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Advice From a Seasoned CRE Pro During Times of Economic Uncertainty with Jeremiah Boucher | S3SP15

In times of economic uncertainty, commercial real estate (CRE) professionals face unique challenges in navigating the market. To gain insights on how to manage these challenges, we sat down with seasoned CRE pro and founder of Patriot Holdings, Jeremiah Boucher, to get his perspective. With decades of experience in the industry, Jeremiah has weathered various economic cycles and emerged stronger.

Listen to this episode to hear his valuable insights on how to navigate the current landscape of economic uncertainty and set yourself up for success in the CRE industry during times of economic uncertainty.

Advice From a Seasoned CRE Pro During Times of Economic Uncertainty

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Episode Transcript

Announcer (00:01):

Welcome to the Adventures in CRE Audio Series. Join Michael Belasco and Spencer Burton as they pull back the curtain on everything commercial real estate and introduce you to some of the top minds in the industry. If you want to take your skills to the next level and be part of a growing community of CRE professionals across the world, this is for you.

Sam Carlson (00:26):

Hello and welcome back to the Adventures in CRE podcast. We’ve got a really good one for you today, mostly because the timeliness of this podcast is pretty interesting. We are on the 16th of March. And I think the word, the term seasoned pro is about to take on a whole new meaning. We’ve got Jeremiah Boucher with us here today, and we’re going to be talking everything commercial real estate, we’re going to be talking about trends from 2008, what happened then, what’s happening now. So Spencer, maybe paint the framework or the landscape a little bit before we jump into the discussion.

Spencer Burton (01:01):

Yeah, sure. So first off, Jeremiah, thanks for joining us. Sam said it’s timely episode. So Jeremiah is the founder and CEO of Patriot Holdings. He’s based in Las Vegas, Nevada. I’ll let you, Jeremiah, share a bit more about what you do, but in essence, he invests in self-storage and I believe some manufactured housing communities. But 20-some odd years in the business, has been through the ups and downs as several of us on the podcast have. So Jeremiah, why don’t you first start by introducing yourself to the audience, share a little bit what you’re doing at Patriot Holdings and where you’ve been and where you are.

Jeremiah Boucher (01:40):

Yeah, yeah, yeah. Thanks, guys. I admire what you do. I love, like I was saying before, the modeling that you guys put out there. I think you guys are right on the pulse of where they should be, where people should be to learn commercial real estate investing. And it’s the nitty-gritty that doesn’t always get the clicks, but it’s the meat that people need. I mean, I bootstrapped it. So I quit college. I grew up in New Hampshire as a kid. My mom moved me out to Vegas, went to high school and didn’t really know what I was going to do in life. Read a cheesy course, no money down, by Carlton Sheetz. I loved it. It got me excited. I found it in my dad’s attic. My dad owns a paving company and it was either, “Go pave, go join the Army or go to school.” And I said, “Forget all those, I’m going in real estate.”


And I caught the ’01 to ’06, ’07 catastrophic rise of residential real estate flipping homes. And then obviously, yeah, that was a bad ending. So I didn’t have a competitive edge and completely lost everything. Lived in a foreclosed house, lived on buddies couches. But along the way, I didn’t care because I knew I didn’t want to be a realtor. I didn’t like that game. I didn’t like the tax status. I didn’t like any of it. So I saw on that platform where I read another course about commercial real estate investing, and then it got into mobile home park investing. And because I had no credit and I had no money and I didn’t even look like I was 30 years old, I went out and called these guys out in Colorado, Dave Reynolds, and he had this mobile home park store course.


And I talked to him and said, “Hey, I’m broke. What can I do? I love mobile home parks. I see the intrinsic value of the asset and I want to go out and invest in them.” And he basically handed me a list of 30,000 people and said, “Go call and find deals and figure it out.” And I hit the phones for 10 years running and sourced those guys a hundred deals and helped them build one of the biggest funds in the country for C-class parks. And did a swap in 2016 and ended up getting my own equity, my own company, helped manage my own assets and took on that whole new adventure of running mobile parks. And then exited in 2019, had a nice payday finally. It all was validated where my parents said, “Oh, wow. He actually pulled it off after all those years.”


