but none of them have taken off really yet but we'll see

36:10 ricky excuse me ricky schmidt asked uh i'm a real estate broker in charleston south carolina currently there's 1700 houses in inventory the average pre-pandemic was 5500 to 6500 so about 20 or so uh loaning standard and home equity is higher than ever uh soften from euphoria yes but where do people think the inventory to crash the market will come from yeah that's a great question um yeah i got like the smartest audience on twitter oh man you got some good people following you for sure um i'd say yeah the inventory percentage-wise it shot up a lot but historically it's still very low he's saying um but they're they're you know the i don't know if it'll be inventory that crashes the market or just the right if the rates just keep rising i mean that's going to put a damper on home values and i think it'll um it'll

36:58 damper the crazy growth we've seen in home values but it might even lead to some not just softening but some decline in value but definitely uh you know you need to see probably more inventory but that person that's a big percentage jump and it could continue probably yeah uh somebody who uh they're not actually using a name said uh for a couple with young kids who wants to buy a house in the next couple of years what are some recommendations to prepare that we might not think of they're already trying to get out of debt raise their credit score and increase income but what else could they be doing just buy a house with within your means right i mean you don't want to buy something bigger than you could chew that you're like struggling to make the mortgage payment and like you want to sort of live under your means and then you could always buy a bigger house at a future date right like um and uh don't

37:45 like in one of my mentors like in the next two three four years the house or the real estate could be worth less than you pay for it but but who cares in the long run it's gonna be worth more in in terms of income producing property the the cash flows can be a lot greater over the years and uh you got to have that long-term mindset it same as the stock market right if you're buying a good company and you you got to set it and forget it right like you could be down all the best companies have had big drawdowns over the years i mean the most notable one amazon had like a 90 drawdown i don't know how many people had had the stomach to withstand that and hold it but if you did you'd be up a gazillion percent you know yeah bezos did mr bezos did and look at them now big basil exactly uh veronica y who says my country is a developing country where population is still growing uh stably

38:30 we've never experienced a housing market crash like in the u.s uh investment is still deemed uh investment in property is still deemed a safe haven uh and then she says is u.s property investment still a good investment due to u.s declines of population and maybe i'll edit a little bit of like how do you think about real estate along with population growth or contraction yeah i mean one of the biggest mistakes we made is we bought in a small community where there was flat population it wasn't growing and we weren't able to really push rents aggressively um it was when we were trying to go into the mobile home park space and with a big bash and we bought like a 400 space three-part portfolio in rural pennsylvania and you know at the time it looked good on paper but there was no rent growth so we try to buy in areas that are growing and you know there are

39:15 cities in the us that like are shrinking we try to avoid those kind of areas we try to buy in areas that are growing and if they have higher barriers to entry that's that's a that's even better so um but you real estate in the us is a safe haven we have a lot of international investors that park money here because of our political stability and maybe they could have higher returns potentially in other kind of developing countries but u.s is like i mean i'm biased but i think the best country the safest place to park capital still and um i think it'll continue to be uh somebody named scam balls uh asked what you think about metaverse real estate and will you buy some i mean i'm i'm i like the concept of nfts and you know i think there's gonna be a lot more cool

40:01 companies that are formed with really killer use cases and i'm an early adopter i bought my crypto punk like i don't even know like i first heard the um a podcast with uh what's his name one of these big vc guys that was talking about it um i forget that kevin uh kevin rose kevin so yeah i i'm like wow this is pretty cool so i had a few bucks in coinbase sitting there and i'm like it doesn't bring me much enjoyment and this little crypto punk nft it's like art and i bought that and it went up like 10x and then it's back down but um with the metaverse and land i mean there's like i don't know i feel like there's unlimited it could just create more and more just like you could create more and more nfts that's why i'm like i only buy the iconic one like one of the first projects i'm not going and buying any you know pfp 10 000

40:47 you know i think there's gonna be a gazillion of them but there will be some you know over the decades things that were done early on that'll be like wow this is has historical value and people you know relate to it and like it but um yeah i haven't bought any land in the metaverse and stuff but i think i feel like with with um there's gonna be more like you know facebook they change their whole name to meta right they're betting the future on that and it's coming you know with the glasses and being out and about and having you know the the augmented reality and different forms of advertising to people and it'll it'll uh make life it's gonna be different for sure yeah punk three zero five four asked uh what your worst decision in business will hold the answer you already said but uh your best decision in your personal life oh that's a great question

41:32 best decision in my personal life was uh marrying my wife i was gonna say man you gotta say that you're gonna get in trouble yeah no i mean i i uh she's fantastic i i totally married up i mean i i i love that we created this cake together she's like my biggest fan i push her she pushes me we've created a beautiful life together with three amazing children we work together pretty much she spearheads all the ground-up development for us um she her projects that she spearheads are some of her best performing ones you don't see a lot of female developers and i think she's very conservative in nature and always plans what's the worst case scenario and um she's hit it out of the park she she buys in areas that are like changing and she follows where all the restaurants are going and fall sees

42:18 where they're getting permits and stuff and she's really early and um she's a prolific developer she's done really well and she's an amazing person uh four to eight asked at what point during lockdowns in panic did keith and gelt realize that they would bet big on la when everyone else was leaving and then the second question is work life balance possible like actually possible yeah so the first question so when did we start doubling down on la we already had a few projects in la and um during la actually our our collections were remain pretty robust um our buildings in la are pretty high quality and either newer or major renovations and they did well and we're like yeah we just started seeing these other markets that got crazy heated and you know valuations

