Jack Krupey is the visionary Founder of JKAM Alternative Investments, an asset management firm providing private investment opportunities to accredited investors, enabling wealth growth beyond Wall Street. With 20+ years in off-market real estate, Jack’s expertise includes distressed mortgages, acquiring over $3 billion from top players like Fannie Mae and Goldman Sachs among other things. He later founded JKAM, driven by his personal real estate investments and network.
Here’s some of the topics we covered:
- Why Single Family Homes Are Harder To Cashflow
- Housing Markets In Foreclosures
- The Current State of Affairs With Bridge Debt
- How Jack Started Investing Passively In Syndications
- The Different Personalities In Multifamily
- Getting The Value Add Just Right On a Property
- Other Successful Asset Classes That Compliment Multifamily
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
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Full Transcript Below
00:00:19:10 – 00:00:59:23
Rod
Welcome to another edition of Life Time Cash Flow Through Real Estate Investing. I’m Rod Khleif, and I’m thrilled that you’re here. I’ve got a very interesting gentleman we’re interviewing today. His name is Jack Crupi, and he’s the founder of Jay Camm Alternative Investments as Jay Camm Alternative Investments and actually hosts a podcast, which I’m going to be on shortly, which is called the Alternative Investor Mastermind.
00:00:39:18 – 00:01:21:16
Rod
And boy, he’s done a lot of stuff. You know, he’s he’s acquired over 3 billion in distressed notes back in the day, which I’m very excited to talk about with him. And I think we’re going to have a really wide ranging conversation about where we are in the marketplace right now and what he does. And yeah, so stay with us.
00:01:00:01 – 00:01:21:16
Rod
Welcome to the show, brother.
00:01:01:00 – 00:01:21:16
Jack
Thanks for having me.
00:01:01:15 – 00:01:21:16
Rod
Yeah, absolutely. So why don’t you do a much better job of introducing yourself than I just did? Kind of give us your, you know, 50,000 foot view of, you know, your history in the business and. And maybe bring us current.
00:01:14:06 – 00:01:55:00
Jack
Sure. Sure. Absolutely. So I actually thought I was going to be in the I.T. industry. I was in college in the late nineties, and, you know, the Internet was booming. Right. And I graduated during the 2001 dot com crisis. I’d read Rich Dad, Poor Dad, and so I had some knowledge of real estate and I end up going to Las Vegas with a friend for my 21st birthday, and I saw the glitz and glamor and what I saw happening in the IT industry didn’t seem like I was going to, you know, have a lot of opportunity that I thought I would.
00:01:40:22 – 00:01:55:00
Jack
So I bought a book on my flight home and it was one of those. No money down How to make $1,000,000 in Real estate Books.
00:01:45:22 – 00:01:55:00
Rod
Oh, really? It’s funny.
00:01:46:21 – 00:02:05:16
Jack
I read it cover to cover. Got back to Rochester, where I’d went to school and called my college landlord, and three weeks later at a house, almost no money down. You know, Countrywide, 95% financing.
00:01:58:04 – 00:02:05:16
Rod
God, Countrywide. I haven’t heard that name.
00:01:59:18 – 00:02:25:20
Jack
So I went through. I went through I probably had an IndyMac. I had a first Frank, I pretty much went through. So, you know, within a few years, I bought, you know, about ten properties. I quit the job I had and just went full force into the the traditional single family fix and flip wholesaling.
00:02:14:06 – 00:02:25:20
Rod
And this was in Rochester?
00:02:15:08 – 00:02:25:20
Jack
Yeah, this was in Rochester. And from outside of New York City, but just went up there for school and just stayed there. And this was a market you could buy a two family house for 60 to 70000. Yeah, they were cash flow positive.
00:02:24:22 – 00:02:27:17
Rod
This is when 90.
00:02:26:01 – 00:02:36:10
Jack
This was 2001 to.
00:02:28:00 – 00:02:36:10
Rod
2001. You could get duplexes for 460.
00:02:31:00 – 00:02:51:20
Jack
Wow. Yeah. Yeah. And then there was a lot of people from New York and California coming to Rochester because I would put a 15% cap rate on loop that and they, you know, or it would be a 60,000. Our house lived ourselves is for one unit. We’re like, No, it’s actually a duplex. So it was a great place.
00:02:45:02 – 00:02:51:20
Rod
So you would flip them to out of state investors?
00:02:46:23 – 00:03:08:12
Jack
Yeah, we did a combination of but yeah, a lot of that model was the turnkey model before it got. So, you know, now a lot more people do it but it was kind of the early days.
00:02:55:16 – 00:03:08:12
Rod
So you were managing them after they bought them as well?
00:02:57:22 – 00:03:17:07
Jack
Eventually. That was probably one of my mistakes because, you know, the the other management companies weren’t servicing the clients as well. So we ended up starting our own property management company, which became a bit of a money pit. Right. And it’s property management’s a thankless business.
00:03:11:02 – 00:03:34:17
Rod
No, I saw I was going to say that you know you don’t it there’s a lot of burnout in the direct property management business. Like if you own a plex or owned some houses. I mean this is an ask me how I know thing you guys know I give T-shirts away at my boot camps as a hashtag ask me how I know because I made every friggin mistake there is.
00:03:27:18 – 00:03:36:16
Rod
And one was a management business. They don’t call you in. They’re happy tenants or owners. Okay? And so it burns out pretty quick. So anyway, please continue. Went from the single family.
00:03:36:13 – 00:04:10:09
Jack
Sure. So yeah, we built up a business we’re managing. I had about 50 units myself and we were managing a few hundred. And you know, most of the money we’re making flipping houses was getting eaten up by the overhead of the management company, the insurance, etc.. And then, you know, I saw the writing on the wall earlier is I probably made 26.
00:03:53:23 – 00:04:10:09
Jack
It started getting harder and harder to get mortgages.
00:03:55:22 – 00:04:10:09
Rod
Sorry to interrupt. Sorry to interrupt. But I want to circle back to something you just said because you discovered that cash flowing on single family properties is not the easiest thing in the world. In fact, it’s much, much harder than multifamily. Would you agree with that statement?
00:04:09:15 – 00:04:12:03
Jack
Absolutely. Yeah. I created myself a job I hated. Right?
00:04:11:23 – 00:04:37:12
Rod
Right. I mean, because you’ve got a higher insurance, in many cases higher taxes. The maintenance is much more challenging. And that’s what killed me in 2008 nine was the fact that you really don’t cash flow as well on single family. And I debate this all the time where we’re all going to podcast will do multifamily versus single family.
00:04:29:15 – 00:04:37:12
Rod
So I just wanted to hammer that point.
00:04:31:09 – 00:05:10:10
Jack
Oh, it’s it’s a it’s a, it’s a great point. And yeah yeah we you have the extra zero it but you know I took some heat in the right I had some struggles in 2728 myself. Right. And but it ultimately it was probably the best thing that ever happened to me. So eventually it got harder to get mortgages and a lot we had investors from New York in California coming into Rochester to buy, you know, buy properties from us for the cash flow to a lot of them that were paying cash, using home equity lines or buying cash and refinancing.
00:04:56:17 – 00:05:10:10
Jack
And all of a sudden nobody had equity anymore.
00:04:58:23 – 00:05:28:18
Rod
And California was like a frickin light switch went off, man. I mean, I remember in 0808, early oh nine, I tried to sell my portfolio for literally $0.30 on the dollar and I couldn’t sell it. I mean, literally exact I’m not exaggerating, which is all I owed was $0.30 on the dollar and I still crashed and burned.
00:05:14:21 – 00:05:43:03
Jack
Yeah, it was it was a crazy time. And it was tough for me because, I mean, I was late twenties and I the biggest thing for me was I was worried. I had this naive confidence that I could actually make it. You know, it’s almost like a different kind of imposter syndrome was like, was I naive to think that I was going to, you know, be more so?
