Show Notes

Paul’s Contact Info:

www.WellingsCapital.com

Twitter: @PaulMooreInvest

https://www.biggerpockets.com/users/PaulTMoore

Email: Paul@WellingsCapital.com

[00:01:32] IF you want to stick with your resolution and goals, read Atomic Habits by James Clear – https://amzn.to/38ZBqHq

[00:02:22] Paul’s book is called The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing – https://amzn.to/2ScvBj7

[00:04:35] Paul realizes that his degree in Petroleum Engineering tied to oil prices. 

[00:05:14] A few years after getting his MBA, Paul started to work for Ford Motor Company.

[00:05:46] Paul and his friend started a staffing company. 

[00:07:02] Paul explains the differences between investing and speculating.

[00:08:29] True wealth are our assets that produce income.

[00:09:19] Commercial real estate’s value formula.

[00:11:53] Warren Buffett Model

[00:13:03] Paul mentioned Gary Keller’s book. The One Thing – https://amzn.to/37SLrGj

[00:13:35] Adding value to self-storage units.

[00:18:42] Paul explains how well self-storage units did in the last downturn.

[00:21:34 – 00:23:45] How to research what area needs more self-storage units.

[00:24:39] How to research the operator.

[00:33:50] Things to look for during due diligence of a self-storage unit. 

[00:38:19] Learn to pull the plug quickly

[00:45:16] Paul suggests finding a book on senior living and read

Transcription

Paul Moore 0:03
Now the different the opposite lesson is what a lot of, of our guests on how to lose money have learned as well. And that is never give up. Which is kind of funny. Because some of those lessons have been, you know, the fact that if they would have quit in the year three, they never would have got the abundance that they got in your four and five and six. And so it’s really hard to know I think it’s wisdom, and many years or decades of experience that helps you know the difference between pulling the plug early and never giving up.

Unknown Speaker 0:39
Welcome to the show. You are listening to The Real Estate Lab Podcast. In this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing and turn their wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host Vee.

Vee 1:00
It’s a great day to be alive and to invest in real estate. My name is Vee Khuu. And you are now listening to my show The Real Estate Lab Podcast. Let’s take a moment to say goodbye to January, at the release of this episode, one month of this new decade had come and gone. Are you still on track with your goals or your New Year resolution? What resolutions? You know, the one that you made on the first of this year? Yeah, that one, hey, if you’re not on track, it’s not your fault. It’s your system.

Vee 1:32
That’s what I’ve learned recently from James Clear author of the book Atomic Habits, this is a must read. Go ahead and get it right now. For the rest of you out there with awesome systems in place, I hope you’re out there still crushing it wherever you might be listening to this recording from. I would love to hear from you regarding your goals and your resolution. Let’s hop on a call, shall we? Get on my schedule at www.callwithvee.com that is V with two E’s and we’ll make it happen. Cool bean? Let’s get back to our episodes today.

Vee 2:09
Our guest graduated with an engineering degree and MBA from the Ohio State University. He is the co host of a wealth building podcast called How to Lose Money?

Vee 2:22
He’s the author of a book called The Perfect Investment Create Enduring Wealth from the historic shift to multifamily housing. He also appeared on HGTV helped with the development of a Hyatt Hotel, Managing Director of Wellings Capital and has his own live show every Friday on Bigger Pockets. Our special guest today is Mr. Paul Moore. Paul and I would chat about investing versus speculating, what type of assets will give you true wealth? What is the perfect investment for you? And the Warren Buffett motto that his team at Wellings Capital is using your influence epic show today. Let’s get it rolling with Mr. Paul Moore of Wellings Capital.

Vee 3:14
Hey, welcome to another edition of The Real Estate Lab Podcast. It’s an honor to have you here with us, Paul, thank you for making the time to join us today.

Paul Moore 3:23
It’s great to join you Vee. Thank you for having me on.

Vee 3:27
Hey, so, a lot of people know that you have been involved in the real estate world for quite some time, maybe in the late 90s to early 2000. Can you actually take a trip down memory lane and go way way back to say the time when you were eight years old? What was it like growing up in your household?

Paul Moore 3:47
It was I didn’t know a single entrepreneur. And I don’t even know if I knew what the word meant. It’s funny I everybody I knew worked at a factory or an office building and everybody’s father worked there. And I think I met one entrepreneur, my dad’s pharmacist, and I went to with him to the pharmacy and noticed that he just seemed to own the place. But he also worked there. And I’m not sure if he had a business or just a job because he looked like he was tired and he worked there all the time. But, you know, when I when I eventually got into college, I started thinking, I think I’d like to be an entrepreneur and I eventually ended up there

Vee 4:31
Was it at the time when you went to the Ohio State University?