And then I finally got into self storage as well along the way. I thought it was a really good complimentary asset class. And in the pursuit of buying them, again, because of my lack of resources, I went out and did creative deals with seller financing or in these tertiary markets that were gravel roads, and really no fencing, and they looked like trash some of these storage facilities. And I cleaned them all up, and I got some good terms and I expanded them and just lucked out where COVID happened. And all the people in New York and Boston, they all flew out of the cities and they moved into some of these tertiary markets that I went back to and was investing in over the last four or five years.


And then ended up building up a pretty nice portfolio of roughly 65 storage facilities, about 350 million in assets under management with the parks and storage, about 110 million in funds that I’ve raised in capital. And doing well, paying our 10 prefs. And we can get into it, but it’s been a challenge recently. And I’m really glad we’re doing this right now because it was getting quite repetitive on these shows where it’s like, “We’re just going to invest,” and it goes up and you get the exit and everyone’s happy. And now, there’s so much competition, but this is where the strong survive and this is where the wealth is won.

Spencer Burton (05:25):

Yeah, so the classic saying when the tide goes out, I think we’ve said this before, who’s not any swimming trunks. Why this episode is so timely is you went through that 2008 GFC, lost everything. Sam and I had a very similar experience. And I would call pre-2007 a period of hubris, especially for those of us that were in our 20s, had a lot of ambition, but not a lot of…

Sam Carlson (06:00):


Spencer Burton (06:02):

What’s that?

Sam Carlson (06:02):


Spencer Burton (06:04):

Substance, yeah, that’s a good way to put it. And we got smacked in the face. And you learned a ton from that period and from coming out from that. My first question to launch, actually and before I…

Michael Belasco (06:17):

Wait, before…

Spencer Burton (06:18):

Go ahead.

Michael Belasco (06:19):

Sorry. I was going to say before you get into that, for those that are just tuning in and don’t know the background with you and Sam, just give a brief overview of what happened to you guys as well because then we’ll have it all me.

Spencer Burton (06:30):

Oh yeah, sure. So Sam and I were partners, 50/50 partners in a mortgage brokerage firm, which Jeremiah understands that business well. It’s like in the Carlton Sheetz days. It’s hilarious to say that because that’s like a call from the past. That’s like the late night TV in the late ’90s, buy money or buy real estate, no money down. Everyone was riding the Carlton Sheetz thing, and a related business was mortgage brokerage. And early 2000s, it wasn’t just subprime, it was all day. It was really very easy to get a mortgage, and mortgage brokers were making money hand over fist. And so I was doing residential land development. Sam had been a mortgage brokerage or had been a mortgage broker and he approached me about launching a mortgage brokerage firm. And so we both put really our life savings at the time into this thing. We owned it 50/50. It grew very fast, became very successful until it wasn’t and collapsed. And the fallout from that is not too dissimilar from…

Sam Carlson (07:35):

And I’ll just piggyback onto it. When we talk about collapse, and maybe there’s some nuance between that experience and what’s happening today, we had 80 banks that we would broker to at that point in time. And I don’t remember what the month was, but I remember where I was sitting.

Spencer Burton (07:51):

December 2006, yeah.

Sam Carlson (07:52):

Okay. There used to be a website and the website would be, every single day, which banks had gone under. And we went from December into the next month of March going from 80 banks that we would send transactions to, to five. And that’s how quickly the water turned off in those times, and liquidity evaporated. And we were the first ones that felt it. Meaning the banks, obviously that affected us in a really quick way. But everybody else, people in regular America investing their money, they didn’t feel it the same way we did and as immediately. And I will say just one thing, and I’m sure we are going to go all over the place. Hopefully, we can really get a really defined message. Maybe we can do your question, but I’ll say this. In those days and without any real previous experience or substance, when that happened, the thing that felt the craziest, and I think the thing that’s different is the lack of control then.


Where today it’s like, “Okay, this landscape, I see what’s happening. Now, I know how to navigate and take control.” So for me, I’m like, “Well, what can we share on how to navigate today to start taking control?” Because I think that’s the biggest problem, is people just sit there and wait when things are good. And Jeremiah, you said this. When assets are just going up and if you can fog a mirror, you can make money in real estate. That’s not what we’re talking about right now. You have to have substance, you got to have a plan, a strategy. And it’s totally doable, but you just got to take control. So I’ll turn it back over to you, Spencer, but it’s funny that-

Spencer Burton (09:31):