00:05:29:16 – 00:05:43:03
Rod
So you had a little seminar as well. You lost a little money back then, too, huh?
00:05:32:17 – 00:05:49:10
Jack
Yeah. Yeah. And, you know, not as Rochester didn’t crash as badly as most other markets, but the business just froze. It was like, you know, maybe I could have means no capital. Yeah. Yeah, exactly. Like I could have maybe sold some single family houses, maybe represented some Oreos, but I wanted to do something bigger, which is getting into real estate.
00:05:48:00 – 00:06:10:15
Jack
So I ended up, you know, selling a majority. Some of them had no equity and I gave them to a business partner and, you know, move down to New York City. And I always wanted to live in the city, just kind of just didn’t quite just life went differently. And I just got into real estate up in Rochester.
00:06:02:09 – 00:06:10:15
Jack
So fortunately, there was a lot of private equity and hedge funds that needed real estate people because they were buying.
00:06:08:16 – 00:06:10:15
Rod
They’re buying single family.
00:06:09:18 – 00:06:13:19
Jack
They were buying portfolios of loans.
00:06:11:13 – 00:06:13:16
Rod
Oh, got non-performing first lines.
00:06:13:22 – 00:06:34:03
Jack
And especially the first firm I worked at was buying non-performing home equity lines of credit. So the big portfolio they had bought so national City failed and PNC Bank bought them. Right. And they sold 400 million of non-performing second mortgage home equity lines of credit for $0.03 on the dollar.
00:06:29:21 – 00:06:34:03
Rod
Wow.
00:06:30:17 – 00:06:34:03
Jack
Yeah. This is December 2008.
00:06:33:01 – 00:06:52:18
Rod
$0.03 on the dollar. Holy crap. How can you not make that work? Now, obviously, you know, second mortgages aren’t the most desirable position to be in on on in real estate. But at $0.03 on the dollar, how can you lose. Yeah.
00:06:45:12 – 00:07:12:17
Jack
Yeah. And you know, in hindsight is 2020 back then we didn’t know there weren’t all the modification programs. We really weren’t sure if 75% of them were going to wiped out.
00:06:53:09 – 00:07:12:17
Rod
Right.
00:06:54:01 – 00:07:12:17
Jack
It turned out to be probably trade of a lifetime. Right. Because the government agencies and regulations really pushed for modifications, which was a really good thing. And we actually made way more money across the board in my time in distressed loans, actually modifying loans and making better deals with the homeowners than the other banks.
00:07:12:00 – 00:07:43:09
Rod
So you did loan mod yourself. You know, what’s really funny is when I lost everything in 28 and nine, I started a litigation support company. And so I actually formed law firms in five states and I supported them. We did all that. We brought the people that were in foreclosure in we, you know, did the calendaring, the pleadings, preparation to stop the foreclosures.
00:07:31:23 – 00:07:55:05
Rod
And then we had a whole back office team at about 60 employees that would do them loan modification. We helped thousands of families save their homes. I hated the business because nobody’s happy when they’re losing their freaking house. But but yes, very interesting. You were doing the same thing. Wow. Yeah.
00:07:45:03 – 00:08:12:01
Jack
Yeah. And it was great. The people that would actually pick up the phone and talk with us and realize that we were way more flexible than, you know, the larger institutions we did. We we created a lot of win win deals. I remember one where the house, he had a $500,000 first lien. We paid 170,000 for it because you got the.
00:08:02:14 – 00:08:12:01
Rod
First in that case.
00:08:03:10 – 00:08:19:08
Jack
Yeah, that was a first. Yeah. The broker’s price opinion showed the house was worth about 300. Right. So we paid a little over $0.50 on the dollar for it and the guy was a military veteran and just kind of bought at the peak of the market. Sure.
00:08:14:11 – 00:08:19:08
Rod
A lot of people did that in oh six.
00:08:16:13 – 00:08:40:12
Jack
Yeah, yeah, yeah. And then he had a job loss, but he had gotten a new job as government contractor. Now he made good money. He just didn’t have 80 grand to reinstate his loan. Right. So we made a deal. We actually, you know, let him just start making his monthly payments again. And we agreed to sort of just accrue the.
00:08:31:07 – 00:08:40:12
Rod
Stupid not too honestly and just if he sells, he had to pay off. But other than that, he stays in the house. Yeah. Yeah. No.
00:08:38:14 – 00:09:02:14
Jack
So then fast forward 18 months later, there was one of the HARP programs, the Home Affordable Refinance Program, and we told him, if you could refinance this off, well, I could give you a discount in his house. At that point, appraised for 400, he got a new loan for 370. Wow. We gave we gave him $130,000 discount and we made $200,000 on that mortgage mortgage.
00:08:59:18 – 00:09:10:15
Jack
So, you know, those days are over. That was that was a tooth.
00:09:02:23 – 00:09:25:07
Rod
Come on, man. You get me excited. Before we started recording him, I’m like, Do you think there’s going to be an opportunity for home loans? I’m sorry for distressed, you know, loans to be purchased. And I’m creating a fund myself right now, kind of an opportunity fund like that. But, you know, the focus would really be distressed assets versus distressed loans because it’s just not my wheelhouse.
00:09:21:20 – 00:09:43:21
Rod
But but you do. So let me ask you a question. Do you think there’s going to be some opportunity to buy some distressed loans in the commercial world with what’s coming?
00:09:29:21 – 00:10:10:15
Jack
Absolutely. It’s 100% going to be the commercial, not the residential right. But the residential supports the commercial to some extent as well. On on. You know, I don’t think this is going to be a 2008 type of of crash. It’ll be more like the nineties or the leading use the savings and loan RTC days.
00:09:44:13 – 00:10:10:15
Rod
Right. Which was all commercial at that time because, you know, Savings Loan was doing loans on all sorts of commercial property. Let me share some stats with you guys while we’re having this conversation because it’s timely. So this is this month’s Forbes and it’s talking about office occupancy in six of the major cities. So this will blow your mind.
00:10:03:03 – 00:10:31:21
Rod
So right now, New York City is at 80% occupied. Chicago’s at 73.9% occupied office. The whole city, L.A. is at 73.8. And San Francisco, 67.3% occupied. Houston, 70.3. DC is at 78%. But I mean, these assets don’t break even if they’re not in the 85 range. At least, I would guess. Would you? Would. What do you.
00:10:29:21 – 00:10:38:06
Jack
Think? Yeah, at least the other problem is those were probably bought it for or if these are classes the class was probably bought at like a four cap rate.
00:10:37:10 – 00:10:38:06
Rod
Right.
00:10:37:17 – 00:10:51:12
Jack
And now you know at 70% occupied in a in a market where, you know, people are less bullish on office. I don’t know whether office should be at a seven or an 8% cap rate now. Yeah. For the whatever the new risk is. Right. Likely occupancy and cap.
00:10:51:03 – 00:10:55:06
Rod
Rates based on risk just so you know.
00:10:53:00 – 00:11:13:03
Jack
So Yeah. And then some of them all converted. I had this conversation recently to.
00:10:57:11 – 00:11:13:03
Rod
Convert to or.
00:10:58:10 – 00:11:13:03
Jack
So. Yeah. So I lived in financial district in 28 2009 and there were a number of Class B office spaces that were rented for about 35, a square foot as a Class B office student, 470 as a high end residential.
00:11:10:18 – 00:11:13:03
Rod
Interesting.
00:11:11:09 – 00:11:15:04
Jack
Not all buildings support that, right? Really depends on some.
00:11:14:12 – 00:11:15:06
Rod
Of the infrastructure.
