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by | 09, Nov 2022

Everything We Got Wrong In Real Estate Investing

We made it! 300 episodes of Multifamily Investing Made Simple. That’s a LOT of episodes, and while we are right 99% of the time… we may have gotten some things wrong in the past.

John Maynard Keynes said, “when facts change, I change my mind”. We’ve been doing this podcast for quite a while now, and the facts have changed on certain topics.

So, in this episode, Dan and Anthony look back on 300 episodes, and… reluctantly… see where they were wrong about real estate investing. It’s not a lot.

Thank you to all of you who support this show. We hope you have learned something, and that maybe… just maybe, we’ve made multifamily investing… simple!

Tweetable Quotes:

“It’s important that things are simple, but not too simple. There comes a point where if you oversimplify you lose the resolution necessary to be able to make out what the picture clearly is.” – Anthony Vicino

“Focus on the stuff that you understand extremely well and put all your time and energy into that.” – Dan Krueger

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five rules of investing

The Five Rules of Investing

*Transcript*

We Were Wrong

[00:00:00] Anthony: to create

[00:00:15] Dan: show on Earth. Oh wow. Setting the,

[00:00:18] Anthony: let’s get ready to invest.

[00:00:21] Dan: That’s, that’s trademark.

[00:00:24] Anthony: Yeah. That’s great. Hey, welcome to the podcast. I’m Anthony. This is Dan. We’re here. We’ve done, we’ve done it. We’ve jumped a shark. This is the episode. We’re officially 300 episodes in. Cue the confetti, cue the balloons.

We did it. We, This is, this is episode 300. I can’t believe. How long have we been doing this? 200, two and a half years. Almost three years.

[00:00:48] Dan: Since April, 2020. Is that like Yeah, that’s accurate. Read. You just listen to all of these in one session, so I feel bad for you. But April, 2020, it feels about right.

Roughly.

[00:00:58] Anthony: Yep. Yeah, we don’t, [00:01:00] So it’s been about, it’s been, it’s been about two and a half years, 300 episodes, and it’s been a wild ride. If you guys go back and start at the beginning, you’re gonna be here for a bit. Uh, I would, I would skip some of those earlier episodes and maybe some of the later episodes.

Um, honestly, I think we have like a 10% hit rate. Um, 10% of our podcast episodes are actually like, That’s pretty good. . The nine. Yeah, the nine. You know, it’s about the intermittent, uh, reinforcement. They’re free. I mean, what do

[00:01:27] Dan: you expect?

[00:01:28] Anthony: It’s free. It costs, you get what you cost you your time. So I mean, that’s, that’s not nothing.

Don’t tell people that. But today we, we thought we would do for this very special, um, not inaugural, um, celebratory episode. As we hit this milestone and what we thought we’d do is we’d go back through, read, read our, our, um, awesome producer, went back through all the episodes, he listened to every single one of ’em.

I can’t believe he did that. I can’t believe this. That’s, I can’t believe we paid him to do this . [00:02:00] And he, he came back and said, Okay, let’s do a look back episode where we say, what are all the things over these 300 episodes that when we look back, we realize. Okay, we got that wrong. A lot of regrets. We were wrong.

A lot of regrets. Cause it’s good to be reflective and be open to the possibility that you don’t know everything. And that, uh, John Maynor Kins has this, uh, quote that I’ve always really enjoyed, which was, he said, When the facts change, I change my mind. What do you do? Good, sir. and he

[00:02:32] Dan: was being press. I dig in my heels.

I dig

[00:02:34] Anthony: in my heels. That’s what I do. Yeah. Oh, the facts change. Is that wrong? I’m gonna hold my ground even tighter. Yes, exactly. So now, now that we are this far along in our life, we’re two and a half years older, much wiser. We’re 300 episodes. Much, much more brilliant. Uh, we can look back now and, and judge our previous stupid selves and say, Ha

[00:02:52] Dan: ha ha, you were so wrong.

I do enjoy judging. So let’s do it.

[00:02:57] Anthony: And the number one, um, item. [00:03:00] Well actually do we wanna do our bad investing advice this week? I suppose we can’t as well. Got

[00:03:04] Dan: it. Can’t skip that. You guys want it? Do you guys want it? They can’t. They said yes. They said I heard. Yes. This is not live. Read.

[00:03:11] Anthony: Do you want you can go over to, you gotta be careful about asking, read things cuz he doesn’t have a mic.

