How To Pick The Best People To Invest In Real Estate With - Paul Moore

Mario (00:00:00) - Hey guys, I'm back and I'm super excited because I've got Paul Moore with Wellings Capital on with me today. And Paul's got a super impressive background. He's been in the game for a really long time. He has experience both in entrepreneurship and running and selling companies. Also, he's got a very colorful background in commercial real estate investing and other things, So I'm excited to have you on. Paul, Thanks for being here. You ready to rock?

Paul (00:00:27) - I am ready to rock.

Mario (00:00:29) - All right. Now, what's cool is Paul's got a very interesting background. He started out in entrepreneurship, sold a company. I definitely want him to dive into that. But he's been on, uh, on HGTV. He's actually has has been on Bigger Pockets quite a bit and has a pretty colorful media background as well, which is pretty exciting. So hopefully we get to dive into a lot of that. Paul, I'm excited to have you here. Can you maybe just tell everybody a little bit about how you got into business and then eventually commercial real estate and maybe a minute or two?

Paul (00:01:04) - Yeah, I had an engineering degree, which was my first mistake.

Paul (00:01:06) - And then I got an MBA, went to Ford Motor Company for about five years, and I liked Ford, but I had this entrepreneurial itch the whole time. I was trying to think of stuff to do in the evenings and weekends. And so eventually a buddy of mine at Ford and I quit and he started a staffing firm. I joined him later and we sold that to a publicly traded firm about five years later in 97. So 26 years ago. And I thought, Hey, I'm a full time investor now. And it turned out I look back 20 some years later and I realize I was not a full time investor. I was a full time speculator. I didn't know the difference. And, you know, now I see that investing is when your principal is generally protected and you've got a chance to make a return. But speculating is when your principal is not at all protected and you've got a chance to make a return. I didn't know the difference. So I did that and I made a lot of money doing it, but I lost a lot more.

Paul (00:02:13) - And that's one of the reasons I launched a podcast about seven years ago called How to Lose Money. And it was actually a wealth building podcast. We interviewed 230 successful entrepreneurs and business owners about their pain and losses on the way to the top, and a lot of them had a lot in common, I'll tell you that.

Mario (00:02:35) - All bat. So so for for selling off a business to a publicly traded company. How complicated was that?

Paul (00:02:45) - You know, thankfully my partner was the detail guy. I'm kind of a visionary up side of it, and he was the one that did all the, you know, the work and the due diligence and all that kind of stuff. And thankfully he was really good at that. He's since then he's bought and sold a whole bunch of companies. And but I do recall that it took months longer than I ever expected. And, you know, it took a lot more attorneys and a lot more paperwork than I ever dreamed.

Mario (00:03:17) - Yeah. Anytime you're dealing with public, public, publicly owned companies, there's obviously a lot more disclosure, a lot more depth to that type of transaction.

Mario (00:03:28) - So let's let's I want to pause kind of on that whole business sale because that's something that a lot of entrepreneurs dream of, right? The day you sell. What do you feel? Funds come through. It's done. What's the feeling that you have? After you guys have sold your baby?

Paul (00:03:49) - Yeah. I was only 33 years old when we sold it, and so I had one thought that, you know, no matter what else I do in life, from now on, 33 to 100, I'll have been successful. I'm going to count myself. Chalk this up. I'm a successful person. And so I thought that that would really carry me for a long time. And that kind of I remember thinking that. But that thought faded pretty quickly. As you know, had some other businesses we start up and were massive failures and other investments that didn't work out. So that that carried me only so far. One thing I did notice the morning after I woke up on October 8th, 1997 was it didn't really feel any different than I did the day before, you know, like people say, Oh yeah, you make a lot of money and you you really it won't buy you happiness.

Paul (00:04:46) - I really found that. I think I proved that. Um, I actually thought, I'm going to be I'm going to now, after being a workaholic for years, I'm going to be the best husband, the best father and the best friend that, like I've ever been. And I really wasn't. I actually became worse because I found myself bored. I told people I was semi-retired, I was bored to death, and I found myself trying to, like, get back in there and prove, you know, I felt like. You know, as an entrepreneur, business owner, a lot of people feel this way. We get our a lot of our self-worth wrongly from being productive. And I was on that hamster wheel probably even more when I wasn't being productive.

Mario (00:05:34) - That's interesting. A lot of I've talked to a lot of guys who have sold businesses and it's very common that they actually go into a light stage of depression and they it because we don't realize how much our identity does get tied up into what we do.

