by | 27, Jul 2022

Asset Classes To Avoid, $1 Million VS $5,000 And Diversifying Your Portfolio

In today’s episode, we took the podcast to you! The audience, the dear people listening to this show every week. We wanted to answer the questions of the masses.

And boy were these questions interesting!

Would you rather take $1 million dollars right now, or $5,000 dollars every month for the rest of your life? What asset classes will we NOT touch!? And should you diversify your real estate portfolio with different asset classes?

Find out on this week’s episode of Multifamily Investing Made Simple.

LEAVE A REVIEW if you liked this episode!!

Tweetable Quotes:

“I kind of fall on the line of diversify a little bit.” -Anthony Vicino

“People just don’t think of it that way. They look for the bigger total number and think that that’s better on the surface.” – Dan Krueger

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five rules of investing

The Five Rules of Investing

** Transcripts

7-26-22

[00:00:00] Dan: Well, is this on.

Hello, should we accomplish something and welcome to multifamily investing me,

give

[00:00:33] Anthony: me a little bit of that ski da. Skip it back. Welcome to multi-family investing made. This is a podcast where we take the complexity out of real estate investing and we also get our jazzy selves. Skip it. We go crazy. we do it all. Yeah, but you can, uh, maybe take some action today on your real estate investing journey.

I’m your host, Anthony of Invictus capital joined as always by Dan SC,

[00:00:58] Dan: man. [00:01:00] Damn, that was good.

[00:01:00] Anthony: Kruger. that’s what we call improvisation. And scene, that’s not a word improvisation or improvisation improvisation. Are you, are you really doubting me on this one? I can’t tell if you’re gaslighting me or gaslighting yourself

[00:01:18] Dan: now.

Uh, I was trying to Gaslight you actually. Oh, I don’t think you pronounced

[00:01:23] Anthony: it. Right. I, so here’s the problem with trying to Gaslight me is I have infinite confidence in myself. Mm. Very hard to Gaslight a person who refuses to acknowledge any of their shortcomings. so anywho, uh, thanks for listening in tuning, in, uh, being here with us today, we’re psyched, like seriously, psyched to have you here with us.

Um, this is gonna be kind of a hodgepodge episode. We’re gonna, we’re gonna cover some ground. Hey Dan. You know, Do you know what our, what our best listen to episode of all time is Naval. I mean,

[00:01:54] Dan: no,

[00:01:54] Anthony: it’s not that one. It’s not even close to that. I thought that was download. I mean, that’s the one that we’ve listened to the most.[00:02:00]

Oh. But what’s, I don’t know that. Okay. Our, our re do you know, um, he’s, he’s looking up at the sky. He does not seem as though he knows not as a past investor versus Nope. No, he doesn’t know either. You guys, you guys are not connoisseurs of multi-family investing made simple and all the stats I’ll share this with you.

Okay. What do you got? So the number one most listen to, and number two, this is really interesting, actually, how’s this possible? So it tells you exactly what our listeners are tuning in to hear about. like exactly. All you guys care about is this one topic, cuz both of our top two podcasts episodes are about this single topic.

Oh, refinances, refinances. Yep. Oh, people are psyched. People are psyched to hear about the cash out refinance. So our number one podcast episode is, um, cash out refinance made simple. And then the second one is when we did it, part two, we went even deeper about a year. Um, so what do you think, um, we

[00:02:49] Dan: should just rebrand as the refi

[00:02:51] Anthony: podcast, pretty much all you guys care about is that cash out refinance, which, um, we did a cash out refinance, not too long ago.

We got another one come up here in the not too distant future. If [00:03:00] you guys are interested in hearing about those, then you’re gonna want to go listen to, uh, depending on when this episode goes live. I think it’s last weekends, the last, last 10 minute episode where we’re gonna kind of unpack, um, some cash out refinances, but.

we’re gonna do something a little bit different. The reason I asked you what our top listen to episode is, is to then ask you, what do you think is our worst listen to episode. Mm. And if you don’t know the, the most listen to I’m guessing the chances are you’ll, you’ll never guess this one.

[00:03:27] Dan: Um, I mean, it was, I’m gonna go ahead and guess it was something that we did back in the day with the

[00:03:31] Anthony: guests.

No, I wasn’t a guest episode. Oh, wow. Just us. But this one, this one has always like, this has always surprised. It has always surprised me that this was our least listen to episode. Was it a bad one? I thought it was really good. I thought it was really interesting actually. Uh, I don’t know, but you know, the people talk and they tell like, if they don’t wanna listen to it, they don’t listen to it.

Give me the data, what you got. Okay. So the worst, listen to episode ever is we fielded questions from the forum. We that’s right. Went to the bigger pockets forum. We found like five really popular questions that [00:04:00] people were asking. And then we brought him back to the podcast and we answered. and you guys at home did not care for that.