So for an audio only format, the people at home are like, gimme a resounding,

[00:03:18] Dan: why are just silence ? You gave me a resounding yes. He’s like, gimme the bad advice. I will oblig. All right. Bad investing tip of the week is

[00:03:27] Anthony: uh, I hit my water bottle. It was like a gong. Yeah,

[00:03:32] Dan: Sorry. Well, that was good. I was emphasizing what’s about to happen, which is gonna be profound.

You’ve gotta be invested in the hottest markets or sectors or asset classes if you wanna do really well as an investor.

[00:03:45] Anthony: Well, this is something that we’ve said before and actually I think this is something that we’ve gotten wrong. Yeah, I think we do need to be in the hottest markets. Maybe you do, maybe you don’t.

I’m going to Phoenix. It’s like 120

[00:03:55] Dan: degrees. That is extremely hot. I mean, today it’s like 40 here, [00:04:00] so I’d take one 20 over 40 any day. What’d you one 20 over 40. You mean a dry one? 20. If I could sit by the pool

[00:04:05] Anthony: drive time. 20. I mean, you. No, no, no, no. Pool of my 120. I want you wearing black denim. No, and like a flannel shirt.

And you have to get into a hot, steaming car that’s been in the sun all day. You have to get into a Walmart parking lot. Why would anybody do this? Well, that’s regular life . That’s the life I live. All right. Black denim

[00:04:23] Dan: dress like a lumberjack in Arizona in Walmart parking lot is what? Yes, you

[00:04:28] Anthony: do. Yep. Okay.

Would you take that over? Lumberjack in m. No, everybody dresses. Its lumber. Jackson. My imagination .

[00:04:37] Dan: All righty. Um, so yeah, you gotta be in the hottest markets if you wanna do really well, which sounds pretty good. Uh, it even sounds a little bit homos ish, uh, when we’re unpacking the a hundred million dollar offers book.

Uh, I believe you had something in there talking about how you wanna be in, you know, an industry that’s doing well as opposed to something that’s declining. It’s a theme that’s come up in a lot of books that we’ve unpacked in our, our book episode. . [00:05:00] The point I wanna make here is that it could be tempting to always be running around looking for the, you know, the next hop thing, uh, that everybody’s into.

Back up a couple years, it was crypto and, you know, there’s, there’s always some new flavor of the month. Uh, but the point is, uh, you wanna invest in things that you understand and that you know really well, even if it’s not like the biggest, hottest market in the. Because we look at how to get Rich by, uh, Richard Felix Dennis, um, that we did that, uh, months ago.

But I do remember from from that book, one of the key things that took away from it was that he’s in publishing. It’s not like the the sexiest industry to be in by any means, but he knew it really, really, really well, and he made a ton of money doing it. So just stick to what you know, even if it’s not the hot new thing, don’t get distracted by what everybody’s freaking out about.

Focus on the stuff that you understand extremely well and put all your time and energy. Am my humble opinion. Nothing about you’s humble, obviously, . All right. All right.

[00:05:59] Anthony: I agree. [00:06:00] Concur. Let’s get to the bad. Um, the parts where we were wrong, April,

[00:06:04] Dan: 2020. Oh man. This was like probably

[00:06:08] Anthony: episode five. I don’t know.

So two? Yeah, well, those are origin stories, so I don’t know what this one was, but this one he said, Uh, Reid says, Vetting a winning general partner. It. Uh, there’s some, take some, This is the first time I’m looking at some of these, so I’ll, I’ll kind of read it out and the, the audience can join along in my discovery of what I, of what we were wrong about.

Most people jump straight into analyzing deals, but the most important step and the first step you should take is finding a general partner. You know, like in trust, uh, Grant Cardone is a good example. You set up a fund where you can take funds from non-accredited investors. It’s usually not worth all the rig mural and he puts into, Okay, so let me go back real quick.

So if we did, in fact, That the most important step and the first step is finding a general partner, you know, like and trust. Then I would say that was wrong. I disagree with it. What do you think the first step

[00:06:57] Dan: is finding

[00:06:57] Anthony: a general partner that you know like and trust? Yeah. [00:07:00] You disagree. I

[00:07:00] Dan: disagree. I’d say as soon as you identify what you wanna invest in, what your parameters are, and that real estate’s gonna check that box, then that’s where you go find.

[00:07:11] Anthony: Yeah. I’d say step one is actually education. Yeah.

[00:07:14] Dan: Read passive investing made simple step one. Yep. If you like it, step

[00:07:18] Anthony: two, all step one. Step one, read it. Step two. If you like it, leave a review. Step three, Investing, but also within the, the idea of finding a general partner, you know, like and trust. Do you think that that is not the entire picture?