Paul Moore 4:35
Yeah, I went to Ohio State I got an engineering degree, first of all, Petroleum Engineering degree, which was my first mistake. And then I when I got out, I made a good move. I was going to get a Masters in petroleum engineering and decided this is really tied to oil prices. I think I’d be better off getting a generalist degree like in business and so I went and got an MBA, at the last minute I changed. I’m so glad I did, because I went to Ohio State and there I got to actually take an entrepreneur class, which is really unusual class that no one talked about that back then in the 80s.

Paul Moore 5:14
And so I took a class on entrepreneuring, a friend of mine took it with me and we both got to Ford Motor Company a few years later, and we both found ourselves trying to start a side business. Honestly, quite often, we were working on that on evenings and weekends, and we loved Ford, but it was kind of boring for people who had a drive to be entrepreneurs. We eventually both left Ford and started our first company back in 92.

Vee 5:44
So what was that company?

Paul Moore 5:46
It was a staffing company. A lot of people don’t know what the term PEO means, but professional employer organization. And basically we do outsource human resource management. We did all the payroll taxes, benefits. Workers Comp unemployment insurance helped with hiring and firing and employee handbooks and all that for small to mid sized companies. And by doing that, we basically gave the employees and the owner a much better employment experience and better benefits. And we got paid a fee to do that.

Vee 6:19
And so how long did it take you to switch from doing that to real estate? And what was the reason behind it?

Paul Moore 6:28
So we actually I was fortunate enough to be finalists for an Entrepreneur of the Year in Michigan, two years in a row in the mid 90s. And a publicly traded firm heard about us and they acquired our company. And so I found myself before my 34th birthday, with a couple million dollars in the in the bank account and not having the first clue about investing but I thought I’m an investor now and I went out and wasted a lot of money.

Paul Moore 7:02
I actually did not understand the difference between investing and speculating, you know, Vee investing is when your principal is generally safe. And you’ve got a chance to make a return and speculating is when your principal is not at all safe, and you’ve got a chance to make a return and I actually confuse the two and I made a lot of money along the way, but I lost a lot of money unnecessarily as well. I learned a lot of lessons. And anyway, about, let’s see, three years later, I started flipping houses with a friend. And that grew into an obsession that led me down a long path through building ground up construction, doing a subdivision, eventually building a large multifamily property that we actually managed as well and then even a hotel before I jump back into what well We’re doing now.

Vee 8:00
So can you tell us a little bit what you’re doing now and why you make the switch to, to this field instead of the flipping business?

Paul Moore 8:11
Yeah, you know, when I was flipping houses, I always needed to do another deal to make money. And when I was doing the subdivision, we always had to get another piece of land or sell another lot. And when I was I actually had a real estate broker business as well. And we always had to sell another house to make money.

Paul Moore 8:29
But you know, Vee, true wealth are ours is assets that produce income, true wealth, and that’s what I wanted. And when I realized that commercial real estate had a completely different potential, it really intrigued me and I found it’s even better than I ever thought. If your Chip and Joanna Gaines Jr. and you can take a $300,000 house and finish the attic and finish the basement and add on to it and put on beautiful gold plated fixture not that you would. But if you did, and you spent half a million dollars beefing that house up, you had $800,000 in it, and you think you can sell it for $800,000. But the neighborhood is all $400,000 homes, chances are you’ll be limited by comparable properties.

Paul Moore 9:19
That’s how residential real estates value by comps. But commercial real estate Vee is entirely different. I’m getting excited thinking about it because it’s based on a value formula that says the value is the net operating income divided by the rate of return or also known as the cap rate. And so we can actually force appreciation on the property quite dramatically by increasing the net operating income and sometimes by even compressing the denominator in the equation, the cap rate and by doing that, we invest in lots of properties that have been able to increase in their equity value 50% or even 100% in a year or so.

Paul Moore 10:08
And it’s the key is buying from mom and pop sellers. And these sellers, these mom and pops don’t have the resources or the knowledge or even the desire to really maximize the returns and the value. And then beefing them up running them professionally, bolting on some extra ancillary services, ancillary sales and then selling to an institutional investor, who will pay a premium, which means basically a reduced cap rate. And that is the formula we are using. And so you asked what we’re doing now. So my company Wellings Capital, I wrote a book on multifamily investing a number of years ago, it’s still selling quite well. And it was called the perfect investment but oddly enough, the perfect investments not so perfect anymore if you can’t find any deals and multifamily at the time of this recording at least Vee is really overheated.

