Ep #538 – 5000 doors and $250 Million in equity
Mike Ochstein has been active in commercial real estate since the early eighties and has seen it all. Mike started as a broker and quickly moved into buying multifamily. Great conversation that covered topics like:
- Real estate cycles
- Timing the market?
- Outlook for 2021
- Cheap money is driving the economy
- Advice for starting out
- Finding your passion
- How you define success
- Preparing the next generation
To find out more about our guest:
https://www.linkedin.com/in/michael-ochstein-8037987/
Full Transcript Below
Rod: Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing.” I’m Rod Khleif and I’m absolutely thrilled that you’re here and you are going to get tremendous value from the gentleman we’re interviewing today. His name is Mike Ochstein and he founded and runs Price Realty Corporation in Dallas. They’ve got over 5,000 doors and they’ve placed over $250 million in equity. And so, we are going to learn a lot today guys. So, hang on to your seats. Mike, welcome to the show bud.
Mike: Thanks so much Rod. I really appreciate you doing this podcast and getting this out and about a little bit.
Rod: Yeah. Well, you know, I didn’t think I’d like it when I started because it was all auditory but now it’s visual so I can actually see, and I just love it. And so, I’m really grateful to have you on the show my friend and, so why don’t we start by just having you talk a little bit about your background and how you got into this business because I think you started with a duplex? Correct me if I’m wrong and then you went from there. And now, you’ve got 150 employees and killing it. So if you don’t mind, go back and give us a little of the history.
Mike: Well, I moved down to Dallas back, a little way back, so it’s really aged me like a dinosaur. But I went back, I came here in ’82 when you hold it and I learned “y’all” with “you all” from Indiana when the Midwest was just dead and was fortunate to get on with Marcus & Millichap in investment sales of multifamily. And, you know, in the early 80s and in DFW, and really anywhere in real estate it was A to A because everything was driven through tax syndication. And guys were, especially in Dallas, they were building, building, buildings, selling a lot of activity, and I was just getting my feet wet right out of college. And then you fast forward up to ’87, they changed the tax laws and all my buddies that were driving big fancy cars were all driving little Toyotas because the whole market crash and the multifamily was strictly, in those days in early 80s, it wasn’t bought on cash flow. It was bought on how can we, you know, our tax write off. So, it was a real great educational process. It was great from the standpoint. The ones who survived that period, the ones that were promoters. And for me, just being fresh out of college, you know, I learned, I saw a lot of that. So, you know, I was just starting a market similar to I’ve had, you know, great years and, you know, then they changed the tax laws in ’86, ’87, everything just came to a halt. And then the RTC was for closing on, you know, all this real estate. It was unbelievable and I was in a great position. You know, it’s all about timing. Being in a great position, creating an opportunity for yourself, so I got to represent all these institutions on all this real estate and all their all these REOs. So then, you know, there was an influx of buyers from California East Coast, West Coast, coming in here buying up this real estate and I was learning how well, you know, some of these guys would go non-refundable day one and close real quick. And then, you know, I got an opportunity to watch those guys. So, you know, during that time I started out with, you know, I bought a duplex. I think that was the greatest deal in my whole life. Bought this duplex and then, you know, bought a little 13 unit right around the corner from it. I remember schlepping my wife while these guys were doing renovations late at night. We’d be at the restaurant having dinner and then I go, Let’s go check on my 13 units. See how they’re doing it. I was still brokering a Marcus & Millichap and, you know, for those guys trying to broker and buy real estate, I would recommend that you can’t do both. So eventually, I got up to 300 doors and I thought, you know, I just bought a really rough deal on Spring Valley Road that we were talking about before on the high at the courthouse steps from HUD. And at that time, I moved my offices in there and it was the renovation from hell but we got, I think we got through it. It was 73 units. We didn’t have a renovation plan. We didn’t have anything. I think I moved my offices in there. There was no AC. It was the summer of Dallas. It was 100 degrees. The way the guy fixed the plumbing, he would just cut the sewer pipe. So it was hot, kind of smelled. It was rough. You know, it’s myself, my partner, and my parents. My parents quit taking my phone call because everything I’d call them every week, Hey, we’re out of money. We got to finish it. I mean, you know, we wanted to, you know, really add value to the property. One individual, it was a two pipe chiller. We want individual HVACs. We wanted to change. It was an old 60s building so we wanted to get the change to the side. We wanted to change the pool area. We changed out all the windows. I mean, we didn’t even have a budget. We just did it.