Because I know I like and I trust my brother, but I would not invest with him, and so it seems as though there’s something missing here Still. Like, I don’t know what it is. Track record? No. Like trust, track, record. No. Like trust. Um, believe in, uh, I guess that’s kinda like trust. I don’t know. Maybe I trust that they can do the thing.

Yeah. But when I think about trust, I think more about trust in their integrity. So this doesn’t seem like the full picture.

[00:07:57] Dan: No, but we did, um, I’m gonna give us [00:08:00] credit here. We did do, um, a pretty good job of unpacking what makes a good gp. And there were, you know, several things to focus on, one of which was integrity and things like that.

Yep. So beyond just like trusting em, that’s kind of a blanket statement. I think you need to go a little bit deeper and. Really make sure there’s alignment and communication, business model, track record, integrity, that kind of stuff. Mm-hmm. , we talked about it in those previous episodes. It’s hard to really learn that on like a Zoom call or like one or two meetings.

A lot of the stuff you have to just,

[00:08:28] Anthony: you gotta go hang up by the pool with a man to really understand, you know, what kind of human he is, like we do with billionaires. Oh yeah, you guys, I’m, listen to that episode. That’s a good episode. When we hung out, that whole episode was perfect with the billionaires by, nothing wrong there.

All right, so then a month later, May, 2020. Wait. January, February, March, April, Yep. A month later. ,

[00:08:45] Dan: uh, did you carry the one? Sometimes.

[00:08:47] Anthony: So three key metrics and one important term every passive investor should know. Made simple. This is, this is a good episode actually. So armed with a deeper understanding of cash on cash return, internal rate of [00:09:00] return, equity, multiple and preferred return, you’re gonna be able to tell if an investment opportunity aligns with your personal investment criteria.

So, Dan, do you, you still stand by this, that the three most important metrics that an investor needs to understand are cash on cash return, internal rate of return, and the preferred return when it comes to looking at a deal.

[00:09:21] Dan: Uh, no. I. I mean, there’s no mention of what the assumptions are in the, the numbers that are supporting those return metrics that you’re looking at.

So like great return metrics are great. These are all return metrics, cash on cash return, internal rate of return. All, all these are return metrics and they tell you what the operator’s projecting to produce. But the other thing that you’d need, and I don’t know if I left this out, I dunno what happened.

Did you edit this episode? Did you cut out all the good stuff? What you need to do is understand what are their assumptions that are producing those numbers and make sure those make sense. So, um, that’s missing. Um, if I had a red pen I’d, I’d write on this, but yeah,

[00:09:59] Anthony: the, the unfortunate [00:10:00] thing is that metrics.

On their own will never give you that, right? Like, no, you gotta ask. It should be

[00:10:07] Dan: in the deck. I mean, most operators give you at least some of that. And then you’ve gotta ask, and then you’ve gotta decide is that realistic? Does that make sense? And if it does,

[00:10:16] Anthony: great. The, the thing that, and I think we’ve talked about this a lot, all these episodes, is that you can never take a number in isolation.

Like no number. There is no number that makes sense on its. In, in the context of investing. So you look at the cash on cash return, that doesn’t really mean anything if I don’t understand the cap rate assumption, The rent growth assumptions, the expense ratio assumptions. It doesn’t really tell me anything if I don’t also understand like the, the return splits, like so there behind every number.

There’s a whole lot of context that you have to have. There’s other numbers. There’s

[00:10:48] Dan: other

[00:10:48] Anthony: numbers. Every number is hiding another number and so, If you’re not, it’s some people’s nightmare. It kind of is. It can be horrifying. It’s, it’s a little bit like a hydra for every, every number three, you chop [00:11:00] down a seven and a six pop up in its place.

You’re like, What’s happening here? Those are good numbers though, but, But it is important then that you don’t try to like, Our book is Passive Investing Made Simple and our podcast is multi-family investing made simple. and it’s important that things are simple, but not too simple, that we’re not oversimplifying because there comes a point where if you oversimplify you lose the, the resolution necessary to be able to make out what the picture clearly is.

And then sometimes, you know, maybe we even fall prey to this. Sometimes we’ll have, we’ll put too much importance on singular things that then lose sight of the full picture. And so if there’s anything to take away, I think it’s that, um, context is everything. Yes. So, Ooh, the next episode is we must have had a really good spurt of good episodes, cuz the next one is December, 2020.