So

[00:04:06] Dan: here we are. The podcast audience is just different than the forum. I think

[00:04:09] Anthony: so. So, but here, but here we are two years later, we’re gonna do it again. Sort of didn’t the first time around, but I’m confident.

[00:04:16] Dan: Just listen to it. Just listen,

[00:04:18] Anthony: stick with us. Like this is gonna be good when we’re gonna cover three, uh, three questions that did not actually come from a forum.

I think re generated two of these. I think I generated, I generated none of these. These were all from. And they were pretty good questions. So we’re gonna, we’re gonna unpack each of those today, but before we do that, how about you? Um, ski da Bedu bou some bad advice onto us.

[00:04:39] Dan: I’m I’m done with SCA, but okay.

I will give you some bad advice. Uh, the markets are looking shaky, little wobbly, a little UN sturdy. Uh, so you should reduce was that kind of like. Oh, she is not, she got my balance for sure. which is not good. Uh, Mark’s looking a little shaky, a little wobbly. So you should reduce your [00:05:00] exposure to prevent the risk of loss.

That is my bad advice for the week.

[00:05:06] Anthony: I’ve already reduced all my exposure. I’ve sold everything. even your shoes,

[00:05:09] Dan: even my shoes for those of you on the YouTubes, uh, you’ll notice that Anthony is not he’s son’s shoe.

[00:05:14] Anthony: You’ll notice, uh, dear listeners that I did not today, encourage you to go to YouTube and , uh, subscribe to multi-family investing it’s casual Friday.

And look at this particular episode today, I am barefoot. And, um, if that’s gross to you, I am very sorry, but I do my best work. Free

[00:05:33] Dan: feet. Okay, well, let’s run with that. Okay.

[00:05:36] Anthony: So shaky, shaky market should sit out. You should liquidate. You should get out. You should get out, get out panic, panic

[00:05:41] Dan: and flee.

[00:05:42] Anthony: Panic is always a good investment plan,

[00:05:44] Dan: right?

Yes. Yes. If you’re not operating from a place of fear, you are screwed. This is all horrible advice. Um, I’m gonna take a quote for Warren buffet here to, uh, describe how I think you should be approaching these types of times. Uh, this is from Buffy boy. See, we’d used it twice now. Now it’s a [00:06:00] thing. It’s a thing.

It’s officially a thing. Um, a market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at great better. Yeah, there you go. Right? Yeah. So I like that. I do. I like that. That that’s the, that’s the, the lens you need to be looking to add things through is, um, not from an emotional driven, uh, state of mind, but.

View it as an opportunity, right? Um, these things happen. Markets are cyclical. This is a great opportunity to go out there and, uh, get some exposure. Um, for us it’s primarily real estate for some of you, it might be stocks, whatever it is is your thing. Even crypto’s been getting the crap beat out of it. So, uh, look at this, this as

[00:06:41] Anthony: even crypto as though that was kind of surprising.

Like even crypto.

[00:06:45] Dan: Well, because it was pitched so long as this kind of alternative asset, that should be ahead. It’s digital goal inflation. It should be not correlated equities, but it just matches the NASDAQ right now. So, um, yeah, everything is getting beaten up. I don’t, I mean, the only thing that’s going up is treasuries and things like that, [00:07:00] but otherwise everything is getting the crap beat out of it.

So this is a time not to be scared, but to actually look at taking on a little bit of exposure as soon, you’ve got a long time horizon. Follow buffet in the Sage wisdom. Keep a cool head. Uh, don’t get freaked out by market turbulence. This is actually a time when you can, uh, enter

[00:07:18] Anthony: real quick. Disclosure is again, remember guys, this podcast is not investment advice.

It is not even advice. We’re not even really talking about investing. We’re. I mean, we opened with a scat improvisation, so take everything we say with a big grain of salts. Uh, don’t hold us liable. Don’t Sue us. Um, I will ask this question. What do you think about this? So I agree, fundamentally agree, especially in a, I’m gonna use big air fingers here, uh, in efficient market, like stocks or crypto right.

Like a lot of, um, sarcasm there, but also a little bit more truth in the fact that at the very liquid markets, the prices and those, uh, equities have definitely dropped and you can go out there and you can. [00:08:00] Apple stock or a P a stock, you know, lower today than you could have seven months ago. But does that hold true in real estate where it’s a little bit less efficient things trade slower, and that we haven’t really seen a huge pricing shift yet.

So do we kind of sit still and wait on that or what, what’s your, because it’s kind of different.

[00:08:21] Dan: Yeah, well, I mean, generally speaking for me personally, I don’t wanna try to time the market, uh, especially with real estate. You know, we’ve got our core philosophies that we look, uh, to acquire properties based on, and those philosophies are gonna service well in strong markets and weak markets.

