Top #Investment Tips for Aspiring #RealEstate Moguls with Ed Prather

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Welcome to raising the flipping bar, the go to podcast for aspiring and seasoned real estate investors.

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I'm your host, Derek Marlin, and I'm the CEO of Elevation.

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We're a real estate investment company based right here in Denver, Colorado.

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We'll dive into smart investment strategies, market insights, and essential tips for scaling your real estate ventures.

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Whether you're making your first investment or your hundredth investment, this podcast is your blueprint for success in the ever evolving world of real estate investing.

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Get ready to elevate your real estate game and begin your journey with me.

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Hey everybody.

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Welcome back to another episode of raising the flipping bar.

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I'm your host, Derek Marlin.

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And I'm super excited because we have a fantastic guest in the house.

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We've got a guy who is a super savvy investor.

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He's doing a bunch of different things.

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You're going to want to listen to this entire episode.

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He's a fantastic real estate agent, and he also owns and runs a team.

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So welcome Mr.

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Ed Prather to the show.

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You're too kind, Derek.

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It's great to see you as always, and I'm excited to be on the show.

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So thanks for having me.

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Absolutely.

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Well, we're going to dive right in.

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And the way that I always like to say this is these podcasts typically, you know, can get, as my kids say, a little businessy.

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So I like to start it with a little lightheartedness and a little bit of fun.

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So I would love for you to give our audience some sort of fun fact, random fact, something crazy that people, when they listen to this, they go, I would never have thought that regarding Ed Prather.

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Give us a fun fact.

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I, you know, I, for anybody, especially who I spend, you know, we spend time with these days.

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Um, it would seem quite, you know, you know, contrary to the fact that I, I skied on the freestyle team at CU bumps and jumps, and I loved it.

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And I grew up skiing on the Eskimo ski bus going to winter park.

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And if you talk to me in the last five years, I am so anti skiing.

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It's, it's incredible.

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And I hate to say that it's just, you know, the dynamic I think has changed.

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The last time I went was a couple of years ago.

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I had a blast, but you know, it was the coldest day.

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Of the year or like of the last three years at winter park.

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And of course I walk up and buy a ticket.

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So I'm just, you know, get the demo skis anyway.

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That is my fun fact.

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So long, long ago but I'm proud of that.

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And, and I still love skiing bumps, but it's maybe once every three or four years.

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Okay.

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I love that.

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And here's a crazy connection.

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We have, I too am an esteemed alumnus of the Eskimo ski club.

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not a lot of people know what that is.

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And so the cool thing is it's funny.

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I'm going to say this out loud really quick, obviously, because I feel like even though I try not to be a helicopter parent, and I think a lot of people don't, I was there in the eighties.

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and you would essentially get dropped off, you know, at back in the day at South Glen mall, and then you would be with your friends.

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You would go up and you would ski your bus.

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Right.

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Like without your parents, yes, without your parents, no cell phones, no, nothing.

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And then I don't know if like, you know, I have to admit, I, I.

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I skipped out on the lessons sometimes and just skied.

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And man, I just, I remember, you know, what's funny is I remember, and I was probably early nineties when I did that.

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And it was 32 bucks to ski at winter park.

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Yeah.

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You're right.

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Vastly different now.

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It totally is.

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It's funny.

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Okay.

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I'm with you though.

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We have, for the first year, we, I'm one of four boys.

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We all skipped the lessons and it wasn't until the next season.

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My folks dropped us off the first time.

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And then somebody totally kind of ratted us out and they were like, Hey, this year your kid should probably take the lessons.

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And I remember my dad looking at me and the whole trip up.

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We were like, we're dead.

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We're dead.

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We're completely toast and we got our asses kicked.

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But then sadly we took lessons and of course it became significantly better skiers.

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So we did two more years and we did lessons, but, um, I love that.

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So cool.

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Okay.

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Ask him all lumps.

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All right.

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I know.

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What a, what a fun connection there.

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You know, that holds a special place in my heart.

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Just that, that time in my life.

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So I love it.

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That's so cool.

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So, okay.

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So we're going to dive into real estate.

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Um, what, what I'd like to know is I'd like to hear a little bit about more in general about your investment journey.

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Cause you're a savvy guy, and you're doing a bunch of different things.

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Maybe give our folks, whether it's kind of your universal portfolio of if you're a hundred percent real estate, if you do stocks, bonds, crypto, just give us kind of a sense of like what you're doing right now.

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Absolutely.

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I think this is a really, a great question because I've thought a lot about this and especially, As of late, I was fully invested.

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I mean, fully in real estate.

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Some longterm holds, some multifamily in some flips and things.

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And as of late, I've tried to think.

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You know, a little bit bigger, a little bit out of the box, a little bit sort of let's diversify and let's take advantage of some of the vehicles that are in front of us.

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So I, I have moved some of that and in building up, you know, I mean, we've had Roths and like the stuff you're supposed to have, but really have pushed into the equities markets.

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And, and I love that too.

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I, we'll talk about this, but I love economics, which includes all of it, right?

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All of these measures, we have this big jobs report coming out here shortly.

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I still do a lot of real estate.

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I consider that certainly my circle of competence and just like, you know, a kind of a quick rundown.

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I graduated in 05, got licensed in 07, and then went full time into real estate in 2010 and really started on the investment side.

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Uh, doing some flips.

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I remember, I guess like just before 2010, cause we had that 8, 000 tax credit to buy a house as a first time home buyer.

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And that really sort of like got me out of the nine to five.

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Poked around, I was kind of like doing my own thing.

