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The way they think about money and
wealth. Real estate investors have much more

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of a cash flow focus than the
accumulation model that you know, kind of

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we're all taught when it comes to
investing in your stocks, bonds, index

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funds, all that kind of a
thing. It's that is more based around

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building up enough of a pile of
assets so that when you're eventually ready to

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retire, your pile will be big
enough so that you can sell pieces of

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it off gradually and pay your bills. You're listening to Carrie Lets's Financial Survival

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Network, where you get valuable information
you just can't find anywhere else to thrive

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in today's trying times. You need
the Financial Survival Network now more than ever.

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Go to Financial Survival Network dot com
and get your free newsletter and gift.

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Financial Survival Network now more than ever, And welcome. You aren't listening

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to watching the Financial Survival Network,
I'm your host, Carrie Lutz. Well,

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you know we're always looking at different
investment classes and different investment categories.

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Well, the show started, I
definitely was a precious metals investor still am

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to this day. Have not given
up faith or hope in it at all,

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and I've done quite well in it, but I've done well in other

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asset classes as well. So the
point is you have to everybody's different,

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Your situation is different, and you
need to look at the overall scheme of

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things when you're deciding where to allocate
your scarce capital. Well, we have

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a new guest on for you.
He started out investing in the market,

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Teller lot. In twenty fifteen he
had an epiphany and at that point he

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switched his investing over to real estate, to both the multi family and storage

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facilities. Tellor, it's great to
have you on the show. So in

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twenty fifteen had this epiphany. How
did this come about? Well around that

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time, thinking back, it's been
a little while now. There was the

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big price crash in oil, which
didn't hammer my portfolio, but it pointed

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out to me. It showed me
how much the performance of my investments was

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out of my hands. And in
the investing world that's always the case to

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some extent. But when we buy
real estate, we're really buying a business

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that we can run and operate and
have fundamental control over, which completely changes

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the what aspect of it is within
and without of our control. If that

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makes sense. It was really noticing
how much of it was out of my

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control, and just I was kind
of tired of the volatility of Wall Street

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and also seeing that when we invest
in like publicly traded securities as compared to

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real estate, we can't control what
happens with those big businesses when we buy

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a stock out there. But when
we buy a piece of real estate,

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we're in the driver's seat, right
We're making decisions about not only the property

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that we buy, but what renovations
do we make to the property, and

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how do we handle evictions, what
property manager do we have in place?

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Everything around that is just completely a
different ball game from buying stocks and bonds.

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Okay, so I get that you
wanted more control over your future.

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And look, Wall Street exists first
and foremost to feed Wall Street, to

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feed the interests of Wall Street,
and the client is always coming behind the

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interest of the broker or advisor or
whomever. Yes, there are plenty of

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well intended financial planners out there who
aren't getting paid by every other company that

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they put you into. But look, even when you go into an ETF,

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you got point two or five percent
expense ratio. You go into mutual

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funds, annuities and things like that, the UF fees can be far higher.

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Doesn't sound like a lot, but
when you factor that in over ten

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twenty thirty years, you see that
Wall Street gets the lion share of the

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profits and you come in second always. So, how has it worked out

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for you? Having this epiphany tailor? Oh it's going great. One of

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the things that you learn once you
get into the real estate investing world is

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how differently successful real estate investors think
about money and think about wealth. So,

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first off, thinking about money,
successful real estate investors have a successful

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mindset. They have an abundance mindset. They don't have this scarcity mentality.

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Even though we aim to invest in
scarce assets where the supply is limited and

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demand exceeds to supply and everything around
that, As far as the amount of

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success that is out there to be
had, we don't see it as a

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limited function. Right, There's enough
out there for everybody and who's willing to

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go and get it. But going
beyond that, the way they think about

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money and wealth, real estate investors
have much more of a cash flow focus

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than the accumulation model that you know, kind of we're all taught. When

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it comes to investing in your stocks, bonds, index funds, all that

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kind of a thing. It's that
is more based around building up enough of

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a pile of assets so that when
you're eventually ready to retire, your pile

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will be big enough so that you
can sell pieces of it off gradually and

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pay your bills until hopefully you die
and you have at least some of your

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pile left, rather than running out
before you pass away. Whereas for real

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estate investors, the goal is much
more focused around building it up enough cash