Yeah, so let me set it up for the question at hand. Yeah, so we are March 16th 2023. This past Friday, Silicon Valley Bank failed, follow on from that, Signature Bank. Third, SVB, second-largest bank failure in history. Prior to that was WaMu, September 2008. Signature Bank fails, third-largest bank failure that happened over this past weekend. This week now, you’ve got First Republic that’s being saved by the Big Four here in the United States. Credit Suisse was overnight injected 50 billion of capital in order to hopefully stabilize its balance sheet, but it’s a potential Lehman waiting to happen. The point is, is we are right now in this period of intense volatility, intense uncertainty. And Jeremiah, to you. As you’re now thinking about it, you own several dozen properties, you got 350 million of AUM. How do you approach this situation based on what you learned from your time in 2008?

Jeremiah Boucher (10:39):

Yeah, that’s a good one for all of us.

Sam Carlson (10:41):

That’s not a loaded question at all.

Jeremiah Boucher (10:42):

Yeah, that’s a good one right there. From so many different perspectives. As a investor, as an individual investor, I’m looking at it a specific way. And then as a business owner, I’m looking at it a specific way. So it is something here. So okay, from a business standpoint, I’m in the business of private equity, or I think real estate syndication, being a general partner like I’m sure all you guys are. I think how this looks different is the availability of information and the amount of lending and creative financial engineering on assets in my perspective, and maybe because I’ve evolved as a business person, has evolved dramatically over the last 10 years or 12 years. So it might not be subprime home loans now. That was the ticking time bomb that no one… Looking back, it was so easy to see they weren’t sustainable. Now, there’s so many. When we look at these banks, many of their loans that were perceived as assets were lent on venture capital.


I mean, some of these businesses, I would be surprised if there was really a true business model that could actually make money outside of the next guy buying it at a higher valuation. At some point, all the assets can’t be levered up. And it sounds like the same position we were in in the single family home residence where you guys remember, you do a loan on a house, somebody buys it. The intrinsics of the actual deal never made sense, but some other guy, some sucker will buy it after you and you look like a genius because you got out of it. And valuations weren’t really dictated on the performance of the asset. There was a lot of money chasing assets and a lot of people making fees on getting that money out there. And I think to a degree, there’s that parallel with the industry now where in apartments and in private equity, venture capital, all this money is created.


And this could be the COVID effect, or this is a macro theory, but that that money now, it has to be put out in the system and it has to be applied to assets in order for these banks to make fees and for investors to make fees. And I’m just a small microcosm of it all, but I played this cautious approach after 2008 of buying these assets where I’ve had my stint with retail, with industrial, with office. And those assets always had an issue where one of the larger tenants or the secure tenant never really came out the way that I wanted and it never was as simple. So I’ve pivoted to have all these multi-tenants in storage and mobile home parks in order to control my destiny moving forward. We’re on year-to-year, month-to-month leases, but with that comes the responsibility of having to operate the assets.


And these assets have exploded in value over the last 12 years. But I think there’s still this other side of the equation that you have to serve your customer, your tenant, you have to know how to operate them, and you’re limited on your resources. You’re not bringing in high, high revenues. These are low ticket items, a hundred, $150 for a storage unit and 400 bucks on a mobile home lot rent. There’s no easy money. My father told me a long time ago, “You never get something for nothing. You got to work hard for it.” And now, it’s coming to fruition where you can’t just buy these assets where I was selling these mobile home assets in 2019. And I look back and I thought, “Jeez, I’m going to actually… I left money on the table.” And that bothered me, but to a degree, I remember the old times where I lost it all.


So I just see the real fundamentals are coming back. So how I’m navigating right now, is what you guys teach quite a bit, is digging into the numbers. I mean, forget the emotion. I mean, the Warren Buffett way of looking at things in terms of real estate, I would perceive if you were to say teach me about real estate, is look at the intrinsic value of the asset and look at what the Wall Street guys like to call the un-levered yield or the stabilized cap rate regardless of the financial engineering behind it. So where is it today? Are you buying it on a six and a half or seven cap? Where can you bring it? Because I’m a value add investor. And with those, are those real assumptions? Or is that fabricated? Because right now for us, we’re not building in a lot of rent growth. And for us, we’re building in a lot more economic vacancy with concessions and rental discounts and vacancy.