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So I was seeing like 15, 20 houses a day, trying to underwrite stuff, had no idea what I was doing.

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But, if you remember Derek, and I know you were sort of part of this, but it was.

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You know, we always talk about that 1 percent ruler.

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We used to, you know, if you buy a home for 200 grand, can you get 2, 000?

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And it's so out of whack now.

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It's just, this is a different type of market and that's okay.

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But back then they were everywhere.

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You know, the rental market was much softer.

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Anyway, my wife and I were lucky enough to pick up a few and built on that as far as long term portfolio stuff.

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over the years, but in 2014, I had the great idea that, Hey, it's, there's no more room left in the Denver metro area.

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So why don't we go to Omaha, Nebraska and start buying multifamily?

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I mean, what an amazing experience from 14 to basically 2017.

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Quite a bit of activity with repositioning, great experience, learned a lot, you know, knowing what's happened here, in our own backyard probably would have been just, as fine to, you know, just stay in put cause I did have to move some of the, assets, through exchanges into that market.

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But, um, and then after that, you know, I had my daughter in 2017, had been doing some stuff in Oklahoma city, mostly single family homes.

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And, and kind of realize like, Hey, I need to, I need to, to get a home base here and I want to be around and I don't want to like have my career all speculation.

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By this time, people know I'm a broker.

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I've done some friends and family, but then I got coached at the, the highest level I could afford and really focused on brokerage and building that business.

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And then in 2019, we launched the team and kind of coinciding with, I, I'm like you, Derek, I like doing deals and so whether they come through the brokerage or whether, I get a call or see something that's always been kind of a long, you know, we're happening in the background and like I said, I've been focusing on really pushing into the equities market.

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But on top of that, I believe there's a immense opportunity.

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So I have a really focused and been intentional about expanding our portfolio.

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And especially over the last nine months as we gear up for some of these rate cuts and what I believe would be some upward pressure on values.

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Yeah.

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You're right offline.

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You and I had talked about your experience investing out of state.

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We invested in cincinnati.

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Have you run the numbers on?

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Yeah.

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Had you just kept what you had in Denver or did you go straight into the other market and you didn't have to sell or liquidate in Denver versus just staying here the whole time and riding that equity kind of wave over a 10 year period?

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At this point I could do it.

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I love spreadsheets.

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I'm a finance major back then.

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I was just like, Oh, let's do it.

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You know, I can get a 10 cap.

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And, you know, The idea that we're going to enter a market, and I was late to Cincinnati.

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I mean, I like took eight trips to Cincinnati and wanted to do it, but I was just a little late, but you know, I think your timing was good.

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And there was this time in the market with multifamily and otherwise, where you could like fall into deals because there was a lot of fear, but the idea that we're going to enter another market and be effective when you have competence.

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Amongst local investors.

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I mean, we took our licks overall, certainly positive in a good experience.

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And it was, I had 10 31, not many, a few properties.

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I remember the first one I did was like a townhouse in Aurora.

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Plex for 340, 000 in Omaha.

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And the big lesson there is you get what you pay for.

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And it was, I mean, it was brutal, but I had a partner who was really good at syndications and so we were doing small stuff, but it was much bigger than just those 10 31.

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So I think if I would have focused here and pushed into multifamily and continued single family, probably better off, but.

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Yeah, I'm not someone who's going to look back and regret anything.

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At this point I, I track those numbers, return on equity, return on investment, net worth, all that stuff better.

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But I'll chalk it up to, you know, good experiences and some really good deals.

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You were buying at 30, 000 a unit.

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And now Omaha probably trades closer to 80, 85 a unit.

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Okay.

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But I'm fairly, you know, I'm fairly divested.

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I've got a couple of single family homes and that's it.

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Cause we repositioned and we exited and that was per the syndication terms and here we are.

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And when you were making your strategy shift of, of selling that stuff in Omaha and coming back, was it because you couldn't scale up to the degree you wanted?

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Was it more management nightmare?

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Like, what was that trigger that got you to go, you know what, let's kind of come back to home base a little bit and reposition ourselves.

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It's a good question.

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And I remember vividly part of it was just my daughter was being born and kind of like, Hey.

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You know, this isn't quite as good, as we want it to be.

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And now it feels saturated, you know, where you've just got, you've got a lot of folks from Denver.

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You got more people in Omaha that are active on the, on the investment side.

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And what was tough for us is when you're chasing cap rates, you're following the D class buildings and that has D class tenants and that experience and the friction, even with.

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You know, good management.

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It's very hard to manage properties like that because, obviously we want these to be assets, but people are just.

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I mean, they thrashed these things.

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And if I could go back and, I teach, we do a lot of investment oriented training at our brokerage and I teach that a lot.

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There's this thing in a big part of my position and moving into positions and equities is Charlie Munger and Warren Buffett and of course, you know, how relevant to Omaha, but Hey, instead of a fair asset at a great value, let's get a great asset at a fair value.

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And it's funny.

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Cause I was so aggressive before, you know, and you and I talked about the last time we met.

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just that intense hustle where it's like, Hey, you know, if you guys can't place tenants, then I am going to fly out there and place tenants myself.

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And, I think I've grown a little bit, hopefully a little bit wiser over the years and have nothing else understanding like, Hey.

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Time is really, really valuable.

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Our minds are really, really valuable and we only have so much capacity.

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And so in 2017, we had sort of wrapped things up with the properties we had, and it was just harder to find new stuff and instead of forcing it and, the fact that I'm traveling a bunch, it was sort of that natural progression in wanting to have an impact in Denver.