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flow to cover your expenses or massively
exceed your expenses once you get it to

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that point, so that when you're
in a phase where you want to retire

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or get out of the get out
of the hustle, whatever your household is,

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that your income, your cash flow
from your real estate investments covers or

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exceeds your expenses. And if you
have to sell something off, it's because

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you choose to it's the right time, rather than I need to sell this

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off to pay my bills. That's
not to say that can't happen. That

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certainly can happen, but real estate
investors generally speaking would consider that not to

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plan right. We want to have
our cash flow cover our expenses rather than

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the other way around, and that
that model of investing. I have a

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rich dad, poor dad behind me. Many of your listeners might be familiar

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with that classic book, you know. He talks about that quite a lot

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in that book as well, but
very common mentality and real estate. All

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right, So what's the worst deal
you've ever done in real estate? So

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it was my first one, actually, So the first deal that I invested

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in. I started as a passive
investor in multi family properties because I had

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built up this nest egg in Wall
Street and it had done well. But

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I decided to make this pivot.
So I had capital ready to go.

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Spend some time researching how do I
want to invest in real estate? And

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the thing that stuck out to me
right away was multi family properties is what

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I still invest in today. So
spend some time networking and meeting with operators,

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learning about the asset classes, and
met this operator that I thought,

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Okay, I'd like to invest with
this guy and this team, and so

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I invested in a deal that was
two apartment complexes in Atlanta. That was

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in twenty sixteen, I think late
twenty sixteen, if I remember correctly,

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invested in the deal, and long
story short, the property manager ended up

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stealing some money from us, and
normally that's not great rights, that's a

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problem in its own. This was
complicated by the fact that the owner of

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the property management company had general partnership
shares in these so he was part of

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the operator team essentially, and as
soon as the main person who was running

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the deal found this misbehavior on the
part of the property manager, they were

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terminated. He did all the right
things, but the kind of muddied waters

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of who owned what and how he
had general partnership shares led to a couple

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of years worth of legal battles and
arbitration, so that, you know,

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we lost out on quite a lot
of cash flow. Fortunately, we were

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saved by the market, to be
honest with you, Even though the deal

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went sideways, the market continued to
appreciate, so we got out profitably,

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but it was a lot less than
we'd really expected, and a lot less

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than I think would have been possible
if there hadn't been this huge distraction,

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legal battle and all the associated you
know, bills and headaches around the behavior

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of the property misbehavior excuse me,
of the property manager. So that really

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hammered home to me very early the
importance of, you know, having the

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right people on the team. All
right, So I'm going to tell you

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first lesson of business according to my
father, and that Let's first rule of

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business. Anytime you go into a
new business, you pay for lessons.

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That's true. And what you're describing
your virgin deal, you paid for lessons,

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right, and hey, you didn't
lose money, so actually you got

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paid to learn, although the profit
wasn't as big. So I just look

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at it from what you should have
made to what you actually made. That

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was tuition educational expense. And you
could have written it off, right,

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I mean, because I assume you
didn't make that mistake again, certainly not.

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No. That informs you know,
the way we do deals today,

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what I invest in today. And
you know, hey, one of the

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upsides is that I get to tell
folks like your listeners about what happened and

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spread the knowledge. And with that
comes you know, and it has value

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to somebody out there, all right. My first love of business, Kerry

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Lets's first love of business is you
will spend in business the majority of your

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time doing the things you like to
do the least at least when you're starting

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out, that is a guarantee,
whether it's invoicing or customer handholding, whatever

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it is that you hate doing the
most, that is what you will be

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left doing until you create the systems
that enable you to free you from that

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slavery. That is a great point, and that's something that Yeah, there

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were a lot of things that I
was doing years ago that I didn't like

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to do because they need to get
done. And as I've grown and reinvested

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in my business, I've started I've
hired people to handle those things, and

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I've constantly looked for what is the
next thing that I'm doing that I could

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hand to somebody, I could hire
somebody for I could give to my current

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team, Or what is the next
thing that we're not doing that I don't

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want to do, I'm not going
to do consistently on a day to day

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basis because I have other higher value
distractions. So it's a great point,

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totally true. And hiring and building
my team has been a key part of

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growth that I've had in multi family
and the way that you avoid not doing

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the things or avoid doing the things
that you don't want to be doing that