And that’s gonna be a little bit easier to, you know, get debt financing and strong markets a little bit tougher to find good deals, but when markets get softer, In our industry, it’s the financing thing gets a little bit tougher, but the deals actually become more readily available. Um, so I imagine our kind of shopping season to be more next year because we tend to kind of lag, uh, the stock market a bit in that, you know, these pricing, these [00:09:00] price adjustments happen in those liquid.

Public markets very rapidly, but it takes a while for the transactions in the very slow multi-family space or any kind of real estate space, uh, to really start to reflect those increased rates. So I’d say over the next year or so, once we get our next, next hike here, rates are gonna be at that level for a little bit.

That’s gonna start to kind of. Dampen a little bit of the buyer’s appetites. I think cuz cost of capital goes up and that’s probably a, a as much of a dip as we’re gonna get, honestly. So it’s probably gonna be the best opportunity for some time. Hopefully. I mean, I don’t want there to be any sort of economic collapse, but I think we’re gonna get a little bit of a slowdown next year.

Those rates kind of get up to where they’re gonna be. And I see personally, I see it kind of coming back down a little bit after that maybe they keep going up. We’ll see.

[00:09:45] Anthony: But yeah, it’s interesting. The, uh, just reading some reports today about how, um, the market’s already cooled in the sense that things are spending longer on market now.

Right? Whereas before in Minneapolis it was like 22 days on market, which is obscene. And

[00:09:59] Dan: you’re talking about [00:10:00] single family homes, right. I’m

[00:10:00] Anthony: talking about single family homes, but even in multi-family like it’s things are spending longer on market. And not, not significantly, right? Like 22 days on market before is absurdly low.

Um, now it’s like it’s up by like 10 or 13%, which is still like 25, 26, 27 days on market, still absurdly low. But it does seem to signal the, a little bit less demand. However, the prices, the valuations haven’t dropped. So while things are spending longer on market, they’re still finding the buyers at the number that they were looking for, which is interest.

So I don’t think we were at that point yet where things are gonna spend long periods of time on market because people can’t get the financing. People don’t have the money and they’re not willing to pay the prices. And until that starts happening, I don’t think the prices are gonna start coming down. So not a ton of buying opportunities at this instant.

[00:10:49] Dan: No. Yeah. We’re kind of sitting tight.

[00:10:51] Anthony: Well, actually we’re not, we’re buying a lot of stuff. That’s a different situation. Like we’re the exception that proves the

[00:10:56] Dan: rule. We’re in the middle of something. But as far as like looking for that next thing [00:11:00] we’re, we’re looking, we’re not.

[00:11:02] Anthony: Aggressive. Yeah. For context, everybody at home over the last three months, we’ve acquired three buildings.

Mm-hmm , um, it’s about a hundred units or so, and we intend to acquire probably another a hundred or so. Um, but this is the deal that we’ve been working on for a very, very long time. The numbers look still look really great. Um, but we’re coming out of this and we’re like, okay, once we’re done with these transactions, October November, once the last door closes, we don’t really we’re.

We’re just gonna kind of sit and yeah, we’re still

looking,

[00:11:30] Dan: but we’re fine. Just sitting, waiting, because we’ve said it before on the show. It’s that’s what investing is. It’s a lot of sitting and waiting for that. Right. Opp opportunity to present itself. So let’s get, let’s

[00:11:41] Anthony: get into these questions. Let’s it?

Cause these are, these are good questions. Some of ’em tied directly into some things that we’re talking about here, but number one is so re Reed proposed this question that he saw on, I don’t know, he watches like Fox news or something like that. if you guys know, re Reed probably does not watch Fox news.

fairness means [00:12:00] July. So, but. I guess the question they were going out on the street, and they’re just asking random people on the street, would you rather a million dollars today or $5,000 every year, every month, every month for the rest of your life. Um, and so that’s an interesting, that’s an interesting question, Dan, which would you prefer a million dollars today or $5,000 every month for the rest of your.

[00:12:26] Dan: Well, my answer’s always gonna be maximum dollars today. Even if the lifetime total number is gonna be bigger, cuz this is the same question that every lottery winner gets as well. They get the option of a big lump payout today or some sort of annual payout, which is a higher total. Number of dollars, but the math makes sense for the, um, uh, lottery commissioner, whoever does that, I don’t even know what they’re called lottery commission.

That sounds good. No, that sounds good. Uh, the guys running the lottery, um, the mob, the numbers, yeah, the mob numbers make sense for them and the bulk payout all at once, as opposed to, um, I’m sorry. The [00:13:00] numbers make sense for the individual, for the bulk payout all at once more than the bigger number over long term because of the present value of all those future cash flows.

If you’ve talk, if you’ve listened to any of our content on. present value or the time value of money and the, uh, you know, net present value of future cash flows. That concept of discounting money that you get in the future. Um, given the fact that you can turn around and invest it. Now, this is typically not what lottery winners do.