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I remember being in the Highlands and like, look over.

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Downtown and just being like, you know what?

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I want to do something here now.

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And it's been really fun.

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I mean, it's fun and intense and crazy as real estate is, but, over the last and it's crazy to think that it's been five years with the team, but gosh, what, six, seven, eight, since the majority of our Omaha, you know, purchases and dispositions.

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Yeah.

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And something that you just mentioned that really.

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Perked my ears up was we ended up kind of having this term called spreadsheet returns, meaning you can have the most conservative underwriting, you can feel like you're accounting for everything.

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You're not doing pie in the sky underwriting, but you're right.

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Going into those C and even D class apartments.

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And for that, those, out there in our audience, a class is your beautiful downtown Denver.

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You're in the highlights, yeah, you got amazing amenities and then D classes is truly Yeah, kind of.

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I heard a term and it's.

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Maybe not politically correct, but the war zone, I mean, there is some shit going on in, in some D class apartments.

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We were in the sea, meaning they were just slightly a step above, but yeah, I had, let's put it this way.

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If I was training my kids in real estate, I would not have brought them to our Cincinnati apartments when we first bought them and we're trying to turn them over because whether you've got somebody dealing drugs out of one unit, somebody doing who knows what out of another unit, yeah, there is, you're right.

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The pain and the extra effort and the energy versus had you just bought B class out of the gate, you would have probably gotten almost the same nominalized or real return without all the brain damage, but you don't know.

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And you know, we were probably doing at the same time, like you're in your late twenties, you're in your thirties.

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You're like, well, of course I can do this.

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And then at some point, like, what the hell am I doing?

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So you're right.

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You live and you learn.

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And it's a great lesson.

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And I think it's a good reminder and we see it every day, but there is an intensity that comes with real estate because residential real estate, of course we're all involved in it.

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We all need housing, whether we're renting or buying or, whatever.

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Yeah.

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There is an emotional intensity that comes with it.

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And so when you are dealing with folks in Cincinnati or Omaha or Denver or wherever, and you say, Hey, you know, we've gone as far as we can go.

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Without you paying rent and we're going to take, you know, this is what's happening now.

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I mean, you're sort of like begging them not to smash up the unit because like you get, it's this crazy irrationality and not always.

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I think like part of it, I, I love like, real estate, it's just so dynamic, but when you have those moments where you're like, Oh my gosh, this doesn't make any sense on any level.

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Sort of just go, okay, let's keep our head down and keep going because that's the only option, especially if you're in the reposition process, cause you know how painful that can be and how expensive it can be because that spreadsheet, we had like a big, nice mixed use building in South Omaha.

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And.

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Has galvanized pipes.

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I mean, what happened with the plumbing above this bar where it's like dripping black sludge when the bars open?

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you couldn't make it up and that's what you get in real estate.

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And of course, like I said, all is well that ends well, but you got to take your lessons.

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You got to learn from this.

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And for me, not to say that there aren't opportunities in that space because there are.

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But it's probably not suitable for what we would look at or, you know, would be a fit at this point.

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Yeah.

00:15:34.400 --> 00:15:42.921
And something that I, really wanted to dive into that you told me about, and it's always fun for me when we, we kind of jive with other investors, but that they're doing different things.

00:15:43.280 --> 00:15:48.140
Talk a little bit about what you guys are doing in, I'm gonna call it, and please do kind of correct me whether it's.

00:15:48.451 --> 00:15:58.140
Luxury airport parking or luxury hangar parking, you know, I've got, you know, the 30, 000 foot overview, but really give our audience an idea of kind of what you're doing now and how you got into that.

00:15:58.140 --> 00:15:59.081
Cause that's super interesting.

00:15:59.100 --> 00:16:01.240
And we've never had anybody talk about that on the podcast.

00:16:01.610 --> 00:16:02.581
I appreciate you bringing it up.

00:16:02.610 --> 00:16:04.510
It's not luxury.

00:16:04.571 --> 00:16:10.730
And I'm not just saying that because You know, we see these big bunkers and hangers for like the toys, right?

00:16:10.730 --> 00:16:12.671
The RV with the couch and the football.

00:16:12.701 --> 00:16:13.240
It's sweet.

00:16:13.280 --> 00:16:14.311
Like those are really cool.

00:16:14.551 --> 00:16:14.801
Yeah.

00:16:14.821 --> 00:16:16.410
This is on airport.

00:16:16.410 --> 00:16:20.130
So we look at a longterm, you know, like a 20 year lease from the airport.

00:16:20.740 --> 00:16:25.931
We look for smaller airports because it's very difficult to deal with the bigger airport.

00:16:25.961 --> 00:16:27.681
There's just like many, many, many layers.

00:16:28.135 --> 00:16:34.625
But imagine, you've got a second home in Moab, you live in Colorado, you live in Salt Lake city, wherever it might be.

00:16:35.076 --> 00:16:41.495
And it just so happens that like the Canyonlands airport in Moab is about 16 miles outside of town.

00:16:42.176 --> 00:16:48.155
And so what we've done is we've leased some land and we're in our second phase now, but adjacent to the terminal.

00:16:48.155 --> 00:16:52.145
So certainly walkable and, and I'll just make this caveat.

00:16:52.255 --> 00:17:02.336
Once you involve a shuttle, it gets very difficult, but walkable and, you've got basically a 12 by 25, unit in a nine foot door.

00:17:02.395 --> 00:17:03.186
That's roll up.

