Podcast Episode 164 Transcript

Episode 164: The Power of Self Directed IRAs for Capital Raising Success w/ Matt Faircloth

there's always a difficult factor in real estate investing and if you can dissolve that difficulty Factor then you can make it work right now it's like finding deals that pencil right like that's today's problem are you ready to bring your real estate game to the next level my name is James Prendamano I'm the CEO and founder of prereal and over the past 25 years I've closed over a billion dollars in transactional real estate he outstanding investors High performing individuals and Visionaries operating in the real estate space these are the people that are actually out there in the real estate game right now getting it done this podcast aims at bringing anyone's game to the next level this is the prereal podcast welcome everyone to the prereal podcast we have a real treat for you today Matt Faircloth he's the founder of the DeRosa group Matt is a 15-year investor Capital raiser author uh published by BiggerPockets raising private Capital how to build your real estate Empire with other people's money uh he has incredible content online tremendous Source folks uh of information really a great follow Matt I can't thank you enough for taking the time to join us today James it is an honor to be here man thank you so let's let's jump in here you you you have a portfolio of over a thousand units you've raised Capital you've done fix and flips you've done the elbow grease you know kind of sourcing those those deals and putting that hard work in better returns right you've done multi-family where did where did you start I got started uh believe it and I changed out a little single family home that I lived in one bedroom and I rented out the other two to two of my buddies um just kind of stumbled into it that way I had read Rich Dad Poor dads I wanted to own the real estate I knew where it would take me um and so I I just was was in tune with all that but just didn't really do all the math on how great it was going to go in living you know mid-20s at the time living in one bedroom renting out the other two rooms the two buddies of mine and and I was able to live there rent free and had a good day job you know had a good salary and was able to pay off all my student loans all my credit cards um scroll up some cash I I got myself bad debt free within a couple of years through that Arrangement and that was like the the Kool-Aid that I needed to drink to get me to jump into real estate full time so uh was this you're headquartered in Trenton New Jersey right uh up until recently we actually just sold the office building that my company was out of so now we're kind of headquartered out of wherever we sit at the time so that's one of them I've got I've got two partners that we all work from home or work from wherever we are I'm sitting up talking to you sitting from a Regis right now so that's my headquarters today one of the the great things that came out of Covid is the ability to do these things and and stay connected yes so when you were doing this um kind of arbitraging and renting out your rooms how old and was that in New Jersey yeah no no that was in um Conshohocken try and spell that uh Conshohocken Pennsylvania um just north of Philadelphia uh where I met my wife when she was finishing up at University of Pennsylvania I was a traveling sales rep her and I both lived around the Philly area and did a lot of our dating around Philly um and then when we got married we needed to move to New Jersey for her job I was quitting my quitting my job with the company I was with and wanted to we had to move to New Jersey for her employer who had a residency requirement um and so we moved there and I believed in like the Acres of diamonds concept you know meaning like there's I I don't need to invest in Albuquerque or whatever because I live in New Jersey so let's find a place to invest right here and so we had some investments in Philly when we kept growing in uh the next town over from where we lived and the next town over was Trenton um and so we started doing landlording work in Trenton New Jersey and became fairly proficient Trenton landlords um over a long period of time did a lot of fixing flips did a lot of rehabs bought an office building that I said we just recently sold there um and and grew our business in Trenton New Jersey for many years so was there a mentor a a moment I mean to even even the what at this stage of your your career you know thinking about renting out rooms of course that's a natural thing to do but most of us never think of real estate that way right yeah what were the the driving pieces for you to say wait I can start to monetize this thing not just look at it as a place to live in and yeah and then go on that Journey what were the influences for you you know James I'd love to tell you that I had this whole business plan all written out and everything like that but I kind of stumbled into it man at the end of the day you know like I knew that I again I was a traveling sales rep and I had sold I was selling industrial machines like he's really really loud really really you know obnoxious machines that that are used in manufacturing um and so I sold them uh I sold a ton of them to Minimate orange juice up in New Jersey um and I had had this big commission check just sitting in my city I didn't know what to do with it it was so much money at the time it was a lot of money right into a 20 something it's a lot of money um and I didn't know what to do with it and so I was like oh wait I gotta set that somewhere so I I my landlord was ending my lease I was like well I gotta go somewhere and I had it was me and my two knucklehead friends we're all renting this little