Mario (00:05:50) - And like you said, wrongfully, we really shouldn't. But it happens because you build something for so long and you're so involved in it and it relies on you so much that it becomes kind of part of you. So I think it's great that you learned that lesson in your 30s and you were able to recognize that, hey, this, you know, the business isn't me, and obviously you still had the entrepreneurial itch and you got back out and started doing it again. So let's talk a little bit about what you're doing right now. Your focus is commercial real estate, correct? And from an investment standpoint.

Paul (00:06:28) - Yeah. So we, um, after a short time, start investing in single family residential. Then we started flipping waterfront lots at a resort in Virginia. Um, and I did a bunch of other stuff along the way, but then transitioned to commercial real estate in 2011 with getting into ground up multifamily. In 2016, I wrote a book called The Perfect Investment. Humble title. Yeah, really about investing in multifamily apartments.

Paul (00:07:01) - And then shortly thereafter on Bigger Pockets, I started screaming to everybody who would listen. The perfect investment is not perfect if you have to overpay to get it and get floating rate debt and take all these risks. And so we were really concerned watching a lot of friends make millions and millions of dollars for them and their investors and really happy for them genuinely, but also really concerned and thought, you know, we just can't take these risks. I'm in my 50s and I don't want to take risks like that anymore. So we transitioned over to becoming a fund of funds. And our goal is to find to give our investors geographic diversification, diversification among different asset types, different operators, different strategies, and to pick the best of the best operators we can find in all these different asset types and then invest heavily with them. So we're sort of a due diligence partner for our investors.

Mario (00:08:02) - Love it. Paul There's something that stood out to me when we were talking preshow and was and that was how many asset classes you guys are investing in.

Mario (00:08:11) - A lot of times, you know, funds or sponsors or just individual investors get very, very focused. They they specialize in one 1 or 2 asset classes. And you told me that you're in seven. Can you just give the listeners an idea of the different asset classes you guys are investing in?

Paul (00:08:30) - Yeah, So I'm working on my fourth book, which is Warren Buffett's Rules for real estate investors. And I absolutely believe in the power of focus. In fact, I think I've lost most of the money I've lost over the decades by being not, you know, unfocused and but at any rate, so we are looking for operators who are really, really focused, especially if they're geographically focused or focused on one asset type. But we ourselves are able to actually work with a bunch of those hyper focused people and put them together in a diversified fund. For our investors. It's a little bit I mean, we're trying to emulate Buffett's Berkshire Hathaway. He hate he's all big on focus. He loves the circle of competence issue.

Paul (00:09:17) - But at the same time, he's very diversified. He gives us investors diversification across over 110 companies in lots of different industries. So we invest in asset types, including self storage, mobile home parks, RV parks, light industrial, open air shopping centers and multifamily as well as we do other pref equity type investments outside of those asset types. And then we even have one investment in debt, a private private lender fund.

Mario (00:09:53) - Interesting. So I think you said a couple of things that were really important there. Number one, you said focus is crucial, right? And I would agree with that. Every time I've lost money, it's been playing around in an area I shouldn't have been playing around and trying to be the lead on something that I had almost no experience in. And when you can get with people who do something all day every day and invest with them, you ultimately get better results because they're focused on it and they know it like the back of their hand. When you start to get spread out to thin doing multiple things, you just can't be an expert at it.

Mario (00:10:32) - And so I love the fact that you guys are finding very focused sponsors, people who are experts in their given world and then investing with them. And then obviously, like you said, you guys do your own due diligence and understand the deals from a high level, but you're not trying to be an expert in all areas. So I love that. And that's something that I see others and I like I said, I've made the mistake as well, but I see a lot of other people getting into multiple things at once. They start investing in apartments and then they see a self-storage deal. So they chase that and they're kind of chasing that shiny object and they end up not being good at any of that. And I think it's because social media, you know, glorifies so many different things that it's like, hey, somebody's making money over there. I'm going to go do that. And we jump around a lot. And, um, and so being good at something and doing it for an. Extended period of time is, I believe, a secret key to success, which it's not that big of a secret, but a lot of people aren't willing to do it, do it for ten years, and you're going to be a you're going to be an expert in the industry.

Mario (00:11:40) - Do it for a year and keep switching. You'll never get there. So I think that's super good info. So Paul, if you are looking at sponsors, how do you vet sponsors for your deals? What are you looking at in these guys or girls that are running these deals on a daily basis? What's the the flags?