00:17:03.586 --> 00:17:05.905
I mean, you just, you have your padlock, you roll it up.

00:17:05.905 --> 00:17:06.121
Okay.

00:17:06.351 --> 00:17:08.661
And, you know, maybe you have a Tahoe in there.

00:17:08.691 --> 00:17:20.060
Maybe you've got all sorts of toys, as far as stuff that you're using and running around with like razors and all those four wheelers and stuff and Moab, but, our first phase there was 17 units.

00:17:20.060 --> 00:17:22.070
We're getting ready to build 19 more.

00:17:22.431 --> 00:17:27.240
And the idea is it's not just second homeowners, but there's a lot of folks that.

00:17:27.641 --> 00:17:37.941
That don't want their car in long term parking getting beat up getting all the dust and everything So we started moab in 2009 was the first phase.

00:17:38.111 --> 00:17:42.361
This will be the second phase and quite frankly this is my dad and I that do it.

00:17:43.040 --> 00:17:58.496
I've been aware of it and sort of educated on it But in just the last couple years i've been much more active So the first project was at dia that would never happen at this point because it's just so big You Yeah, there is a shuttle service there and it works really, really well.

00:17:58.496 --> 00:18:01.796
It's the DIA employee shuttle that we've been able to work with.

00:18:01.796 --> 00:18:01.826
Okay.

00:18:02.066 --> 00:18:03.326
we have 62 units there.

00:18:03.326 --> 00:18:04.826
We have 11 at Centennial.

00:18:04.826 --> 00:18:04.945
Cool.

00:18:05.276 --> 00:18:06.655
17 in Moab.

00:18:06.665 --> 00:18:19.306
It's an interesting thing because when you're looking at a long-term land lease, with the airport, you're never gonna buy land and you, there's never gonna be land available close enough where you would buy it and then walk, you know, private land.

00:18:19.786 --> 00:18:20.026
Right.

00:18:21.111 --> 00:18:29.230
It's really a very, very niche thing, and it's a pure, if you can imagine this, there's no sale, okay?

00:18:29.290 --> 00:18:36.931
So, something to consider here, you build the units for say 12 or 13, 000, you rent them out, for 200, 225?

00:18:37.181 --> 00:18:41.050
There's no toilet, there's no bed, which I love say.

00:18:41.490 --> 00:18:48.601
And, uh, what we have found is especially like regionally, right now we're looking a little bit at rifle.

00:18:48.651 --> 00:18:49.921
we have Roswell in our pipeline.

00:18:49.921 --> 00:18:51.661
We have Laughlin, Nevada in our pipeline.

00:18:52.070 --> 00:18:53.230
but there's need for this.

00:18:53.230 --> 00:18:57.141
And especially, I mean, gosh, regionally, we know what we get with snow and stuff.

00:18:57.181 --> 00:18:59.590
And people just don't want their cars sitting out there.

00:18:59.601 --> 00:19:04.855
And especially as you can imagine, If these are second homeowners, and many times, they're affluent.

00:19:04.885 --> 00:19:08.435
And so, you know, 200 bucks a month is sort of a drop in the bucket.

00:19:08.875 --> 00:19:14.346
and really what our job is moving these things forward in our pipeline.

00:19:14.675 --> 00:19:19.175
Obviously bringing them, to fruition with construction and everything else.

00:19:19.611 --> 00:19:31.131
But each airport is different with an airport board and airport, you know, Many times an advisory board and an airport director So I have to say it's been really fun because it's very different.

00:19:31.441 --> 00:19:32.971
Yeah residential real estate.

00:19:33.260 --> 00:19:40.980
i've always been intrigued by the commercial world and the idea is, if you've got a 20 year lease It works.

00:19:41.070 --> 00:19:42.490
There's no sale at the end, but it works.

00:19:42.570 --> 00:19:46.000
I mean, if you put it, if you kind of force it into an IRR calculation, it'd be okay.

00:19:46.371 --> 00:19:51.270
And what we're looking for is sort of the mid, mid to high teens, if not 20.

00:19:51.320 --> 00:19:56.520
And the idea though, is, you're working and providing an amenity to the airport users.

00:19:56.550 --> 00:19:59.701
So there's really no reason that they wouldn't renew with you.

00:19:59.701 --> 00:20:03.691
And once you, once they renew, then that return gets even better, as you can imagine.

00:20:04.530 --> 00:20:07.760
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00:20:08.060 --> 00:20:12.330
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00:20:12.740 --> 00:20:21.711
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00:20:22.290 --> 00:20:25.121
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00:20:25.705 --> 00:20:31.655
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00:20:32.226 --> 00:20:33.625
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00:20:39.635 --> 00:20:39.895
Okay.

00:20:40.046 --> 00:20:41.076
Let's get back to the episode.

00:20:42.671 --> 00:20:45.411
Well, and that's perfect because you answered, I was going to ask about return.

00:20:45.411 --> 00:20:47.631
So that's awesome on a financing side.

00:20:47.631 --> 00:20:55.020
Are you guys doing this in cash or you refine, can you get, you know, loans on this, talk maybe about the debt side of this venture for you guys.

00:20:55.050 --> 00:20:56.520
So far it's all cash.

00:20:56.570 --> 00:20:58.730
And as you can imagine, that's a little bit tricky.

00:20:58.730 --> 00:21:03.580
So you're, it's really, it's a different, it's a net present value calculation.

00:21:03.621 --> 00:21:05.131
So you're coming up with a discount rent.

00:21:05.546 --> 00:21:11.786
So you can't really like look at it as a cap rate, but you know, we all know a cap rate is an unlevered return.