00:11:15:06 – 00:11:39:18
Jack
Issue. Yeah, right. Offices. You might need one or two toilets for the whole floor, right? You know, two bathrooms, you know, residential. You need one for every apartment. So sometimes it just doesn’t support it. Right. When it does, that’ll work. But in the more suburban markets, you know, a suburban office park is not going to convert. That’s probably just needs to be torn down and.
00:11:32:09 – 00:11:39:18
Rod
Right. It got.
00:11:33:00 – 00:11:39:18
Jack
To be good land, but it’s not going to.
00:11:34:10 – 00:12:01:14
Rod
Be. But but see, the problem with that is, is somebody’s got to take the hit. So here same same edition of Forbes. These are the casualties in the commercial space, the highest casualties so far. So there’s there’s five of them here. So in L.A., gas company Tower $465 million default, New York, six 97/5 Avenue, $450 million. Default 1740 Broadway $308 million default 777.
00:11:59:00 – 00:12:27:21
Rod
Tower in L.A. to an 89 million and to another 240 million in San Francisco. These are high end casualties. And, you know, and as we discussed before, we started recording, a lot of this debt is held by local and regional banks. So unless the Fed does another bailout, there’s 1.6 trillion you know, I get mixed numbers on that.
00:12:20:20 – 00:12:49:08
Rod
I read somewhere is 1.6 trillion coming due by the end of next year. But then somewhere else that somebody said that’s the total in commercial debt. So I don’t know which number is accurate anymore, but it’s still staggering.
00:12:31:22 – 00:12:49:08
Jack
Yeah, it’s a double whammy to the ones that are performing at a lower interest rate. So it’s the same issue they had with owning Treasuries. If they own a 3% mortgage, it’s not worth 100 cents on the dollar right now. If they have withdrawals. And then the second thing is, yeah, the ones that are in default, that’s a double whammy.
00:12:47:03 – 00:13:10:22
Rod
Right? Right. And we’ve got we’ve got of course, you know, forget office in the multifamily space. We’ve got a ton of guys that did bridge debt over these last couple of years and and they’re getting their clocks cleaned right now. And you know, there’s a 75% year over year decline in multifamily sales first quarter of this year. And you know, and those guys that have non-performing or bridged it, that’s already gone up in value.
00:13:08:14 – 00:13:31:05
Rod
I mean, up in interest rates have two options to refi or to sell. And the sell doesn’t look good and the refi really doesn’t look good with, you know, rate caps being what they are right now. They’re insane. I saw an article about rate caps where in 2020 you could get $100 million rate cap, three year, 3% rate caps, not going to go up more than 3% in three years.
00:13:30:03 – 00:14:03:05
Rod
It was 26,000 or 23 or $26,000 today. That rate cap for one year at 3% is 2.3 million. So, I mean, how are these guys? They got to pull money out of somewhere? You know, I guess they do capital calls. Plus, they’ve got to meet their debt service coverage requirements at a higher interest rate, which is tougher. So I don’t know.
00:13:50:10 – 00:14:03:05
Rod
I think there’s going to be some pain. Brother out. Yeah. If you agree, it’s certainly.
00:13:53:05 – 00:14:03:05
Jack
A bit concerning. And I mean, I’m in over 40 deals and, you know, fortunately we’re in a bunch that are Fannie Mae. Right.
00:13:58:18 – 00:14:05:09
Rod
Right. So those are great, right? I got a ten year fixed. Freddie Mac on the debt on the two that I bought this last year. Yeah. Yeah.
00:14:04:20 – 00:14:30:09
Jack
Then the deals that do have rings. Yeah, you’re right. I mean, that service is more than doubled, right? You know, the the value add is holding up. So as long as the operators, the operators that are executing, you know, there’s certainly no cash flow or pay distributions. But at least the way we’re modeling the deals we’re in, if the you know, basically you’re just renovating your way out of the problem.
00:14:22:11 – 00:14:30:09
Jack
Right. And you know, hopefully that if.
00:14:24:15 – 00:14:41:21
Rod
The but the rents, the rents have declined. I just get literally from I got my Siri little update from connect CRM and rents have started decline I think on a national level.
00:14:37:12 – 00:15:01:08
Jack
So yeah I’ve see I’ve seen that too. And you know, I’ll have the investors send me articles on things and you know, it’s still so regionally dependent. Yeah, I’ve seen Phenix decline 5%, but in the class C plus B minus where they actually.
00:14:49:15 – 00:15:01:08
Rod
You know, you’re right, in San Antonio, our asset there is we’re still getting our rent bumps on our turns. So. Yeah. So anyway, I interrupted your bill. Please continue. So I know you got $3 billion worth of non profit.
00:15:01:03 – 00:15:34:06
Jack
Yes. So basically I left that one firm. I was out for a few years where I learned the business and I just went on my own. I was I think I picked up a number of clients I was buying small batches of loans from a few of the private equity funds that would buy large portfolios and it would trickle down and I’d buy five, ten, 20 loans for a couple of million dollars and and and.
00:15:20:14 – 00:15:34:06
Rod
Then you have did you have the team in place to make those phone calls? Because, I mean, trying to deal with all those homeowners can be a challenge or did you do it?
00:15:27:10 – 00:16:02:20
Jack
Or so we used a third party servicing company for the day to day. But I would get on the phone with the borrowers. I was the second level of support. It was.
00:15:35:14 – 00:16:02:20
Rod
Odd.
00:15:36:04 – 00:16:02:20
Jack
Exact work. I was making sure that, you know, sometimes if you’re not the servicers a lot like a property manager, you have to manage them. You have to be behind the scenes pushing the asset management. Exactly. Otherwise, they’ve got thousands of loans for and then they’re just going to kick the can down the road, right? So we were there to make sure that if a deal made sense, we would do a modification.
00:15:53:12 – 00:16:22:18
Jack
And then if it didn’t, the foreclosure would get started and we would push it forward if we had to. And so I had a boutique business with a business partner, just kind of a small family office, just structured, running a, you know, $5 million of capital. And then a group of Bear Stearns guys that had left Bear Stearns and wanted to get into the mortgage space, just met them randomly for a coffee in New York, didn’t know what I was walking into and know We did a $5 million test pool, went to ten, went to 100, and eventually they purchased.
00:16:22:02 – 00:16:36:23
Rod
Was worth your.
00:16:22:21 – 00:16:36:23
Jack
Deal. Yeah. Yeah. For you. It’s the right time, right place, you know. But I was active. In what.
00:16:28:03 – 00:16:36:23
Rod
Year was.
00:16:28:13 – 00:16:44:20
Jack
This? This was 2014. We started that deal and yeah, between 2014 and 2019, we bought $3 billion of loans we bought directly from Freddie Mac, Fannie Mae only transacted with Goldman.
00:16:40:00 – 00:16:44:20
Rod
Now, what was that? Primary residential.
00:16:42:00 – 00:16:56:18
Jack
Yeah, these were large residential pools. Interesting. And so we buy a thousand loans at a time and do a lot of modifications and the demand for re performing loans was really strong as well. So we made more money making those deals with the homeowners, getting the loans, performing, and.
00:16:56:05 – 00:16:59:19
Rod
Then you’d sell them off again.
00:16:57:05 – 00:17:06:12
Jack
Yeah. And sometimes close to par when interest rates were really low and we had loans with four or 5% interest rates, there was strong demand from Wall Street.
00:17:04:02 – 00:17:06:12
Rod
Wow.
00:17:04:14 – 00:17:20:02
Jack
And we even did securitizations, which it sounds you did? Yeah. What we would do. Yeah. We through Goldman in Nomura.
00:17:10:16 – 00:17:20:02
Rod
We’ve got your gosh And.