Paul Moore 11:08
And so we found that there are other asset sub classes, like self storage, and mobile home parks that have all these mom and pop sellers. And you can pay a very nice price to them a fair price. But you can significantly upgrade them, increase the value, increase the equity to the investors and have a phenomenal asset on your hands. And so we decided to expand into self storage and mobile home parks a couple years ago, but we said yeah, now I don’t think we would invest with ourselves. We we wouldn’t trust ourselves to do this because it’s late in the cycle. We know how to do it on paper.

Paul Moore 11:53
But you know Vee we’d never done it. We didn’t have a team who walked through the last one or two recessions. And really knew how to navigate this type of thing. So we decided we wanted to go on a quest to find best in class operators. So that’s what we did. And so we now our company Wellings Capital invest with those best in class operators. We trust them to have the deal pipeline them to get the debt, them to manage and operate. And we and our investors get the benefits. It’s sort of like the Warren Buffett model. Buffett doesn’t make ice cream. Buffett doesn’t design and sell insurance policies. He doesn’t build mobile homes, but he benefits from all these experts in those arenas. And that’s what’s made him the wealthiest and most successful investor on the planet. And so that’s the model we are operating under at Wellings Capital.

Vee 12:50
So now we actually have Paul Moore, the new Warren Buffett.

Paul Moore 12:55
No, I didn’t say that but I do love that model. And I do recommend That everybody stay in their lane.

Paul Moore 13:03
You know, Gary Keller, the most successful real estate broker on the planet taught us the one thing, one thing means focus on what you’re really good at, and outsource everything else. And that’s what he does well, and that’s what I want to do.

Vee 13:19
Yeah, so the topic that you just brought up is really interesting. The superpower of commercial real estate, right? So talk about mobile home park and self storage units. Just Exactly. How do you go about adding value to them?

Paul Moore 13:35
You know, I chuckled. When I first heard about value add Self Storage, I thought, Well, wait a minute. I love apartment value adds I mean, we can change the flooring and the lighting and the fixtures and the cabinets and beautify these apartments. But how do you beautify? How do you add value to four pieces of sheet metal and a concrete floor and a door?

Paul Moore 13:58
Well, there’s actually about 40 different ways to add value to a self storage facility. I’ll give you a quick example. We invested in one in Colorado, your state, and the seller was quite a mom and pop. In fact, the seller would place anxious phone calls to my friend, the operator who acquired this facility. They would call at four in the morning and talk for like two hours about all the things they were nervous about in selling this property. And my friend the the buyer became this person’s personal counselor, financial planner, and it seemed that the seller really trusted my friend.

Paul Moore 14:45
And when he acquired the property in Colorado, it had 80% occupancy which isn’t that bad, and he was able to raise it to 92% in the first six months. It also had 80% delinquency, which means four out of five tenants weren’t paying or were paying late. Well, he was able to lower that 80% delinquency down to 5% in six months. He also added a showroom that sold locks, boxes, tape and scissors and that added money to the pot. He also was able to raise rates 25% because they were below market that raised a lot of revenue. And I think really significantly, he bolted on something called U haul. He actually added truck rentals to this facility and just that alone added about $4,000 a month in revenue. Now let’s do the math on that Vee, $4,000 a month in added revenue with no capital outlay and no significant operational costs. That’s $48,000 a year.

Paul Moore 15:57
Now let’s use our formula that I mentioned the superpower formula of commercial real estate, the value is the net operating income 48,000 a year divided by the cap rate. And that cap rate he acquired at, I’m not even going to tell you about the increase or excuse me the compression in cap rate. Let’s just go with the cap rate he purchased it at which was 7%. So take 48,000 divided by point 07. That’s $685,000 in value, he was able to add at least on paper from adding U haul. That was just an operational change. He also did all the other things I mentioned him more. And so what happened is the facility when he acquired it was $2.9 million. And he was able to increase the value to about four and a half million dollars in just six months. That sounds great. That sounds Sounds like about a 50 or 55% increase in value. But it’s better than that. Because he only had about a million and a half in equity, a million and a half was was the purchase price was debt or less. And so that million and a half in equity, the bankers didn’t get their hands on that $1.7 million increase. The equity holders got it all. And so the $1.5 million in equity just went up by over double to about three or 3.2 million. And that’s in just six months. That’s a true value add story. And the great news is, for a company like my friends, who has an acquisition pipeline, and a group of people working the phones, they get opportunities like I just described almost every week.

Vee 17:52
That is fascinating to hear. I first heard about self storage back in 2009. And it was a good idea back then. However, as you remember, the crash happened, you know, in 09. So a lot of the mom and pop Self Storage operator were basically got wiped out by the crash. So another topic that I heard you talk about was the economy is about to crash or the crash is coming. So how do you protect yourself against something like that with storage facility, because in the downtime, people are not going to pay the rent in self storage, they would rather pay for say, to stay in a mobile home, or to stay in an apartment unit.