So I’m getting really sober on the actual underwriting. And when that happens… And then yes, the financing’s a function of it. And yes, I want to get creative, and I think I can do some seller financing, and I think a lot of competition’s going to fall away. But what I’ve seen over the last six months is if you take a sober look at the deal, it just doesn’t pencil. There’s just too many heavy lifting, moving parts, or resources I need to apply to that asset from my company that I believe will create a huge opportunity cost in the future. So I mean, I know a lot of people don’t like to hear it, but you got to be patient, but that doesn’t mean not play the game. I mean, I’m swinging the bat, I’m looking at assets, I’m talking to sellers offline before brokers get them, but now it’s just saying no a lot.


And then focusing on operations, focusing on the construction that we’re doing, reducing projects and communicating to our investors. I mean, shit. I spent the last week just taking business plans, putting them into webinars, putting them into decks, sharing them. I mean, it’s killing me. But it was a sobering moment where investors would come up to me and say, “It’s cool that you’re promoting social media.” I just do a few videos and my team gets them out there, but they’re like, “I want to know about the property. What’s going on with my property? It’s my money and you better hit your projections.” And it’s like, “I don’t care about social media. I care about delivering on my property.” So that’s where my head’s right now, is it’s not about flash, it’s not about size of deals, who’s the biggest, who’s the best. It’s about executing on your plan and being patient for great deals.

Sam Carlson (17:24):

Well said. Well said.

Michael Belasco (17:24):

That’s great. So to sum up what you’re saying for the real estate financial modeling mind, I mean, you’re underwriting and doing the valuing. And you said it perfectly in the very beginning where some other sucker’s holding the bag at the end. You have your two components of value creation. One is this operation and what you’re talking about, and then there’s this reversion reversion calculation you do at the end.


So what you’ve said basically is we’re not over-relying on this reversion value right now. Our secret sauce here is crushing it. If we’re doing value add, we’re crushing it in a way, whether it’s construction or there’s been mismanagement. We’re doing that so we ensure that we are tying up and securing that operating cash flow so that that is the driver of value and we’re not being over-reliant on something that’s less predictable. We control management, and that’s our expertise. And how things fall on the back end with the “reversion value”, quote, unquote, for us who are in the models, that’s where you leave that up to fate. But as long as you have that proper execution strategy, that is where safety lies, no matter what’s happening in the external markets. Did I sum that up in a…

Jeremiah Boucher (18:43):

Yeah, well put. And then one point to that too is well put right there. And the people that are playing this game now, it’s a big boy game. The game that you’re playing is no more do you sell a property, make a million bucks, or as you as a sponsor, and then you go out and buy some nice house or car, whatever, and you show it off. You better put every dime back into your team and in reserves because right now, if you want to really capitalize this time around, what you said right there is rather than the reversion at the end where you’re going to get some compressed cap rate and you look like a genius, those trends are gone. Who knows what’s going to happen, but you better be able to dial in on the operations.


And I don’t care who you are. Unless you’re buying a 50… Well, even then. If you’re buying a 50 million-dollar apartment complex, you better have accounting, operations, construction, leasing, marketing. That better be dialed in. The talent is there, but you better invest in it right now. And if you don’t, you’re just some guy that thinks he’s a real estate investor that can engineer a spreadsheet and got a little bit of an education, but that you’re never going to scale, you’re never going to grow and you’re going to a lot of people off. So put the money into the team right now. That’s how you win this game. It’s a business. We’re a business. We’re not a real estate investor. You’re an LP too, that’s great, but you’re a business that makes money for investors.

Spencer Burton (20:06):

No, I love this. You brought up Warren Buffett. So one of Warren Buffett’s philosophies is buy companies that you want to hold forever. And too often in real estate, we get into this game of, “Well, I don’t want to hold it forever, but I can get this quick return, flip it back to the market.” And that’s fine until you run into periods like this where either you don’t have rent growth or you don’t have cap rate compression, and then you actually have to operate a property that you want to own and you don’t know how long you’re going to own it. And so first, buy real estate you want to own forever. Even if you don’t intend to own it forever, if you’re buying real estate that you would be comfortable owning forever, you’re generally going to be in an okay position, all else being equal.


