Today my guest is Travis Watts. Travis is a full time passive investor. He's been investing in real estate since 2009 in multifamily single family and vacation rentals. Travis is the director of Investor Relations at Ashcroft Capital. And Travis has invested in over 30 syndications. And in just a minute, we're going to speak with Travis about passive investing in real estate.
I'd like to ask you, Travis Watts, what is the BIGGEST RISK?
Travis Watts 47:39
I would say the BIGGEST RISK in passive investing to me is partnering up with the wrong team. It can be disastrous, as we've talked about, but, you know, if you can't execute a business plan, specifically if we're not talking about value, add real estate. So say we're talking about new development new construction, it can be a very bad scene. So I would say you're aligning yourself with the right folks picking the right partners and doing your due diligence up front to mitigate those risks. And in the deal itself, you're looking for a sponsor or or yourself if you're doing your own deals to be as conservative as you possibly can be. You mentioned earlier on the call cap rates, you know, on real estate. So if you're buying something at a five cap, you should be and you're hoping to sell it in five years, you'd like to see a higher cap rate down the road, right? Maybe you project a sell at a six cap, you're just being conservative in case the market softens in case COVID ends up being a, b, c or d. You're using your best judgment to mitigate risk that way. So those are kind of the to two part question. Two part answer.
Today, my guest is Mark Ritter. Mark is the CEO of MBFS and an expert in credit unions, real estate investment lending and small business lending. His primary role at MBFS is leading company efforts to assess assist credit unions and making commercial loans and helping businesses and investors.
I'd like to ask you, Mark Ritter. What is the BIGGEST RISK?
Mark Ritter 30:00
As a lender and people who like to lend money for your real estate investments, my BIGGEST RISK that we come across is is it is kind of nothing to do with real estate. It has to do with the people behind it. When loans go bad in our cases, the vast majority of time it has to do with the people behind it. Maybe you had something go on in your personal life, maybe you you had that vise that you have to get taken care of. Maybe sometimes enough that some things are never enough, where you you can't put the brakes on your growth. And because what happens is maybe when that personal life is out of whack, whether it be a whether it be a substance, whether it be some values, whether it be too much spending is that tends to cause people To make take too much risk in their commercial real estate business, where their margins and and window of error is much tighter. And then as soon as there's a bump in the road, things start to snowball. So we really that's why to manage that risk, we really want to get to know the people behind the transaction as much as the transaction itself. Because, you know, if we have good people who manage their personal life and their expenditures, all right, in a good manner, then all that then you're much more prepared to manage the risk in your commercial real estate life.
Today my guest is Rich Sarkis. Rich is the executive chairman of Reonomy, a leading provider of property intelligence to the commercial real estate industry. And in just a minute we're going to speak with Rich about Reonomy and how you can utilize that to help grow your business.
I'd like to ask you, Rich Sarkis, what is the BIGGEST RISK?
Rich Sarkis 40:28
So from my point of view, the BIGGEST RISK right now that folks within our industry have is the risk of complacency, the risk of getting crippled by what's going on with COVID-19 and obviously, the situation is fluid, it's evolving it's it's, to some extent, getting worse in many areas of the country and that is not good news. And there's you know, no real light at the end of the tunnel because yes, there's there's vaccines in flight and therapeutics etc, but nothing really concrete. that's readily available and where we can say, okay, by this date, you know, business as usual, right. And so in the face of such huge and unprecedented uncertainty, the BIGGEST RISK right now for companies and individuals alike is to almost freeze and to not make decisions that they ought to be making. In our world. That means specifically embracing data technology, information insights, to be able to when things do pick back up beyond the front foot and not get caught, shortchanged, basically. And to probe a little bit deeper, one of the things that recessions tend to do, right, and you don't know if we've seen the last of the, you know, big dip that we had in March, April, and whether it's a true V, you know, recovery, but there are going to be headwinds, at the very least, and we're even seeing you know, job numbers come back and we're was picking up now because states are having to shut down again, it's going to create some more negative outlook, they're one of the one of the benefits, perversely enough of a of a shock to the economic or financial system is it shines a light on inefficiencies. And whereas when the sun's out and everyone's making, hey, you can sort of throw more bodies at the problem and say all hire more people, and we'll do this do that. When times are tough and belt tightening happens, it's like, well, what are these people doing? Do I really need this? This? This is how we do that. And so when you are critically looking at those inefficiencies, there's this almost this, this cleansing mechanism where you then say, Okay, well what is the most efficient way to do this function or to prospect to risk to assess risks to underwrite to whatever it is to conduct an appraisal? And that's where invariably all roads lead to data technology, systems and machines doing what a lot of folks were doing. And don't get me wrong, I'm not saying machines will do everything, but it's really the highest best use and making sure that the appraisers, the brokers, the investors, the lenders, the insurance agents are focusing on their highest best use, which is doing bringing their local knowledge, their insights, their judgment. And that's things that are very difficult to train a system to do, right? And let the computers and the machines and the data crunch through all the data and do the dirty work, frankly, right, the 80% of it, and let the people do the 20% of their highest best use. And so the BIGGEST RISK is to not embrace that not realize that there is this huge opportunity ahead of all of us to really sort of shift the paradigm and go to a much more efficient and I believe sustainable, long term outlook for the industry.