Rod: Wow! Well, what a learning experience, right? I mean, holy cow! I mean, you probably, you know, what an incredible learning experience. I mean, I call them seminars and I have these t-shirts I sell at my live events that say, “Ask me how I know?” Because I talk about a horrific situation and then it’s something that I experience. So but, wow! I mean, so you didn’t raise enough money. You didn’t really have a plan. You just went in there and did it.
Mike: Thank God it wasn’t syndication. It was just myself, another partner, and my folks.
Rod: Right. Wow!
Mike: And we did really well. I mean, we bought it for like 3,000 a door.
Rod: Oh my god.
Mike: And we probably put in, you know, that time that was early. It was in the early 90s. We probably put in 15,000/16,000 a unit worth of renovation.
Rod: That’s a heavy lift, yeah.
Mike: And, you know, refinanced out with Freddie Mac and actually probably refinanced it twice. Eventually, I hate selling deals but we eventually sold it. And now, fast forward, I just read that they’re tearing it down. They’re gonna build wrap product on that site.
Rod: No kidding.
Mike: We built the townhomes. If you when you’re in town, Rod, we built the townhomes right next door to it.
Rod: No kidding.
Mike: Brand new townhomes that we bought the land and built.
Rod: Yes. So, you don’t like to sell and that’s just a really important point. I regret everything I’ve ever sold, honestly. And, you know, I’ve had really big hitters like yourself on the show 20,000 doors, 30,000 doors and, you know, one of them like to– Albert Berriz owns Mckinley Corporation likes to say, I’m a real estate buyer not a seller. You know, I mean, all things being equal. Obviously, if the market shifts you have to sell. But yeah so, you know, you bought that with friends and family that was at 70 some units, and so at what point did you start syndicating? And, you know, give us a little more of the progression if you don’t mind.
Mike: So, you know, right after that, I mean–
Rod: Okay.
Mike: We started syndicating. We, you know, bought 14 duplexes, bought a 56 unit foreclosure from Fannie Mae. Friends and family syndication bought at 30. I mean, it’s like yesterday and 32 unit then the biggest, and then 184. And just, I’ve really grown my investor base really from coast to coast.
Rod: Yeah, yeah. I remember that time in the 80s and I love to give an example because I was in Denver at the time. I had 500 houses that I owned and I remember buying a house, and this just to talk about cycles and the impact on value, so I bought this place for 56,000 flipped it for 76. You know, made a nice hit. The market crashed and I bought it back for 18 same house. Then I ultimately sold it for 160 and to add insult to injury, that area gentrified and it’s about 800 to a million now because it’s a tall two-story Victorian. Anyway, it’s like, you know, just crazy what happened. I remember the RTC, my god. You know, if I knew more, I wasn’t in commercial at that time. I was only doing single family but what I know people that became billionaires buying RTC properties. I mean–
Mike: A lot of these REITs today, the Camdens of the world all started in, you know, buying up all this real estate in the ’80.
Rod: On that topic, how do– you know, real estate goes through cycles. You’ve been through a couple of them for sure. And so, what’s your opinion on where we are? And, you know, what does your crystal ball tell you? Because I get asked this all the time and, you know, I think we’re going to have a contraction at some point here. But, what are your thoughts?
Mike: Well, as long as we have this inexpensive money and people are able to lock in this long-term debt, and as long as you’ve got interest only debt–
Rod: We’re going to keep going. Yeah.
Mike: The cycle will keep going. Now, I think there’s going to be some concerns because, and I faced it myself. You know, when some of these guys are in the, you know, five years interest only loans, things are looking really great, they’re distributing great cash flow with these LP partners, and all of a sudden these loans start amortizing and your debt service increases by 40, 50, 72,000. I mean, I have a deal that’s coming up next January where my debt service increases by 72,000 a month.
Rod: Wow!
Mike: And because I’m getting out, you know, the 350 loan, we bought it when Trump got in the office.
