Today my guest is Hamza Ali. Hamza moved to the United States five years ago, and founded Gray Spear Capital, which focuses on bringing investors together and investing in real estate projects in the Texas area.
I'd like to ask you, Hamza Ali. What is the BIGGEST RISK?
Well, it's funny, you bring that up, then I know this is not supposed to be an insurance related answer, but I do have a little bit of a story here that I'd like to share. So very recently, I was I was under contract to buy this property, great deal, great location, you know, just I mean, it checked all the boxes. And, and I put it on a contract. So I, you know, sign the contract, we put on a contract and the next day I get a call from the guy and he's like, I need to talk to you right away and I'm like, okay, and this is the seller directly. So it's buyer and seller. Usually there's a there's a broker in between. But this seller was so panicked that he called me. And he's like, I want to meet you at the property and Okay, I was like, okay, sure, let's go at the property. And then so we walk the property and one building has been completely burned down. And I'm talking completely like it's gone. And it was 114 unit deal when it became 100 unit deal. And he was like, What do I do? I'm like, What do you mean what do you do you know, this is a, this is exactly what you what you carry the right insurance for. And so to answer your question, insurance is the biggest component that will save save us in the time when we need to save you just need to have the right coverage. So talking about risk, this gentleman did not have the right coverage did not have the right dollar amount covered towards this fire damage and I will tell you he lost close to a million dollars because of that.
Today my guest is Richard C. Wilson. Richard is a third generation Eagle Scout. He's also the founder of the Family Office Club, which has over 2000 registered investors. And his team offers a digital investor platform and sources direct investment opportunities for his 58 investor clients.
I'd like to ask you, Richard Wilson, what is the BIGGEST RISK?
For my company, even though we have good managing directors, I think the BIGGEST RISK is myself, you know, I'm driving forward a ton of the new content. You know, when I when I hang up here, we're doing a 1000 person webinar. And I've got someone on my team that could do a webinar on many different topics, but not the same topics I could, you know, fluidly and so it's kind of like a key man risk. And our business, you know, would have to go down to, you know, a skeleton crew if I got hit by a truck this afternoon, and move forward as much smaller business. So I think it's just like many entrepreneurs, getting yourself out of your own way and making sure you're not the bottleneck to growth and making sure that you've got kind of a C level team being groomed and built is part of that but also just thinking through things you know, that are insurance related, honestly related to key man or life insurance, or just You know, if you're disabled and can't work for a while, because think that you know, like most businesses that are like mine with 15 employees, you know, you're trying to grow into a medium sized business from a small business you're in that in between world where, you know, you're constantly trying to push stuff down to the team and get a better quality team.
Today my guest is Dr. William "Bill" Danko. He is the co author of The New York Times bestseller, the Millionaire Next Door, and also his newest book, Richer Than a Millionaire.
I'd like to ask you, Bill Danko. What is the BIGGEST RISK?
Yeah, I think when people are just so blind to well, for example, in Miami Beach right now. There are a lot of people with very beautiful houses on a flood plain or a rising ocean. And one of the things that they're doing in Miami is raising the roadways and creating culverts to drain off the water. What seemed like a good idea at the time to build a house next to the ocean is, in retrospect, not a very good idea. So sometimes we bring this on ourselves. And, you know, I remember reading a book from the 1950s, how to build your dream house for $3,500. And it was kind of a classic and chapter one talks about first select the building site on a hill as opposed to on a floodplain. Okay. People walk into these problems, I think in a, in a naive way, saying, oh, there's land available on the build. Okay, so that's one thing being just not being prudent, okay. But also in minimizing risks. If you do have some pretty good assets, you know, one thing that I have seen with some high net worth individuals and one thing that I use myself is that for example, my timber, my rental property and a lakeside property, I have not my primary house, they're all individual limited liability companies freestanding, then all three of them are held in a limited partnership. So my physical assets are divorced from my my might, my liquid assets and so having some good legal structure is certainly very good in terms of minimizing the risk as well as having your umbrella policy from your insurance company, but having the ability to separate your assets through like the LLC s and then that limited partnership. That is something that is Well, one thing I use And I endorse. And it works for me. My accountant likes it because he gets to do all these extra tax forms every year. Right? I don't. But but but it's okay. It gives me peace of mind. And then in terms of, there's a societal risk. You know, we talked about a lot of lessons here you know about frugality and the 20% and living below your means and all that stuff. And that's all important. Those are good, solid lessons. But at the end of Franklin's essay on the way to wealth, he really summarizes it so well. The people heard the message, agreed with it, and then practice the contrary. The problem is change is hard. People are going to walk into traps. They don't understand the risk they're getting into. What we have to do is be better students. And let's take on some personal responsibility and don't expect the government to bail us out. But build, don't build in a floodplain. You know, don't drive recklessly. You know, a lot of things depend on how our society behaves. And that's going to be the thing that minimizes risk. So I think risk is all the stuff that we take on ourselves. Because we just don't do the homework.
Today my guest is Anthony Scandariato. Anthony is the co founder of Red Knight Properties. They are a multifamily syndication firm. It's a vertically integrated doing both investing and property management. And in a moment we're going to speak with Anthony about both multifamily and property management more specifically.
Darrin: Anthony Scandariato what is the BIGGEST RISK?
Yeah, I mean, the BIGGEST RISK is to me it's always on the buy. So you have to always buy right you have to always run your numbers. You To run a sensitivity analysis, you have to understand, you know, if downside base case and upside, and if the downside scenario still makes sense, then it's a good deal. So the BIGGEST RISK is people not buying right? You know, we always not running these analysis because markets change, and right now they're changing every day. So, you know, you have to incorporate those into your numbers, and we always do, you know, what happens if, you know, I can't get the rents I wanted? Or what happens if I can't refinance or sell for this cap rate? And, you know, what happens if interest rates go up? And, you know, I have to therefore increase my exit cap by 3300 300 basis points. Am I still gonna make a decent return on my money as opposed to putting it in the stock market? And the answer is yes, then that checks my box. But we have a whole criteria of that but the base versus people overpaying for deals just today. Deal doesn't necessarily mean it's a big deal.
Today. My guest is Alex Fleiss. Alex is the CEO of RebellionResearch.com. They're an artificial intelligence company. He's also an instructor at Cornell Engineering. And in just a minute we're going to speak with him about AI and the potential to disrupt real estate.
Darrin: Alex Fleiss what is the BIGGEST RISK?
Alex Fleiss Well, you won't forget my last name because my cousin is Heidi Fleiss, of 1990s fame and Dennis Hof's widow, but I'd say the BIGGEST RISK is the unforeseen risks without a doubt, which obviously is manifest in the COVID-19 Black Swan event or the S&P debt downgrade of the US government in 2011. The unforeseen risks is always always the worst risk, but it's very, it's very hard to worry about risk, you know, because there's, it's almost a it's really endless. I think about my, you know, my, my, my Papi and 911 some people told him Don't take any insurance out for terrorist events, and then other people telling him to take more. And so but Terrorist are gonna blow up the building. That sounds ridiculous, but then of course, what six weeks later happened. And so, you know, we're living in, you know, in times where the unexpected is expectedly happening now. Whether it's America's Cup, the best comeback of all time, the idea of winning seven Sailing races in a row. So unlikely I'm a sailor. And so I got to play the odds that are just almost impossible. But, you know, we're getting to these kind of new. We have such a globally connected world, which obviously has nothing to do wiht sailing. But, you know, it presents more and more and more potential risks against the globally connected world. If a risk arises in India or China, it will travel faster than ever did before because we didn't have that connection in the world that we have now.