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aren't the best use of your talent, because if it was a great use

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of your talent, you didn't like
it so much. But you see,

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the value is the first thing you
need to do. How much am I

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worth an hour? All right?
Is it ten dollars twenty five fifty one

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hundred? You know, at one
point in my life is worth probably two

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three thousand dollars an hour? And
then it's like this job that I really

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don't like doing, how much if
I was in the market, would I

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get paid to do that job?
And if it's less than what you are

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worth, then you are basically doing
a job that you shouldn't be doing because

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it's beneath your pay scale, and
you should always be asking now would look,

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if you're starting out, you don't
have any money, you don't have

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adequate finances, that's one thing.
But if you have the money and you're

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just being cheap, you're just stealing
from yourself. I'll give you For instance,

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good friend of mine content producer,
and got into YouTube's and he was

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complaining to me, I just spent
eight hours putting together this video. And

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I said to him, hey,
look, I know what you're worth here,

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we're doing work together. You're worth
somewhere between two fifty to five hundred

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an hour. All right, so
that means you spend eight hours putting together

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a video. I know you did
a great job. I still don't think

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he did as good as someone else
who's a pro. But I know you

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did a great job. But it
cost you somewhere between two to four thousand

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dollars to do that. It would
have cost you a three to five hundred

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to pay a professional editor. And
honestly, I said, hey, you

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know, people actually go to school
to learn how to do video editing,

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and they'll do it much faster than
you as well, because I got templates,

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they got all the tricks. So
I persuaded him, said hey,

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so you shouldn't be doing it.
And then like two weeks later I found

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a video editor, the guy who
was a real pro, and he said,

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carry you're like so one hundred percent
right. I said, now you

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have to look at the other stuff
that you're doing and get somebody else to

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do that too, because you're blowing
a lot of time. Time Really important.

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A question for you, teller,
how do you find deals? So

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early on it was really hard.
I had a really hard time. Now

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we have a network that has been
built up over years of basically folks who

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bring deals to us. We build
up these relationships, get to know people

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that people do deals with them,
and then over time you just build up

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a deal flow. But it's really
hard at the beginning, especially in the

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commercial space. A lot of that
has to do with Okay, if you've

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never done a deal before, then
it's hard to go to a commercial broker

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and demonstrate to them that you're able
to close on a commercial deal. Why

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is that important? That is important
because commercial real estate brokers control eighty to

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ninety percent of the deal flow,
particularly in multi family. In any given

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market, there's a handful of brokers
who will control that deal flow. Now

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you can certainly go off market,
it's going to be a big hustle to

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find a deal and get a deal
done. These brokers really specialize in that

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and that's what they're paid for.
So it's hard at the beginning. But

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building up your network over time,
putting in the work, you can make

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it happen, but it takes it
takes a while, and it's a slog

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there at the beginning. So networking
really essential. So I asked you your

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worst deal, What is your best
deal. Let's see. So I'm in

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a deal right now a sell storage
property in Texas that is going to be

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sold soon within the next couple of
months, and my capital is probably going

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to once I get back out.
I'm not sure if the exact percentage return,

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but what we're expecting is probably two
and a half maybe three x.

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That deal was done back in twenty
nineteen, so we've held it a little

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while here and it's done pretty well. There's quite a lot of value add

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done on the deal. Really a
healthy timing, good location between two major

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markets, So that'll probably be the
best deal we'll see. I mean,

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we're holding a few others now that
have been acquired more much more recently that

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won't be sold for a few years, so only time will tell on those.

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But you know it really it's boiled
down to, you know, having

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the right people in the right place, investing in the right location at the

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right time, with the right strategy, all those pieces being in order,

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and then just you know, buying
real estate and waiting. Honestly, okay,

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and so let's look at obviously real
estate, it's really thousands of markets

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across the United States and different sectors. So the least favored real estate market

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now office buildings. Is there any
way to make money off of that type

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of commercial real estate? That is
a good question, and frankly, I'm

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probably not the best person to ask
because it's so far outside of my strategy,

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you know, kind of going back
to what we talked about earlier,

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is I invest in scarce assets that
have high demand, and the problem with

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offices is that that equation is flipped
right. Many markets have too many assets

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and very little man. I would
like to see and I'd like to find

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someone who is doing office to multi
family conversions. I believe in my heart

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of hearts that that is a viable
business strategy if you get the building at

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the right price. I think,
you know that's there's just so many markets

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that are ready for that strategy to
work. But again, you have to

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get the properties at the right price, which might mean some pain for today's

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office investors and taking a big haircut
on their investment. But personally, it's

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it's not what I invest in because
you know, we can survive without offices.