Paul Moore 18:42
Yet statistics say that overall Self Storage did very well in the last downturn. In fact, similar to mobile home parks, which you mentioned, they resisted, they had a slight downturn, but overall they did very well. Here’s one of the reasons if I’m renting, a $1,000 apartment to you and I raise your rent by 6%. You’re basically signing a one year contract to pay $60 more a month that’s $720 you might move rather than pay that. But if I’m renting to you a $100 storage unit, and I raise your rent by 6% Well, that’s only a $6 commitment because it’s a month to month lease. So most people would just not going to spend a Saturday rent a U haul get their friends to basically spend a day of their life to move their junk, I mean their treasures down the street. I was just being silly down the street to save $6 a month especially when they typically think you know, I’m going to be out of here in just a few more months anyway.

Paul Moore 19:51
Now during a recession, some of the 4000 square foot homeowners are downsize into a 2000 square foot home or a 2000 square foot homeowner might be downsized into an apartment. Some might be downsizing the mobile homes, and for a very small amount of money, they can store their stuff. And they do. So that’s what happens during a recession and a good time. People are filling up their Amazon cards, their Walmart carts, and they’re actually buying more stuff and they need a place to store it. And so that’s one of the reasons Self Storage is fairly recession resistant. I want to make a caveat here though Vee. Self Storage is micro, I should say micro local. And so while I could, Why I could say to you that self storage is overbuilt in a whole lot of markets across the country, which is true places like Boise, Idaho, Nashville, or overbill on self storage. There are sub markets within those areas that are under built like you could go to Nashville and See that it’s overbuilt, but you could go to Bellevue, which is a close in suburb on the southwest side of town. And it has virtually no self storage. And it would be a great place to build or buy Self Storage if you could find it. So Self Storage can be overbuilt, like apartments. But right now, it’s still a good time. If you know the right operators, it’s a great time to invest.

Vee 21:25
So a follow up questions to that is, how do you do your research to know what area need more storage units in what area don’t?

Paul Moore 21:34
when we were investing in multifamily, we will only only want to be in cities with a million or more least half a million, but Self Storage is quite different. There are about four things we look for on the surface. And if these four things are good, we’ll dive deeper. But those four things, number one would be the square feet of storage in a given radius. Now if that’s a if it’s a dense urban area, it might be this one mile radius. In a normal suburban area, it would be a three to four mile radius and a rural area, which we don’t ever recommend investing in. It could be a 10 mile radius. And so the metric we’re looking for, would be about seven square feet of self storage per person in a given radius. So let’s say a suburban area, three mile radius, we’re looking for seven square feet of self storage per person, man, woman and child or less, and that’s the national average now, so that means if it’s like 10, or 12, we might say, that’s maybe a little overbuilt. And if it was like one or two square feet, then we’d say oh, that’s really under built because there’s a higher demand and some of those people are probably going outside the area.

Paul Moore 22:55
A second thing we’re looking for is the occupancy and the current facilities. And of course, if it’s if it’s 100%. And it’s like I said that first metric hit, that’s another good sign. A third thing we’re looking for is the traffic on the road. If it’s on a location that has 30,000 cars per day, like I 25 going through your area, then that’s a really good thing. We also want it to be very visible on that road. It’s one thing to have a great road, but it’s another thing to be if it’s behind a hill or behind a Walmart parking lot, you can’t see it. The fourth thing we’re looking for is the income in the area. It doesn’t have to be super high income, but we want it to be at least an average income level or higher.

Vee 23:46
Right. So you don’t want it to be in a an area where the poverty is just below the state poverty level.

Paul Moore 23:52
Yeah, that’s right. I want to look at the city and state lines and see, you know, make sure that we’re above that.

Vee 23:58
What about crime rates. Do you feel comfortable having it in a high crime area?

Paul Moore 24:03
Yeah, we would dial in further if those four metrics were hit, and we would look at things like crime rate, zoning, the amount of land that can be developed nearby, making sure that we’re not going to get a competitor next door, things like that. We want a lower crime area for sure.

Vee 24:21
And so when so that’s for the property when you are looking to purchase. What about when you are looking to invest with an operator just like your company is doing, Paul? What are the things that you look for in that operator to feel comfortable enough to move forward?