00:17:11:15 – 00:17:20:02
Jack
It sounds kind of more exciting than it was. It was essentially just refinancing of debt.
00:17:16:00 – 00:17:20:02
Rod
So. Well, right. You just get it. You just basically selling you’re getting out of the.
00:17:19:01 – 00:17:43:04
Jack
Yeah, it’s basically cash out refinance.
00:17:20:13 – 00:17:43:04
Rod
Right, right, right. That’s the simplistic way.
00:17:22:13 – 00:17:43:04
Jack
But it was interesting. I met I met one of the characters in The Big Short.
00:17:25:18 – 00:17:43:04
Rod
Oh, no.
00:17:26:12 – 00:17:43:04
Jack
The character that the Deutsche Bank character in The Big Short and in the book, they use his real name, Greg Litman. Yeah. He owns a firm called Lieber Max. And I, you know, they were, you know, participating in some of the bond offerings. This is interesting.
00:17:39:08 – 00:18:05:17
Rod
Oh, those are crazy times, man. I you know, in my foreclosure defense business, we saw so much fraud from the big banks. I mean, it was insane when you said Deutsche Bank big time notes, you know, because the problem was to foreclose on these things. They had to have a decent, you know, had all have all the documents and documents were scattered all over the hill and gone because these loans have been sliced and diced so many times.
00:18:02:10 – 00:18:26:04
Rod
So they had to basically fabricate documents to get the foreclosure process through. And they absolutely did it. I saw it. So, you know, call me out on it if you want. But I saw it firsthand. It was crazy.
00:18:13:08 – 00:18:26:04
Jack
Diligence was a big part of the process. Just tracking the assignment changed it right to exist.
00:18:17:15 – 00:18:26:04
Rod
All of that.
00:18:18:04 – 00:18:26:04
Jack
Getting going back three OTA’s prior to find someone who could sign because there was a break in the assignment chain because. Right. You know, during the day. Right.
00:18:24:23 – 00:18:36:14
Rod
These these banks would assign these debt. That’s what you’re talking with the assignment chain, right? Yeah.
00:18:29:16 – 00:18:36:14
Jack
Yeah.
00:18:30:06 – 00:18:56:00
Rod
No level. Not the ownership level, right? Yeah. Yeah. It was crazy. Yeah, it was. It was crazy times, man. It was, you know, for a while I enjoyed it, but. But, you know, nobody’s happy when they’re losing their house. And I sold that company a few years ago. We had 60 employees. It was about a $10 million company.
00:18:45:10 – 00:18:56:00
Rod
Not huge, but we had a it was the guy. He’s killing it now, the guy that bought it from me, because the foreclosures have really ramped again. You know, they had the moratorium, so they’ve really ramped again. So what did you do after that?
00:18:55:20 – 00:19:15:01
Jack
Yeah. So, you know, I got into I started investing passively in syndications while I was there in New York. What asset class in multifamily. I met a guy locally at a meet up group who lived in Long Island but was buying in in Georgia, South Carolina. And a similar story that we talked about earlier, he had owned some single family realized it was a grind and started going bigger.
00:19:15:06 – 00:19:32:19
Jack
And so I had some exposure to it passively while I was in New York.
00:19:18:07 – 00:19:32:19
Rod
And when was this?
00:19:19:10 – 00:19:36:12
Jack
This is, I think, my first deals like 2015, 2016. And, you know, I started in real estate. I was, you know, as a real estate professional, I didn’t even know it in my twenties. So I was used to having to take losses carry forward. All right. Yeah, exactly. Unprofessional, professional, right. When I was like 20 something. But could you.
00:19:34:07 – 00:19:36:12
Rod
Explain the difference for my audience?
00:19:35:16 – 00:19:52:10
Jack
Sure. So, you know, when you’re a real estate professional, there’s a designation from the IRS and, you know, loosely, it’s 750 hours in the real estate business per year, but 500 of them are supposed to be in rental property activity. So and this is a fine line. So certainly not giving official tax advice, right?
00:19:52:01 – 00:20:16:03
Rod
No, no, of course. Of course. There’s no tax advice here, guys. We’re just this is we’re having fun.
00:19:55:18 – 00:20:16:03
Jack
Okay, But but, yeah, you’re supposed to be actively involved in rental property activities for 500 hours of it. And if that’s the when that happens, generally all of your income gets pulled together. And if you have losses on paper through depreciation, you know, it basically go against.
00:20:10:09 – 00:20:16:03
Rod
Ordinary.
00:20:10:19 – 00:20:16:03
Jack
Income.
00:20:11:16 – 00:20:43:09
Rod
Yeah, it’s fantastic. I mean, it’s why most people that do real estate for a living don’t pay taxes, period. Now, now, you know, and when you’re investing passively, you can like like a lot of operators will do cost segregation and there’s still 80% bonus depreciation. So you’ll get your your income, your passive income offset by some losses. But you can’t go to your active unless you’re you’ve got that designation.
00:20:35:09 – 00:21:10:21
Jack
Right. Exactly. Exactly. So so I found myself all of a sudden I’ve got, you know, a private equity job in New York. I’m taking a big salary with a bonus. I own a piece of the business. And eventually it got to the point where my ownership of the business was was paying me more than my salary. And I’m losing 50% of my salary in New York City.
00:20:53:13 – 00:21:10:21
Jack
And it’s just sort of, you know, I got into real estate for passive income and I have freedom and flexibility and it became, you know, a grind where it’s like you’re guilty for taking vacation days.
00:21:02:15 – 00:21:44:13
Rod
New York’s New York and California, man. I mean, I don’t know how people survive there, honestly. The taxes are so onerous. In fact, there was just a headline today where landlords in New York are getting hammered for. Did you see that? Literally just they just passed something where there’s there’s a lose more much more loose description of a fraud based on on raising rents and they can and they can go retroactive five years against New York landlords just passed today literally I should have pulled it and brought it over.
00:21:30:03 – 00:21:57:21
Jack
Yeah, it’s crazy. And I heard about, you know, California just blanketly putting rent control on certain property. It’s not like you had to opt into it. It’s right. Yeah, it’s crazy. So. So eventually I burnt out in New York. I really just, you know, being an entrepreneur first, it’s really tough to just do that kind of private equity grind.
00:21:46:06 – 00:22:15:20
Jack
Sure. And I was like, I can’t do this for another ten or 20 years. I want to travel the world and enjoy enjoying the money. So I ended up leaving and I moved to Puerto Rico, which has some pretty amazing incentives. Right? And eventually I got bought out. So I’d already been in a number of syndications passively and, you know, was decided to do it as more of a business.
00:22:03:19 – 00:22:32:20
Jack
A few of the operators that I was investing with, you know, explained to me that, you know, even though they’re successful and able to, you know, raise money from friends and family, that when you’re you have to raise millions of dollars in 30 to 60 days, it’s always a sprint.
00:22:17:03 – 00:22:32:20
Rod
Right?
00:22:17:10 – 00:23:09:03
Jack
So I knew after being in the property management business when I was younger and having that grind in New York, I didn’t really want to be a full time operator. I’d preferred to be try to build a passive business. So I focused more on allocating money to a select group of partners. Probably some of your students. And yeah.
00:22:35:02 – 00:23:09:03
Rod
Very likely I will have to. We’ll have to find out who they are. I’d love to know because I’m sure I know 75% of them. Yeah. But yeah, so, so you basically you have a fund that invests in other operators deals, correct? Correct. And you come in as a limited partner and sometimes you have a relationship as well.
00:22:52:02 – 00:23:31:15
Rod
And that’s a very common dynamic, guys, by the way. And you know, I’ve got students that have done that extremely successfully, you know, raised, raised hundreds of millions and and got involved in thousands and thousands of doors. But so that’s that’s effectively what you do. Well, I know your your website is Jake James investments dot com and again his podcast is alternative investor mastermind just so I don’t forget to say that but let’s talk about some more global stuff if you are were you finished with with your with your introduction or introductory bio that I kept interrupting.