Vacancy Made Simple. It’s a good title. I’d click on that. That’s, that’s actually, just so you know, probably our worst performing episode of all. I’m not kidding you, I’m not, I’m not kidding you. Uh, [00:12:00] people are not interested in, maybe we should have called it occupancy. Can you confirm that for me real quickly?

Like I bet it’s in the bottom five. It’s, it’s, it’s real bad. But anyway, Right. An economically vacant unit is worse than a physically vacant unit. What do you think? Is that still true? Is that, uh,

[00:12:15] Dan: yeah. So to define this for our listeners slash viewers on YouTube, hello. Um, the difference between economic vacancy and physical vacancy.

So physical vacancy, as you might infer, is when a unit is physically empty and there’s no person in there with a lease be. economic vacancy is when you’ve got a unit that has a person in there, maybe they’re on a lease, maybe they’re squatting, whatever. There’s a, there’s a person in there that is not paying you rent and you need to get them out before you can get a rent paying person in there.

That is way worse because getting people out of a unit, whether it be through an eviction or, you know, whatever the issue is, if you need somebody to get out of a unit, that means you can’t get anythings done and it’s a pain. So that is way worse. I stand by that [00:13:00] statement.

[00:13:00] Anthony: Okay. Oh, I. and I disagree because remember, context matters.

Nuances matter. And so it is possible to have an economically vacant unit where they’re not paying, but we have high belief that money is coming. So that’s possible, right? Like somebody’s on some kind of payment plan 2020, and so they’re not caught up yet and it’s like the check’s in the mail coming in.

This agency and so the

[00:13:28] Dan: money would be there. I wouldn’t even throw it on the economic, like I wouldn’t if, if we’ve got guaranteed payment established, I don’t even include those in delinquencies. Like the number’s technically there, but a guaranteed payment letter from some sort of agency in my mind is as good as a check in hand.

It’s just a matter of weeks. So I, I wouldn’t even consider those in the same category personally. Yeah. But if it’s just a guy who says it checks in the mail, that’s, that’s different. I mean, I

[00:13:51] Anthony: wonder if this is, is, um, a different strokes for different accounting folks and where, and how they choose to, to account for that particular [00:14:00] thing.

Because if the money’s not there and is coming, then it’s a, it’s a receivable. Right, but it’s not there. So it might be guaranteed, but it’s not actually money in the bank yet. So that’s what I’ll say. How about this April, 2021? This is a year. This is like our one year anniversary,

[00:14:23] Dan: so we didn’t do anything good between December and April.

It looks like

[00:14:27] Anthony: surprising to me. Ugh. Yeah. This is not surprising. Phoned it in. When is the right time to buy? Waiting for a crash will guarantee you miss opportunities. So, . Yeah. Well, don’t jump in right now. You should probably wait a little bit longer for things just to go a little bit lower. I would, I would think just don’t be tweaker to get in there.

[00:14:48] Dan: I mean, I would take the word jump out. Um, I, I stand by the waiting for the crash thing is, is is a good way to [00:15:00] miss your opportunity to get in because I like that, but I don’t like the jump in. Reid, was that you or was that us? It’s putting on

[00:15:08] Anthony: me re he’s put it on me right now. Re is says he’s like, that’s, that’s you.

You guys said this.

[00:15:13] Dan: This is where you throw up a, uh, quick clip of me actually saying that thing. I didn’t say jump in just on repeat. Jump. Come on, people jump . All right. . But yeah, no, I think it’s, it’s stupid to, to try to wait for the crash. Uh, but at the same time, you don’t wanna like run into a market that’s, uh, not prime for good deals.

Cause you, you might end up. I mean, deal.

[00:15:34] Anthony: Mm-hmm. . Yeah. All right, so the next one actually, same month, man. April. We were on, We were hot killing it. REITs versus syndications made simple in under 10 minutes. Okay. So this is interesting. If you wanna be able to cash out your investment within the next year, then maybe the REITs better choice for you than going into syndication, which is probably gonna lock up your money for five to seven years.

What do you think about that?

[00:15:57] Dan: Um, I mean, [00:16:00] reading this, it’s kind of frustrating because that, I feel like it kind of implies you only have two options. One is a reit, one is a syndication, and if somebody wants to be in something with liquidity, I wouldn’t like, Only have those two options, right? Don’t you have a whole plethora of options for Yeah,

[00:16:14] Anthony: those are the only two.

Those are the only two. Yeah, because, yeah, because people will all this all the time, uh, when we’re talking about private placement and syndications, like, Oh, I’m already exposed to real estate, and they’ll think REITs, and so we just had these two posing against each other. But here’s the thing is that they’re really not the same.