Rod: Right.
Mike: Great locked right before the announcement. You know, fast forward, you know this Covid, we’ve had no rent growth, we’ve had a lot of concessions, we’ve had a lot of lost lease. In January of next year, you know, it’s not a negative thing. I mean, it’s a million dollars a year that we’re paying down principles. So, in that three or four percent, or five percent you’re distributing is cash flow, you’re now paying down debt. So, you know, it’s kind of an educational process to the LPs but I think a lot of guys today that have been buying, and got this interest only, and they’re not putting away reserves–
Rod: And they’re skinnier. Yeah.
Mike: For a rainy day.
Rod: Yeah.
Mike: And then they start amortizing. There’s going to be some problems with it.
Rod: There’s going to be some blood. Yeah. I totally agree. You know, some of these– I don’t know about you, I’m sure you see this as well. You’re in best and final on a deal and then you hear what it traded for you like, What were they thinking? And, you know, these guys put these things together and make an offering memorandum look any way they like it to entice investors. But, you know, there’s going to be some pain in my opinion but we’ll see. You know, my kids love to tell me you’re tired of being wrong but, you know, I do think at some point there’s going to be a reckoning. It’s just the way the cycles work but who knows how long. Yeah, how do you feel about all the money they’re pumping into the economy? I’d just love to get your opinion as it relates to the potential for inflation.
Mike: Well, I just hope they, that money finds a way to some of these residents who can’t save Iran. I mean, that’s–
Rod: Yeah.
Mike: There are a lot of people that are, you know– I mean, you know, everyone in multifamilies and I’m not answering your question. I’m kind of around about what–
Rod: It’s all right. It’s all right.
Mike: You know, we’ve been– there’s a lot of money in this economy and asset prices are going through the roof. I mean, look what’s going on in stock market? Yesterday was an all-time high at 31.4. Real estate value went ups. Buying stuff from 20, 30, 40 grand a door and now this stuff’s going for over a hundred thousand a door and–
Rod: Right.
Mike: You gotta wonder but, you know, what’s driving it obviously is cheap money.
Rod: Yeah.
Mike: And eventually, does it– you know, a lot of people, you know, I’ve always put fixed rate debt on all my stuff but the smart guy because I like sleeping at night.
Rod: Thank you, same here.
Mike: But the smart guys, the black stones, you know, I’m looking on an assumption deal of theirs and, you know, they got live or–
Rod: Wow!
Mike: Live or debt it’s like $1.50, you know, interest only and I’m going, you know, this is great debt.
Rod: Yeah. We just assume. That’s we’re assuming a loan like that right now. Yeah. So, yeah.
Mike: And, you know, the other thing–
Rod: I know it’s fixed at that rate. They got that great rate because it was such a huge loan and they parceled out this asset. The one we were talking about earlier and, but no, it wasn’t LIBOR, I’m sorry. It was fixed at that low rate but, so what do you think is going to happen? I mean, you know, what are your thoughts on something that’s tied to LIBOR?
Mike: Well, I mean, it can change overnight. You get one bad inflation number or the economy starts really running high. Now, you know, I don’t know who’s making up these reports but, you know, inflation’s been in check and a lot of people believe in some of my, you know, we not only do high net worth, we do a lot of institutional as well. And, you know, they’ve changed their own tune instead of fixing. They’re going all live or they don’t see any risk in long-term higher rates. It’s a different opinion.
Rod: No kidding, interesting. So guys, those of you who don’t understand what he just said, so he takes equity for Limited Partner interest in his properties both from high net worth individuals and from private equity companies and that’s what he just said. So let me ask you this, what– you know, I have a lot of listeners that are, you know, obviously people that are doing this business already maybe on a smaller scale. They’ve got some residential, some smaller multis, and some larger operators as well but there’s a lot of people that haven’t started yet. What suggestions would you have for someone that, you know, maybe has a W-2 job, they want to do this on the side, they want to create a better life for their family, any suggestions for someone starting out?
Mike: I think it’s two-fold. One, you don’t have to swing for the fences or hit the home run. Start off with a single family home. Start off doing a small rehab. Hell, I started off with a duplex and I thought that was just the greatest deal in the world.
Rod: Right.