00:21:12.246 --> 00:21:19.385
And if you were to, it would be strong, it would be right off the bat, 11 or 12 cap.

00:21:19.615 --> 00:21:19.806
Okay.

00:21:19.816 --> 00:21:22.296
so it gives you kind of an idea, but.

00:21:23.105 --> 00:21:30.435
We've found it very difficult, to obtain financing outside of, there's a lot of private folks that are very intrigued by this.

00:21:30.516 --> 00:21:38.455
You've got a long term lease that fits into the airport layout plan and you've got something that has very real cashflow.

00:21:38.855 --> 00:21:46.605
So I don't know that I would call it debt, but I would call it like, you know, participation or even, partnerships that we're putting together.

00:21:46.901 --> 00:21:55.471
As we build out these additional phases and that works pretty well, because if you go to, I still don't understand why you couldn't go to like a regional bank.

00:21:55.721 --> 00:22:00.570
If we have a 20 year lease, what would be the problem with a 10 year balloon or a seven year balloon?

00:22:00.891 --> 00:22:03.141
but so far it's, it's all cash.

00:22:03.141 --> 00:22:05.730
And as you know, that makes things a little bit trickier.

00:22:06.310 --> 00:22:06.951
Yeah, definitely.

00:22:06.951 --> 00:22:07.201
You're right.

00:22:07.201 --> 00:22:19.996
I think we're still in this weird skittish banking time between some of the failures, 12 to 18 months ago, interest rates being crazy, hopefully Things kind of normalize and then you might be able to put, a bit of strategic debt on that or you're right.

00:22:19.996 --> 00:22:21.276
Take on partnerships and grow.

00:22:21.276 --> 00:22:22.455
But that is cool.

00:22:22.455 --> 00:22:28.596
And I, again, I love hearing about when people are doing unique things because a, you don't have as much competition be.

00:22:28.596 --> 00:22:31.675
What I really want our audience to think about is you started this in no nine.

00:22:31.915 --> 00:22:34.586
This wasn't just something that you just threw against the wall.

00:22:34.596 --> 00:22:36.326
You're just trying to all these different things.

00:22:36.326 --> 00:22:38.425
So I think that's a really great way to do it.

00:22:38.445 --> 00:22:40.445
And obviously you've got a long play.

00:22:40.891 --> 00:22:43.030
With the 20 year lease, you know, set aside.

00:22:43.030 --> 00:22:44.351
So I, I love what you guys are doing.

00:22:44.351 --> 00:22:45.070
That's really cool.

00:22:45.500 --> 00:22:46.911
Well, I appreciate that Derek.

00:22:46.911 --> 00:22:55.070
And I think, this is a part of, delayed gratification, you and I are doing this not necessarily for a paycheck, right?

00:22:55.131 --> 00:22:59.621
This is for bigger, long term implications and impact on our families and things.

00:22:59.961 --> 00:23:06.421
With that having an asset that is, it's so niche and it's because each airport is so different.

00:23:06.671 --> 00:23:13.530
It's very hard to scale, but imagine like if you find an Omaha, for instance, you know, some folks that we partnered on and D.

00:23:13.530 --> 00:23:13.701
I.

00:23:13.701 --> 00:23:14.080
A.

00:23:14.496 --> 00:23:17.766
they have Kalispell 240 garages.

00:23:17.766 --> 00:23:21.576
In the airport is very, very, amicable and it works together.

00:23:21.576 --> 00:23:27.726
So I think what, what I've found is it's difficult to do, like we could never do less than six or 10 of these.

00:23:27.776 --> 00:23:28.415
It's kind of a block.

00:23:28.415 --> 00:23:31.895
It almost looks like larger self storage, it's dressed up a little bit.

00:23:31.895 --> 00:23:32.215
It's nice.

00:23:32.226 --> 00:23:34.625
Sometimes we'll do like a rock facade.

00:23:35.145 --> 00:23:41.316
but if you can find, you know, for instance, we reached out to Jackson hole, like Jackson hole would be perfect.

00:23:41.635 --> 00:23:44.986
And you can get to like, there's all this amazing data, like Google earth.

00:23:45.056 --> 00:23:45.965
So you can see.

00:23:46.185 --> 00:23:48.675
Some of my person, there's just no land to do it.

00:23:49.165 --> 00:23:58.316
but Jackson hole is surrounded by land, but they just don't lease land, because if they did, you can imagine how many folks would want that.

00:23:58.316 --> 00:24:05.135
Just given the weather, you know, you fly in from wherever you get in your Tahoe or your Hummer or whatever it might be.

00:24:05.490 --> 00:24:21.101
And you head to your beautiful ski chalet, so it's a little bit tricky, but I think our goal in, in the kind of mid to longer term is, you'll find some airports that we work really well with and continue to phase and add units for their users.

00:24:21.915 --> 00:24:27.115
And the idea though, is, you're working and providing an amenity to the airport users.

00:24:27.145 --> 00:24:30.296
So there's really no reason that they wouldn't renew with you.

00:24:30.296 --> 00:24:34.286
And once you, once they renew, then that return gets even better, as you can imagine.

00:24:35.046 --> 00:24:37.786
Well, and that's perfect because you answered, I was going to ask about return.

00:24:37.786 --> 00:24:40.006
So that's awesome on a financing side.

00:24:40.006 --> 00:24:47.395
Are you guys doing this in cash or you refine, can you get, you know, loans on this, talk maybe about the debt side of this venture for you guys.