The other thing that Warren Buffett brings up, and this actually relates to your point around retail and office. He says buy company… He prefers to buy companies that even a ham sandwich could run. I don’t know where he came up with that and why a ham sandwich could run it. And/or to you, it’s as easy as running a ham sandwich. And that usually is when you’re a specialist at something, running it’s easy for you. And too often, we’re either getting into a space that we don’t know that well. And therefore to us, running it is not like running a ham sandwich or we’re over complicating it. And to use a phrase that Michael and I know well, too sharp doesn’t cut either. And so anyway, those are some great points. Sam, you were going to say something.

Sam Carlson (21:37):

Yeah, I want to jump in here real quick because as you know, again, firing off all these memories and everything. I behaved very differently over the last three, four years than I did back in the years leading up to the 2008 thing. And in 2008, the time running up to that and then recently, there’s a lot of this behavior that I would sum up as speculation, okay? Everybody’s speculating. Why are they speculating? Because there’s so much cheap money everywhere. We don’t have time to do evaluation. We have to do speculation. And so evaluating the fundamentals of a business. And it’s really funny. I mean Spencer, we’ve been friends since we were seven. And even just in a micro sense, I’ve been looking to buy a home in the place where I live, and it’s just been like the fundamentals do not support me buying a house in this place where I live. It supports putting my money in other places in my business, whatever it is.


And that’s been maybe more difficult because you look around, up, people are buying houses and they were running up their equity. And it’s like, “Okay, well, some people do get lucky.” That does happen, but it’s not a behavior pattern that I am at all willing to participate in. If it’s not a sound investment that I can understand, look at and go boom, that’s a quality investment, I’m getting a good exchange for my money, I’m not doing it. And I think that there’s been a lot… Again, do micro. I’ve got a friend who has been buying cars, the same Airbnb approach. He’s been buying cars to do Turo. I just heard from him recently. He’s hosed because he’s got 15 cars. Some of them Porsches, some of them these really nice cars. And when money was running up, he was getting all these things rented out.


So I think that that seasoned approach, okay, if I look back and the reason that I feel so confident coming into today is I’ve always, since that time, I’ve always evaluated decisions. And anytime I find myself speculating, I’m like, “Nope, I do not participate in that behavior anymore.” It’s a sound investment or it’s not. And I’m cool getting rich over time, little by little, base hits over time and focusing on quality. Now, Jeremiah, you said something a couple times, and Spencer talked about the tide going out and seeing who’s wearing shorts. Liquidity is drying up. That doesn’t mean opportunity is drying up. In fact, opportunity is going to start abounding because you have a bunch of bad assets, a bunch of bad businesses that are going to get wiped away. The tide has come, but the good ones are now going to rise. I mean, right now, you have the opportunity if you’ve done all of these things right. And maybe you haven’t.


If you’re like, “Oh, I’m listening to this and I’m a little freaked out,” well, operations, like you were talking about Jeremiah, quality, evaluate your business, evaluate your plan. Where are you vulnerable? I’m guessing today, you are looking at things within your own plan, within your strategy, within your business that you had never considered before, things that like, “Oh, I wonder if we’re doing business with that bank. Is this a good decision? Or if we’re, whatever it is. You might take some time and start evaluating vulnerabilities today that you did not think that you had a year ago. Start shoring those up so you can move forward confidently because there will be opportunities and they will be amazing, but you’re not going to be able to take them if you don’t have your war chest, if you haven’t battened down the hatches. And I don’t think it’s a time to shrink and a time to be scared. I think it’s a time to assess, take control, and just modify, adapt your strategy accordingly.

Spencer Burton (25:38):

With that thought though, not everyone has the experience that Jeremiah had in order to prepare, nor did they have call it the runway. We all had 10, 12 great years. Some people didn’t have that. They started maybe in the late ’20, teens, maybe they even started at the beginning of COVID and they aren’t prepared and they are scared right now. Jeremiah, psychologically from what you learned, what advice can you give to those people? They’re sitting there going, “I’ve got a loan maturity coming up this year and there’s no way I’m going to be able to pay it off.” How do you respond to those people? Psychologically, what advice do you give to them to help them through a time right now that could be a very difficult time for the next few years for them?

Jeremiah Boucher (26:26):

Oof. So in that particular case, you’re saying if an investor is on here and they have an asset and they know they’re entering into some choppy waters and it looks like it’s going to look tough for them? Is that the question here, is psychologically how they-

Spencer Burton (26:45):

Yeah, that’s exactly the question. Or put another way, what advice do you give to Jeremiah 2007?