Um, you’re gonna be able to make a lot more money than that total larger payout. So taking a million dollars today would be better than taking 5,000 a month for the rest of your life. Assuming you actually invested mm-hmm and, you know, buy a couple pools.

[00:13:39] Anthony: I’m just gonna, I’m gonna be buying some Lambos.

Yep. Um, that’s about probably can’t buy very many Lambos

[00:13:46] Dan: guys like that should just take the paycheck cause they’ll just

[00:13:48] Anthony: blow it. Anyway. I do think it’s really interesting. Reed said he, he did the calculations on this and he says, if you, you run it out, the $5,000 takes about 14 years to earn to about a million dollars.

So then in my mind I reverse engineer. Okay. That [00:14:00] $1 million. How long would it take me to double it? And typically. In the stock market and what it’s produced historically over the last 50 plus years, it would take about seven years to double your money in a real estate syndication. You’d probably do it faster five years, maybe a little bit less.

Um, but I think seven years is a good, good estimate. So that means in year seven, I now have $2 million. So by year 14, I’ve actually turned that, that 1 million into 4 million. So it’s gonna take 14 years just for that $5,000 a month to equal my original starting amount. And it’s never going to catch.

Assuming conservative investments in that you don’t lose money. A lot of, lot of assumptions there, it is nice to have the guaranteed payment. However, um, I think you could vastly outperform that with even a very conservative investment portfolio. Yeah.

[00:14:47] Dan: Unfortunately, most people just don’t think of it that way.

they look for the bigger total number and think that that’s better on surface. That would make sense, but you understand the logic behind this, then you can do the math a little bit more effectively, but I mean, I do [00:15:00] also

[00:15:00] Anthony: like the idea of just being able to have $5,000 a month and not even think about where it’s coming from or having to like.

Handle anything that there’s no risk. That’s kind of nice too, right? Yeah. With

[00:15:09] Dan: the million, you gotta take a little responsibility. Yeah. You gotta do stuff. Yeah. If you’re the type of person that likes that and knows what to do then. Great. But if you’re not, then maybe just sign up for the paycheck, even though the, uh, the finance, uh, professor would look at you.

Like you’re buffoon, what are you doing? Yeah. Oh man. Like nails on a chalkboard for

[00:15:25] Anthony: him, but bad life choices. No, you didn’t. Um, you? Well, maybe you did. I dunno. Okay. Okay. Let’s get to question number two. Oh, um, I haven’t asked you this. What asset class would you avoid at all costs? Like, like, I couldn’t even give you a building in this asset class

[00:15:44] Dan: right now for me personally,

[00:15:45] Anthony: like answer this, however you want, you could say right now, or just like macro economically over the course of 50 years.

Like, what are you just not interested in?

[00:15:54] Dan: Um, yeah, for me, I’m gonna answer this for me personally, because I mean, I’ve said it [00:16:00] before a million times that you could do really well in pretty much any asset class in real. Right. If you wanna just focus in and, and do that one thing, get really good at it.

You could be a rockstar. So my answer is gonna be based on the fact that I know my lane. And so I would say personally right now, Office just because hear me out. Um, it’s ripe with opportunity. There’s gonna be a lot of people that do extremely well, but it’s in a very big transitory phase right now and it’s changing.

So the office space of 2018 is not gonna look like the office space of the next. 10 20 years. I don’t know what it’s gonna look like. And for that reason, someone’s gonna make a killing there. A lot of guys are gonna lose their shirts. Um, right now I think it’s actually fair and pretty damn good compared to how you would think possibly.

Yeah, there is gonna be, there’s gonna need to be a lot of changes in that department. So I would say for me personally, that’s not my lane. There’s gonna be some guys do really well. Um, I’d stay outta that personally, just because I know the least about it, [00:17:00] and there’s gonna just be some big changes that I’m not smart enough to know about.

[00:17:04] Anthony: I would second that I actually had, I guess I have three asset classes that I’m just really not interested

[00:17:09] Dan: in everything, but multifamily

[00:17:10] Anthony: well, no, kind of. So office is an interesting one, not because I, I think it’s doom and gloom and that it’s gonna get hit really hard. Like. I think a strong argument can be made for that.

I don’t know if I completely buy it. If office is really gonna get smashed, I know it’s getting smashed in like certain markets, but generally that’s not the reason I would avoid it. The reason I would avoid it is because it’s just so different. Yeah. From what I already know, um, the leasing is very, very different.

This is why I also put retail into this category. I’m really not interested in learning the ins and outs of retail leases. Like, uh, I know it’s not that complicated. I, I have. I would say, I, I have a deeper than most understanding of it, but I just don’t wanna deal with it. Um, a

[00:17:54] Dan: lot different than what we do a lot different

[00:17:57] Anthony: and you could say for better or worse, but I guess that’s something I don’t wanna [00:18:00] play with.