Mike: Get a couple of your, you know, your football watching buddies. Put a little bit of money. Go buy the asset. Go through the pains of, you know, replacing the appliance package, and replacing the flooring, and replacing the mechanical system. Get your feet wet or another strategy, there’s a lot of small syndicators, find someone that you get– it’s all about trust and it’s, find a guy that’s been just starting out and put, you know, maybe he’ll take you in for 25,000 or maybe he’ll take you– I remember when I first started, you know, I had guys at the time. You know, this was in the late 80s or I mean early 90s that, you know, invested with $10,000. Today these guys are investing two, three, four hundred grand with me. So, you know, maybe you should start, put 10,000. Get a taste of it and learn. I learned from the broker’s side because I saw, you know, the good things some of the operators were doing and I saw some of the bad things, you know, and it was because, you know, the brokerage world’s a completely different business.
Rod: Sure.
Mike: From really owning and operating this which is what we do today.
Rod: Sure. Did you– as you were getting rolling, are you completely self-taught? Did you have any mentors? Speak to that a little bit.
Mike: Well, you know, when I really started buying, syndicating my first deal, I had a great attorney who has passed and his family was already in the multifamily. And he really, I mean, he really helped me structure the deals. He really helped me introduce to some high net worth and then it was my ability to, you know, own and operate this stuff.
Rod: Yeah, yeah.
Mike: And the biggest thing that I think that really helped me is the person, you know, we’re completely vertically integrated.
Rod: I was about to ask you that. I didn’t know if you, you know, had your own construction property management. Everything else but–
Mike: So, a person that’s been with me since 1995 over, it’s going on 26 years, has been running the management company. You know, I came from the brokerage side which is promotion.
Rod: Sure.
Mike: Like even today, when you see in that broker packages and you see insurance at X and you know it’s X plus Y or R&M is that X and you know it’s going to cost you X plus Y. But, you know, I came from the brokerage and really, the person that’s been with me on the management side has really kept me out of trouble.
Rod: Oh, that’s great and that’s a great team. By the way guys R&M is Repairs and Maintenance. So, and that’s a great segue to my next question. So you connected with someone that paid attention to the operations or you found somebody with complementary skill sets that you brought in, 26 years, wow! That’s commendable. Is that an accurate statement? What I just said so you could focus on investor relations, finding deals, things of that nature, broker relationships, all of that?
Mike: You know, the brokerage finding deals and all that was completely on me.
Rod: Right.
Mike: But management and all that was completely on her. It was a great team.
Rod: Wow, fantastic!
Mike: And then my CPA that was originally, you know, doing all my tax returns and putting my private placements and all the numbers together.
Rod: Right.
Mike: He came over from a midsize company and he became my CFO. He’s been here over 20 years so we have a great long term.
Rod: Fantastic!
Mike: A lot of people have been here forever.
Rod: Yeah, fantastic!
Mike: And that’s, I mean, I could sit here and talk all day long Rod but it’s really–
Rod: The team.
Mike: Would have been here for 20 plus years.
Rod: Wow! That speaks to your leadership buddy. I mean, that’s really commendable. Those tenures of that long really speak to, you know, you must have a family culture there and really take care of the people that work there. And that’s really commendable and unusual, frankly, to see that length of time in this business particularly. So, very commendable. So let me ask you this, and guys I hope you’re getting the feel about team here, you know, because we talk about this being a team sport and one in a great example of that just now with Mike. So let me ask you this, starting out Mike, did you have any, well, any time in your career, did you have any “aha” moments where it was like, holy cow! You know, now I see the light or was there any of that? Is anything come to mind? I know you’ve been doing this so long.
Mike: Every day is coming. It’s either like, honestly Rod, even today, 60 years old plus. You know, and you’re seeing the market dynamics change and–
Rod: Yeah.
Mike: The renovations change, and the mindset changing, and deal and returns are changing. So, like a friend of mine was giving me a hard time. It’s one of the reasons he goes, You’re like an old dinosaur. You got to keep educating, got to keep changing with the times.