Jeremiah Boucher (26:51):

Oh, boy. Ah, man. So you got to get real, first. You got to stop being delusional and you have to get a real assessment of what’s going on, an objective view, and you got to take off the rosy glasses, and you got to really deal with the hard problems. And if you do it right now, you got a chance at being able to work them out over the next two years. If you put your head in the sand and you pretend like it’s going to get bailed out because the market’s going to shift and you could sell or you don’t have the tough conversations with your investors, with your partners, with your banks, with a lot of other interests, with even your tenants that are delinquent, if you don’t address this now and you get in front of it, that is going to create a lot more hell in your life.


So if I looking back could do it differently back then, I would’ve took the hit earlier. And I’m not saying it wouldn’t have worked out. I mean, people could be in a position where there’s not a whole lot they could do. I mean, you got a series of things that you can look at in terms of looking at higher debt, interest debt, and can you break even now and just take the hit. You can look at selling off some of your GP shares and bringing in a partner. You can look at somewhat… There’s a few different creative things. You can look at the seller possibly extending out their note or some way of negotiating it, but if financially it’s not going to work, you got to have those tough conversations and deal with them now. Because when panic really hits, I mean, it’s just starting, people are going to really go after you and you’re going to ruin your reputation.


So that was a lesson that I learned in my book. I mean, I wrote this book called Finding Your Edge: How to Win at the Game of Commercial Real Estate. And through this process philosophically and through just a maturation process of me evolving as a man and a business person, you can’t run away. You have to address life in every situation. You got to confront conflict and you just deal with it, be it resourceful and you dig deep. And if you’re committed, then people see that. And even if it didn’t work out, you do everything you can to be obviously ethical and have integrity, but you stand. You fight it and you handle it upfront. And people, even if they don’t like you, they respect you for that.

Sam Carlson (29:29):

Yeah. I was just going to say before you… Within the first 30 seconds, you said what I was thinking too. If I were to give myself advice, I’d say waiting is your enemy. Waiting is your enemy. Creativity is your friend, okay? So be creative. I mean, you took the words right out of my mouth. The other thing I would say is to Spencer’s point, if you find yourself in a position where it’s like, “Man, I thought I was going to be here a year from now and actually, I’m going to be behind, quite a bit behind,” I would say that a self-assessment, you said reality, is really good. And if you can’t invest in opportunities and in your business, then you got to invest in yourself and in your network. Whether you have a lot of money, a little bit of money, whatever it is, investing in yourself and in the people around you, that will always pay dividends, always.


And so when an opportunity does come, you’ll be good. But if you don’t have the wherewithal to do opportunities, that doesn’t mean you sit on your hands. That doesn’t mean you wait. It means you identify, “Okay, where do I need to be better personally? Knowledge? Information? Do I need to be better at…” I mean, a lot of people right now are shoring up their modeling skills because if you’re going into employment in the commercial real estate experience, do you think there’s people that would value the person who is more skilled as opposed to the person who’s like, “Well, I just graduated. I know a little bit, but”? No, “I have experience. I’ve taken all these programs. Here’s some models that I’ve done.” So just shore up yourself, shore up your network.

Spencer Burton (31:13):

Well, I think the fear, at least this is how I felt coming out of it. It’s like first off, I kept digging. So to both your points, it’s like, “Stop digging. You’re digging yourself a deeper and deeper hole by waiting. Get creative, get out of the hole quickly. The sooner you can start over, the sooner you can be back on track.” And this is actually from Michael. So Michael has a really interesting story from wanting to be a famous musician to having to start over. And then your journey back to grad school, Mike, I think is… What mindset should someone be in? Or what advice, Michael, do you give to someone that, let’s imagine that they hear this podcast a year from now, they went through all this and they’re like, “Oh my gosh, I have to start all over again. I don’t want to start all over again…”

Michael Belasco (32:01):

Yeah. Well, in a lit of ways…

Jeremiah Boucher (32:01):

“… the last 10 years”?

Michael Belasco (32:05):

I mean, in a lot of ways, and I won’t go too public with it now, but this is happening to me now, after leaving a company and I’m starting over now. I’m about to launch. I’ve launched, actually. We’re underway. And I read this earlier today. If you’re afraid… And you hit on it, Jeremiah, indirectly of what I would say. If you’re afraid of death, you’ll never fully live. If you’re afraid to die, if you’re afraid to look at it, you said burying your head in the sand or not facing the reality, hoping the market switch. If you’re afraid to face that, that reality that something bad is coming down the road and not just getting in front of it and owning it, then you’ll never be able to pivot. You’ll never be able to transition. Something might be dying, something then it’s outside of your control. And you need to take that by the horns, recognize it, and then either you go through that metaphorical death or you figure out a way to survive.