00:23:28:09 – 00:23:48:19
Jack
That’s that was good. It was, it was a good one. That’s what I was. All right. We covered a lot of good stuff in the in between.
00:23:33:11 – 00:24:13:04
Rod
Yeah. And that’s the whole purpose of this is to educate you guys. And so, you know, talk about you gave me a topic to ask you about and I’m intrigued as to where you where you’re going with this. And that is how to avoid the last straw moment. So can you elaborate on what you mean by that?
00:23:50:21 – 00:24:13:04
Jack
Sure. So, you know, I was kind of giving a little preview, I guess, about. Yeah, for me it was I was in New York. I was losing half my money in taxes. Ultimately, I just wasn’t happy. I mean, I was making a lot of money, but I wasn’t happy. I’d sort of trapped myself right into a job I hated.
00:24:08:01 – 00:24:44:09
Jack
And, you know, I think you need to do some soul searching when you’re trying to figure out like what what part of this business you get into. And I think I know a lot of people who make seven figures that just their first thought is to I just want to be an operator. And then they or they think I’m going to go buy an Airbnb or I’m going to buy a single family house and, you know, be really mindful and really thoughtful of your lifestyle design when you’re an accredited investor.
00:24:32:10 – 00:25:15:03
Jack
We’re trying to get towards retirement, right? And passive income. I think a lot of people just default to, you know, what they think the simplest thing is, is to buy a single family or do an Airbnb or just try to do everything themselves and know I’ve used the quote. I’ve heard it on other shows that real estate is a team sport and, you know, I think to you know, to avoid that that burnout and that that trap, that neverending trap of never quite getting passive and even the business I mean now it’s not fully passive but right I’m going to Hong Kong in ten days and I don’t have to worry that my phone’s going
00:25:03:15 – 00:25:15:03
Jack
to blow up because, you know, toilet’s overflowing.
00:25:06:08 – 00:25:15:03
Rod
Right over the property. Right, right, right.
00:25:08:00 – 00:25:40:03
Jack
I think it’s really important to, you know, to to look at passive income and really design your life and your investments around your lifestyle.
00:25:17:01 – 00:25:40:03
Rod
Lifestyle, lifestyle and how much bandwidth do you have? You know, if you’re going to be an operator, you’re going have to have some bandwidth. I mean, I’ve got my students, I’ll break for a minute. My warriors, my coaching students now own upwards of 170,000 units that we know of. We’re doing a count right now, and I’ve only been teaching five years, so I’m really proud of that.
00:25:34:09 – 00:26:19:00
Rod
And when you say team sport, most of those were done between warriors. So everybody playing to their strengths and you know, some of them invest passively, some of them both passively and actively, and it works very, very well. So you know, and it absolutely is a team sport. There’s no question this business is a team sport. And that’s the beautiful thing about it, candidly, is, you know, if you do want to be operational, there are several different hats you can wear.
00:25:59:09 – 00:26:19:00
Rod
You know, obviously you can be the one that finds the deals and raises the money similar to what Jack does here, at least on the equity raising side. And then or you could be the one that does the you know, the underwriting. If you’re you know, obviously you’re very analytical as well if you were going to be in the IT space.
00:26:15:14 – 00:26:52:03
Rod
And so that, you know, that that’s required. And then there’s the asset management piece. So somebody with some construction experience or some project management experience or something could do that. But if you don’t have the bandwidth for any of that, then then you’re crazy not to, you know, explore passively investing. But when you say last straw moment, I don’t I don’t I didn’t pick up on on that move from New York, by the way.
00:26:38:06 – 00:27:03:02
Rod
I got married in Puerto Rico. I freaking love Puerto Rico. We talked about that a little before we started recording. You know, love the hotels there and the people there and the the climate, of course. And of course, the tax is you know, it’s interesting. I had I’ve had some economists on the show. Harry Dent, for example, lives down.
00:26:54:02 – 00:27:03:02
Jack
Yeah.
00:26:54:16 – 00:27:22:18
Rod
Yeah. And and, you know, it’s it’s a pretty extraordinary place to live. I don’t know if I could talk my wife into it, but I totally would move down there if I could. But. But what do you mean by last straw? I was just like. Like. Like you’ve reached the point where you’re looking at life differently or.
00:27:11:09 – 00:27:22:18
Jack
Yeah, yeah, it was. Maybe it was, you know, you may call it a midlife crisis, I guess. Okay. Okay, okay. I mean, I had some I was developing TMJ in my jaw from the stress, like, Oh, wow, yawn. It would crack like, like you’re snapping your fingers.
00:27:22:08 – 00:27:40:19
Rod
You’re clenching all the time cause you’re stressed.
00:27:24:07 – 00:27:48:04
Jack
I guess you’d say. I became an official New Yorker because I saw a therapist. Right? I think it’s like a rite of passage in New York City. It’s like almost everyone I know, right, goes to, you know, therapy. Yeah, yeah, yeah. It was. It. It was helpful. But, yeah, for me, it was just it was deciding that, you know, to some extent, the money wasn’t even as important as the freedom for me.
00:27:42:00 – 00:28:00:01
Jack
Yeah. And, you know, as someone who started as an entrepreneur, I kind of gave myself golden handcuffs and, you know, so I could see it from the perspective of somebody who’s also trying to, you know, trying to retire or trying to, you know, become self-employed and build passive income, but is afraid to take that step to, you know, take the step into doing real estate, investing full time.
00:28:00:01 – 00:28:19:13
Jack
So, you know, it’s for everyone. It’s different. You know, for me, it was just started to affect my health and, you know, really just had to.
00:28:07:10 – 00:28:19:13
Rod
You have a family or is it just you.
00:28:08:22 – 00:28:19:13
Jack
Had a wife? No children? Not so I mean, a little easier, Right.
00:28:12:09 – 00:28:19:13
Rod
And and she’s happy down there, too.
00:28:15:00 – 00:28:19:13
Jack
Yeah. You know, it’s still it’s it’s.
00:28:16:22 – 00:28:19:13
Rod
Still news.
00:28:17:11 – 00:28:19:13
Jack
90%. Great. I think like most.
00:28:19:07 – 00:28:30:10
Rod
You speak Spanish.
00:28:20:08 – 00:28:30:10
Jack
Poquito.
00:28:21:03 – 00:28:30:10
Rod
It’s okay. Yeah.
00:28:21:20 – 00:28:45:02
Jack
Okay, okay. You know, it’s like Miami. I mean, everybody speaks English, too. I, I understand more than I. Yeah, that I speak, right? I do want to. I should make more of an effort, honestly, because I’m an outgoing person, too. Once I get to a base level, you know, I’ll just be asking everyone commodities this time. All right, All right.
00:28:38:19 – 00:28:54:01
Jack
It’s enjoyable. And there’s also, I wouldn’t say expat because everyone’s still a U.S. citizen, but there’s a a great community of entrepreneurs down in Puerto Rico. Oh, yeah. 10,000 people who’ve moved down there for the various incentives.
00:28:49:16 – 00:29:09:04
Rod
And yeah, some big players. You know, I was I went to a is it Exit Realty which which realty.
00:28:56:10 – 00:29:09:04
Jack
Is the Expo Lobby.
00:28:57:13 – 00:29:09:04
Rod
XP XP. Yeah. Some big hitters in XP that make a million a frickin week or whatever move down there because they’re just picking.
00:29:04:08 – 00:29:23:22
Jack
Yeah. And I could I can cover the very basics of the Yeah. There’s two major tax incentives that people tend to use down there. One of them is the Export Services Act.