They’re not even close. And I, and I just don’t like REITs. I do remember this advice is like, Hey, the big thing that REITs have going for is the liquidity. So if you’re gonna need your money out quickly, . It could be a, Could be an okay place to park it. That’s not exactly true, right about. Where if you had parked your money in a REIT at the beginning of the year, well, you might not be super psyched and it might not be super accessible.

Uh, you could access it, but it might not be, it might not be the time to take it. So,

[00:16:54] Dan: Yeah. And not all REITs are like, there’s a lot of illiquid REITs where you totally, your money is locked up. So it’s not even as simple as [00:17:00] like REITs. It’s like those publicly traded REITs that are liquid. Like, I dunno, I, I don’t really, I don’t like ’em.

I mean, yeah, you get a yield, you get a good dividend. But, uh, I mean, if you factor in the, the shift in value of the shares, you know, that dividend gets washed out pretty quickly. So

[00:17:17] Anthony: yeah, you get, you get this asset that’s backed by real estate, but you don’t really get any of the big benefits of it, and you don’t necessarily, you don’t get any of the big upside that you would get by just being in a, in a public equity.

Yeah. All you

[00:17:27] Dan: get honestly, is, you know, if the real estate industry is doing well, um, you should do okay. Um, but you’re not in real. You own a company you own shares, a company that owns real estate, so you’d probably be better off buying home builders in that environment as opposed to a reit. Personally, I think

[00:17:49] Anthony: so.

Do we agree with our past selves here, or did we disagree? I think we,

[00:17:52] Dan: I just don’t like saying. You should put your money in reit. He didn’t like, he was

[00:17:57] Anthony: like hard for those words to come outta my mouth. He’s like, [00:18:00] I just puked a little bit. So, but yeah, I mean, oh man. Spring 2021. We were on a roll. Okay, we got another one here.

May, 2021. This is selecting a market. The best way to decide on a market is the job market. I’m just gonna put this out there. I disagree with that. I don’t know which one of us said. I feel like read your paraphrasing. Oh, that was Dan that said that. Oh, okay. It’s

[00:18:19] Dan: paraphrased though, correct? I don’t say anything that concise.

[00:18:23] Anthony: Let’s get real. Dan has never said anything in sent,

[00:18:25] Dan: uh, 21. There’s a lot of con context, I think is, is, um,

[00:18:29] Anthony: pulled out here. I I think the job market is obviously a very, very, very important one, but, um, if the best way to decide on a market even better than just the job market, I’ll go with these two things.

Um, you could either say economic, More vaguely than just job market or for whatever reason, it’s just a very desirable place to live. Like people want to live there. I think those, at the end of the day invest in markets that people wanna live. And jobs are a good way of, [00:19:00] um, measuring that

[00:19:01] Dan: and supply and demand.

Yeah, I mean, even if there’s, there could be a situation where there’s an amazing job market, but way too many units and that wouldn’t be a good place to put your money in

[00:19:11] Anthony: real estate. Yeah. Or it could just be, you know, like San Francisco has a great job market, but that’s a really hard market to invest in.

Yeah. So I mean, that that can’t, on its own be the, again, like what you’re saying when you were talking about metrics, like no number can be looked at in isolation and the, there is no one single best thing. I know we like to do a lot of episodes where like the best thing or the worst thing or the three that’s just click bait.

It’s just click bait. Like we don’t truly leave that. Like it’s, it’s all very gray and there’s a lot of. But hopefully, hopefully we’re helping you guys understand and cut through some of the, the butter, uh, to see to the Yeah. At the, I picturing weeds, butter, butter cut through the butter. Like we’re just up to our ears and butter.

We gotta cut through it. Okay. , I don’t know. That sounds kind of fun. No, I want cut through butter. That sounds cool. Like gimme a hot knife and [00:20:00] this, like a corn maze of butter.

[00:20:02] Dan: Yeah. But I think you’re just trying to describe a tough process. Cutting through butter is, Ooh, it’s

[00:20:06] Anthony: easy. I don’t know if it’s six.

If is, if it’s a six frozen block of butter, it might

[00:20:11] Dan: be hard . Right? Right. We’re

[00:20:14] Anthony: way off top. Okay. Um, why you can’t save your way to wealth the poor spend the middle class save and the rich invest. Okay. I say this and I love this as a. A framework for helping people

understand.

[00:20:27] Dan: Real quick, for the record, this, I mean, this is us quoting somebody else.