house that was all leased and the real estate broker that was selling the house he was actually ending our lease contract so that he could put the house up for sale for the owner so the real estate broker was okay I need to get in and do some showings here it is you can do that and I was like well I want to buy a house too I don't want to buy this house because this house is kind of a beat up rental property but I want to buy a nice house that has for a 25 year old you Aspire for to live at a place one day that has central air conditioning you know or that has a washer dryer in the house I don't have to go to the laundromat you know so I wanted some some amenities like that and so that real estate agent that was selling the rental property I lived in was was kind enough to take me around town and show me a few other houses for sale that had a few of the bolt-on amenities that wanted and so I said okay great and my other two knucklehead buddies living with me were like well where are we gonna go I'm like you're gonna come with me because Robert Kiyosaki told me if I'm a landlord I could make money and so they rent along when came along with me and each of these guys started paying me 500 bucks a month in this new house but the thing was my mortgage was 940 and so I was living there for free and making 60 bucks a month cash flow right and I I kind of stumbled into it but it was only through like the core principles of You Know Rich Dad Poor Dad taught me about like okay I need to own assets which I looked I was able to look at the houses and asset because he also said in which that poor dad your house is not an asset the home that we live in most of the the Talking Heads the uh you know of the world um uh what's the big one um that everybody talks about the uh Dave Ramsey near your house oh pay your house off whatever well kisaki gave me another way to look at it that your house is not an asset It's actually an expense but by leasing it out it made me realize that I was creating an asset for myself and a revenue stream and and something that eliminated a big expense line I had for myself and most Americans have is their living expense I was able to make that zero which in that enabled me to quit my job because now now I'm living I don't have any overhead for my my Homestead for where I live that's zero so now I can my my overhead's not as well a lot less than it would have been um had I had a mortgage to pay on my own without roommates it's uh amazing how how many successful entrepreneurs and investors I speak to that reference kiyosaki's book no boy it it it is folks if you do nothing else pick up Rich Dad Poor Dad like you've heard this I'm sure a thousand times but it is that impactful of a book it really is transformative yeah it's caused a lot of people to quit their jobs for a lot of people to get into our world of real estate investing or a lot of people to get into everything from real estate investing to Amway it's caused people to get into uh other alternative ways to make money yeah no no doubt so you you jump in you see the opportunity and you're kind of doing what most of us entrepreneurs do and back then we didn't have the resources that we have today right so it's kind of trial by fire and I would assume that you're brushing up against the same challenges that that most of us face scale access to Capital um I assume that was your reality and if so is that where the raising Capital piece came or was that much further down the road for you you know I I I think that this has been my my life it's been perhaps a bit of a Charmed Life but a bit of a kind of walking and putting one foot in front of the other and when something works saying oh hey that worked I should do that again you know kind of thing right and so uh what would it happen with the capital was we did a bunch of deals with our own money and we were also lucky enough to be doing this thing James in 2005 when the market was blowing up through 2008 so we refinanced our way up um I got I had one property it was a duplex in Philly that I owned that I refined every year and pulled out 30k every time I refined it and then sold it and made money again um but that you could do that in in the run-up right um we also had a few immediate family members join us like literally my parents and her and my wife's parents join us with what money that they had we put their their money to work in our businesses well so we were able to grow with that the aha moment the stumble into a thing or like I said walk and walk into something that worked and let's do that again happen when my wife was getting reconnected to somebody she went to school with um and she was just telling them about what we were up to with real estate investing and my wife also had a full-time day job because we needed the revenue from her Day job to pay our bills and to keep our trains running on time fine so she uh she was getting reconnected to this friend of hers and said yeah you know I got this full-time day job of my husband's building this real estate investing business you know and this person who's now graduated from the college my wife went to and is now a stockbroker in Manhattan putting in 80 hours a week right making a lot of money but putting in eight hours a week says the magic words he says real estate investing that's interesting I wish I could do that too but I just don't have the time and my wife hears something that's an opportunity and she says you should talk to my husband and so me and my wife hopped on a train in a course where to all stockbrokers lives he lives up he lives up in Manhattan so me and my wife jumped on a train that next weekend and went up to me go meet this guy at a little coffee shop in Manhattan and he starts saying like well what