43:06 going kooky and we're like let's just start buying more doubling down on not just la but core infel socal i mean we were we bought some great deals in long beach in anaheim and we're looking in you know all these sort of core southern california markets um where i feel like there's less bitters on stuff now and you know i think things are gonna the pendulum swings la and socal it's gonna it's always gonna be a great place for people to live and raise family and um you have some influx of people leaving but i think you're gonna have new people come in um there was another question here uh what were the trigger points that you used to increase your team size like when did you know to grow well that's a great question um oh i forgot the work-life balance on the last one um work-life balance

43:51 um i'm a professional delegator so i think i've created that work-life balance and i get to work the hours i want when i want and that's what true financial freedom and wealth is right um i have an excellent team that are killers in the different you know departments that that they're they're in um but i think that whole remote we're still remote i i'm allowing the team to be remote and i think they're enjoying it they don't have the hour commute each way they're able to pick up their kids if they want this hour they're working probably more hours but on their own time and terms not every job you could do that obviously some have to be in person you know with other people um and dealing with customers that come in or clients or whatnot but i'm a big believer in uh giving people flexibility and uh you know they're they're still held accountable and doing great work though for us so i think light work life

44:37 balance is it it's it's it's achievable um but you gotta really manage your time properly especially when you have kids and stuff but i feel like i'm so much better working in the hours i do work um i'm not fooling around as much you know i'm really working um growing team size team size yeah we we just kept hiring when we had holes and we needed you know more people so like it's pretty uh scalable in my business because i don't do property management we outsource that that that requires the most people uh we would have probably 250 people if we did property management we have 20. i'd rather have a smaller team and not have to deal with personnel issues hiring training firing and that's what has helped us scale and really focus on finding good investments and and letting the day-to-day you know collection of rent fixing repair

45:23 maintenance we oversee the property management company you know and make sure um they don't overspend and every major ticket item we have to approve and we oversee the major capex items but the day-to-day operation we let them do it and we pay them a fee um but yeah we haven't hired that i mean we have 20 some people and every year we had like one or two it's not like a huge need to hire up and stuff which i like it's we hire we have ton of applicants people that want to work with us and we got to be choosy on who we pick uh i have two more questions one of them is business related and one is personally related but uh on the business front your twitter bio just says one word compounding yeah uh why what what is it about compounding why is that so important and why is that

46:08 i'm just enough to put as the only word in your twitter bio yeah man i i like it keeping it simple sweet and to the point i'm uh i believe everything in life the best things in life are compounding relationships obviously investments um i even got my tattoo recently you see this little chart up to the right that's compounding baby that's what we do each one of these is mike there's five of us for the five of us in our family so it's double meaning but i feel like consistent you know every day you put in the work and make a little progress every day and then it's like you look back 10 years and it's pretty amazing you know you don't see it day to day but over the decades you see like wow this is tremendous growth you know so i think compounding is everything in life um just being long-term most people are not long-term thinkers being sticking to the

46:54 plan you know we talked about bezos you got elon musk like just spit sticking to the plan and uh you know elon musk had that master plan he put out there right when he started it's been the same since day one he kept focused on doing that you know starting with the with the the first car the roadster and then the the model s and he had a whole plan on what he was gonna do and he's stuck to it and um the best thinkers are just ones that are persistent and don't give up and just keep compounding over time i love it um one of our sponsors is eight sleep what is your sleep schedule what what oh man um what what do you do you you i feel like have so much going on and you're so effective at it yeah it's tough with three kids that are waking me up at all hours of the night you know the the the 21 mo

47:40 21 month old you know he's crying for milk in the night and then the three-year-old is he's lost his pasty in his crib or his his blanket's not folded right i mean we yeah sleep is is important uh not getting consistent sleep could make you a little deranged i i need i need to invest in an eight sleep bed as asap and then some sleep training for for our children but um yeah i i try to go to bed at a reasonable hour i'm not one of those at real time i go to bed probably 10 yeah late 11 at the latest and probably sleep till 6 30ish and um so you get eight hours yeah pretty much try to get that yeah my body i wouldn't function on four hours like some people could do yeah um which is i used to be able to do that and now no more yeah it's it's it's not worth it i mean you're better off getting a good night's

48:25 sleep and being well rested and just crushing it during the day versus you know try to pack everything in i am uh i don't think that people understand the sleep thing until they do it like when you're younger i actually think there's some like weird thing about like uh i have so much to do at school like school in america starts so early compared to like many other places and then it forces parents to get up cause they gotta wake the kids up and like all this stuff um but to some degree once you realize the power of sleep you're like dude this is amazing what am i doing yeah i agree we're we're transferring our kid to a different school and it starts like an hour later and it's going to be better man yeah that wasn't that wasn't the reason but it was like that's pretty cool yeah i love that um all right where can we send people to uh to find you on

49:12 the internet or find out more about guilt just just just hop on the twitter to you know shoot me a message at dm it's it's keith uh underscore wasserman his twitter i'm active on linkedin is another one um shoot me an email it's keith geltink.com g-e-l-t dot com um i'm i'm i'm open book and if if you have any questions just try to make it specific i get a lot of people are like i have 10 to 15 minutes of your time and i'm like no just go to go to pumps podcasts i talk i'm on a lot of podcasts you go listen listen to me but ask me specific questions i'll give you specific answers you know and and uh i formed relationships with people over over the years that have uh you know that have done that so i love it i i uh i'm enjoying watching you have fun

49:57 because i know i can tell that you're having fun doing it you got to have fun man we're having fun here you know we're i know you're you're hard working man back to back interviews i'm probably number three or four for the day and uh but you got to have fun you know you got it that is the that's the whole key all right well listen thank you so much for coming on i hope everyone uh enjoyed this if you don't know about real estate he's a great guy to follow on on twitter um that's it that's all we got for you all i appreciate every single one of you i'll see you guys tomorrow thank you everyone