This is, This is not

[00:20:31] Anthony: real line. Yeah. But this quote, I think is a good framework for helping people understand that the poor, they tend to spend everything that they have. The middle class has been taught to save, and the wealthy typically invest. However, I do not agree with this. Um, and you have to look no further than Alex Hermo who did not start investing until he had 15 million liquid in the bank, right?

Like, it can save your way to extreme wealth. It can be done. And in fact, in a lot of cases, it, it can be the best way to go. [00:21:00] But, um, I don’t want to just black and white this one and say like, The middle class are the only fools that save and the wealthier always investing. Cause I know plenty of wealthy dudes like Tom biu, billion billionaire dude, who only in the last two years really started looking at like investing as a serious thing.

Before that, he was like, I’ll just put all my time and energy into making more money.

[00:21:22] Dan: Yeah. I think there, there’s a lot of people that just sit on their wealth and they, they don’t do. I think, I mean they didn’t get there doing that. Typically they got their work and their asses off, but then when they get the thing, they’re like, I don’t know what to do with it.

So it’s gonna be right here in cash. And there’s a lot of that. So,

[00:21:39] Anthony: I mean, I wouldn’t complaining if somebody just wanted to give me like $15 million liquid cash in the bank, I’d be like, pretty cool with that. Honestly. You just sit there and

[00:21:47] Dan: look at your bank balance.

[00:21:49] Anthony: That’s pretty. If if I had, yeah, if you gave me 15 million liquid cash, I’d just put it in the bank and look at it all day.

I wouldn’t even touch it. I’d be like, Look at that. It’s

[00:21:55] Dan: pretty. Can I get another statement? Send another statement. Refresh, refresh,

[00:21:58] Anthony: refresh. Still [00:22:00] there still the same. That’s a lot of digits. All right. All right. This one’s from November 20, 23. Three things that make

[00:22:06] Dan: 2023 in the future. ?

[00:22:08] Anthony: Yeah. . I’m future cast care.

Yeah. 2021. So things that make a great deal. The market. Ability to execute the business plan and the operators.

[00:22:19] Dan: Are those the only three things or those are

[00:22:21] Anthony: three things? Those are, It says three things. I don’t know if it says the three things, but, Okay. I like this. Things that are there, these are important, like the operator is huge.

The ability to execute the business plan. And that was going back, I think to my, what I was railing against. When I, when I hear like the no, like, and trust of the operator, I’m like, Yeah, I know, like, and trust you, but can you execute? Yeah, there’s a bunch of really nice people. Nope. I like ’em plenty and I trust them plenty, but I, I, I’m like, I don’t think you can execute, so mm-hmm.

I, I, I still agree with these three things that make a great deal. Market execution operators. Yeah. I mean, yeah. As long as we

[00:22:58] Dan: didn’t try to say that these were the [00:23:00] only three things. I mean, maybe we made the title of the video that to get everybody click, these are three

[00:23:05] Anthony: pretty good ones said maybe I put these in the top 30.

Yeah. Oh yeah, this is this next one. Holy moly. I still remember this one. Um, December, 2021. Why real estate investing is evil? Real estate investors get the most hate compared to other investing mediums. I think this is still true. I still think this is true. Um, and it still baffles me. It’s always interesting, like, because we put out a lot of content, YouTube, Instagram, and all these different places.

And so sometimes a post will go viral and we’ll get a, as it starts to attract more mainstream thinkers, I’ll put them as in air quotes, thinkers, and we start to deviate further and further away from the um, um, the woke folk. No. No. The woke folk are the ones that the woke folk are the scary ones, not feeling, Yeah.

They come down hard on real estate investors and they have no pity in [00:24:00] their heart. None. Yeah.

[00:24:03] Dan: I still don’t really understand why that is, other than like some vague kind of avatar of what that guy typically is. Like Scrooge McDuck, super rich, just extracting money from a community like outside of that, like what do you really point to?

[00:24:18] Anthony: That’s like, yeah. It’s an avatar, like you said, I think people have it in their head that this is the, like the default. Yeah. And it’s like, in my experience meeting other investors, other real estate people, like they’re generally not evil folks. I know a couple that I wouldn’t, I wouldn’t trust with with Dan’s children, but like, yeah, there’s some

[00:24:38] Dan: annoying ones.