Paul (00:12:04) - Yeah, we have a 28 point due diligence checklist and that's mainly about the operator then also about the deal. But we're looking for, you know, years of experience. And even if the operator themself only has, say, 3 or 4 years that they've hired in like we we invested in RV parks, the operator had had experience since 89 in commercial real estate, mostly self storage, but he'd only had like four years in RV parks. But he hired one of the top RV park management gurus in the country to come be his chief of operations. So that helped. We're looking for skin in the game, how much that cash they have invested. We're looking for the type of depth they take on.

Paul (00:12:50) - What's their history with that? What's their belief about that? The amount of debt, the type of debt, how they use debt. Of course, we're looking for long term fixed rate, you know, safer type debt or sometimes no debt at all. Um, we're looking at their management team. We, we look at how they talk about their, their wife or their husband, how they talk about, you know, their investors, how they talk to the waiter or waitress at the restaurant. I mean, we're looking for character. We're looking for a lot of other things as well that we, you know, run through this due diligence checklist, how they pick their assets, how they find, you know, how they're acquiring, who their team is for that, how they're doing, property management. We fly out to the headquarters with a scheduled visit. Then we usually do an unscheduled visit where we show up at 1 or 2 of their assets and check out how they're doing it on the ground.

Paul (00:13:50) - So those are the types of things we do. I mean, for somebody an LP investor, I mean, if you're giving away 50 or $100,000 or more to a sponsor, it behooves you since you're going to be hands off to really get to know them up front. It's worth the you know, it's worth the flight to go to their office. It's worth it to drill in deeply. We really like Brian Burke from Praxis Capital and his book The Hands Off Investor, which is, you know, 350 pages or so of dense questions and, you know, analysis. You should do before investing with a sponsor. And we really think that people should really get that book and go through it and use it.

Mario (00:14:37) - Very good details there. So if you're sponsoring deals and you're operating deals. Listen to what he just told you. He's there. They're looking more often at the person's character, the person's personality, how they work with other people than necessarily just track record. A lot of times I think managers, sponsors, whatever you want to call them, think that it's all about just purely the returns and, you know, the track record on the deals.

Mario (00:15:10) - But I think you're 100% smart for paying attention to how they treat other people because everybody everybody going into a relationship is buddy buddy. Right. Everyone's personality is going to be attractive, especially someone who's raised money before they know how to attract investors. Right? So the upfront dating period is always going to be great. It's when things go rough or don't go well, you got to know how they're going to handle that and how they're going to treat you as an investor. At that point, are they going to put you first? Are they going to communicate well? Are they going to deal with things the way they need to be dealt with? Are they going to blow you off and start start fresh with new people and you're going to be in legal battles forever on it? And and so I think it's crucial to understand the people that you're putting money with. And what I'm understanding, Paul, is you are that due diligence guy for your passive investors. They bring you on. They essentially give you the money to go do the heavy due diligence on the people and the sponsors that the money is going to be invested with.

Mario (00:16:18) - And that's yeah, that's exactly right. So you are a professional passive investor essentially. As with that.

Paul (00:16:25) - Before I've used that term before.

Mario (00:16:27) - I like that. So what are some what are some things that you found in interviewing other sponsors and doing due diligence on them that maybe threw you off or surprised you? You went into it thinking it was going to be, you know, sunshine and roses. And as you got into the due diligence on that individual or that company, things maybe shifted quickly and opened up your eyes. And you don't have to mention any company names, but any any experiences that have kind of thrown you off or surprised you.

Paul (00:17:01) - Yeah. One. Remember in 2018, we were in a sponsor's office and they spent like, almost the whole day bragging and talking about themselves and even telling us about their expensive pool and their, you know, expensive cars and everything. And it just really threw me off. Um, and we decided not to invest with them years later. I'm really glad we didn't.

Paul (00:17:27) - Another thing was we went way down the road with a sponsor after, you know, we did two trips. We flew to the West Coast and the East Coast last year from Virginia on a sponsor. We were right down to, I mean, even having a date in mind, we were going to wire them millions of dollars and just couldn't get comfortable with one thing. And that one thing we kept drilling into was there was just inconsistency in their answers. And the more we dug in, like they would say, you know, out of the 14 loans, we have only two or floating rate debt. And then another document would show that there were six that had floating rate debt. And then something else was inconsistent. And so we decided not to invest with them and we told them why. Um, another one. We got an email from a friend of ours who this operator, a mobile home park operator, was trying to raise money and we got an email from a friend where they had said, Hey, Wellings Capital is in for several million dollars.