if I gave you 50k to put to work in your business what if I just gave you 50 000 to to put in 280 and this is post crash this is 2010 right um so there's like you know blood running the streets and people are looking for opportunities nobody could get a bank loan but what you can get is equity right and what makes deals happen is equity bank loans are you can't come by them anymore um at that time but uh but you can get equity and he was like What if they gave you 50K you know and I'm like you're uh it's a great question what if you did do that right let's find out so we I went out and found a couple little single-family home deals he gave me 50K we bought those two simple family home deals in a blend of his equity and a a private lender that I had who put his Ira into the deal so I had an IRA loan and a an equity from uh this friend of my wife's and the deal went great and so before he knew it this New York stock broker is telling his other buddies and his clients about this dude that's down in Trenton buying dilapidated houses fixing them up and making cash flow for them right and so it just starts working and before you know it we're doing windshield tours with these guys God bless them from Manhattan taking the train down to New York City from New York City down to Trenton and they're I'm driving around and showing them the neighborhoods and everything like that and we're me and the stock broker guys start raising money through his Network for deals and trends and that was what that was the the aha moment that before you knew it we were going from a couple single family homes into small multi-family uh small mixed-use buildings those kinds of things and it grew from there so as you're putting these these decks together and these offerings together is it uh where were you thinking about what the market is bearing at this point or are you just building out a model like hey this is what I do here's what I know I can pay here's what the returns are going to be and like that's it well you know James there there's always a difficult factor in real estate investing and if you can dissolve that difficulty Factor then you can make it work right now it's like finding deals that pencil right like that's today's problem back then um deals penciled all the time you just couldn't get financing you know um in 2010 11 12 people that were investing back then don't remember but Banks were super skittish because they got their teeth kicked in in 2008 right so um it was hard to find a bank that would finance a reasonable real estate opportunity so you had to do the whole deal with private money um yeah and and so the uh the deals penciled you also needed to have in-house construction um because all the deals were completely you know beat up and needed a bunch of work and everything like that um and so uh it was awesome we ended up starting an in-house construction company to mitigate that so we started to find a way okay how could I buy a property for X do the renovations for why and when I'm all done that I can be at a one and a half to two percent rule to give you my my numbers here right and that was easy to do back then I mean the two percent rules pretty much non-existent these days um explain what that is if you'd like but but the we were able to get done in Trenton somewhere around those parameters so it was about finding the deal that needed the right amount of Renault that was in a good location that you could pop into and and uh and and get it done and then you you would get a portfolio with these things going and then what you got a portfolio over a certain size then you could get A bank's attention once it was large enough to get a refi going so we would assemble a portfolio of deals with investor capital and then refinance them up into a new stabilized loan and then I'd free up all that Equity all that private money and then I'd rinse and repeat do it over again so that was our that was our model for for years so you've become experts and you have tremendous experience in identifying properties that are value-add and bringing them to their highest and best use uh that is an incredibly rare skill and is this something that you've just learned and you because that's what I do right we find emerging markets and undervalued assets and it's hard to explain it it's very hard to teach it is this something that you've again developed on your own or were there resources that you're relied on to help hone your trade School of Hard Knocks brother yeah that's that's I I went to that school and as you can see from the Grays and everything like that I just got my teeth kicked in enough and had enough contractors steal from me and had enough uh deals go sour and had enough deals go bad that I learned what not to do and um learn what to do what not to do and had to trust my gut a lot and I didn't have I did it's not like I bought some course about how to do value-add 101 kind of thing right um because there wasn't as much of that back then um there was you know a few different things but it wasn't like the Burr strategy or the value-add or whatever this is something people were kind of learning in real time you know um and so I implemented a lot of that and we've learned what worked and I had a few buddies who were doing the same thing and so we would compare notes and say hey who's the best lender out there oh it's that credit union we learned how to really really get a really good at borrowing money from credit unions and so the credit union was the Outsource for us okay and we all all my little real estate buddies would all kind of like figure out who the best lender was and we would all go and you know uh give that lender a lot of business that was doing the best work so it's more like networking versus