It’s almost like you got a lump and you don’t go look at it. You don’t go take a look at it at the doctor for 10 years or however long. And when you’re looking at a period right now, a lot of people that are owning real estate might have a lump that they might know is there and they just won’t go take a look at it. And this is all metaphorical obviously, but this is on the micro to the macro. And then yeah, if you are at a moment where you need to transition, yeah, you just have to open up and face that reality, and you have to dig and you got to say… And Sam, you talked about speculation versus making an educated decision. And you just have to get in and do the work and figure it out. There is a lot of speculation, but a lot of it before you make a move is research.


And we learned this, Spencer, from a mentor, which now when we’re in this moment in time and you’re looking at an investment strategy, whether your own and you’re reassessing just at a macro level. And I said this for everything, every type of real estate strategy, Spencer, you know exactly who said this. It’s as simple as this, no matter how sophisticated you are, demand greater than supply at attractive pricing. If you can get that, whatever you’re doing, if you can get the research down and be able to prove that without a doubt, you have a great strategy going forward. So that’s my reassessment. Oh, go ahead, Sam.

Sam Carlson (34:34):

I want to pick up on that because that’s a perfect direction where I was thinking. We’re getting towards the end of our podcast here. I want to shift it from maybe the evaluation and maybe some advice stuff to tactical, okay? What are the opportunities? Now, you gave a really good land, or a really good formula there, Michael. It makes sense. But tactically, what are the opportunities today? What assets maybe look better? What opportunities look better? And I guess I’ll go to you first, Jeremiah. You can talk about what you’re doing now, but then some ideas on top of that.

Jeremiah Boucher (35:10):

Yeah, yeah. I know we’re getting tight on time. So I got some things to say what you guys just brought up, and I think it’s really important right now with the climate that we’re in. So what you said, Sam, in terms of what do you do right now? In an environment of fear, it’s easy to play. I love sports. It’s easy to try to protect your lead and play defense. And there’s a time for that, there’s nothing wrong with that, but in every game, there’s a time and a strategy to play offense. And that offense is still now. Having that offensive mindset and getting in there and being self-aware to play to your strengths so you really understand, even in this in market, what are you good at? And you better really understand that. And like you said, Sam, you got to invest in that.


So for me, I was good at making a lot of cold calls. I was good at evaluating things very quickly. I wasn’t in depth, but I had a good positive attitude, a shitload of energy. And I just was willing to take a lot of risks because I didn’t have a wife or kids or anything, and I really believed in the asset class. So my strength was getting out there and communicating at scale and building trust and relationships and playing the long game. And then the thing is with fear, you were talking about there, Spencer, when fear is clouding your mind, if you’re in a fight and you have fear controlling you, you can’t think, you can’t actually implement any strategy. You get beat up and you exhaust yourself. So the big thing I would do is you have to understand that whatever you’re great at, you stop and figure out some discipline to focus on that craft for 2, 3, 4 hours a day, whatever it is. Even if you’re losing everything, if it’s a calamity, practicing the craft is what makes you great.


So don’t worry about the financial rewards. If you’re getting better at evaluation, if you’re getting better at cold calls, if you’re building your database, if you’re getting better at construction, that’s the long-term success. I mean, yes, you have to handle your financial business, but investing in that skill, that’s the only thing authentic and real to you. Money’s everywhere and real estate’s everywhere. That’s the only thing unique. And then the last point is if you’re subjected to working a job or if you have to do some type of income earning, trading time for money, I would highly recommend whatever you do, choose a parallel where you’re working to learn. Like the old Kiyosaki thing I read in 2002 or whatever where I was a realtor, not because I liked being a realtor, I wanted to learn what is contracts? What’s MLS? What’s comps? What’s the whole game? Appraisals?