00:24:47.425 --> 00:24:48.895
So far it's all cash.

00:24:48.945 --> 00:24:51.105
And as you can imagine, that's a little bit tricky.

00:24:51.105 --> 00:24:55.955
So you're, it's really, it's a different, it's a net present value calculation.

00:24:55.996 --> 00:24:57.506
So you're coming up with a discount rent.

00:24:57.921 --> 00:25:04.161
So you can't really like look at it as a cap rate, but you know, we all know a cap rate is an unlevered return.

00:25:04.621 --> 00:25:11.760
And if you were to, it would be strong, it would be right off the bat, 11 or 12 cap.

00:25:11.990 --> 00:25:12.181
Okay.

00:25:12.191 --> 00:25:14.671
so it gives you kind of an idea, but.

00:25:15.480 --> 00:25:22.810
We've found it very difficult, to obtain financing outside of, there's a lot of private folks that are very intrigued by this.

00:25:22.891 --> 00:25:30.830
You've got a long term lease that fits into the airport layout plan and you've got something that has very real cashflow.

00:25:31.230 --> 00:25:38.980
So I don't know that I would call it debt, but I would call it like, you know, participation or even, partnerships that we're putting together.

00:25:39.276 --> 00:25:47.846
As we build out these additional phases and that works pretty well, because if you go to, I still don't understand why you couldn't go to like a regional bank.

00:25:48.096 --> 00:25:52.945
If we have a 20 year lease, what would be the problem with a 10 year balloon or a seven year balloon?

00:25:53.266 --> 00:25:55.516
but so far it's, it's all cash.

00:25:55.516 --> 00:25:58.105
And as you know, that makes things a little bit trickier.

00:25:58.685 --> 00:25:59.326
Yeah, definitely.

00:25:59.326 --> 00:25:59.576
You're right.

00:25:59.576 --> 00:26:12.371
I think we're still in this weird skittish banking time between some of the failures, 12 to 18 months ago, interest rates being crazy, hopefully Things kind of normalize and then you might be able to put, a bit of strategic debt on that or you're right.

00:26:12.371 --> 00:26:13.651
Take on partnerships and grow.

00:26:13.651 --> 00:26:14.830
But that is cool.

00:26:14.830 --> 00:26:20.971
And I, again, I love hearing about when people are doing unique things because a, you don't have as much competition be.

00:26:20.971 --> 00:26:24.050
What I really want our audience to think about is you started this in no nine.

00:26:24.290 --> 00:26:26.961
This wasn't just something that you just threw against the wall.

00:26:26.971 --> 00:26:28.701
You're just trying to all these different things.

00:26:28.701 --> 00:26:30.800
So I think that's a really great way to do it.

00:26:30.820 --> 00:26:32.820
And obviously you've got a long play.

00:26:33.266 --> 00:26:35.405
With the 20 year lease, you know, set aside.

00:26:35.405 --> 00:26:36.726
So I, I love what you guys are doing.

00:26:36.726 --> 00:26:37.445
That's really cool.

00:26:37.875 --> 00:26:39.286
Well, I appreciate that Derek.

00:26:39.286 --> 00:26:47.445
And I think, this is a part of, delayed gratification, you and I are doing this not necessarily for a paycheck, right?

00:26:47.506 --> 00:26:51.996
This is for bigger, long term implications and impact on our families and things.

00:26:52.336 --> 00:26:58.796
With that having an asset that is, it's so niche and it's because each airport is so different.

00:26:59.046 --> 00:27:05.905
It's very hard to scale, but imagine like if you find an Omaha, for instance, you know, some folks that we partnered on and D.

00:27:05.905 --> 00:27:06.076
I.

00:27:06.076 --> 00:27:06.455
A.

00:27:06.871 --> 00:27:10.141
they have Kalispell 240 garages.

00:27:10.141 --> 00:27:13.951
In the airport is very, very, amicable and it works together.

00:27:13.951 --> 00:27:20.101
So I think what, what I've found is it's difficult to do, like we could never do less than six or 10 of these.

00:27:20.151 --> 00:27:20.790
It's kind of a block.

00:27:20.790 --> 00:27:24.270
It almost looks like larger self storage, it's dressed up a little bit.

00:27:24.270 --> 00:27:24.590
It's nice.

00:27:24.601 --> 00:27:27.000
Sometimes we'll do like a rock facade.

00:27:27.520 --> 00:27:33.691
but if you can find, you know, for instance, we reached out to Jackson hole, like Jackson hole would be perfect.

00:27:34.010 --> 00:27:37.361
And you can get to like, there's all this amazing data, like Google earth.

00:27:37.431 --> 00:27:38.340
So you can see.

00:27:38.560 --> 00:27:41.050
Some of my person, there's just no land to do it.

00:27:41.540 --> 00:27:50.691
but Jackson hole is surrounded by land, but they just don't lease land, because if they did, you can imagine how many folks would want that.

00:27:50.691 --> 00:27:57.510
Just given the weather, you know, you fly in from wherever you get in your Tahoe or your Hummer or whatever it might be.

00:27:57.865 --> 00:28:13.476
And you head to your beautiful ski chalet, so it's a little bit tricky, but I think our goal in, in the kind of mid to longer term is, you'll find some airports that we work really well with and continue to phase and add units for their users.

00:28:13.776 --> 00:28:18.125
And are you doing any other, LP type of investing or limited partner type of investing?

00:28:18.125 --> 00:28:25.215
I know you and I have talked about that and you hit that phase in life where you have, you know, I feel like early on, we always have more time than we have money.