mentoring with somebody uh and that kind of thing just finding somebody else doing the same thing and say okay what's working for you uh you know it doesn't work if I don't check the tenants credit or check for criminal background history it doesn't work if I do that so you know we just compare notes that's all so as you've grown over the years have you remained focused in one or two areas or have have you found that scarcity of deal and product has forced you to kind of expand those boundaries well we scaled up in size and Stratton is only a 80 000 population last time I checked so it is tough to scale and grow in that market there are apartment buildings we're primarily a residential actually I'm glad to say I'm only residential now because it just sold my office building a year a week or two ago um in that so uh we've been our heart has been in residential real estate State and so it's hard to scale very big in that market or in New Jersey for that matter and so as more and more investors started showing up as we became lucky enough to be featured in Bigger Pockets as a blogger and then eventually a podcast guest and then eventually an author more and more money started showing up from people that became aware of us from the track record that we were generating and from the right that we did by investors then also by that attention that they were getting us right so it became really hard to put the miner to work Justin Trenton and so we had to expand out now of course we used to live in Philly so we decided to go back to our to where it all started and did we did some work in Philly then Philly got really really popular as a lot of New York money was looking for yield and went to Philly and so Philly became unaffordable so we started pushing into further markets in Pennsylvania gotten to Lancaster um and then brought in a few partners that really really helped me expand and think a little bit bigger because we were self-made managing everything up until now up until then all the stuff was under my management um and a few people that caused me to think a little bigger said hey management gives you a lot of control but it's not going to give you scale and so you need to focus on growing your business not managing what you got and so I was able to give away management to a third party and that only able to we literally 10xed our size as a company by giving away things that didn't make us a lot of money and management did not make us very much income it gave us control uh gave me oversight gave me good Vision but didn't give me uh it didn't wasn't really helping me scale and so by giving that up we then scaled quickly into North Carolina and into Kentucky and those are our two primary markets now Lexington Kentucky and the Piedmont trial of North Carolina wow it's uh it's amazing that you can be in this game and and be a seven day a week person and really working your portfolio and get lost in it a little bit and and miss things like hey Matt management gives you a good feel because you're so connected to your assets right but it is really hard to scale and it really does take up a tremendous amount of time um and we've made so many mistakes like that where we were doing things just because it's what we did and you don't even realize that if you just step back a little bit and you you selectively decide where you're going to put your intention you could have explosive results well let's expand on that for a second James I think that that the the epiphanies in my business happened and I'm sure in your two in yours too happen when I stopped doing one thing and started doing something else you know the the real growth like you can have like organic growth like you know five ten percent growth and that kind of thing by doing the same thing just doing a little bit better or by just pushing or pushing a little bit harder and doing one thing a little bit differently right but if you truly stop doing one thing and open up the time so you could do something different to grow your business that's where X but M exponential growth happens uh by me getting out of management and by me focusing on Capital by me focusing on markets and capital um and allowing others to take over management you know post ownership management like asset management and also Property Management that enabled me to grow exponentially which I wouldn't have grown because like you said there's only been so many hours in the day right so if I'm dealing with you know leading the team and where are my contractors going and um which tenant gets approved and who didn't pay their rent that's cool that that will make you money and that will also occupy your entire day but if you start to question what am I occur applying my day with and what is the outcome that these tasks in front of me will generate if you start to question that and say okay if I extrapolate that out five years and keep doing this for five years where does that take me you know and if that place is not really really where you want to go then you really ought to question it and find a way to get out from under doing what you're doing now and start doing things that will take you where you want to go and that's that's made all the difference in my life and in my business and and I appreciate you pausing and spending a few more moments on it because I think it is the most difficult thing to do we're so busy pedaling the bike while we're fixing it that yes lose vision right you lose sight of those things and it's really hard I think there's uh part of it is just the familiarity of it I think part of it is ego and emotion um it's really hard to step back and say I definitely shouldn't be doing half the things I'm doing now why am I sitting on this bike yeah right why am I why am