Paul Moore 24:39
That’s a great question. You know, Warren Buffett bought, he actually invested I believe it was billions of dollars to help acquire ABC from from the seller to with capital cities in 1979. And then they sold it for very, very large profit to Disney in the 90s. And he made that decision on a 15 minute phone call. That was it. He didn’t do any more due diligence than that. And the reason was, he actually knew the buyer. He knew the operator really well. He completely trusted him. He’s been quoted as saying he was the best business owner/manager that he knew of in the whole country. And so in a 15 minute phone call, he was willing to invest and he made out really big with that because the operator was right.

Paul Moore 25:32
We spend a lot of time getting to know our operators, we fly to some of their locations unexpectedly. We fly there expectedly we show up at their office, we talked to their employees we talked to investors will talk to ex investors if we can find one to talk to. We’ll see how they talk about their investors, their employee, their spouse. We want to see that they had a track record that started well before The great recession that they didn’t just get into this and in the rising tide since 2011, to now, we want to see that they have a W2 staff that they’re not just a bunch of independent contractors all on their own. We want to look at the type of debt that they use. We want to look at the leverage amount. We want to see you know, what their attitude is about what happens in a downturn and how quickly they plan to sell. We look at criminal checks, background checks, all kinds of things like that, and we go on gut feel too. We had a potential operator wants that everything checked the boxes, he looked great. But we had a funny gut feeling about him and we didn’t invest.

Vee 26:47
So the point is, if you feel some, if you have some funny feeling in your gut, you just want to move on. You don’t want to even proceed any further.

Paul Moore 26:56
It’s really hard to say no based on having No tangible reasons. But I really believe that we were designed with an innate sense of knowing in our gut. When somebody as a shyster not always, obviously, a lot of people been taken in by people and been wrong, but often we can sense something, you know, they say, our brain. And I guess, I guess you could say our spirit somehow picks up on like, two or 3000 nonverbal signals that people have, whether it’s the way they’re standing or the way they, their move their hands while they’re talking, and the way they pause and their sentence, all kinds of things our brain can pick up that we don’t even know but it leaves us with a feeling like something’s funny here.

Paul Moore 27:49
I don’t know if I want to invest with this person. And usually, well, most amateur investors, I should say, override that and they just look at the numbers on paper and they say, Oh, this is my chance to get wealthy. And they override that funny feeling they have. I’ll be really honest with you here Vee, a lot of ladies are much, much better than guys at this, I find that guys are more willing to override the gut feeling or they don’t even have the gut feeling. But a lot of wives of investors that I know some of them are investors too, but a lot of times the wife or a lady in general has much better antenna and they pick up on these things and so I love it when my wife can meet anybody we’re going to invest with cuz she can often see through them faster than I can. And of course, we don’t invest in those cases.

Vee 28:52
Alright, so for your own business, how how are you finding these operator you just go to networking events or they call you How does it typically work out for you?

Paul Moore 29:04
Yeah, that’s a little tough. We’ve actually met some through referrals. There’s a couple people that I know and really trust who have been investing in these arenas for years or even over a decade. And I get advice from them on great operators are also there’s a couple websites out there that review large syndicators, and you can go and learn about great syndicators from these folks, and you can find out who’s great who’s not. It’s a little harder to get on there and to learn all about that, but that’s, that’s something you can do.

Paul Moore 29:44
There’s also crowdfunding sites. Now that may not sound like a place you want to meet an operator. But if you go to crowdfunding sites like realty mogul or fundrise, you can actually see List of operators and that doesn’t mean they’re all good. Good, some of them aren’t. But at least you can get a list on there and maybe you’ll find one, you’ll go to their website, and you’ll really realize that you really resonate with them. We met our best in our favorite operator that way on a realty crowdfunding website. That’s what I was trying to say. And through that crowdfunding website, we just got to know them personally. And we’ve had great respect for these guys. Now.

Vee 30:30
It’s interesting that, you know, this is a strategy that you are doing, because most of the investor that I talked to, they want to operate the project, they want to be the GP and raise money, but you are on the other side, you’re looking to just bring the funding in to the most trusted operator that you can partner with. Hmm. So what’s your philosophy behind that?

Paul Moore 30:59
We had to decide, do we want control? Or do we want the very best investment opportunity and best investment experience for our investors. And so since we didn’t have a team, who had been through the Great Recession, or through a couple recessions, and these asset classes that with these strategies, we thought we’d be better off being a middleman and finding the best people we can that have outsized returns, and that also treat their investors well, and who would even give us a premium for investing with them who would give us you know, a larger share of the pie and that’s exactly what we look for.

Paul Moore 31:44
Again, I’ll go back to Warren Buffett, Warren Buffett, like I said, doesn’t make ice cream or sell, you know, he doesn’t design insurance policies or mobile homes, but he actually invests and he’s made billions and billions of dollars for himself and his investors, through trusting these great operators, and trusting them to be experts in what they are focused on.