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It's been years of folks working from
home. I know some people have

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different feelings about that, but you
know, I think we're in a different

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era now. Okay, So number
two of the disfavored real estate shopping centers,

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malls, particularly strip centers still doing
well, right, supermarkets still doing

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well. But malls, closed malls
or even outdoor malls, if they haven't

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repositioned into entertainment centers, they're basically
shuddering, absolutely true. And that's a

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shifting a matter of shifting consumer demand. So I live in Richmond, Virginia.

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We have one mall here that has
been converted to add multi family essentially

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attached to it. And I think, frankly, that's the change that is

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going to need to happen to keep
some of these malls just as viable properties

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that have any value. Because you
know, I'm a millennial. They say,

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how awful we are. I mean, I'm in my mid thirties,

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right, I'm married, I'm an
adult. We're adults now, right,

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and we are not going to malls. We don't go to malls. We

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shop online. So those assets need
to transform, is my opinion. Okay,

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And you see the repositioning where,
like you say, where there's actually

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shopping centers with residential above it,
there's an outfit. They're in Austin but

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I think they're around the country remain
and that's what they do, very chic

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looking shopping spaces with like an Apple
store in the mix and other restaurants and

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clubs and that type of thing.
And then you got that there, so

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that's interesting. Obviously can't be done
everywhere. The only place retails are really

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doing well is in the South,
you know, the malls Florida. But

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even here we've got some duds that
have to where I live, that have

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to be repositioned. So then we
get into like trailer parks. Now,

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those have been like a real popular
very you know, it's attracted a lot

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of capital, particularly from hedge funds
because these large cash on cash returns.

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I know we were talking prequel,
you said you haven't gotten into any of

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them at this point. You think
if the other markets you're in dry up,

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you might look at one. I
think possible, you know, never

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say never. There are several different
segments in the mobile home park space.

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There's the kind of older properties that
you know, we're kind of more a

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tune to looking for right kind of
the classic what you might think of as

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a trailer park, and then there
are newer assets that are oftentimes like retirement

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communities that are brand new that have
you know, just essentially detached mobile homes

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on them that folks want retired to. I understand. I think there's a

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few of those that have gone up
over the years in Florida and other more

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coastal markets. You know, personally
there I see a lot of still fragmentation

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in that market, a lot of
mom and pop owned assets. But you

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know, many areas, many municipalities
have you know, they really have it

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in for these mobile home parks,
and there are a few reasons for that.

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There's a perception. Of course,
we've all many of us have probably

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seen the show Trailer Park Boys,
great funny show, and I got to

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check it out. It's it's a
great show. It's very funny set in

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Canada, but it applies to the
US. So there's the perception of say

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crime, and then on the other
hand of that, you could just look

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at it financially, mobile home parks
they generally have low tax assessment values.

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They don't bring in a ton of
revenue to these municipalities, so there's the

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financial incentive to for municipalities to kind
of try to squeeze those mobile home parks

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out and have them redeveloped. So
there's a few problems with it. I'm

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not saying I'm opposed to it,
but any business plan has to make sense

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with those realities in mind. Yeah, they're like low revenue, high services,

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particularly police department. That's the stereotype
there for sure, and it does

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apply to some, not all by
any stretch. There's certainly within the city

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that I live in, there's a
couple of them, but they're like they're

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00:21:48,160 --> 00:21:52,359
high end. The you know,
a unit there, it's more modular,

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I guess than trailer but you know, unit there go for half a million

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00:21:56,920 --> 00:22:04,279
bucks. I mean, that's not
you, not your redheaded step child's trailer

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park, you know. So interesting. So but you've gotten into storage,

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all right. I like storage.
You don't need a lot of management there

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and basically the money just comes in
and when they stop then you call it

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in the guys from storage wars and
they sell it off there. If you

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do, you have like regular sales
in you in your storage areas, your

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00:22:33,440 --> 00:22:40,359
storage properties, where you wind up
selling off abandoned lockers. So I'm fortunate

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00:22:40,440 --> 00:22:44,480
that with my in like our investment
model, I get to stay out of

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00:22:44,480 --> 00:22:47,640
the day to day that was one
of my big goals because going back to

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your your comment about the value of
your time in terms of dollars per hour,

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00:22:52,720 --> 00:22:56,359
I think that's a big mistake that
a lot of folks make, generally

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00:22:56,400 --> 00:23:00,440
more on the residential side, buying
single families and trying it self manage.