00:29:13:07 – 00:29:23:22
Rod
And so elaborate on this.
00:29:14:18 – 00:29:44:18
Jack
Sure. So if you’re a resident of Puerto Rico, you don’t pay federal income tax. Now, if you’re just a random lawyer in Puerto Rico, the typical rate’s 33%. So there’s not generally you can’t just move there, right, and get any break.
00:29:28:10 – 00:29:44:18
Rod
How do you get residency, though.
00:29:29:19 – 00:29:44:18
Jack
Houston? You need to live there 183 days of the year. And you also need to pass the closer connection test. So you can’t just hop on a plane four days a week to have your wife, your kid, your dog. Right. You know, in another area and just say you’re in Puerto Rico. So you’ve got to really be there.
00:29:43:04 – 00:30:06:02
Jack
You don’t need to be there all the year. But, you know, you have to have a presence there. And any money you make off island through where it used to be called at 20, now they’ve they’ve consolidated this under what’s called Act 60. But any money you make off island. So that can be a consulting business, a education business fund administration fund management is only taxed at 4%.
00:30:04:00 – 00:30:23:15
Jack
Well, and there’s also do.
00:30:06:12 – 00:30:23:15
Rod
You have write offs that go against that as well or.
00:30:09:11 – 00:30:47:11
Jack
Certain things? I would say I’m less I’m not I’m probably not as diligent tracking every receipt at 4% that I would be for, you know, picking up a dinner here and there. Sometimes I just, you know, throw the credit card out and maybe don’t expense every dollar I would have. But, you know, yeah, there’s the standard business deductions you can use as well.
00:30:25:08 – 00:30:47:11
Jack
And then the other powerful thing for there’s a lot of stock traders and cryptocurrency entrepreneurs is because there’s no short term or long term capital gains, that short term for stock traders is super powerful, right? I mean, I know some guys who have six figure days, right, that would be taxed at 50% for their trading and you know, it’s zero.
00:30:42:21 – 00:31:06:05
Rod
That’s crazy. Yeah. Wow. Very cool. Yeah, I like I say, we love it down there, but it’s a you know, it’s a big move. It’s definitely a big move. So, you know, what would you suggest to people to prepare themselves for this economic you know what storm that I feel like we’re in and we haven’t any gotten anywhere near the end of yet.
00:31:06:17 – 00:31:13:11
Jack
Yeah, so I have I have some mixed feelings. You know, I’ve got some scars from 2008, like, like you’ve mentioned it. Yeah.
00:31:12:08 – 00:31:30:04
Rod
Well, so carrying around bad memories that probably make us a little more bearish than most.
00:31:16:07 – 00:31:30:04
Jack
Oh, yeah. Yeah. Like every, every couple of weeks, I listen to Peter Schiff and I’m like, Oh, go buy some gold yourself.
00:31:21:17 – 00:31:30:04
Rod
I want to shoot you. Yeah, Peter and Harry both are like, Oh, good God.
00:31:25:11 – 00:31:30:04
Jack
But it’s, you know, it’s.
00:31:26:23 – 00:31:47:02
Rod
They’re bound to be right eventually. And I think now they’re going to be right, you know? And I bought a lot of gold and silver recently, too. But anyway, yeah, yeah.
00:31:32:17 – 00:32:07:17
Jack
So, you know, at the same time, I mean you still you can’t just sit on the sidelines in cash either. So, you know, I think there are still some good deals out there. You just got to be selective and you got to be in the know and in the right network as well. And that’s that’s the power of just getting out there and being part of these investment communities.
00:31:49:10 – 00:32:07:17
Jack
You know, I think it’s it’s just as risky to have money sitting in the S&P, you know, over ten, 20 years. Yeah, you may average 8%. But you know, what was our 23% drawdown last year? So, you know, the whole Vanguard index fund that the traditional financial advisors preach. You know, I’m not a proponent of that either. So.
00:32:06:08 – 00:32:32:14
Jack
Right. I think you need to be selective and get into good opportunities. I think there’s still good opportunities today. If you find a deal and multifamily today that cash flows with a, you know, close to a 6% interest rate, if you’ve got a fixed rate debt and a 6% interest rate and positive cash flow, you know, there’s no reason not to allocate in some deals now.
00:32:26:23 – 00:32:32:14
Jack
And I am a.
00:32:28:04 – 00:32:32:14
Rod
Yes, as long as there’s not short term debt.
00:32:29:17 – 00:32:53:02
Jack
Oh, exactly. Exactly. They give you a fixed rate. And you know, what calms me is is looking at the dollar cost averaging examples of if you put if you put money into the stock market the day before the 1929 crash and you put it in the day before, it would take you 12 years to break even. However, if you invested six months before and six months after in equal amounts within two and a half years, you break even really.
00:32:51:20 – 00:33:19:11
Jack
And I think the same could be said for real estate. You know, if you obviously if you bought everything in 0507, you know, you’re in a world of hurt. But you know, those that if you bought one or two properties at the peak but then started buying all the foreclosures and kept going. So yeah, I’m a proponent of just continuing to build network look for deal flow.
00:33:08:01 – 00:33:19:11
Jack
That’s where the great deals will happen too.
00:33:10:08 – 00:33:19:11
Rod
Right.
00:33:10:13 – 00:33:19:11
Jack
But that’s a two deals last week, right.
00:33:12:08 – 00:33:39:22
Rod
But right. Me too. We got we got eyes on three deals going right now. And here’s the thing. I mean I was very interesting example you gave about the Great Depression. But honestly, you know, our business is empirical. It’s primarily a numbers if if the rents are there and you’re not being aggressive, you know, like I’ve seen I saw some pro forma is back in the day I won’t mention big names was a big name everybody would recognize he was performing 10% rent increase for the next five years.
00:33:38:17 – 00:34:02:18
Rod
I mean come on. You know and and right now what we’re performing is zero rent increase for the next year. And then 3% after that. And I mean, very, very modest, you know, on our on our projections. And and I think if you’re conservative like that in the numbers make sense today, why not? I mean, you know, it doesn’t matter when you buy as long as the numbers make sense.
00:33:59:04 – 00:34:31:05
Jack
I agreed and I catch myself saying this a lot. It’s I think is a good point to repeat again to your audiences. I focus really heavily on the value add, you know, interest rates you don’t have control over. But if you’re doing diligence on a deal, if they’re if they’re projecting a $300 rent increase on a renovated unit versus a classic unit, and you believe that number and that numbers, maybe it’s attainable because the prior owners have done a few.
00:34:22:00 – 00:34:40:10
Rod
The market shows a comparable properties are getting it, You know, for a for a truly comparable asset. We’re looking at an asset right now in Tampa. And, you know, we’re just making sure that, you know, our projections are real. I think they are. But but the other piece is it’s not you know, when you say value add, sometimes value added, just bring the rents to market as well.
00:34:40:10 – 00:34:50:17
Rod
It may not it may not really require a ton of CapEx. It could just bringing the rents to where where the market is. And that’s a much safer bet than projecting increases in the future. Right. Would you agree?
00:34:50:10 – 00:35:07:13
Jack
Oh, absolutely. Absolutely. That’s the one. You know, if you nail the value add, you’re going to keep yourself out of a lot of trouble. Right. You know, if interest rates go up a half a point further somehow. Right.
00:34:59:16 – 00:35:26:17
Rod
But they’re saying they’re going to I mean, I just saw it today when really today he said don’t assume that the rates are going to go up more before the end of the year. I literally just read it in Fox or somewhere today.
00:35:09:23 – 00:35:26:17
Jack
Yeah. And then there are starting now, I’m starting to see I got sent to deals that have distressed in the last two weeks where they’re looking to raise capital instead of capital. One was the traditional bridge loan and the construction went over budget. The other one, it was though is their ten year debt with three years interest only.