why aren't I on a motorcycle why aren't I in that car over there whatever why am I sitting why am I continue to Pedal this bike why can't I have somebody else pedal this bike for me so I can fix it while it's well somebody else is doing it you're right the primary thing I hear an entrepreneurs say that is com totally in their own way and not going to get where they want to go ever is saying things like no one can do it like me or I have to do it myself or I have to make sure it gets done right BS man um that's a that's a great way to stay stuck is to insist that you have to do everything yourself because you'll never duplicate yourself completely you'll never you'll never really scale that way I'll tell you I'll give you a dirty secret right this is just a fact we if I had to truly score my property management company when I was running it not much like high-fiving myself we were good at it right um we I would score me at like a seven and a half or an eight out of ten on collections ten and happiness work order prop work order taking you know the ability to crush out work orders functionality everything seven and a half eight out of ten we're good at it when we hired a new pm probably like six and a half out of ten but I had to accept that little bit of a I'd accept that to scale you know and then I'm able to put them in a headlock and everything like that because they can do a good job yeah you know what maybe you accept maybe you accept the Dirty Little Secret that maybe somebody else can't do it as good as you can right maybe they can do it good enough though right maybe they can do it good enough so that it gets done or do it their way and maybe they can't do it better but not for nothing you got to really look at the big picture of where your time is better spent can you accept the six and a half out of ten property management company so that you can 10 extra portfolio size maybe maybe it's worth it you know yeah it's um to have the drop off from seven and a half to six and a half is is negligible we're we're shooting for like 70 where we're trying to say if if we can put things down and the next person can pick it up and do it 70 the way we would do it when we personally have our hands in it and then over time that becomes a 73 and a 75 and you know if you can move them up a little bit great but if you can get it 70 man I feel like that's good enough to to pick up and move on you gotta be willing to put your ego down for that right oh yeah you get a bit then there's a lot of big fat egos in this business James and all that but uh but you got to be willing to put that down to say well I got to see the forest beyond the trees and yeah I'm right they can't do it as well as I can but what I can do better than they can to scale my business and build relationships and find Opportunities and think a little bit bigger um and maybe I'm wrong maybe they can't maybe they maybe with their systems they're going to run it at a 9 out of ten yeah you know and that that would really hurt my ego if they did it better than I did oh no doubt but uh these are the challenges to growth man yeah it was the hardest thing in the world to accomplish with any level of success so let's talk market today yeah um what are you seeing out there Bank crisis not a bank price yes this is a big ass mess that's what I'm seeing today James yeah yeah I'm seeing sellers that haven't come back to reality at to what at that what the market is really able to Bear they act like money still gets borrowed at what they paid to borrow money for properties um I think that that the Brokers are probably the biggest devils in this whole business right now the real estate brokers that are trying as hard as they can to drive up pricing to try and keep the party going and they're just not allowing for the mild correction man I'm not talking talking about blood in the streets I'm not talking about like this thing getting cut in half or whatever it is that's not going to happen I just just give me like let's get to reality and I think that that probably means like a 10 maybe 15 price clip in some D in some instances but not not the end of the world but the Brokers just can't they're perhaps their ego can't allow that to happen and they just want prices to be the same as they were in 2018-19 you know um I think that there is reality because I don't think rates are going down anytime soon again my crystal ball is broken I have no idea what's gonna happen but um I will say that I think rates are going to stay the same for a while which will eventually start to take some of the wind out of the market you know um but I think it'll have to happen deal by deal you know one by one I think that there are some people that overbought in my world anyway I think that you're in retail but but it but in my world I'm in multi-family mostly right so um we're also we're in hard money lending and uh multi-family that's what my company that's our focus is right so um at the end of the day uh I'm seeing probably more opportunity to come in as people maybe get to a point where they need to sell you know and I don't wish elbow on anybody but maybe if they overpaid a little bit they wouldn't under capitalize maybe it's better to just hit control alt delete and reboot and and try again another day and just let that property go or you know just just sell it for what they can get for it move on right um we uh are seeing a lot of that uh like underneath the sheets though and I think it'll become more prevalent but I don't think it's going to drag the market down that's my prediction if you will or and that's also what I'm just seeing so for the last few years we saw a lot a lot of Pro Formers that scared the heck out of us we saw a lot of um you know banking on a 30 