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00:23:00,440 --> 00:23:03,480
And you know, we all know
like doctors who un rental properties and self

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00:23:03,480 --> 00:23:08,920
manage, Like my friend, your
time is valued at hundreds or potentially thousands

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00:23:08,960 --> 00:23:12,279
of dollars per hour, why would
you go self manager rental property? And

295
00:23:12,319 --> 00:23:17,920
I've applied that to my own real
estate investment model as well, So honestly,

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00:23:17,920 --> 00:23:21,359
I couldn't tell you how often you
know we're having to auction units off.

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00:23:21,559 --> 00:23:26,000
I'm certain it's happening. In reality, it's a lot less exciting than

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00:23:26,039 --> 00:23:30,000
in storage wars. You know,
people often just kind of keep junk in

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00:23:30,039 --> 00:23:33,960
these units. But you know it's
not just predominantly junk. There are businesses

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that often you know, take advantage
in many areas of climate controlled storage.

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So you know, there's a pretty
diverse demand base for self storage out there.

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What kind of returns are you getting
on your self storage properties? So

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00:23:48,279 --> 00:23:53,200
I would be kind of generic about
what I might want to say publicly if

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00:23:53,279 --> 00:23:59,559
we tax return, if I looked
at a deal that was below like the

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00:23:59,680 --> 00:24:03,400
teams, I would not be interested
in it personally. But I don't know

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00:24:03,440 --> 00:24:06,920
if I want to get any more
specific than that. That's cool, Hey,

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00:24:07,240 --> 00:24:11,279
risk in storage properties? What are
the biggest risk factors that you face

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00:24:11,759 --> 00:24:17,720
in a buying one an existing one
and building one from scratch. I didn't

309
00:24:17,720 --> 00:24:19,720
even ask you if you actually develop
them or not. That's part of the

310
00:24:19,759 --> 00:24:26,880
model generally. What we invest in
though, is existing properties with expansion potential,

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00:24:26,920 --> 00:24:30,000
where there's demand in the market and
there's also empty space on the lot

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00:24:30,079 --> 00:24:36,839
that we can build into. I
perceive the biggest risk and sell storage generally

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00:24:37,400 --> 00:24:42,440
that many markets, especially primary markets, are overbuilt and have been overbuilt over

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00:24:44,400 --> 00:24:48,279
the recent years, and that you
know, it's relatively cheap to put these

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00:24:48,319 --> 00:24:52,000
properties up, so there was a
lot of money going into putting those properties

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00:24:52,079 --> 00:24:59,400
up, kind of irrespective of the
amount of supply and demand. So buying

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00:24:59,400 --> 00:25:03,240
a property an area that is overbuilt
in self storage, I think as I

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00:25:03,279 --> 00:25:08,480
see as a much higher risk than
in say multi family, where most major

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00:25:08,559 --> 00:25:14,799
metropolitan areas, even secondary and tertiary
don't have enough housing right, you still

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00:25:14,799 --> 00:25:18,799
have to quantify that when you're doing
an investment, but that's just kind of

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00:25:18,799 --> 00:25:22,680
the reality as most areas are undersuppled
and multifamily, where self storage some are

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00:25:22,720 --> 00:25:29,240
oversupplied, and the demand dynamics are
so different in that self storage is more

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00:25:29,319 --> 00:25:34,640
dominated by in terms of demand drivers
by drive RADII like basically how far do

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00:25:34,640 --> 00:25:38,799
you have to go from the property
and how much population do you have in

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00:25:38,839 --> 00:25:44,000
that area. Generally folks will talk
about and we'll focus on one, three

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00:25:44,000 --> 00:25:48,519
and five mile drive RADII, which
you can map out pretty easily. There's

327
00:25:48,559 --> 00:25:52,039
also some advanced tools that will look
at drive times, which is a bit