00:35:26:19 – 00:36:00:22
Jack
And it was a it was a Fannie Mae deal. So the you know, they don’t have the rehab budget built in like a bridge loan word and they’re a little behind in their renovations and yeah because they have not pushed rents enough the interest only is expiring and they’re going to have some cash flow issues. So there’s an opportunity to get into a deal as a bit of a bailout that’s got seven years of debt at 3.1%.
00:35:45:23 – 00:36:00:22
Rod
So it’s an assumption.
00:35:46:20 – 00:36:00:22
Jack
Well, yeah, or just a recapitalization now by yourself, so to speak.
00:35:50:21 – 00:36:25:03
Rod
Yeah, but obviously you’d have to make sure that you’re able to meet their proforma numbers on on increased rents. And so so let’s dig into that deal just a little bit more. So they’re right. So they’re going to have trouble cash flowing because they didn’t get their their renovated units done quickly enough. Correct. Okay. Okay. So so on the ones that are renovated, they’re able to get the rents that they needed to have the deal make sense direct.
00:36:20:04 – 00:36:25:02
Rod
Okay. So you just come in, you recapitalize and then you you finish the CapEx and and get their rents where.
00:36:25:02 – 00:36:46:20
Jack
They need it. Exactly. And it’s just a negotiation of, you know, how much the other investors are going to get diluted is Stafford equity. It’s in Texas.
00:36:31:12 – 00:36:46:20
Rod
Texas. Yeah. You know, the thing that’s killing people in Texas right now, ask me how I know we’ve got multiple assets in Dallas and we’ve got assets in Houston and San Antonio and insurance is freaking o us. So I’m sure you’re factoring that in.
00:36:44:09 – 00:36:56:08
Jack
Oh, yeah. When you’re about to just kill the deal we had, we had a potential hot assumption with a 2.5% interest rate.
00:36:49:17 – 00:36:56:08
Rod
My God.
00:36:50:06 – 00:37:09:16
Jack
And, you know, the deposit was returned. It was the contracts were set, right? But yeah, we were. We thought it was like, you know, 30 days from closing. But, you know, HUD at the last minute demanded the higher insurance premium then than the previous owners had. And so it was good.
00:37:06:02 – 00:37:09:16
Rod
You mean in their pro forma, in their modeling.
00:37:08:00 – 00:37:19:16
Jack
Yeah. Well, even with the current owners, we’re paying, I guess HUD was requiring a different level of insurance and it was going to raise the price significantly to the point where.
00:37:15:14 – 00:37:38:23
Rod
So much more comprehensive insurance. Oh, interesting. Wow. Yeah, that’s that’s you know, HUD deals are very regulatory. They take a long time to close. But my God, two and a half percent interest probably still had over 30 years left on it. I mean, that was 35 years. Yeah.
00:37:28:22 – 00:37:38:23
Jack
And this was earlier this year.
00:37:30:00 – 00:37:38:23
Rod
Loans are fantastic.
00:37:31:07 – 00:37:38:21
Jack
Yeah. Because a lot a lot of my industry partners were are afraid of bridge loans and everything. So you know to have two and a half percent long term is a it was a really we were excited about that I’d be.
00:37:38:22 – 00:38:01:11
Rod
Afraid of bridge to brother I mean there are so many operators right now they’re sucking wind my partner I mean I’m in a few bridge loans. I mean we’re okay you know things things are looking good. But, you know, there are a lot of people that are sucking wind. And so, I mean, our obviously our our debt service coverage ratio has been hurt.
00:37:58:05 – 00:38:14:17
Rod
And I keep telling him he should stop his distributions right now. And I think he’s going to here shortly. But, you know, we better be safe than than sorry. I mean, you saw that big Houston foreclosure. I’m sure the 300 doors there that nefarious.
00:38:11:17 – 00:38:14:17
Jack
Yeah, yeah, yeah.
00:38:12:19 – 00:38:33:18
Rod
That’s it made the whole industry look bad. It was in the Wall Street Journal, everything else. One of my competitors students. And you know, it’s it’s it’s a shame.
00:38:20:17 – 00:38:38:18
Jack
There’s there’s hit pieces in the mortgage industry too. We kept getting hit with hit pieces that we were, you know vulture Wall Street firms buying performing loans. You know, a vast majority of us were good helping the community. We don’t care because it’s not.
00:38:33:23 – 00:39:14:18
Rod
No, no. It’s just like sell papers. They want to make people look bad. Yeah. And yeah, it’s a shame that that comes out. And please, if you know, if you’re thinking of investing passively in and you’re concerned about that, that was a pretty nefarious character. I’ve heard some really negative stuff about what happened there. Ran off with money, went to India, whatever, you know, and really didn’t know what he was doing.
00:38:53:00 – 00:39:14:18
Rod
That was obvious. And, you know, it’s amazing. He was able to buy as many units as he did.
00:38:58:00 – 00:39:14:18
Jack
But yeah, and it’s rare. I mean, the barrier to entry is is pretty high. I mean, there’s net worth requirements, right? What did you requirements. There’s experience requirements. It’s I’d say, you know, to have someone run off with money is, is, is extremely rare.
00:39:11:12 – 00:39:35:06
Rod
Oh yeah. That’s very unusual. Very unusual. I’ve got a little I’ve got a little back door into some of the stuff that happened there. I know some of the players and yeah, not, not, not a good situation. And it’s a it’s a you know, it’s a black eye for the industry. And it’s unfortunate because some people will see that like, oh, man, I’m not going to, you know, invest in multifamily too stupid because there’s incredible opportunity coming in my opinion.
00:39:34:00 – 00:39:56:18
Rod
And, you know, there’s so many pluses to doing it hedge against inflation. And, you know, and typically if you’ve got an operator knows what they’re doing, they’re not super aggressive. You know, a lot of these guys use Bridget just to just to get their return numbers up so they didn’t have to raise as much money. You know, with Fannie and Freddie, they’re not stupid.
00:39:54:12 – 00:40:27:21
Rod
They dropped their loan, the values down to 70% and 60% now because they see the writing on the wall. But, you know, you were able to get 80% bridge debt, you know, and they were they weren’t using it for, quote unquote, bridge, you know, to bridge from one, you know, from a state on stabilized to a stabilized. They were using it to get the returns they needed, you know, because obviously, the less money you put into a deal, the higher returns you can typically project.
00:40:16:00 – 00:40:46:11
Jack
So, yeah, absolutely. And they’re still now I mean, bridge debt without a cap would be, what, 8% most of the time. But they’re in some cases they’re just prepaying the interest, calling it a cap, but it’s really just paying points to buy down the rate.
00:40:28:05 – 00:41:02:05
Rod
Yeah, you know, I heard I heard a guy at the AM and mid-market conference I went to a couple of weeks ago for the southeast region here and they have fixed rate bridge now and I’m like, oh yeah he’s like, yeah, man, this is awesome. I said, What’s the interest rate nine? Like now they’ll listen, just so you know.
00:40:47:03 – 00:41:07:05
Rod
I mean, when I got in the business, this is 1978, interest rates were 18%. And I remember doing backflips when they hit seven. So, you know, we could see some, some higher rates, you know, one that article I read about Powell saying the rate increases are going to continue, also said that they’re closely watching what’s happening in the commercial real estate space.
00:41:05:17 – 00:41:30:19
Rod
Thank God, because I don’t think they do else. But don’t get me started. But anyway, you know, I hope that I hope they don’t go too much further because I think they’re really we’re really going to see a train wreck. And I think it’s I don’t think there’s anything to prevent what’s going to happen in the office environment.