pickup in rents from Lost to lease items and you know someone entering a new market where they've never managed before in an inflationary period chopping expenses by 20 and you know tinkering with things and driving another five or ten percent on in noi that's what I gotta do right yeah right and like if if those things didn't happen which they weren't going to right you can't tell me you're going to cut expenses in the market you have no experience in while inflation is I don't care what they reported it was at 11 12 13 percent for a while there these things are just not possible so a lot of those deals took short-term money like for for us it's always get to the other side of the rainbow you must have that debt to get you to that next turn in the market uh and we're starting to see this get reported now where there's um there was a historian Real Deal a week or two ago the the first quarter of this massive amount of debt is coming due and these small to Mid cap Banks deposits have dropped right covered money is burned off people are not earning like they used to savings are are being eaten out eaten up big banks are sucking deposits out into their institutions through incentives when those notes come due what happens I mean the even if they're performing notes these lenders can't extend credit anymore because they're they've now fallen below their reserves does it get to that point where we we're seeing note sales at 30 40 cents on the dollar again and and we get to that level or do you think it doesn't get that bad um maybe maybe it does but if you want to be okay maybe it does if you want to take advantage of that you got to be on the inside you know I don't get hits I don't think that hits the market you know I don't think that that the retail buyer that's sitting around waiting for this thing to collapse is going to get to take advantage of any of that um there are certainly going to be plenty of banks selling off they're unloading their bad debt unloading their Bad Assets um and sellers that need to sell that that can't get refi or whatever looking to unload but you're not going to get into the no on those things unless you're plugged in and the way you get plugged in is by picking a specific Market picking a specific asset class and um becoming a infiltrated expert on those things so I think that what I would do not everything you just said yes but bus remember real estate is kind of slow to move right and it's going to start moving a little bit quicker soon um so the what I would do now if I were any of your listeners or whatever is I would become Uber focused you can't just sit around and wait for good deals to show up on loopnet you can't just sit around and like oh okay I'm just gonna sit and wait for this thing to hit it's not going to happen if if you're you're not going to see it it'll happen good deals are going to get had 30 cents on the dollar is going to happen but the those that know the Brokers those that are already talking to the banks about buying Bad Assets that that have a bunch of equity lined up from investors um and have a really tight buy box Geographic and asset class wise those are the folks that are going to get the phone ring because the whether it's a bank or a seller they can't afford to go back and forth and deal with free trades and well I need another 30-day extension or whatever it's like no you got to buy it right now in the as is where is they buy it right now and you get this great price um and everything like that so I think that what you can do is get Equity lined up and tighten in on markets and then you know for what they're predicting in the real deal article if that does happen then there's opportunities to get had what do you think about that yeah yeah so without a doubt it was uh we were making a conscious decision or when we decided to not do this but about a year ago we we had determined if we wanted to be on that inside track when this glut hits because we're we're fairly convinced it's going to hit we think the the decentralization of the big cities is is grossly underreported it's very real there's an office Market issue that's that's coming that's also very real Curious to hear what you think the solution on that one is by the way well unfortunately there there isn't a solution that's short of 20 years at this point you know when when the city's decentralized and they shut us down and locked us down as long as they did uh people change their habits and behaviors and that now they they we broke the old habit we instituted a new habit and folks are more aware of equilibrium in their lives they're more aware of wellness and health they're more aware of being connected to the outdoors in nature and companies also skinnied up and said you know what I don't need this office on Fifth Avenue I don't need to have this this crazy legislation where every month it seems like there's a new rule there's a new lawsuit there's a new insurance and they they said okay this is our chance to save face and kind of quietly back out out and start to relocate elsewhere the reason big cities rebound always is because they're the epicenter of jobs that's over they're not the epicenter of jobs the way they used to be anymore so your tertiary markets became secondary your secondary became primary and you know we've seen this cycle before right that where normally Florida right now would be getting annihilated it'd be getting clobbered because the music has stopped that's not happening because a number of the people have now made Florida home South Carolina New Mexico Arizona you name it people have relocated and I think that they're avoiding snow yeah you know the going where it's nice and warm it's nice and warm it feels safe it's clean and you know I think that