So whatever you do, like you said, if you want to be an investor and you want to be in commercial real estate, but hey, work as a modeler. Do a thousand models, get paid a base salary, take care of your business. But every single day, the bigger vision is so you learn and you are great at your skill, and you’re not taking these daily reps and wasting your life away for money. You have to be looking at the bigger picture. So it’s like having the long-term vision of what you want will help you get through that fear. And then Sam, to hit your point about what asset classes I’m interested in right now, I’m sticking with what I know. I like commercial small-bay warehouse with storage. It’s in conjunction. And I like manufactured housing, but what I’ve pivoted, when you asked me, Spencer, what would I do now differently?


So number one, you mean, you got to fix debt on there. So short-term debt, obviously, everyone knows is going to kill you. So even if you get the seller to help you finance, you get creative. Or if you get a bank to finance you, be disciplined and fix out that debt as long as you can. Secondly, look at the operational cost of the deal. I think the biggest thing for me is I did a lot of deals that were really hairy, that they were rough, conversions where it was a really old asset and I had to convert it into storage, or I had really rough tenants in these mobile home parks and the infrastructure was falling apart. You got to, just like the Buffett method, look at the value of the asset. And if you had a punch card, like he always says, and you can only buy five assets your whole life, would this be one of those assets that you would buy?


And you guys mentioned, Michael, you were mentioning, I mean, sometimes you just get lucky, sometimes you get lucky. Well, luck is thrown out of the equation. There’s no more luck. I mean, you’re going to be stuck and married to this thing. So for me, I look at when I make that decision, it’s really about, “Okay, how much of my resources, meaning my time, my energy, my team, my money, how much am I going to take up on this asset?” And if it doesn’t check all the boxes and if it’s outside of that, that is a huge mistake right now. Just like when as a guy, you don’t go on a date for six months. And then you finally get a girl to talk to you, but she’s definitely not your type, but you’re like, “I don’t care. Right now, I just want to go on a date.”


You can’t do that. Right now, you got to just wait, wait, wait, and this is when you got to be super picky about the asset. And I guess to tie into that so that’s applicable for the people here listening, it’s really the capital expenditures, taking a true assessment of what are the true capex needed on this asset, not only in the first year, but the next five years. Because like Buffett said, he loves businesses with low capex. So if you’re pumping money on the balance sheet constantly back into capex, but on the P&L, it looks profitable, that’s just a trick in business. The asset’s a ticking time bomb. So now, if the market liquidity dries up, and you guys, we see it all happening. Unless there’s some crazy intervention with the government again, that this liquidity’s going to dry up.


And what that really means to the average investor and the average guy is you cannot sell. So forget it. There is no exit. I mean, if anyone’s owned a business or a piece of real estate and you run into problems, just like a marriage, you’re married. You can’t get divorced in this stage. There is no backing out. You are stuck with this thing no matter how much you don’t like it. So that is the phase we’re entering into. So realizing that right now that I’m in this, I’m going to have to live with this. And for me and what I see the market valuing right now, especially we got about 400 investors and people that are wondering what’s going on, they want to know cash-on-cash. Where are my distributions right now? How are you guys going to perform? And that’s what’s valued in the marketplace.


And there’s a price discovery going on right now where these sellers thought, “Oh my God, I got all this crazy value,” and the brokers are still in La La Land. And we have to get down to, “Okay, the buyers are realizing more and more every single day cash is king. I am not going to give up my cash for some subpar asset that is built on proforma.” So it’s very critical to hold that cash and wait for the discovery of those prices to go down and value real cash on real assumptions. And then if you can get those deals, they’re fine. If we can hit a 10% cash-on-cash and distribute that out to everybody, you are golden. You’re going to look like a genius. And then when you, you’re going to be… More and more money’s going to come your way, but that is the focus for me right now, is true cash-on-cash numbers.

Spencer Burton (42:37):

Sage advice. I love, Sam, how you started this. It’s seasoned advice. And Jeremiah, you’ve seen the worst. You’re obviously well-prepared for this cycle, and really appreciate you coming on. Sam, I’ll let you wrap it up for us.

Sam Carlson (42:58):

Yeah, this was a fun one. Hit close to home. I feel hopefully that people listening to it have gotten a ton of value and maybe even some confidence, some resolve to start taking the first steps to shore up whatever needs to happen. And thanks for listening. Thanks for watching and we’ll see you on the next episode.

Announcer (43:18):

Thanks for tuning into this episode of the Adventures in CRE Audio Series. For show notes and additional resources, head over to www.adventuresincre.com/audioseries.