Paul (00:18:33) - Do you want to invest? Well, we were still in due diligence. We weren't in and I called that owner of that company. I'd never spoken to him before and I said, Hey, dude, this is a bad start to the relationship. I got this email right here saying this. And he, he he did a good job explaining it away, but we never got comfortable with them.

Mario (00:18:53) - Yeah, they were using you as the bait to bring in other people which, you know, I think if you're not standing on your own, on your own with investors, then there's probably a problem with that. If you got to use other people's credibility. It was just the integrity issue.

Paul (00:19:09) - You know, Warren Buffett says it takes 20 years to build a reputation, five minutes to lose it.

Mario (00:19:15) - So true. Let's talk a little bit about debt, because I've heard you bring it up a few times, I think and I've said this on the show and on some of my other YouTube videos and things like that, where a lot of times investors get focused on the upside, right? They're so focused on the blue sky opportunities that they forget about the downside risk.

Mario (00:19:37) - And what I hear you talking about is that downside risk a lot. You're sounds like you're very risk adverse. And I think that's something that we overlook because we get excited. Emotions come in, we say we can make millions and we can hit great returns, but we also don't pay attention that the downside risk is actually more often than the upside potential, but we just don't pay enough attention to it. Can you maybe talk about some of the things that you guys look for or some of the things where maybe others have made mistakes that you've seen with debt?

Paul (00:20:10) - Yeah. Keith Cunningham and The Road Less Stupid. He talks a lot about focus, by the way, he made 100 million and lost 100 million and then gained another 100 million later. But he sounds like a serial entrepreneur to me for sure, Keith says. The amateur investor asks, How much can I make? The experienced investor says, How much could I lose? And the real pro says, Can I really afford to lose that? And so it's really important to look at debt, the type of debt.

Paul (00:20:44) - A lot of the reasons, a lot of these multifamily syndicators, the last ten years have made so much money, some of them being amateurs, honestly, um, was because the rising tide, you know, lifts all boats. But as Buffett said in 2009, someday that tide's going to go out and then we'll see who's swimming naked. Yeah, and that's happening right now. In fact, some of these multifamily syndicators who I really love and admire, they're saying to their investors, Hey, the reason you made millions with me the last ten years was because we had floating rate debt, and here's why it was cheaper and here's why it had no prepayment, no deficits, no penalties. And now it's come back to bite us. One of these guys on a on a mastermind call recently said he had 2000 a month going toward a reserve for his new interest rate cap that was about to expire and the lender, senior lender got with him and said, no, that 2000 a month, you've got to raise that to 70,000 a month.

Paul (00:21:51) - And another guy on the call said, well, I had 1000 a month going into reserve and my lender made me raise it to 89,000 a month.

Mario (00:22:01) - Oh, man.

Paul (00:22:02) - So you've got these guys that are faced with not, first of all, their debt service, their debt payments with the cap in place, let's say, have gone up, say, 50%. Second, you've got, you know, rent increases that were going at, you know, ten, 15, 18% a year in places like Phoenix and Tucson. Now they've leveled off. Third, you've got, um, you've got costs. Inflation has driven the operating expenses up continually while the revenues have leveled off. And now, worst of all, you've got a lender saying you've got to increase your lender, you know, your reserve requirements from 1000 or 2 a month up to 70 or 90,000 a month. And so these guys are being crushed. And so it was really important. We found out in times like this that we did look at the debt.

Paul (00:22:59) - And it's really important for anybody listening, you know, take a close look at that debt, how it's structured, what could go wrong.

Mario (00:23:07) - I've heard a lot of investors talk about having having their name on the debt for personal guarantees and basically recourse debt as a as a sign of pride in their abilities and their their capabilities and their belief in their deals. And although I understand that concept, I think it's bad strategy. Typically, what we will do is we will buy an asset. That's usually something that has some value to add, will buy it with bank debt, that's full recourse. Okay. Once we've stabilized the asset, we turn around, refinance it immediately into non-recourse debt, fixed rate, long term non recourse debt to get ourselves off of that personal guarantee and get into non-recourse situation. And I've heard other people kind of dog that strategy saying you don't believe in your deals. No, I'm we're actually focused on being able to scale and not having those contingent liabilities. But there is downside risk.

Mario (00:24:09) - We want to recoup investor capital as quickly as possible so their money is off the table. And then we want to make sure that we're not personally guaranteeing debt long term as well. And so I'd be curious to know your thought on that, because obviously as a fund of funds, you guys want to see skin in the game from the sponsor, but what are your thoughts on personally guaranteeing debt as a sponsor?