00:28:25.215 --> 00:28:28.526
And then slowly, hopefully we tip that and we have more money than we have time.

00:28:28.526 --> 00:28:30.246
And so how do we want to buy that back?

00:28:30.256 --> 00:28:32.256
You doing any LP investing or other other stuff?

00:28:32.645 --> 00:28:33.435
You know, I am.

00:28:33.625 --> 00:28:35.905
And it's funny because early on, I thought I would never do it.

00:28:35.905 --> 00:28:36.986
I don't know that I like.

00:28:37.266 --> 00:28:40.786
Thought that we would have the ability to do it for some reason.

00:28:41.226 --> 00:28:46.086
But now, yeah, I've gone the GP route and that works great when it works great.

00:28:46.115 --> 00:28:47.685
And when it doesn't, it doesn't.

00:28:48.445 --> 00:28:52.596
So I should say we, you know, I, my wife and I are absolutely a team in this.

00:28:52.596 --> 00:28:56.346
We invest in, um, a few different syndications.

00:28:56.651 --> 00:29:07.010
Um, so far really built around either mixed use or multifamily and what I've learned as the operator, um, and, and not the best operator.

00:29:07.010 --> 00:29:14.730
I mean, I, I learned my lessons and got better through experience, but that it really comes down to that GP, the operator, the sponsor.

00:29:15.105 --> 00:29:25.705
And, and so we've focused really heavily on those, finding those people that have a track record that have a similar risk tolerance.

00:29:26.115 --> 00:29:28.586
I mean, the nice thing is it is truly passive.

00:29:28.976 --> 00:29:38.006
And I am a glutton for punishment, and I say that because I choose to manage a few of our rentals and I'm, you know, it's not passive.

00:29:38.355 --> 00:29:44.865
Um, so it's kind of nice as an LP, not a, not a whole lot, but, um, you know, we look forward to doing more actually.

00:29:44.865 --> 00:29:49.155
And especially as you know, these operators prove themselves and then so far it's been pretty good.

00:29:49.826 --> 00:29:50.096
Yeah.

00:29:50.096 --> 00:29:52.665
And I think something for audience to really think about is you're right.

00:29:52.695 --> 00:30:01.671
I don't like at all the term quote unquote passive, because to me, I mean, really the only thing that should be passive is equity investing, honestly.

00:30:01.830 --> 00:30:05.790
And even then you should be talking to your advisor, you should be managing it yourself to some degree.

00:30:05.790 --> 00:30:07.990
But when we talk about real estate, yeah.

00:30:07.990 --> 00:30:10.381
Day to day working in the rental space.

00:30:10.816 --> 00:30:12.796
is 100 percent active in my opinion.

00:30:12.925 --> 00:30:16.276
I do like the LP and again, we'll kind of put a little context to this.

00:30:16.286 --> 00:30:31.865
So when people are putting together deals, you're either the general partner, the GP, meaning you are the person doing the work, you're doing the heavy lifting, you have the operational, capacity to fix up multifamily properties, fix up mixed use properties, run them efficiently.

00:30:31.865 --> 00:30:32.155
And then.

00:30:32.476 --> 00:30:40.296
Send out a return to your limited partners, your LPs, the folks that are investing with you to help put down that down payment money or provide that capital.

00:30:40.605 --> 00:30:46.435
And so I do think it's an interesting part of people's lives and transition of again, time versus money.

00:30:46.685 --> 00:30:49.296
but I think the, you know, I don't know if you've heard horror stories.

00:30:49.296 --> 00:31:05.161
I've heard a few that obviously the market has you know, I don't want to say exposed, but made it a big challenge for a lot of people and when people are doing multifamily syndications and everything's going great and nobody thought debt would skyrocket at the rates that it is when these payments are coming due.

00:31:05.181 --> 00:31:08.050
I do think there's a reckoning, to be, you know, kind of.

00:31:08.665 --> 00:31:09.455
On the horizon.

00:31:09.486 --> 00:31:13.455
So I don't know if you've either run into that or heard about that, but it's something I do want our audience to think about.

00:31:13.455 --> 00:31:14.955
It's not just the perfect like, great.

00:31:14.976 --> 00:31:16.375
I give you a hundred grand.

00:31:16.715 --> 00:31:18.155
Oh, you're great at running these apartments.

00:31:18.155 --> 00:31:20.736
And then you pay me my 12 percent we sell it.

00:31:20.736 --> 00:31:25.185
And then I make 30 percent and on an IRR basis, like there's some shit that can go on.

00:31:25.405 --> 00:31:26.976
You hear about the wins, right.

00:31:27.205 --> 00:31:29.516
two years ago we took a big loss.

00:31:29.615 --> 00:31:31.796
I should say, I, it's stung.

00:31:32.101 --> 00:31:35.171
and it was because we didn't research the operator.

00:31:35.221 --> 00:31:42.050
The GP ended up being, I guess time will tell, but, unethical and potentially doing.

00:31:42.480 --> 00:31:43.980
Things that are way outta whack.

00:31:44.280 --> 00:31:44.401
Yeah.

00:31:44.431 --> 00:31:45.631
that came on a referral.

00:31:46.030 --> 00:31:51.810
I still, you know, the guy is a, a friend of mine who referred, he lost a big chunk in that deal.

00:31:51.810 --> 00:31:53.611
And now it's a multi-party lawsuit.

00:31:54.250 --> 00:31:59.711
You look at these things and it's a realization like, hey, for one money goes downhill.

00:31:59.740 --> 00:32:01.961
Like, I mean, it can be burned up in a second.