There’s some, you know, kind of just sketchy, but no one’s like,

[00:24:45] Anthony: Evil kind of tool people. Yeah. Yeah. But evil, like I don’t, I don’t really see it all that, I mean, of course there are people, but

[00:24:52] Dan: No, Yeah, I mean there’s definitely been like the, the major slumlords out there that have just, you know, but I feel like that’s that [00:25:00] small, uh, sample of individuals that get so much attention that it feels like that sample size is actually

[00:25:05] Anthony: bigger.

Yep. So, um, this is a, this is an interesting one, given the timing. So we started, we’re like, we’re like, Do we agree or disagree with these? And, um, I didn’t disagree with that last one. It’s still true, but, Okay. February, 2022. All right. Now we’re in the same year. Here We are single family versus multi-family.

It says this, it says it’s easier to find single family deals and it’s cheaper to get into single family investing at this very moment. I do not think it is easier to get into single family

[00:25:36] Dan: deals. Yeah. So we’re shooting this, uh, early November, 2022 for the record, for context. And uh, this was obviously February.

So for those of you paying any attention, what’s going on? It’s an entirely different world. Completely, completely different world. We were getting low threes in the rates, uh, on deals when we did this episode. And now they’re, if we were to do a new deal, um, six and 6, 7,

[00:25:58] Anthony: 7. So, yeah. [00:26:00] And that, that, that really has hit the single family market.

Uh, I think very, very hard. Well, hard as much as

[00:26:06] Dan: I would’ve thought in February, 2020, if you had told me. The 30 year mortgage on average would be mid sevens. I would’ve thought that prices would be significantly lower. No, I’m a little,

[00:26:17] Anthony: I’m not saying it in terms of pricing, but in terms of transaction volume, it’s, it’s gone completely off of Cliff.

So in New York and October year over year, it’s down 74% in the country. In the last three months, we’re seeing a slowdown in terms of single family, uh, volume going on market just drop precipitously. And so I. That makes it way harder to find a deal. The numbers just don’t pencil quite. They just don’t pencil as much.

So, Yeah,

[00:26:42] Dan: and that’s good. I think I’d rather see just a pause as opposed to like a, like

[00:26:47] Anthony: precipitous fall. Yeah, We’ll see, we’ll see where it goes. But that one, I don’t fully agree with it anymore. Times have changed, so, so it has our opinion. All right, let’s, uh, oh, let’s, let’s end on this. [00:27:00] Uh, look at us in February.

February, 2022 was a good killer. Good month for us. I like it. It says is value add multi-family investing dead? Yep. The CapEx on value add properties is getting so expensive. It might soon be cheaper to just build a new building.

[00:27:14] Dan: What do you think? Uh, no. I don’t know why I said yep before. Um, no, I don’t think it’s dead.

I think it’s just changing because there was like, you know, backup five, 10 years, the supply of potential value add deals, uh, was huge. Fast forwarded now, like a lot of those deals have been done. Um, but guess what? Every five to 10 years a, a building’s gonna need a refresh. So it’s not like everything gets done once and it’s done forever.

It’s like, no, like stuff gets worn out every few years. You’re gonna be able to spruce it up and make it better. So, mm-hmm. , No.

[00:27:46] Anthony: Yeah, I don’t think it’s dead. I think it’s harder. I think there’s a lot more competition out there now. So the numbers at which you can get into a deal to make ’em work and get those big returns that you’ve been seeing in the last decade are, uh, harder, but I [00:28:00] don’t think it’s dead.

This was during a time, I think in the, in the spring of 2022 and we were starting to look harder at development and new builds. And the reason for that is as we were just looking around, we’re like, Okay, what kind of cap rates are we getting on Class C, class B assets versus a class A? Like, could we just go build something?

What would that look like? And so we were entertaining that, that possibility pretty heavily until we realized at a certain point, When it, when you’re trying to take, trying to get into a new avenue, a new, um, asset type. And that’s really what new development would be for us. Like, you’re taking on a lot of risk just cuz you don’t know what you don’t know and you, you can get burned.

And so for us we realize, you know what, we can just stay in our lane. Value add is not dead. We can still just keep doing what we do over and over even though it’s boring. Um, there’s always like, I think this, um, tendency to look across the fence and see like greener grass and sometimes in value add multifamily, definitely you can look across and be like, I don’t know, is this still worth it or would it be better to go over there [00:29:00] and get into that, that shiny new new class, a build or into that mobile home park, that self storage thing.

So couple months after that, maybe a month or two, we, we decided let’s just stay in our lane. Yeah, let’s not, let’s not, let’s just stop looking over the fence.