Paul (00:24:33) - You know, I hadn't really thought about it just that way. But I love the way you said that. If I was a sponsor, I would do exactly what you're doing. I would try to get out of the recourse, get into non recourse, because let's face it, things happen that we don't expect. And I can think of times like people I've known who had a perfectly good deal and then something completely out of the, you know, like a Covid type event. But worse in this guy's case came around and beat him. So, no, I think that's great. We like to see cash in the deal, but we don't really take that much into account whether it's recourse or non recourse.

Paul (00:25:11) - But that's a great question.

Mario (00:25:13) - Yeah, I think the the the focus of a sponsor should be, number one, protecting the investors capital, looking for ways to de-risk their investment and also their selves. And then also, obviously we want to hit returns. That's that's the whole reason we're in the game is to make money. But if you've got a lot of downside risk, um, like you said, things can pop up and they can surprise you and a lot of times it's out of our control. You know, I would say the, the apartment world is probably one of the most ripe for opportunity coming up based on the things that you said, there was a lot of floating debt and that was the only way you could make deals work in many cases was to get that very high risk debt. We've seen a little bit in the mobile home park space, a little bit in self storage, but apartments were definitely, um, big on that. You're in seven asset classes. Are there any other asset classes that you've seen that really aggressive debt be used?

Paul (00:26:17) - No, just honestly, just apartments.

Paul (00:26:21) - It was so absolutely overheated, so many gurus, so many training programs. And while we you know, I mean, we've seen it in self storage and mobile home parks as well. Light industrial. But I mean, it's nothing like we've seen in apartments. I've heard, though I can't confirm this, that up to around 30% of the apartment deals are in trouble like that right now.

Mario (00:26:46) - Yeah, it's really kind of sad to see. Like I said, there's going to be some opportunity, though, and there's going to be a chance to maybe go in and help those sponsors, those investors, uh, exit some of those deals, maybe not at the prices that they wanted, but there might be some good opportunities there. Hey, guys, if you're looking to invest in mobile home parks and you want to take on some of these conservative investment strategies and learn from someone who's built the portfolio over nine years straight, go to get real cash flow. Let's get real cash flow and I'll help you do it.

Mario (00:27:21) - All right. So, Paul, let's talk a little bit about speculation. You mentioned this early on, speculation versus investing. Early on, I kind of had a similar strategy. I was buying and flipping single family homes. I was really in a trading model. Okay. And I learned later that there's a difference between investing and trading, kind of like what you're saying, investing and speculating. Can we go a little bit deeper on that and talk about maybe the advantages of you were a speculator, right? Can you maybe talk about some of the benefits or advantages of speculating, but also some of the risks?

Paul (00:27:58) - Well, I mean, some of the biggest money in history and some of the the biggest wealth and the people that they write books and podcasts about, you know, a lot of them were speculators, like the the guy who invested, the Stanford professor that invested. Why was it $200,000 in Google, uh, as a startup or, you know, the people that invested in Facebook or, you know, Jeff Bezos parents who invested $330,000 in Amazon, you know, to help him get started and buy books for his garage.

Paul (00:28:33) - Right. Um, but those are not those are the stories that people talk about in bars and, you know, at these real estate meetups. But they're, you know, they don't talk about the guy and his dad who, you know, started quietly buying up mobile home parks or apartments all around town and then just quietly built a large empire. You know, and I say that in a positive way because it's not as exciting. Speculating is more exciting. It feels like chasing shiny objects. Uh, it to me speculating was more closely aligned with me as a so-called serial entrepreneur. I was always getting excitement out of my investments, just like I was being an entrepreneur. And I found out later, you know, investing should be boring. In fact, the first Nobel Peace Prize winner in economics from the US said investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. And so, um, yeah, so I really just, you know, I'm, I mean, true wealth is created, you know, true wealth is having assets that throw off cash flow.

Paul (00:29:53) - You know. And so creating true wealth often is boring. And Warren Buffett's life, if you could ever I don't know how I could live a week in his shoes. What he's been doing for 60 plus years every day is unbelievably boring. Yet if Berkshire Hathaway lost, 99% of its value would still be the S&P 500 over the last 58 years.

Mario (00:30:21) - That's crazy. You seem like you're a student of Buffett. Based on our conversation, you've brought up Buffett probably five plus times. Why is that? What are the what are the characteristics that you, um, yeah. Appreciate the most?