unfortunately that's a that's a two to three term um issue that the Mayors and governors are going to have to deal with and and they'll reinvent themselves and they'll be you know they'll become the epicenter for whatever it's going to be next it's just I don't I don't believe personally that that happens in one cycle or even two I think it's going to take a good bit of time my two cents are you still have a housing shortage in America uh and we still will for the foreseeable future um if you if you can price that office complex appropriately the there becomes interesting equations of adaptive reuse right that office complex you know what is it right it's a big box that that is a prime that is probably like super Prime located near highways near food near retail near shopping near all kinds of cool stuff right all things that people want to live near right um it's also got good bones typically a lot of times are made from steel or poured in place concrete right so um they're built like a big bomb house right uh so but within it with some adaptive reuse and likely enough even James people don't think about this but you need more Plumbing in an office building because Office Buildings aren't designed for people to take things like showers and kitchens and that kind of stuff but if you implement um the plumbing to house those things you got enough you got more electricity you know what to do with in an office building right Office Buildings actually use more electricity than a house does than a residential home so if you convert the heating systems over to Electric if you run all the physical plant off of much as much electricity as you can and integrate new Plumbing Solutions then you probably got a really cool thing that with enough window the the right building with enough windows and enough egress could become a really cool residential structure and so I think that if office makes a big enough correction you'll see some really interesting Solutions come online um for maybe the use of people that maybe part like they live someplace and they part-time works and maybe their their Regis we work kind of thing is there they live up on one floor and they work on another floor and they work out on the third on the fifth floor or whatever and you could kind of create like a all Under One Roof living situation now there's a lot of money that has to happen there's a lot of visionary work that has to happen to mix something like that actually you know happen and there's a lot of people have to you know end up losing and banks that may have took a bath in these Office Buildings or whatever for them to trade in the 20 to 30 a square foot range which is probably where they have to go for all that mechanical work and all that risk factor to be baked in for somebody to turn that into a new thing and Office Buildings are appraised way more than 23 square foot right now so there's got to be that correction happens and then then the rebirth happens so so I agree with a lot of the things you're saying we I sit on a few panels um for the last mayor in this mayor and I had actually written a letter very similar to what you're saying a few years ago when Covid just was hitting like what is that it was a a group to study what is tomorrow going to look like what is New York reopening going to look I think it was actually called reopen New York anyway what I've seen change though is the Delta between where those Office Buildings refinanced in the upswing and where they need to be is so massive that maybe it's Federal money that that comes in and helps to reposition these things right but the second piece that uh again I don't think it's being reported the way it should be is the office workers are decentralizing the retail workers are decentralizing retail stores are closing everywhere because people are walking in and walking out with half the store right there's this new paradigm and we're seeing it with retailer after retailer and city after City the people that are going to occupy these new buildings and we're talking about a lot of buildings in a city like New York they need a place to work right so we've got to find a way to stem the tide and keep those retailers and bring these office tenants back and keep industry going otherwise you know they still have to pay rent and they still have to go to work so that's our perception on it at least is we think that if we're not careful uh this can be a real a real mess yeah well you're still going to need some retail right I mean at some point you and I have to get a haircut somewhere and I'll never get my hair cut online Japanese just gonna do a lot of things but Jeff Bezos can't cut my hair you know um he can't do my wife's Nails he can't you know do a lot of the different stuff what online can do is do a doctor's appointment what they can do is do a wellness visit um and you're going to see a lot more things that people never thought they would do online do online you know um but there are certain things that'll never happen you just can't you know uh at an online solution so I think there'll need to be some retail and I also think that people just need to remember like this is part of the human condition wants to be out and wants to be with people and there's just a certain part of human nature that even if you could if you could meet all my needs inside the four walls of my home I still probably would want to get out and about and do something and go be with people go to a festival go to a park go to a plaza go sit and have a coffee with a friend or something like that even if it got the best Nespresso coffee ever in my in my kitchen I still want to go have a a mediocre cup of coffee sitting across the table from a friend you know um in that so I think that there's