Not saying you should stay out of it. Cuz also retail is an interesting one. We could look at it through the lens of office and say that’s a market that’s been disrupted a lot over the last decade and will it continue to be disrupted? Who knows? Um,

[00:18:12] Dan: there’s opportunity for

[00:18:14] Anthony: sure. Opportunity. There’s good buying power, good numbers you can buy at, right?

Like, yeah, some low or some high cap rates. Rather the, the last one I’ll throw out here. And I just thought of this one is mobile home parks and has nothing to do with like the underlying economics of that vehicle and everything to do with something an investor once said to me, which is like, I don’t want to own anything that I wouldn’t be proud to show my.

Hmm. And I was driving by a mobile home park this weekend, uh, yesterday rather when we were going to that golf event. Mm-hmm and it was like the most sad, depressed looking thing. And I know that there’s really sad and depressed department buildings. So I get that. They’re not all the same, but generally, like, I don’t think a mobile home park would spark my soul with joy [00:19:00] to own.

I don’t think it’s something that I would be proud to own. Yeah. That’s fair. I don’t know why that just could be my internal biases.

[00:19:07] Dan: Yeah, I guess you’d, you’d rather have a skyscraper.

[00:19:10] Anthony: I mean, I’ve been very transparent from this, about this. Yeah. From day one is I want that. I want that.

[00:19:16] Dan: So mobile home part, the sky that yields 40% a year versus skyscraper that yields 0.5% a year.

You’d go for skyscraper. Uh,

[00:19:25] Anthony: yes. Yeah. Yes, yes. Yeah. It is what it is. Well, the here’s the other thing about mobile home parks. Cause I think that there is a lot of opportunity there, but I. It’s becoming UN I think it’s gonna become really, really hard to compete here in the near future. Cause I think really big institutions have already started gobbling up.

A lot of them, it’s a very fixed supply market, so there’s only so much for it to be bought up. And I think it’s gonna end up in the hands of fewer and fewer and fewer players. And if you’re just now starting in that field, like there’s probably some opportunities and ways to get in, but the really good deals have probably already been [00:20:00] acquired at this point.

I, I don’t feel as. Um, you’re gonna be able to compete over the next 20, 30 years with where that industry’s going. You might be able to get some really good exits, but I do think that there’s like a, a lifespan on this, on this product.

[00:20:13] Dan: Yeah. That’s where my head went. When you listed that one was that it’s been the flavor of the month for so long and that it just feels kind of long in the tooth.

Mm-hmm to your point. Like a lot of that, that, uh, opportunity’s been. Capitalized on already. Uh, cuz I think of a lot of the stuff that I saw guys were, were doing in that space were pretty, pretty significant value add projects where, I mean, it’s completely different than the type of value add stuff we do, but they were going in and, and.

cranking up the value of these things. And so after that takes place, right, then what, like how much can you really, um, improve a, a mobile home park, right?

[00:20:47] Anthony: Yeah. And, and we’ve seen over, like for the last 30, 40 plus years, the there’s, you’re not really allowed to build. More mobile home park. So it’s a very fixed supply thing and I, I don’t think that’s ever gonna lift.

And then I do [00:21:00] think that there’s gonna be a whole lot of nimbyism in the future of like, Hey, we want to continue developing, expanding. We want that mobile home park outta here. And a lot of zoning and regulatory things I could see changing in the future to, to make it harder to operate now in the same vein of mobile home parks.

Um, I’m in me not wanting to be in it, but something very similar that I would be interested in RV parks. RV parks are kind of interest. What’s the difference. I don’t even really know, except for it’s a recreational vehicle. So one, it presumes a certain level of economic stability. It’s people that are just going on vacations, I believe, and park their cars for like a month and like living out of a place.

And so it’s really just like a glorified campground. Where you can have amenities and features that yeah. Add the value. But,

[00:21:42] Dan: um, so mobile home, Park’s just kinda the same thing. That’s on the side of a highway, whereas an RV park is like in a really beautiful

[00:21:47] Anthony: park. I believe so. And I don’t know a lot about it, but I also think RV parks are a little bit more transitory in terms of like the, the people using it.

Whereas mobile home park. Yes. Those homes aren’t

[00:21:56] Dan: really mobile. That makes sense. I just never thought about too. Brought it up. Yeah. [00:22:00]

[00:22:00] Anthony: I was thinking about it because that became very popular. Um, the industry of RVs in 20. Because everybody was stuck in their homes like that, that industry just exploded.

Yeah. And now there’s all these people out there with RVs that need a place to park it. So you could look at it either through the RV park perspective of like, when I go on vacation, where do I park or long term storage of RVs. I think both of those are kind of interesting things. There you go. All right.

So last question, ready for this one. Really? And there’s a couple, couple different ways that you could answer this a couple different lenses. Okay. So what you answer is probably gonna be a little bit different than how some of our listeners will, will want to answer. Should you diversify into other commercial real estate classes?