Paul (00:30:37) - Yeah, I mean, there's so many. There's so many. But I think real estate investors, if we could take the principles of investing from, you know, arguably the greatest investor of our time, take those principles and apply them to our commercial and residential real estate investing, I think we'd be way ahead. And so that's why I try to study Buffett and Munger and, you know, Howard Marks and others who have written these really wonderful books or just had these.

Paul (00:31:19) - I have written a 24. Mentioned. And we just have to get that across the finish line. Get it out there.

Mario (00:31:28) - Hey, real quick, we just you cut out. You said there was actually a Internet gap or a break there. Um, I'm going to actually correct it. Don't worry about it. We'll just keep going. Let me just make a note.

Paul (00:31:40) - I can go back a sentence or two if you want.

Mario (00:31:42) - Yeah. Go back a sentence or two. We'll add it. Okay.

Paul (00:31:45) - So, yeah, like I said, a couple of friends and I have written 24 chapters of a book called Warren Buffett's Rules for Real Estate Investors, where we take those principles that he's used to buy and sell companies and equities and apply them to real estate. And I've learned so much from this process.

Mario (00:32:06) - I love it. Question. Boring. That's actually a statement that that's that's the way we describe our properties. Once they get stabilized, we're always trying to make the property a boring investment, a boring property.

Mario (00:32:21) - Um, and from a from a passive standpoint. What is the benefit of maybe some of these more boring investments versus the big hits? And I kind of asked you that in a different way before, but maybe you can dive a little bit deeper. What's attractive about a boring investment to you?

Paul (00:32:43) - Yeah. So boring investing. You know, it's it's not. It's the opposite of chasing shiny objects. It's the opposite of swinging for the fence. You know, we all have heard Babe Ruth had this home run record, you know, 100 years ago. But he also had the strikeout record for some of those years as well, because, you know, I mean, it's like a real estate developer. One of my close friends is an amazing real estate developer. It seems to me that real estate developers either end up the wealthiest people in town or they end up delivering pizzas. And I just don't like, you know, I mean, I'm generally geared for that mindset as an entrepreneur, but I just don't want to invest that way.

Paul (00:33:29) - And we're talking about hard earned capital of mine. And we have 700 plus investors who have put in their hard earned dollars. They're trusting us to not go out and take a bunch of risks with it and so I just think passive investing and boring investing, uh, work really well together. In fact, I've got a talk I've done called The Boring Investor, and it's been really fun to go through that with people and see the lights go on.

Mario (00:33:59) - Uh, definitely not the sexiest topic today because this would not get go viral on social media. Nobody wants to hear about nobody wants to hear and click share on protecting your downside and boring investments. But I think it's something that has lost, um, has lost the headlines or people aren't paying attention to because they are chasing the shiny objects. And that's what that's what gets the views, right? That's what everybody wants to hear about. I like how you talked about new development because there's been multiple opportunities that have come to me that were new development opportunities, whether it was RV parks or some other buildings.

Mario (00:34:38) - And every time, although it's been attractive, the returns always look great. And some of those people that were looking to partner with us did very, very well. Every time we've kind of went back to it and said, You know what, we're just not developers. We're not in for that level of risk because it really is big risk, but big rewards. And I'd rather buy something that's already producing cash flow with a predictable business plan and a predictable path to stabilization, get a good return versus hitting home runs. And so I think that's, uh, it's not something you hear a lot right now. So I think we're kind of going back as the market shifts and we start to see some of these assets potentially go bad. Unfortunately, I'm hoping that we go back to the fundamentals and those basic investment concepts that we're talking about today. This is really good, especially for a new investor who's getting into the world of investing to hear this stuff, because they're not going to hear it elsewhere.

Paul (00:35:39) - If Buffett says Buffett says, we've got three boxes on my desk, I've got an in.

Paul (00:35:45) - I mean, yes, which is a very small box, a know, which is a large box. And then Too Hard and too hard are probably great investments, he say. But that's just too too complicated. I don't understand it. He said. We're looking to run a race where we have to jump over one foot hurdles. Yeah.

Mario (00:36:06) - Yeah. There's sometimes big opportunities. And like some of these heavier turnarounds. When we started out, we started buying deals that had a lot of hair on them and we made a lot of money at it. But as we've grown our portfolio, we've looked at those deals less and less and have looked for more of the management plays, more of the CapEx plays, things that are very predictable and aren't going to take two years, three years to get stabilized to to to get where we want to be, because you start looking at the risk more and more and are you going to really risk what you've built on, you know, trying to get rich on one deal and it's just not worth it.