Paul Moore 32:10
Again, I go back to Gary Keller’s one thing focus on what you know, and outsource the rest to others. I was talking to an oral surgeon recently in the Pacific Northwest and he said, I’m building a retirement portfolio of 20 rental homes. And then he got to talking about and he sounded more and more depressed. And then he said, I actually, I’m only on house number three, and it’s driving me completely crazy. I I’m getting calls from tenants in the evening and I’m actually calling painters in the afternoon between surgery. I just can’t keep this up. Like there’s no way I want to manage 20 houses. He said effectively, he said, Why am I working harder than I need to to make less than I could?

Vee 32:59
I’m smiling coz one of my friends is having that exact problem.

Paul Moore 33:03
It’s very common, you know, a lot of people who think they want to build a single family portfolio, abandon that plan. And they eventually go back and they invest either as a syndicator themselves or with a larger syndicator. Very, very common.

Vee 33:21
Right. And I want to go back to the Self Storage Facility a little bit. I want to find out what other aspects Do we have to pay attention to, when we go into buying a facility or ourselves, let’s say I’m the operator, I’m brand new. I have this project, I need to be comfortable to go talk to someone like you to bring in the fun. What are maybe two or three things that I need to pay attention to? Especially doing the due diligence period?

Paul Moore 33:50
Yeah, so one thing I would look for is where’s the meat on the bones? Is there a showroom? Is there an opportunity to add a showroom? Is there room to park several U haul or Penske trucks that you could that you could advertise and manage their actually they do the advertising you just manage the trucks. Is there an opportunity to upgrade the facility you know, improve the marketing at a website.

Paul Moore 34:19
Here’s a big one. Is there any acreage Is there any land available to build an extra facility on we recently invested in a self storage facility that amazingly was on a great road, but it sat back and there was a huge, huge grassy area between this four lane road and the facility and some people said they didn’t even notice it there all the times they drove by. Well, what the operator did that we invested with is they paid a fair price for it. And then they built a large beautiful office and a climate control facility in the front of that, and by building the climate control facility on that acre and a half or whatever in front, they were able to expand capacity. The land didn’t really cost them anything because the land was already part of the purchase. And they were able to add a beautiful show room and office and do better advertising all in one fell swoop and by so doing that it was a huge value add and it’s going to be a great upside for investors.

Paul Moore 35:30
Another thing we’re going to look for, like I said before, is you want to make sure that you’re not going to get a whole lot of competitors around you. And one thing to look for is, you know, be careful there’s not a Kmart or Sears or Toys R Us empty building nearby because those can be a really discounted facility for someone to come in and build self storage. You know, a friend of mine, AJ Osborne built he actually bought a Super Kmart in Reno, Nevada. He sold off a lot of the parking lot to a multifamily developer. And he had the building and he cut it in half, believe it or not to make more exterior storage. And he built out all the inside. Of course it already had climate that already had flooring, lighting, everything was there. He built out the inside, he had two and a half million dollars in it. And he had 5 million in debt. So seven and a half million total Vee. And when it was 40% occupied, last December he got an offer from an institutional investor. Remember he only had two and a half million cash and he got an offer of $25 million for this facility and he turned it down. He wants more and he thinks he can get more once they’re at 100 or 90 plus percent occupancy and I think they’re there now

Vee 36:59
this is officially one of my most favorite worst story. This is crazy. 40% occupancy and he had it in for about 7 or $9 million. And

Paul Moore 37:12
yeah, he had seven half million dollars total in it and he got an offer at 25.

Vee 37:18
Wow, you cannot achieve this with apartment. There’s just no way someone would pay you at at 40% occupancy.

Paul Moore 37:26
Exactly. Because they were increasing an occupancy about four or 5% every month. And so on the track they were on they were going to be at 90% occupancy in another year or two. Very, very, actually, it would have been a year or less. And that’s exactly what happened.

Vee 37:45
Oh my God, that’s that’s good. That’s good to hear. Now, Paul, you have been doing real estate for a long, long time. Now. What is the most profound lessons that you’ve learned so far?

Paul Moore 37:56
There’s been quite a few. I’ve got a wealth building podcast. called How to Lose Money Vee. And we talked about the pain, the losses, the failures that many of us have along the road to success. And so, one lesson I learned and this is going to sound really funny, but is you need to learn to pull the plug quickly.

Paul Moore 38:19
We invested $390,000 in a non real estate property, unfortunately, it was a wireless internet company. And we built that if we would have just pulled had the courage to pull the plug, about a year in we could have returned at least half the money to ourselves and our investors. But we trudged on for seven years and never really turned a profit. And so we shouldn’t have learned to pull the plug sooner.