Rod: You know, that’s funny. I’ll talk to you about something after we sign off here. But, you know, everything’s changing. Taxes in Dallas, I mean taxes insurance, good lord. It’s been crazy. So, that’s a very interesting answer. So let me ask you this and by the way, we’re the same age. I’m 61. Where do you get your drive? You know, what makes you jump out of bed every morning and conquer the world?
Mike: Well, you know, it’s like I got an older son who’s 26 years old trying to figure this sh*t out, excuse me.
Rod: Same here, same age, exact same age. That’s hilarious.
Mike: Hell of a lot smarter than I am. You know, every day when I started in the brokerage business and I have a young son who just started at Marcus & Millichap which is pretty cool.
Rod: Nice. That’s cool.
Mike: So every day, you know, I mean, you find your passion is what I tell my oldest son. Find something you love and I go look, there are days when I was your age in the brokerage world make dialing for dollars, it wasn’t a lot of fun. But when you got that one guy that wanted a list, or you found that new investor that wanted to invest with you, or you found that new deal, or you found that new institutional partner that wanted to team up, then you say, you know, Oh my god! This is great.
Rod: it’s all worth it. Yeah.
Mike: This is rewarding. Not every day is going to be a great day but every day will lead up to a better day.
Rod: Love it. And what an incredible education your boys getting dialing for dollars. Every year you encounter every temperament, every personality type, and talk about a skill set that stays with you forever, would you agree? I mean, it’s like, you know, knocking on doors, that type of proactive sales initiative is just so incredible for your future success, pretty much in anything in my opinion because it enhances your ability to influence at a much higher level. Would you agree with that?
Mike: Quite honestly, you know, I went back to start dialing, calling institutional guys, calling on new investors.
Rod: Right.
Mike: And it got fired back in my belly.
Rod: Yeah.
Mike: It reminded me back when I was 22 years old dialing. Well, you know, today it’s more fun because, you know, you got a track record, you know, we’re real, we got, you know.
Rod: You’re not afraid of rejection anymore. He’s like, you know, okay, you know, whatever, see you next, you know, it’s like who cares? Right. Oh I love it, I love it. So let me ask you this, what would you– if you were asked, what you would consider your greatest and by the way, I love the fact, you know, I asked you what your drive was and you instantly went to your kids. So I mean, you didn’t come right out and say it but that’s what, that’s how you responded. I love that by the way, I just want to acknowledge that. So, what do you consider your greatest professional success so far?
Mike: I would have to say that the longevity of the people that have worked at Price Realty. You know, we have 150 people have been here. If you go to some of these managers that have been with me from the get-go, some of the regionals have been with me for a long time. And then, the other good thing is even I have a lot of the same investors have been in deal in and deal out for–
Rod: Years, decades probably, yeah.
Mike: And they’ve been with, you know, in the ’08 when things changed. You know, they’re living Covid right now with me. So, they’ve been with me, the good, bad, and you know, for better days.
Rod: Yeah.
Mike: You know, they did– you always say when you bring in the new investors, and you buy a deal down in Houston and it’s not performing very well, and I go look, this is your first deal with us. Be patient. We’ll work our way out. You know, I got people been with me for a long time. So really, not to ramble on, I think the longevity of the investors and the people who’ve been here for a long period of time but I’ll be really good when I’m 80, 90, and my youngest son is in here working and that succession continues, that’ll be something else.
Rod: That’s exciting. Yeah, that’s exciting. I’m hoping the same thing on my end. I mean, you know, my son’s like, just now he’s 26 like yours, just now interested in real estate and he’s like drinking through a fire hose. He’s loving it, he calls me every single day to ask me questions, and just praying that he comes into the fold with me as well. So, I totally feel you. So let me ask you this, what do you think is the most challenging part of what you’re doing today of your role? You know, I know it’s evolved and as you’ve grown, but right now with 150 employees with 5,000 plus doors, you know, what do you think’s the most challenging part of your role?
Mike: Well, it’s a combination of one, you know, I have a newer acquisition guy that just joined us, so it’s important for me to continue to be engaged and it’s been difficult to find deals because deals are really difficult to find right now. Everybody has different levels of money. So, from the acquisition standpoint, we didn’t buy anything last year. So–
Rod: Wow!
Mike: That was kind of like, it was like unbelievable.
Rod: Right.