Paul (00:36:48) - If you invested in hundreds of deals and Mario and literally two have caused us a problem and they both been rounded up. Development, self storage.

Mario (00:36:58) - Yeah. Yeah. Let's talk a little bit about self storage here, because I think self storage and mobile home parks are going down similar paths. One is I believe much further along self storage is has consolidate. It's been a consolidating industry for quite a while now and it's kind of at the later stages of consolidation. You got a lot more professional operators running them. But mobile home parks are definitely earlier on in that consolidation phase. Um, what are your thoughts on the self storage industry in general as an investment and, um, supply demand, things like that? Just curious because it sounds like you're in that quite a bit.

Paul (00:37:36) - Yeah. I mean, I wrote a book called Storing Up Profits Capitalize on America's Obsession with Stuff by obsessed by investing, by investing in Self Storage. And that was a couple of years ago. I mean, the you know, who who would have known that we would have gone into Covid and then self storage within literally months of being in Covid would roar to the top of all the asset types performance.

Paul (00:38:04) - But that's exactly what happened. I mean, look, when people are in good times, they're filling up their Amazon and Walmart carts and they're looking for a place to store their stuff in bad times, sometimes they're going through the four DS, which is death, downsizing, dislocation and divorce, and they need a place to store their stuff. And during Covid, there were restaurants and bars and offices shutting down, and they needed a place to store their stuff. And so one of the things we love about it that you're well aware of is, you know, if I have $1,000 a month apartment lease and somebody raises it 10%, well, I might move somewhere else rather than sign up for an extra $100 a month. But if I have $125 self storage unit and they raise it 10%, I'm probably not going to spend a weekend, get my friends together, get a U-Haul truck to move my stuff down the street just to save $12 a month, especially when they could raise the rate next month. And so, so much to love about self storage as far as where it's at right now.

Paul (00:39:12) - Yeah, there's, you know, almost 60,000 self storage facilities in the US. Um, 70% or so are still run by independent operators and about two out of every three of those independents are mom and pops. So there's still lots of opportunity out there, lots of upside, lots of money to be made for if you know how to find those deals.

Mario (00:39:36) - For sure. The again, you're talking about risk diversification. You know, you've got a lot of units paying a little bit of rent and your 5 to 10% rent increase is very small dollars but done over a high volume of customers that are sticking aren't going to move over that. You can create some really great returns and they're not going to move over a $5 or $10 increase because it's just too much work. So I love that new investors starting out there. They're looking to get into commercial real estate. Maybe they've been in the single family world before, flipping homes, wholesaling, whatever, but new investor looking to get into commercial real estate. One key bit of advice for them, if you could give one bit of advice to them, what would it be?

Paul (00:40:24) - So are you speaking specifically of somebody who wants to get in actively and manage the property?

Mario (00:40:32) - Write your call.

Paul (00:40:34) - Okay, great. So the last one third of my book on self storage, um, answered that question. I get that question so often that I took a third of the book to answer that. And so there are seven unique paths into getting into commercial real estate. And I'll hit them hard fast here. And if you want to ask about anything, we can talk about it. But number one would be stair stepping. That would be starting small, you know, stabilizing, selling, buying a bigger asset and just moving up the stairs. Second would be a capital raiser. Be real careful. The SEC is watching. Third would. Be a deal finder, which would be doing the work of sort of as a broker, but, you know, trying to find the deal to bring it to a sponsor. Fourth would be go big. That would mean just jumping right in. If you have millions of dollars from your Bitcoin sale or your NFL retirement or lottery winnings, you know, just jump right in and put a team together.

Paul (00:41:33) - That's a hard path. Path five is also a long, slow, hard path. And that is get a job. Go get a job as a property manager. Learn the business from the ground up. Path six would be take the passive path and that would become becoming a passive investor. Stay focused on your day job or your life or your retirement. And past seven is one of my favorites. And the reason I think a lot of your listeners should contact you, Mario, and that is past seven would be find a mentor or a paid coach.

Mario (00:42:06) - Love it. I want to pause and ask you about that passive. Early on, I always told I shouldn't say told people, but I think I told myself maybe told some other people to, you know, if you want to get the best returns, you're going to run that deal yourself, okay? You're going to be hands on, even if it means you own less, but you manage it. And over the years, I've actually changed my view on that.