Paul Moore 38:49
Now that different the opposite lesson is what a lot of of our guests on how to lose money have learned as well and that is never give up. Which is kind of fun. Because some of those lessons have been, you know, the fact that if they would have quit in year three, they never would have got the abundance that they got in your four and five and six. And so it’s really hard to know I think it’s wisdom. And many years or decades of experience that help you know the difference between pulling the plug early and never giving up. Those are a couple lessons.

Paul Moore 39:25
Another one I learned I already shared. And that is the difference between investing and speculating. It’s really important to know the difference. If I said this to a young investor, if I said, low risk leads to low return, high risk leads to and of course, the young investor would say high return, but that’s not true at all.

Vee 39:46
It could be no return.

Paul Moore 39:48
Yes, high risk, high risk leads to no return or possibly high return. And so if you want to take high risks, you have to realize that you might end up worse off. And you might want to get to a place where a lot of us have gotten to, and that is we stop swinging for the fences. And we start trying to hit singles and doubles. I had a friend named Bruce. And Bruce spent 18 years like average of six hours a day training to be a professional baseball player. And Bruce spent one year I think he was in double A minor leagues. He spent one year he said I’m just going to focus on hitting home runs. He hit more home runs than that that year than he ever had before. He also had the most strikeouts and the worst batting average. And he actually set went backward in his career because he stopped trying to hit singles and doubles which he was very, very good at. And he started trying to hit home runs and a lot of investors realize after they get in their 40s or 50s or later That they would rather hit singles and doubles all day. You know, it may not seem like it, but that’s what Warren Buffett’s very good at.

Vee 41:07
You know, it’s interesting that you said that because I think Babe Ruth has the same story. You know, he got straight out a lot. And in baseball, especially if you got a 300 you’re really good hitter.

Paul Moore 41:21
Yeah.

Vee 41:22
300 you’re really good hitter. And I think it’s the same with real estate. If you get a home run, you know, from time to time. That’s good. But if you can get single double, that’s fine, too.

Paul Moore 41:36
Yeah, it really is. It’s really true. Jeff Zuckerberg from Facebook, of course, asked Warren Buffett. He said, what are your strategies? Not that hard, Warren. why doesn’t everybody imitate you? And like I said he was talking to Warren Buffett. And Warren said, Oh, no, no, no, people won’t generally imitate me. No one wants to get wealthy that slowly

Vee 42:01
overnight success that’s that’s like the go to slogan now every everyone one overnight success, but no one wants to put in the grind that make it an overnight success.

Paul Moore 42:12
That’s right. You are correct Vee.

Vee 42:17
And Paul, knowing what you know now and the wisdom and experience you have now, what would you have done different with that wireless deal?

Paul Moore 42:27
Well, I mean, I would have stayed in my lane. You know, I heard for years people tell me, I’d be raising money for this deal or that deal. And I’d have people say, Oh, no, no, I’m not going to invest in that, whatever that was. Because I don’t know anything about it. And I said, Yeah, but we know all about it. Well, blah, blah, blah. And I realized that it’s really, really important to stay in your lane and if you’re going to diversify, great, but diversify among things, you know, a lot about not things You know nothing about especially, don’t keep trying to start companies and growing them in new areas that you just are learning about as you go, you’ll always be working very long hours. And you will always have uncertainty in your future.

Paul Moore 43:18
And, you know, honestly probably strike out more than if you just pick something when you’re young and stuck with it. I had a friend. I have a friend named Barry who was running for governor of Colorado, about a year and a half ago and he was rubbing shoulders with lots of super wealthy, super successful people. And he said, You know, he said, These people aren’t any smarter. They don’t have any better education really than we do than the average person out there. The average successful person, but these Uber successful people typically have one thing in common. He said they focused on a goal. When they were very young, and they never strayed from that, and they said no, probably 10,000 times to potential distractions, and they stayed focused on that, and they got used to the monotony of success, you know, the monotony of success Vee is when you’re doing something that becomes very boring. You do it over and over and over til you’re really, really good at it. And that’s what he said. And I’ve taken that to heart. You know, I realized that people like Bill Gates decided as a teenager, he wanted to be involved in technology. And he said no to tons of potential distractions to stay focused on what he was good at, and he became the wealthiest man in the world.

Vee 44:44
That’s right. That’s right. Now, fast forward to present time. What exactly is that you are focusing on right now you’re most curious about right now.

Paul Moore 44:56
I am most curious. So I’m most focused on mobile home park investing, Self Storage investing and I still have an interest in multifamily. I’m just waiting for it to cool off. Now what I don’t know about and I’m most curious about is another asset class called senior living.