Should I, I mean, you’ve already answered it for yourself, right? Like you’ve already said you’re not going to yeah. But maybe unpack that a bit. And then from the, the view of, if our listener is a fledgling operator, should. And if they are a prospective LP or a seasoned LP or limited partner or passive investor, [00:23:00] should they, what do you think?

[00:23:03] Dan: Um, okay, so fledgling operator. So I’m gonna try that one first. So you’re saying that if somebody’s struggling in multifamily, should they look at other asset

[00:23:12] Anthony: classes? Oh, I don’t know. I wouldn’t necessarily mean fledgling as like struggling, but like newer. Okay. Like they just, they’re just starting out like.

[00:23:19] Dan: To that guy. no, no focus get really good at it. Like figure out like pick one doesn’t matter, which pick an asset class that speaks to you, right? Like Anthony said that, you know, pick something that you, you feel good about. Cuz I think I’m firm believer that you can do really well in any asset class of real estate.

The fundamentals are there. As long as you buy at the right price, you don’t ever over leverage and you, you, you learn all the nuances of that asset class you could do really. As long as it’s not like going away. Um, so pick one and get really good at it. And the only reason to diversify out after a certain point is in my opinion, kinda like what we’re doing is we want to master our space, [00:24:00] get really good at it.

Build a machine that we can just walk away from, that keeps running. And at that point, start to diversify and get to, uh, you know, get some smaller positions in some non multifamily stuff. So. You know, once we’re the brand new guy doing something new for us again, uh, even if it goes completely wrong, it’s a small piece of the portfolio.

So I wouldn’t rush diversification early on for an operator for an LP.

[00:24:23] Anthony: Wait, wait, wait, wait, wait on that one real quick. Yeah. Cause I wanna, I wanna ask a question on the GP side. How do you know when you’ve been in the game long enough as the GP, you have a well oiled. Uh, enough that you, you can start looking.

Cause I see some people they’ll do like two multifamily deals and they’re like, okay, cool. Now I’m doing a mobile home park and now I’m doing soft storage. What’s what, what would you say is like a handy framework to say, okay, once you have achieved this level, then you can, you can move forward to expanding.

You know, I

[00:24:50] Dan: guess I’d, I’d, I’d probably backtrack a little bit and say like for us, we wanna get it to the point where it’s a well oil machine. Um, for other people, I guess the advice that would probably be a little bit better is [00:25:00] to. Um, if you wanna diversify do it at any point where it’s an incredibly small portion of your portfolio, right?

So let’s say you’ve built up, um, you know, 10 million in multifamily assets and you want to try retail, right? Um, Keep the new thing, definitely under 10%, maybe under five, right? If you’re new kind of speculative and it is speculative because it’s new to you, uh, venture is, is a small proportion of your total thing.

Your total portfolio then have at it, get in there early and do it. I don’t think you need to have like a. A business that you can literally just walk away from for six months and have it keep running. Like, that’s kind of what I was talking about for us, but that’s more of a personal preference. That’s not necessarily something like a prerequisite for everybody.

I think it’s, as long as it’s a small piece, the new thing where you’re the new guys, the small piece, then do it whenever if you

[00:25:51] Anthony: want. Yeah. I think that’s a good way of looking at it. I, for us definitely. One of the frames that we look at this through is not just can we walk away and the machine keep running, but can [00:26:00] the machine keep growing itself?

Mm-hmm like, do we have the team and the systems in place where if we were to walk away and start focusing on this other thing, would it not just maintain, but would it also improve? And I think once you cross that Rubicon, which is as a hell of a Rubicon across, um, then you can start diversifying pretty confidently given the type of company that we’re trying to build.

And that’s very different. depending on what type of operator that you wanna

[00:26:26] Dan: be. So, yeah. And that’s tough to tell when you’re there, because like, you, you know, when, when you don’t, until you get outta the boat, you don’t know until you leave, right? Yeah. So you look at like apple, for example, after jobs left, like it’s been doing well, but it hasn’t really, they just make iPhones.

That’s, that’s it , that’s their whole business. I haven’t really like, uh, innovated much, but then you look at, at Amazon and Bezos just recently exited like, kind of like full-time operations very recently. And. You know, in the most recent, quarterly earnings, we’re hearing about all these kind of new, innovative strategies that [00:27:00] are coming out post Basos, which is pretty cool.

So that’s kind of the first confirmation there that, Hey, it’s working on Amazon side, but Apple’s pretty much just kind of maintaining like yeah. Their sales are increasing, but they just increase the price every year. Right? Yeah. So it’s like, are they selling more units? Not really.

[00:27:16] Anthony: Yeah. They’re, they’re definitely not the same type of company that they were initially, which is about innovation and.