Mike: Maybe it’ll turn out to be a good thing. So, finding new deals is a challenge. You know, keeping the people that are still– I don’t think keeping people. I think people are pretty happy working here at Price. They’ve been here for a long time.
Rod: Well, obviously. I mean, that’s apparent, yeah.
Mike: But, you know, the challenging things from, you know, operations are very challenging right now. Just from the standpoint of Covid, even though they say 95% were paying but you know, from us, we had about two and a half million dollars for 2020, a non-paying rent. You know, well, what happens when they do lift the State and start evicting, are we going to have enough people to fill those units? What happens to rents? And, you know, but hopefully we’re getting to the end of Covid and, you know, by the end of the third quarter maybe things are more back to normalcy.
Rod: Yeah, let’s hope so. Let’s hope so, my friend. Yeah, so you know, what words of wisdom, I mean, we’ve talked about this a little bit but just I’d like to go back to it for just a moment, what words of wisdom would you share with aspiring commercial real estate investors? What do you think, you know, maybe some of the best advice you’ve gotten over the years or what advice might you give them? You know, you suggested starting passively in a small deal. Yeah actually, you know what? That’s been asked and answered. Forgive me. You’ve answered it. But let me ask this question which I love to ask everybody, if you could go back to your younger self in this business, what might you do differently?
Mike: Well, I would have liked to have bought a few more deals and been a little bit more aggressive I think.
Rod: Yeah.
Mike: Instead of being, you know, passive worried.
Rod: Yeah.
Mike: And maybe I got a little– what’s the word I’m looking for? You know, I got a pretty good success. I got a pretty good track record. You know, I lost kind of that motivation that can continue to go out there and look for those bigger value ads. I got kind of like one of my friends say–
Rod: Comfortable.
Mike: I got comfortable.
Rod: Yeah.
Mike: And now, I got a young news acquisition guy. I got a new son that’s learning the business. So, you know, I’m hungry again.
Rod: Good. It feels good, doesn’t it?
Mike: Yeah, I love it.
Rod: Yeah, yeah. It feels good. Yeah.
Mike: You can only swim, bike, run so many hours of the day. You can only take off so many hours a day. So, you got to continue to build that passion.
Rod: Yeah, yeah. That’s awesome. You know, what book do you gift the most to people? I’m sure you meet lots of aspiring entrepreneurs, lots of aspiring multifamily investors, is there anything you recommend or book that you recommend that you– or gift more than another?
Mike: Yeah, I got it for both my, it’s called “Think and Grow Rich.”
Rod: “Think and Grow Rich”, baby. I’ve given away 4,000 copies of that book and I’m not exaggerating. Everybody in my live events gets it. I tell them, read it at least twice a year. I love it. We’re on the same page my friend. Love it.
Mike: And I got it when I was just 23 years old at Marcus & Millichap.
Rod: Yep.
Mike: Just keep dialing, and be honest with people, and don’t screw anybody.
Rod: Yeah.
Mike: It’s a marathon. It’s not an effing sprint.
Rod: Yeah, I love it. I love it. So you said, you mentioned the word “success”, how do you define success?
Mike: You know, I think I’m successful my own ride but–
Rod: I’m just curious in your mind, what’s your definition?
Mike: But you gotta keep building on that.
Rod: Yeah.
Mike: It’s not–
Rod: I tell people– I’m sorry I interrupt, please continue.
Mike: Go ahead, my bad bro.
Rod: No, no, no. I interrupted you. I’m notorious for it. I’m terrible. It’s the only hate mail I ever get is because I interrupt people but, you know, and I lost my train of thought after all that. So please continue.
Mike: Well, we’re on the same page. I mean–
Rod: Yeah.
Mike: Success is not, it’s not all about money.
Rod: No. Oh, that’s where I was going. I tell people, you know, it’s never about the goal. I tell the story, you know, I built this giant house on the beach. Within two months of moving in, I was depressed because it’s about continual progress and growth. You need to feel like you’re growing and progressing which is why you’re probably supercharged again because you’re back in the mix, yes?
Mike: Yeah, I’m engaged.
Rod: Yeah, you’re engaged again. You’re moving forward. You’re not just out there on the golf course. Yeah.
Mike: Yeah.