Paul Moore 45:16
It’s obvious that the demographics are there to support senior living. Go out and look for a book on senior living. I don’t think you’ll find one. I think it’s still a fairly right market to invest in. I’ve had two or three people I know who have looked into it and said that there’s a huge opportunity to invest. Now, I will say that what bothers me is one of the things that makes mobile home park investing so good. I know it may be confusing. I’ll explain. mobile home park investing is great for so many reasons. One of them is the fact that six out of 10 people who retire or who turned 65 I should say 10,000 of them turn 10,000 people turn 65 every day six out of 10 have less than $10,000 saved for retirement. How can that be in the wealthiest country in history? Less than 10,000 saved for retirement. So it really does drive the mobile home park success, because a lot of those people have Home Equity they’re willing to trade it in, and they’re willing to buy a mobile home and significantly drop their daily and monthly expenses. But if that’s true, who’s going to invest in a three or four or $5,000 a month Senior Living apartment? Well, I guess it’s the other four out of 10. But that’s the one thing that bothers me. And if I ever get serious about looking into senior living, I’m gonna have to get an answer. Sort of that question.

Vee 47:02
That’s, that’s interesting. You know, a few months back in one of the masterminds that I’m in, we actually had this discussion. And the verdict from that was that you’re not investing in an asset class like real estate, you’re actually investing in a business where you have to have employee, you have to have nurses. And if you’re not good at running a business, you shouldn’t even get involved with that. So that was the verdict of of that group. And then I heard what you just brought up right now is that, hey, a lot of seniors are actually going to mobile home park, maybe that’s a better way to go. Compared to the senior leaving route, but you make a lot more money from the senior living option. You can. There’s a guy here locally, he has a few facilities, just single-family home and he divided them up, to beds and he just gets Few grand per bed per month.

Paul Moore 48:01
Is that right? Well, that’s an interesting model. I’m sure that would be worthwhile to look into. I know a lot of folks are really looking into this now, but I haven’t heard of anybody doing exactly that. That’s so what do they have like a house manager or somebody just who basically just administers that property?

Vee 48:22
Correct? Yes. So you have a house manager, and then you have staff that comes in to take care of the seniors. And if you have big homes, you can afford to hire chef, massage therapists provide a lot of other services to the seniors that that live there. Well, just collect a lot of it is subsidized by the state. So you’re getting a lot more money.

Paul Moore 48:47
Yeah. Well, that’s that’s, that’s really, really interesting. And I think that that subsidy by the state might be the answer to my question as well.

Vee 48:57
I’m trying to find the course. I’ve heard of this course from another podcast, Gene Guarino, and he runs the workshop for risk residential assisted living homes out in Arizona, and he does it a few times a year.

Paul Moore 49:19
Well, sounds good.

Vee 49:22
So let’s go back to our our podcasts here. One last question, Paul, before I let you go, I know that you used to work at Ford Motor Company in Michigan. You’re really passionate about Ford.

Paul Moore 49:35
Yeah, I love Ford.

Vee 49:37
So what’s your most favorite car from Ford?

Paul Moore 49:41
Well, I mean, Can I count the Jaguar XJ series?

Paul Moore 49:45
Any word on the jaguar in the at least for a number of years, a lot of years. And I actually just a friend of mine, who’s a real estate investor as well just pulled up in a Jaguar XJ the other day and I was really impressed. asked, and it was almost like a limo. And he said, yeah, this was a 2005. He had, he’s really meticulous. So he had a looking almost brand new. And he said that he got it for an unbelievably low price. And I guess jaguars have incredible depreciation. And so if I can count that, that’ll be it. If I can’t count that, it would absolutely be the Ford Flex. My family is the proud owner of our second Ford Flex. And we’re very happy with it.

Vee 50:36
I thought you were going to answer the F 150. Because that’s the most car owned by millionaires in the US.

Paul Moore 50:45
Is that right? I did not know that.

Vee 50:48
Yeah, I saw that article few years ago. And it was the most popular car owned by millionaires in the US

Paul Moore 50:56
You’re kidding.

Vee 50:57
Yeah, I mean, millionaires drive Ford F150

Paul Moore 51:01
That’s amazing. did not know that, good to know.

Vee 51:05
Well, Paul, thank you so much for your time here today with the podcast. I really appreciate you coming on with us.

Paul Moore 51:12
Absolutely. It was a real honor to be here Vee and I really wish you the best and everything that you’re doing and I wish your listeners the best as well. Thanks. It’s really been an honor.

51:23
That’s the end of the show. Don’t forget to subscribe, leave a five-star rating and review on iTunes for The Real Estate Lab Podcast. Until next time, have a prolific week.

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