00:32:02.530 --> 00:32:06.631
And it's a shame on me moment when I should have done.

00:32:06.925 --> 00:32:08.016
More research.

00:32:08.346 --> 00:32:09.405
I trust this guy.

00:32:09.405 --> 00:32:15.645
Like I said, I still trust him, but, we're all looking at each other, like how, how did that happen?

00:32:15.955 --> 00:32:17.086
So, yeah, I think you're right.

00:32:17.125 --> 00:32:31.715
And when debt hits like this, it really changes things because I think we can all agree to some extent, multifamilies become a mania and so it's driven down cap rates to a point where if you're going to try to take on a debt service.

00:32:32.151 --> 00:32:43.351
nowhere near where it was three or four years ago, you know, or the, like to get to a reasonable debt coverage ratio, you know, you're doing 40 percent debt.

00:32:43.601 --> 00:32:44.990
I mean, it's just painful.

00:32:45.000 --> 00:32:50.871
So the guys that I, the general partners that we work with now, it's an old friend of mine.

00:32:50.871 --> 00:32:58.161
I trust him very much as it's, it's his family that operates it and it's in the Manhattan sort of like greater area.

00:32:58.201 --> 00:33:01.340
And these guys have incredible track records.

00:33:01.371 --> 00:33:11.661
And because of that, cause they see it, you know, just like you and I think getting into something like this, if you have a seven year balloon, or if you have a rate that's going to float.

00:33:11.951 --> 00:33:16.770
We need to be really careful and really push that spreadsheet.

00:33:17.111 --> 00:33:24.300
Proforma because we know how off it can be and how painful and older building in the capital expenses.

00:33:24.300 --> 00:33:28.701
Because, you know, we all know that like the things that get sent to us a proforma is the white paper.

00:33:28.976 --> 00:33:29.746
They get sent to us.

00:33:29.746 --> 00:33:31.715
It's so like rarely, right.

00:33:31.865 --> 00:33:38.846
You know, so I think it's, it's on us, but find good people and just know, things are going to happen.

00:33:39.576 --> 00:33:42.496
And how is that general partner going to react?

00:33:42.655 --> 00:33:45.086
And that's a, that's a, I think a good way to look at life.

00:33:45.086 --> 00:34:01.215
I mean, like things are going to happen and do we act by exiting the position in a horrifically bad way, or do we say, Hey, we anticipated this and we have, these guys have one to three year renewals, baked into their terms just in case things aren't good or the market's down.

00:34:01.246 --> 00:34:08.876
I mean, there's been a gap and not many multifamily sales because seller there, the debt's so high and sellers believe that.

00:34:09.226 --> 00:34:12.215
That the asset is X, Y, Z, as far as cap rate goes.

00:34:12.215 --> 00:34:16.766
And so you just don't see, and you know, again, forcing a sale is never good.

00:34:17.315 --> 00:34:18.416
Yeah, no, that's well said.

00:34:19.092 --> 00:34:19.503
Hey everybody.

00:34:19.503 --> 00:34:26.563
So what we're going to do is we're having such great information with Ed Prather that I'm actually going to break this up into two episodes.

00:34:27.032 --> 00:34:38.182
So we've covered so much of Ed's very unique and vast investment background, but definitely tune into the next episode because we're going to dive into what they're doing on their team currently.

00:34:38.563 --> 00:34:42.762
Some very interesting things that are going on in Denver real estate at this very moment.

00:34:43.132 --> 00:34:47.112
And you'll get so much out of everything that you need to know for what's going on Denver today.

00:34:47.112 --> 00:34:49.532
So come back and join us and we'll catch you guys on the flip side.

00:34:50.563 --> 00:34:53.592
Thanks for tuning into this week's episode of raising the flipping bar.

00:34:53.972 --> 00:35:07.282
If you found value in our insights and stories, let's keep the conversation going, connect with me on social media, and be sure to share this episode with friends or colleagues who might benefit your feedback and reviews, help us grow and reach more listeners like you.

00:35:07.663 --> 00:35:10.813
So please, if you enjoyed this episode, leave us a review.

00:35:11.643 --> 00:35:14.572
Thanks again to the elevation Academy for sponsoring today's show.

00:35:15.172 --> 00:35:18.483
If you're interested in learning more, click the link in the show notes below.

00:35:18.992 --> 00:35:20.432
And remember every property.

00:35:20.492 --> 00:35:21.213
Tells a story.

00:35:21.563 --> 00:35:22.853
Every deal brings a lesson.

00:35:23.422 --> 00:35:26.213
Keep reaching for those goals and we'll catch you on the flip side.

00:35:28.978 --> 00:35:29.557
Hey everybody.

00:35:29.577 --> 00:35:32.777
Thank you so much for listening and watching raising a flipping bar.

00:35:33.088 --> 00:35:38.427
Just a basic overall disclaimer is that a, this is not legal advice.

00:35:38.628 --> 00:35:40.038
B, this is not tax advice.

00:35:40.038 --> 00:35:41.777
See, this is not financial advice.

00:35:42.148 --> 00:35:45.827
I hope you get the gist, but I'm obviously not a lawyer, not a CPA.

00:35:45.967 --> 00:35:50.507
Hell I'm not even a real estate agent actually, but in general, we hope you get a ton of value out of this, but there is a bit of a disclaimer.

00:35:50.507 --> 00:35:54.068
Please consult a professional if you have any questions whatsoever.

00:35:54.117 --> 00:35:54.768
Thanks for tuning in.