[00:29:15] Dan: Yeah, I already harped on this, on my bad investing tip of the week. So same kind of concept, like just do what you know and keep doing it. Like, uh, that’s typically what really successful people do.

I can’t remember who said it recently, whether it was a video or tweet or something, but somebody was saying effectively that same thing, like the truly wealthy people find a thing and they just keep doing it over on, over and over again.

[00:29:37] Anthony: They don’t jump around. There’s this, there’s this story, I can’t remember who tells it, but he is like, I had this friend who, who built a, um, trash collection.

It was only like 50, a hundred million or something crazy like that. And then they sold and he sold it and made tons of money, obviously. And he had to non-compete for like three years or something like that. And he just chilled for that three years. And then when it ran up, he started building another [00:30:00] one.

And his friend’s like, Aren’t you bored of that? Like, why would you do this? He already did it. And he is like, Yeah, that’s how, that’s why I’m doing it again, is like, I know exactly how to do it. And sure enough, a couple years later he built it back that that new one to 5,000 million dollars sold it again

Yeah, I can

[00:30:13] Dan: totally get that because it’s like, okay, you just like completed the puzzle. Now let’s see if you can do it in half the time. Yeah, twice as, twice

[00:30:20] Anthony: as good. Exactly. Right. I get. So that’s, uh, that’s the 300th episode. That is what of those are all the things that we got wrong or things that we no longer agree with.

As you can tell, um, we are right quite often. So there really wasn’t much here for redefined. But I, I applaud you for spending God awful amounts of time listening to this podcast to source these. We just don’t make

[00:30:45] Dan: mistakes. This never happens.

[00:30:47] Anthony: Sorry guys. Uh, just eating. Um, Book review, book recommendation.

You got anything that you’ve been reading

[00:30:55] Dan: recently? That’s good. No, I’ve been reading closing statements. We just closed, uh, we just closed four

[00:30:59] Anthony: buildings [00:31:00] today. Four? Yeah. We have four closings before this, so if we sound tired it’s because like Yeah. from reading loan docs. Yeah. It’s. It’s done. So, so that’s cool.

But, okay, so here’s a book, um, that I’ve been reading recently. It’s called Persuasion. I know I’ve been talking about Robert Cini in the last couple of episodes. Uh, specifically his book Influence, another book called Yes and then his book Persuasion. I’ve been on this Influence Persuasion Kick recently, just really trying to understand it because, uh, I think it’s a skill that serves really, really well in all areas of life.

So go check that book out. Persuasion by Robert Cini and hopefully here in the next couple of, maybe the next month, or. We can actually get some, uh, some new sophisticated investor notes and do some book deep dives. But, um, in the meantime, you know, don’t forget that those episodes are still out there. If you’re new to this podcast and you don’t realize, we used to do a segment called the Book Deep Dive, and we had like 25 books that we did, and then we created investor notes for, which is just like a one page summary of 10 takeaways from the book, and you can go download those by going to Invictus [00:32:00] Multi-family.

Uh, dot com slash notes. Download them completely free. And then, uh, go listen to the podcast episode that com that accompanies them. And you can pretty much, you know, uh, give up on reading a book and just that will get you everything you need to know. We’ll do it for you. We did it. We did all

[00:32:16] Dan: the heavy lifting.

Yeah. In a couple weeks we’re gonna actually be able to talk about. Something we’ve been working on pretty much all year. We’re really close finishing the thing I had to tell you guys, but as soon as that’s done, we can spend all day reading.

[00:32:27] Anthony: It would’ve been really cool if we had, um, cited the closing of that.

Oh, with the 300 episode. It, we missed it literally probably by like a week. So like that kind of sucks. It was really close. But, uh, so stay tuned for that as we give you guys what I will call the 2022 Invictus Capital year in review and. F bonkers journey. Um, just, here you go. Here’s, here’s the lead is this year alone, we’ve acquired about 40 million of assets and we haven’t really talked about them because we haven’t been able to.

We

[00:32:56] Dan: leave. We can just stay tuned as come, but as soon as we can, [00:33:00] we

[00:33:00] Anthony: will pretty soon. All right, So that’s gonna do it for us guys. Stay tuned for that, uh, debrief, and we appreciate the heck out of every single one of you for taking the time to join us. As always, we will see in the next episode unless we

[00:33:11] Dan: don’t Yeah, unless we just stop sudden.

[00:33:14] Anthony: Or we just stop listening.

[00:33:15] Dan: We’re not plan, but you know we’re, I’m not gonna stop. You can’t stop. We’ll stop.

[00:33:19] Anthony: Bye.

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