Rod: Okay.
Mike: You got to be engaged.
Rod: Right
Mike: You gotta make that happen and you got to be, you know, I went back to my roots. Hell, I mean, I’m dialing on people.
Rod: Yeah. That’s awesome.
Mike: All right.
Rod: That’s awesome. Are there any favorite quotes that you have that you’ve got hanging on your wall, or you share with people, or that you enjoy? Anything come to mind?
Mike: Oh, I got a picture of Jack Nicklaus and the people that give a sh*t or right over there but … No, and I got a big picture of Warren Buffett. You know, he’s been– You know, I went to a Warren Buffett–
Rod: What a guy. Yeah.
Mike: You know, he’s been doing it for years. He’s been successfully–
Rod: Yeah, what a guy. Yeah, I know I’m totally with you on him for sure. Yeah, he’s amazing.
Mike: I don’t really have any sayings per se. It’s just some people like him I admire.
Rod: Right. That was my next question, who you admire? You know, that you look up to and, you know, I totally agree with what you just said. So, you know, I was going to ask you if you had any failures that contributed to early success but you kind of went into that with that 72. You wouldn’t call it a failure but you learned so much from, you know, that early unit you were talking about with the high, you know, heavy lift.
Mike: But I would go back and talk about like ’08 Rod a little bit.
Rod: Yeah, … please.
Mike: If you know a product, and the markets are going to get tough again, and ’08 was a very humbling time for everyone at Price where we had three loans that were, that came due, and there was no dollars to refinance that.
Rod: Right.
Mike: So the whole thing is being honest with your lenders and working it out, and also make sure you take care of your assets. It’s very, it’s crucial. Don’t distribute all the cash flow to your LP investors. Make sure you got money for a rainy day.
Rod: Yeah.
Mike: I mean, we had several deals, you know, the rents we refinanced. You know, my whole thing in the beginning was refinance return capital. I put a lot of debt on these deals in the early 2000s then that market went away in ’08. And to tell you the truth, I learned from that. I would never do that again, you know, the lever– well, the leverage today I’ve been putting lower leverage, if it’s not there to totally refinance return capital, don’t do it.
Rod: Right.
Mike: And make sure you got adequate reserves because it’s just crucial.
Rod: Yeah. We do huge reserves, low leverage, and yeah, that’s kind of been– yeah, again, I told you about my experience back in ’08. Lost my shirt and get me one shame on you, you know, so hit me twice. It’s on me. So no, that’s a really good advice. Extra operating reserves right now. Hold on to cash. Don’t distribute if you don’t have to until you know exactly what’s going to happen and get a comfortable feeling but you’ve got to have money in the bank. So let me ask you this, do you set aside times to focus on forward vision? Is this something you have? Do you have any habits or rituals around your vision and your goals and or, you know, moving forward. I just have a couple more questions but that’s one of them. Do you have any, you know, like a morning ritual? You said you bike and so you obviously look, you look like you’re in great shape. You take really good care of yourself but is there anything like that? Any vision exercises?
Mike: No, and you know, honestly probably should do more of it. It’s a great question.
Rod: Thank you.
Mike: I really, you know, I’m more– I do a lot of stuff by gut.
Rod: Yeah, yeah. Well, listen and your intuition, your gut, is so powerful. I tell people, you know, if you meet someone and your stomach is feeling a little funny, trust it because your brain is so powerful that subconsciously, you’re not even conscious of it, it’s sensing something’s off. And honestly, when you’ve seen as many assets as you and I have, you can go see an asset and your gut will tell you something and you’re not even quite sure what it is consciously, immediately. Do you agree with what I just said?
Mike: Yeah, completely.
Rod: Yeah, yeah. Okay. Well, listen my friend, this has been a real treat to chat with you, and you’ve absolutely added tremendous value today, and it’s really very much a pleasure to meet you as well. So, thank you for coming on the show and sharing your wisdom, and definitely give you a jingle the next time I’m in your backyard. So–
Mike: Yeah, please do. Look forward to meeting you and I appreciate your time and thanks for the podcast.
Rod: Yeah, thank you. Thank you.
Outro: Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. I know you’ve been hard at work helping our warrior students do just that using our ACT methodology which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?