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00:25:52,079 --> 00:25:56,240
different from drive distances you know,
five, ten, fifteen minute type of

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00:25:56,279 --> 00:26:00,599
things. But supply and demand,
I see is really the biggest risk self

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00:26:00,599 --> 00:26:07,119
storage so therefore really more so than
a multi family, calls for a pretty

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00:26:07,240 --> 00:26:11,880
serious market analysis before you pull the
trigger. And then you want to look

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00:26:11,920 --> 00:26:17,240
for a value add where you can
increase the existing number of units there because

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00:26:17,559 --> 00:26:21,480
like you said, the construction costs
relatively low. Yeah, and if you

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00:26:21,519 --> 00:26:23,799
can't do that expansion right away,
you want to be able to you know,

335
00:26:23,920 --> 00:26:26,279
cover your debt and everything. You
don't want you don't want to be

336
00:26:26,319 --> 00:26:30,680
in a position where you have to
do that expansion in order to keep the

337
00:26:30,759 --> 00:26:34,119
property, right, that's not a
good situation. That's a no no,

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00:26:34,319 --> 00:26:40,960
because you've got to get approvals.
And a lot of towns are unfavorably disposed

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00:26:41,079 --> 00:26:45,440
to storage properties even though they are, like on the amount of services that

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00:26:45,519 --> 00:26:51,680
they require from the government, they're
really at the low end, aren't they.

341
00:26:51,960 --> 00:26:56,079
Yeah, I think probably the i'd
say mobile home parks is still less

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00:26:56,119 --> 00:27:00,000
favorable. And then self storage in
terms of you know, government preferences,

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00:27:00,079 --> 00:27:04,240
but yees, storage is not generally
high on the on the list of what

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00:27:04,279 --> 00:27:08,680
they want to see developed. Yeah, so you got obstacles, But it

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00:27:08,720 --> 00:27:14,160
all depends whether you're dealing with municipalities, counties and all that, right,

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00:27:14,720 --> 00:27:18,839
Right, so it's specific to the
jurisdiction. All right, Well, now

347
00:27:18,960 --> 00:27:23,400
business friendly area and all that.
Yeah, exactly. So Texas areas,

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00:27:23,680 --> 00:27:30,599
lesser developed areas of Texas, they're
probably more favorably disposed than coming into Miami

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00:27:30,640 --> 00:27:36,799
Beach. But you know, prices
are so high, so the market really

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00:27:36,839 --> 00:27:41,920
determines the appropriateness of the use,
right All right, Hey, well we

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00:27:41,960 --> 00:27:47,240
really appreciate you coming on. I
know you are You've got a site to

352
00:27:47,559 --> 00:27:52,319
Passive Wealth Strategy dot com. Is
that the best place for people to find

353
00:27:52,359 --> 00:27:56,000
you? Or where else can they
connect with you? Yeah? Absolutely,

354
00:27:56,119 --> 00:28:00,640
that's my podcast website, The Passive
Wealth Strategy Show, new episod every Monday,

355
00:28:00,680 --> 00:28:03,279
Tuesday, and Thursday. Go there
to learn more about the podcast,

356
00:28:03,359 --> 00:28:07,880
potentially investing with us, you know, or get in touch. All right,

357
00:28:07,960 --> 00:28:10,880
Hey, if you got a question
for Taylor myself, shoot me an

358
00:28:10,880 --> 00:28:15,200
email kl atcarry Lutz dot com.
We'll get you an answer quick. And

359
00:28:15,519 --> 00:28:19,720
while you're at the site, you
can find the Financial Survival Network dot com

360
00:28:19,759 --> 00:28:23,799
show notes to this interview. We've
got a link to Taylor's site right there,

361
00:28:25,400 --> 00:28:27,839
and while you're there, sign up
for your free newsletter Teller a pleasure.

362
00:28:29,039 --> 00:28:32,720
Really appreciate you coming on and perhaps
we'll talk to you again in the

363
00:28:32,759 --> 00:28:36,319
future. Sounds great. Thanks for
having me, Thanks for listening to carry

364
00:28:36,400 --> 00:28:41,599
Lutz's Financial Survival Network, your solution
to today's trying times. For the latest,

365
00:28:41,680 --> 00:28:48,079
go to Financial Survival Network dot com. Financial Survival Network now more than ever