Today my guest is Glen Mather. Glen is the founder of NuView IRA and has been its leader since 2003. In 2018, he also created NuView Trust, expanding the growing business of self directed IRAs into new services to further reduce and eliminate taxes. In just a minute, we're going to speak with Glenn about how you can use a self directed IRA and a little bit about the difference between a custodian and a fiduciary.
I'd like to ask you, Glen Mather, what is the BIGGEST RISK?
Glen Mather 39:19
is this? Are you asking us for my clients and self directing?
J Darrin Gross 39:23
Yep, I'm gonna let you define it for you to kind of, however the BIGGEST RISK, you see, what would you see that is, if it's a client's that's, that's great.
Glen Mather 39:33
I think when you go well, with any kind of investment, you kind of have two choices. You can invest based on the recommendation of others, or you can invest based on your own knowledge. And certainly, maybe alongside recommendations for others where you can actually do your own due diligence on the process. That's what self direction is all about. And if you just get tagged if you're just coming along and doing an alt with a recommend from somebody else, that you don't really know the basis of it, then you might as well be in the stock market. It's no different. I think the the risks, the risks are no greater or less, it's when what you're doing is you're mitigating some of those risks, as you said, or lessening some of those risks through your own knowledge. And, you know, I've certainly heard that Warren Buffett say several times about he won't invest in any business he doesn't understand and I take that to heart is I don't invest in anything and I get some pretty creative things that are thrown at me. And I just recall something if I can tell a brief story, there's a new freeway that's going around Orlando, on the on the west side of Orlando, and it's it just completed almost all of its stops. And, but when you when you build a ring around the city, you generally go through wilderness, right? There's nothing there yet. The freeway effect which we learned in LA right, which is you put a freeway houses are going to come When you own the land around interchange, it's valuable beyond belief, right? So I had I invested in something like this similar that worked out and then the guy told me, he said, I got another interchange, I go great. Bring it in and show it to me. You know, and by the way, it's only for me, it's not for my clients, I don't share it with my clients. And he talked about how he has a land option is going through this company and then you taking that you're splitting the depreciation off and you're moving it to a third company. And then there's a developer who gets 15% of the back end load. My head was about to split. You talk about being the slow guy in the room I was I couldn't get it and I I stopped it after about 30 minutes of trying to sketch it out on a pad and I said I can't invest in it. You guys got a phenomenal track record. All I'd be doing is throwing you money and I trusting you and I don't want to do that I promised I'm not going to do that my with my IRA and or my any over my retirement. So that's been my mantra, the less I know, the more I'll go to partnering until I know, without a lot of money, so, so my risk is mitigated by the fact that generally on my investments until I get to an educated state, is that I'm in it with you. If and if I'm in it with you, Darrin, I suggest that you're probably pretty interested in your money and your segment, you're going to make sure it's as good as your education. So that's kind of as close as I get to risk is, I may look at a deal. I'll educate as much as I can, and then I'll go in at 20% with Darrin. And if Darrin is screwed me is screwed himself 80% you know, and you're not going to do that. So I think it's a pretty fair and easy way to learn and to reduce the risk. But make no mistake, it's on you. No one else is making these selections. It's on you. So that's where the risk lies. And and I don't think that you should be somebody anyone should be scared. Do it with their retirement plan and be Cavalier enough to shove it to somebody else and say go manage it for me. We're in it's stunning because I talk to well educated people. And they're very quick to wave off and say, I don't know anything about investing. I make 600,000 a year but I don't know about investing. So I have my buddy take care of it. I just like it. It shocks me.
Today my guest is Jake Marmulstein. Before grant before founding his company Groundbreaker, Jake held a number of roles involving real estate and technology, supporting the growth of early stage digital technology ventures, while working with the government on foreign direct investment by Fortune 500 companies. In 2011, he started his career in real estate underwriting hotel investments for Watermark Capital Partners. He graduated from Cornell University with a major In Hospitality Management and minor in Real Estate. And at Groundbreaker Jake owns the company strategic vision and execution. He is responsible for sales, management of the departments and people leading them. And Jake also manages the company finances and capitalization as well as the board. And in just a minute, we're going to speak with Jake about software automation, for real estate, fundraising, fundraising, and how it can be an asset to you.
I'd like to ask you, Jake Marmulstein, what is the BIGGEST RISK?
Jake Marmulstein 35:38
So Darrin, the BIGGEST RISK for Groundbreaker in as I as I look at our business, and what we're doing is really managing expectations with people. Software is a living, breathing thing. And it is very challenging for people to evaluate. who aren't typically Software buyers and a lot of people in real estate aren't. So our job is to be good stewards of the, you know, good stewards to other people, treat them with respect and give them the most transparent access to what's really going on and what really our product provides when they're evaluating it, and trying to understand how they can improve their business. And that's how we mitigate that risk of mismanaged expectations and somebody getting something that they think does "x" when it really does "y". And so it's about just education, mainly.