Differentiation that, um, they have a very highly profitable business, but like, like you were saying, like the only way to know that you’re at that point that you could walk away and the machine keep going is if you, when you walk away. Um, yeah. And that’s, that’s such a scary moment, so we’re not there yet.

We’re not there. We, we got some work to do. We got ways. All right. So now answer this question. Should you diversify into other commercial real estate classes as an LP?

[00:27:50] Dan: Hmm. That’s tricky. I mean, it’s so easy for an LP, right? Yeah. Um, they could, they could get into whatever the heck they want. I guess it, it just depends on what you’re trying to achieve.

It’s [00:28:00] gonna be a different answer for every. Um, my strategy, if I were just an LP would be to, um, primarily pick a focus, um, because you know, if you get ultra diversified, we’ve said it before on the podcast, you end up just kind of with the, the market average returns. So if you want the good and the bad, um, you know, take your discretion outta the picture and put equal amounts of your capital in every single asset class.

And then you’ll end up with, you know, fairly mediocre results. Um, so my personal preference, if I were just an LP would be to pick a concent. uh, that, that I think has a thesis that makes a lot of sense to me. And then have maybe I’m pretty aggressive when it comes to investing. So I’d say 50 to 75% concentrated.

And the other 25, I can’t see it being 50, but maybe 25 to 30, a little bit more like, yeah, let’s try, uh, um, let’s try mobile home parks. Let’s get a little bit in that or self storage.

[00:28:58] Anthony: Yeah, I, I kind of fall on the [00:29:00] line of diversify a little bit. Like that’s the cool thing about being an LP is you can go anywhere and do anything, but every time you do that, you have to learn that the ins and outs of that new thing to feel confident to be able to sleep well at night, or at least I would.

And so I would probably just try and find maybe two asset classes and I would do my diversification based off of geography and operator less so than the asset class, because what I’ve, what I’ve noticed is. and having looked at a lot of like mobile home parks, indications, or retail deals and a lot of multi-family deals, honestly, the, the return structures, all kind of like, they all break out about the same in the grand scheme of things.

It’s like six of one, half a dozen of the other. Yeah. And so I don’t think that one is gonna vastly in the grand scheme of things outperform the other based off of the strength of that asset class, I think it’ll occur because of the strength of the operator and the particular market that you’re in. So I think you’re probably just better off, like figuring out which asset class resonates with your soul and spend all your time finding the operator in the [00:30:00] markets and you you’re probably in the grand scheme do better.

Yeah.

[00:30:03] Dan: Yeah. I agree. And I think it’s safe to say that the, you know, you find those great operators to work with. they’ll make it probably an easier decision as far as like, which asset classes to focus on, because they’ll turn you onto the information, the data to help you make those decisions. Um, so mm-hmm, start with the operators.

We’ve been saying it since day one.

[00:30:24] Anthony: Yeah. We really bang that up from a lot. I can’t believe we’ve gotten 250 episodes of this podcast. Just banging that. , but thanks for coming, listening to us each, each episode, everybody, I like that’s pretty cool. you guys really like that beat though? It truly is the most important piece.

So. we don’t, it’s not something that we just say, it’s something that we live.

[00:30:45] Dan: Um, it sounds like we’re ING our own horns, like, and it, and it’s, it’s, we’re the most important thing in the world. cause we’re operators that’s, that’s not how we

[00:30:54] Anthony: need it. Um, yeah. And on the, on the same side of that, like, we’re definitely not the right operators for most people.

[00:31:00] That’s sure if you need some, if you need an operator who wears a suit and tie shoes,

[00:31:05] Dan: Hey,

[00:31:05] Anthony: I got shoes on. I, I, I don’t what to tell you. you’re coming to the wrong people. All right. Let’s let’s, let’s wrap it up. So those are our three questions. Um, I hope that this episode does not come in last place. So it probably will.

If you’re listening to this ignoring the episode was good. You thought you got some value out of it. Just help. Help the algorithm a little bit and just go share this with a friend on Facebook or something and be like, Hey, listen to this podcast episode, wasn’t their best work but wasn’t the worst.

[00:31:35] Dan: These

[00:31:35] Anthony: guys need help.

And, uh, this is let’s boost it up there so that, um, these, these, uh, what would you call it? Pope, um, episodes. Um, cause I love these popery

[00:31:47] Dan: episodes. Yeah. I think nobody likes pop. This is not gonna help our numbers.

[00:31:52] Anthony: is that true? Yeah. People sucks is pop

[00:31:54] Dan: out, re back me up here. I don’t know anybody that

[00:31:56] Anthony: has pop has pop been canceled.

[00:31:58] Dan: I feel like it’s, it’s like moms in the [00:32:00] nineties had it. It’s a generation. No one liked it. I think. I mean, people, my age probably know that pop sucks. Have I

[00:32:05] Anthony: just exposed myself as a nineties? Mom? Yes, you pop.