also a human condition that wants to be with other humans and so I think that if we can play into that in retail answers um I've even I had a friend that was looking to buy his trip Center they had a big plot of land behind it and they were talking about turning the plot of land into like a like Pavilion slash mixed use slash like Festival the kind of space we put live music and food trucks and that kind of stuff and the retail's still there the retail's got the nail salon and the haircut place and yeah a clothing store God forbid you don't didn't buy the clothing on Amazon you can walk in there and buy vintage clothes or whatever um and I think it's a good move because they're playing into the human desire of of our need to be with each other you know but I think that if you play to those needs and and not to the way that we've always done things and it's one that we talked about the beginning of the show uh business owners doing things the way they've always done things if you try and do things the way they've always been done you might not get to the the new the the new reality and the new reality is going to be very different we should be questioning everything like why am I sitting in an office building when I could be here why am I doing this to consume product or doing this to eat food when I could be you know doing doing something doing it differently right the question the more we question and the more we come with new ideas the more I think adaptive reuse and tweaking real estate use will help us get to new I do Frontier now this is a fascinating chat uh before I I let you run can you just speak a little bit about the coaching program that you're offering and I saw a post from a couple of days ago about a new fund yes sure thank you a few minutes on that two things um we believe that there are this is on the coaching side we believe that everyone in real estate has a bit of a like a shrink called a unique ability call it uh something that they bring to the table and just because you get into real estate investing you're like man I'm probably not a good real estate investor because I can't underwrite or I can't I don't want to talk to people to raise money or I don't want to be the the hard ass that goes in broadbeach contractors into submission or something like that there are facets of real estate investing that no not one person could be good at everything so we believe that that there is a core strength that somebody brings to the table and I think there are four course friends and I think that so everybody possesses at least one of them and under the right leadership the right coaching programs we can help people take their one maybe two core strengths then help them 10x their business by focusing on just what they're great at and Outsourcing very quickly the things that they're not so we've we've built a phenomenal program that helped that can help people get there they can learn more about it on our website derozastergroup.com um but our education Vehicles help people bring out their best into the real estate investing business um that's number one the fund um we are primarily a multi-family syndicator which means my company goes and buys a multi-family apartment building and we break that building down into bite-sized chunks and sell those chunks of equity off to investors that want to buy into the building right all well and good it's done very well for us extremely well for our investors that said that can be a slow growth of cash flow where there's little to no cash flow in the beginning and then a you know stream a trickle than a stream than a river and then maybe an avalanche at some point when the property sells right um but but it it tends to grow over a long period of time I believe that there should be other vehicles that uh and the other things that you know you can't compound your returns in multi-family syndications so if I send you a check you can't invest it back in automatically so I I believe that multiformis indications have gaps in what they can offer just due to structure right so we built this new thing called jerusa income fund that answers the question of like what if I don't need the distributions what if I want to recycle it in what if I want to get my money back what if I want something liquid when you can't liquidate a multi-family apartment building but a fund you can so there was an income fund is liquid it is something that compounds returns and it also plays into something that I think we're going to need more of in America and you and I've talked about it's like the underlying theme but we talked about all this thing here is dollars to transform things from one condition that they're in into something else call it Bridge debt call it you know short-term short-term loans right so draws to income fund is a provider of short-term Bridge loans to take things from a and convert them into B uh that's what your income fund is and does it's been very successful we've got millions at work already um and and it is an open fund so people can get in they do they can learn about that at derosacroup.com as well I really appreciate it um and again born out of questioning everything and thinking about better ways to employ capital and and just because one vehicle says this is the way it has to be done why the hell not put together a vehicle that allows you to compound and is liquid and does these other things I think it's brilliant man I love it thanks brother you you are really just I mean it's a pleasure to chat with you you've done amazing things I was really looking forward to this one congrats on all the success and best of luck in into the future thank you James it's been a pleasure to be here today as always folks please stay safe [Music] foreign [Music]