Mario (00:42:33) - And for those who make great money, I've got a good friend of mine. He makes a crazy amount of money wholesaling land deals and I mean just incredible amount of money doing it. And he was looking to invest in apartments and some other commercial real estate and he wanted to be active. And I said, Why are you going to go do that? You've got a business that produces an incredible amount of money. Why don't you go partner with a sponsor, put up money with a good 1 or 2 active, very professional sponsors, and have them manage those deals, use their expertise to go invest in whatever they're specialized in. Pick your pick your favorite too, which is basically what you're doing at the fund level. Um, and go make the money that you're making because as soon as you start going and trying to become an expert in apartments or whatever it is self-storage, you're going to lose focus on the business that's creating the money that has taken you years to become an expert in. And I think that's, um, I found myself giving that advice to more and more high paid professionals.

Mario (00:43:41) - High paid business owners and entrepreneurs. Quit trying to be an expert in everything. Do what makes you the most money and then partner with people who actually are experts in what you want to be a part of. So let me ask you this. What is your you said you have over 700 investors in your fund. What would you say the majority of those investors have done or do to create their wealth to be able to invest with you?

Paul (00:44:11) - Yeah, I don't have a great answer for that, Mario. A lot of them are in it. I've noticed. I just took a trip to the Bay Area two weeks ago and just went all around the bay, just doing coffees, lunches, dinners with these folks. And so a whole lot of them are in that IT world. More and more, we're seeing doctors, dentists. We have some attorneys. I mean, we have a friend, we have a franchise consultant. We have a couple of retired NFL players. It's all over the board.

Mario (00:44:43) - But so either high paid professionals.

Mario (00:44:45) - Sounds like a lot of high paid professionals.

Paul (00:44:48) - Yeah.

Mario (00:44:49) - Interesting. All right. Let's dive into one last thing. What does Paul do? Okay. On a on a weekly or monthly basis, routinely to stay focused. You've been in the game a long time. All right. You've been you're not new in the business. Okay. And obviously, you've you've done well for yourself. So what keeps Paul motivated? What keeps Paul focused? And is there any routine things that you do to keep pushing yourself to grow?

Paul (00:45:22) - Yeah, great question. So once I dealt with my identity issues and realized, you know, hey, I don't get my product, I don't get my self-worth, my identity from working, and that helped a lot. Yeah. Um, I've gotten to the place now where I really need, um, I used to look at weekends more as a chance to get more work done. I mean, I literally love Saturday and Sunday because I could catch up on emails and do all kinds of things.

Paul (00:45:54) - I didn't have time as I was on the hamster wheel all week, but now I take a very serious view of Sabbath. I really, really want to take a day off. It could be a, you know, some day during the week, but usually for me it's Saturday, could be Saturday and Sunday usually. So I take that very seriously. And I also have an hour a day every morning. I build in two hours, actually every morning into my schedule, hoping to get at least one hour. Just thinking, journaling, meditating, praying, reading, sacred scriptures, things like that. Just in the morning. I just try to do that every morning. It's super important to me and I find if I ever go like three days in a row without doing that for reasons I don't even I can't even identify until much later in the day. I seem anxious, irritable. I feel like that old, you know, that kid 30, you know, 25 years ago running, chasing my identity.

Paul (00:46:54) - And so that's really important to me.

Mario (00:46:57) - That's super good, actionable things that other people can consider. I love breaking out some scripture first thing in the morning with my cup of coffee, and I can't say that I do it every single day, but multiple times a week in those days are usually where I'm where I'm the, the most, uh, most in tune, I guess you could call it. So love it. Hey, Paul, how can people get a hold of you? And who should get a hold of you?

Paul (00:47:24) - Yeah. I mean, if if somebody is interested in hearing more about our fund of funds or if they would like to get a special free special report on RV park investing. Self storage investing, mobile home park investing, or just investing in commercial real estate in general, They can go to Wellings Capital. That's Wellings Wellings Capital. Com forward slash resources and at that link they can get any of those free reports and learn more about what we're doing.

Mario (00:47:57) - All this has been an awesome interview.

Mario (00:47:59) - I appreciate you being on and I'm looking forward to doing more with you in the future. Thanks again.

Paul (00:48:04) - Thanks, Mario.

Mario (00:48:05) - All right. We'll see you guys on the next one. Thanks for listening. I hope you got out of this as much as I did. I'd really appreciate it if you could leave a five star review so we can reach more people. Jump over to Mario Dataflow dot net and find out what else I got going on. Be sure to connect with me on all the socials and I'll see you on next week's show.