[00:32:10] Dan: He does. It’s just

[00:32:11] Anthony: so tasty. It’s just, and it’s always like, so you just grab a handful on the way out.

It’s like, it’s like nuts. It’s just like,

[00:32:17] Dan: I, we are talking about different things. Is like a

[00:32:20] Anthony: smell. You can’t eat that, man. Reid is losing his mind over here. You guys started this episode trying to Gaslight me. Boom.

[00:32:26] Dan: So for the listeners who can’t hear Reid, I mean, let me clue you in, um, Reid got punked.

Yeah. Ah,

[00:32:35] Anthony: don’t don’t try. And he was

[00:32:36] Dan: don’t read, you were punked, mad punk mad. You were mad about that claim. Re Reeb

[00:32:39] Anthony: got him. He was like, what? . Okay. So, uh, book re book recommendation for this week. Do you remember what we’re re.

[00:32:47] Dan: the last book, deep dive episode. And what was that? The psychology of money by Morgan Hauser.

Hauser. You gotta say it with a really deep German [00:33:00] aggressive tone. It’s probably Spanish. Probably. That’d be funny. I’m just making assumptions.

[00:33:05] Anthony: Uh, tell me a little bit about this book and why somebody should go. Uh, if you guys don’t know, um, what we’re recommending right now is actually a book that we did a deep dive on last.

And so that podcast episode went out on Wednesday and we give you 10 takeaways from the book, but what gimme a high level. What’s this book about? Why is it good? Why do we love it? Why should people go and check out that episode?

[00:33:27] Dan: Yeah. Check out the episode. If you don’t wanna read the book, basically. Um, I think it’s a great book.

I think you should read the book, but if you don’t want to get the sophisticated investor notes, check out the episode. I like it because a, I like, uh, psychology and I like money. And so this book, psychology money. Automatically, uh, appealed to me and it took me forever to read it. And that’s because I think Anthony, you said you had a similar feeling.

It just like that it didn’t jump off the Amazon list. You right. You saw like, that’s interesting, but it just sounds like, okay. I’ve probably heard all this before. There’s probably nothing new in here. Uh, but when you crack it open, it [00:34:00] actually does go fairly deep into. the psychological nuances of your brain and how you think about money.

And it really brought up some insightful pieces that somebody who’s read a lot about money in psychology has never really thought about before. So it was very thought provoked. We had some good takeaways, even some actual action, actionable items that we took out of it with respect to our, oh, that’s right.

Enough numbers. We, the enough number we actually came out of that and I didn’t get my number yet. I have to sit down. Nailed that down, but you did, but, so we actually got some actionable takeaways out of it. So check out the episode. We, we call those out in there and maybe read the whole book. It’s pretty good.

[00:34:36] Anthony: so that’s, that’s the book. It’s, uh, the psychology of money. It’s super great. I would say it’ll probably take you six or seven hours to read it or so big. You could just go and listen to the podcast episode that we did and get everything you need in under an hour and download the, uh, sophisticated investor notes.

It’s a win, win easy. If your time, according to Naval, if you’re in Naval and your time is worth [00:35:00] $5,000 an hour, then we have just saved you six times five. This is math in public. So 30,000 blooms. You’re welcome balloons.

[00:35:11] Dan: Huh? Balloons re can we tag Naval on this? Yeah,

[00:35:13] Anthony: let’s get, let make sure that this gets on Neal’s desk.

Um, for everybody else, that’s listening out there. If your hourly wage is a little bit less than that, then that’s okay. We’ll, you know, do the math for yourself of how much time we saved you. And then go ahead and cut us a check and send it over. Um, we’ll put the address of the offices in the, in the show notes.

I’m just kidding guys. We, we appreciate you taking some time. If you wanna pay us back seriously, all you gotta do is just go drop a review, share this with a friend or family member, enemy, uh, person on the street. Um, you know, those people that sit on the pan handlers, like where they’re on the side on their, yeah.

Um, like, uh, anything helps. Yeah. This could be that anything, this could be that anything you just go up to them and say, have you listened to multifamily investing mid simple? And they’ll be like, you know, that I was. Not, it turns out not everything helps that doesn’t help at all, sir. It didn’t help at all.

So, [00:36:00] uh, yeah. I don’t know. You you’re, you guys are smart individuals. I’m sure you’ll figure out what to do with this. Um, I’ve run out of content. Hmm. I’ve run out. I think we ran

[00:36:10] Dan: out about 10 minutes ago. How do we get outta here? How do we, how do we

[00:36:13] Anthony: exit this podcast

[00:36:14] Dan: episode? We’re bad at this. Can you, I think everyone just needs to leave and we’ll stay here.

Just, just walk away from us. Why are you

[00:36:20] Anthony: still here?

[00:36:21] Dan: I’m not even sure I’m gonna rotate the mic away from my face.

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