00:41:21:11 – 00:41:30:19
Jack
Oh, yeah. That’s that’s it’s.
00:41:23:04 – 00:41:30:19
Rod
Done. It’s done. Yeah.
00:41:24:11 – 00:41:30:19
Jack
Yeah. It’s it’s a generational shift that.
00:41:26:11 – 00:41:40:04
Rod
It’s like bud at this point. Yeah. Sorry I went there, couldn’t help it, but.
00:41:31:20 – 00:41:40:04
Jack
I’ve got a meme to show you after the show.
00:41:33:12 – 00:42:02:05
Rod
Okay, good. Okay. But so. So why did you come up with the name Alternative Investments? Elaborate on on your definition of that. Is that, is that, is that just talking about what we’re talking about, which is multifamily passive investing, or should it go beyond that?
00:41:50:01 – 00:42:02:05
Jack
Yeah, it’s definitely more than multifamily. You know, I just have you know, I knew a lot of these people in New York that, you know, the the accredited investor that’s worth, you know, one to maybe $20 million.
00:41:59:10 – 00:42:02:05
Rod
Right?
00:42:00:07 – 00:42:34:06
Jack
Very I think a high percentage have 90% their money just in the stocks stocks bonds of traditional financial system. When you look at a family office or those that are worth 5000, $200 million, more than half of their money is typically tied up in private equity. Real estate businesses. So the laws have changed with the, you know, the credit, the five or six.
00:42:21:11 – 00:42:34:06
Jack
See, it’s really just the last ten years or so. Right. You know.
00:42:24:15 – 00:42:50:21
Rod
That you can even advertise. You can. I mean, good Lord. I remember back in the day. Yeah, the three touch rule where you had to have talked to him three times before. You could offer them a deal. And now I can shout it from the freaking roof.
00:42:36:06 – 00:43:02:07
Jack
Exotic story. Tough. It was. It turned. It was. It used to be like a country club industry. You pretty much would hear about them from a guy country club. Right? And now with with the Internet, it’s really opened up access to, you know, to the masses. Right? There’s 3 million accredited investors in this country. So so I’ve always been an evangelist.
00:42:53:12 – 00:43:22:18
Jack
I was the guy in my early twenties telling my friends to buy a two family house house, rent the other half. And then when I got into non-performing loans, a lot of real estate investors went from flipping houses to buying loans and flipping paper. And, you know, I’m always kind of shouting from the rooftops, trying to help people, you know, just get into good deals.
00:43:10:03 – 00:43:22:18
Rod
Right?
00:43:10:09 – 00:43:22:18
Jack
And now I’m at that stage in life, you know, a lot of my friends, colleagues have amassed some wealth and are looking to kind of plan for retirement. And I just think that there are superior opportunities out there outside of that.
00:43:21:13 – 00:43:28:02
Rod
Give us some examples. Give some examples.
00:43:22:23 – 00:43:56:20
Jack
Yeah. So, I mean, multifamily is one of the core asset classes. I’ve got probably half nobody ever my funds there. But you know, self-storage love it. Mobile home parks, student housing. We did two student housing deals in late or early 2021 when everyone was a little bit afraid of COVID. Still look to deals in SEC states where kids are still going to school.
00:43:42:00 – 00:43:56:20
Jack
Covered didn’t really wasn’t as big of a issue and as other parts.
00:43:47:08 – 00:43:56:20
Rod
Of the states.
00:43:48:12 – 00:43:56:20
Jack
Like the SCC football like yeah.
00:43:49:22 – 00:43:56:20
Rod
Like just yeah okay got it.
00:43:51:14 – 00:44:03:05
Jack
God so what else I mean I mean some oil and gas deals. I don’t need it just because of the tax status I have. But I have some some doctors and some others do some good.
00:43:59:10 – 00:44:24:02
Rod
Things about oil and gas deals. Yeah I’ve one of my past students is big in them now. You know some of the other asset classes you said I the student that’s huge in the self-storage space now as well thousands and thousands of and he said it’s softening for sure. Okay. But everybody has their stuff then most of the time they don’t want to give up.
00:44:16:02 – 00:44:24:02
Rod
So I don’t think it’s go anywhere Mobile home parks. I freaking love I absolutely love those. What else did you say?
00:44:22:11 – 00:44:24:02
Jack
Student housing.
00:44:23:05 – 00:44:48:13
Rod
Student housing. Now don’t let Harry Dent scare you off a student housing because he’s convinced that that’s going to fall through a floor because of the you know, he focuses his rhetoric on population demographics. Right. And how there’s going to be a drop in enrollment. B, just because of a drop in in that age group. So I don’t know.
00:44:43:08 – 00:45:10:07
Jack
Yeah, that’s interesting. I haven’t heard that specific quote from him, but I do. I mean, that population and stuff I follow I follow another guy named Peter Zion. He’s done tons of geopolitical stuff and talks about he’s one of the few economists that’s bearish on China because of their one child policy and their population. There’s a lot of a lot of old people and not enough.
00:45:01:18 – 00:45:10:07
Rod
Not like Japan. Yeah, Japan basically has been stagnant for 20 years because of their lack of population.
00:45:07:19 – 00:45:25:15
Jack
Yeah. So if you listen to too much Harry or Peter and you’re, you know, feeling.
00:45:11:03 – 00:45:36:05
Rod
I would ask Harry though, because you know, I will tell you something. You know, I don’t admit this very often. I did when I interviewed him is, you know, if I had I went and saw him, I don’t know, maybe in 2000, the late nineties, I went to Vancouver, saw him speak, and he said, Man, make sure you were out of real estate by 2007, eight, nine, something like that.
00:45:29:13 – 00:45:53:13
Rod
Had I listened, I wouldn’t have lost $50 million. Now, you know, nobody listened basically back then. But he talks. And the one thing that stuck with me was the conversation he talked about with students in colleges and student housing. So, yes, since he’s in Puerto Rico, I hit him up and ask him what his thoughts on that are.
00:45:44:21 – 00:45:53:13
Rod
Be good.
00:45:45:04 – 00:46:14:18
Jack
Yeah, they’re certainly do a deeper dive. Yeah so so the Peters I had things like if you listen to too much Peter Schiff and you start worrying about the U.S. and the U.S. dollar right. Xi’an is still pretty bullish on the U.S..
00:45:55:11 – 00:46:14:18
Rod
Because you know, there’s the brick thing going on right now. Egypt just joined. And so you’ve got all these nations, but I also saw something as well where they’re not as worried because the U.S. currency is still so powerful and so strong. I mean, I you know, I get sucked into that conspiracy stuff and it’s really not conspiracy.
00:46:12:19 – 00:46:46:05
Rod
I mean, that’s happening. And what scares me about the BRIC thing is it is it’s backed by by gold and silver and and commodities, which, you know, the dollars air, basically. But, you know, China has manipulated their currency so much as well. That was another component I heard. But anyway, tell me what you’ve heard from this guy. Sure.
00:46:34:00 – 00:46:53:09
Jack
So, you know, he just the fact that the U.S. is also our energy sector, I mean, we’re a net exporter. We’re energy and food independent. There’s only a few countries in the world that are energy and food independent. China is not one of them. So they’re importing heavily for it for both the only other countries that are energy food independent of Argentina and their political system has been.
00:46:50:22 – 00:46:53:09
Rod
A it’s a joke for.
00:46:52:17 – 00:47:05:19
Jack
That perpetually for like 30 years. There’s two there’s like a black market for U.S. dollars there. So if you change at the airport, you’ll get $250 to a dollar. But you go to a Western Union, you get $500 to a dollar. So everything is half price if you bring U.S. dollars.
00:47:05:11 – 00:47:20:21
Rod
They’re interesting.
00:47:06:11 – 00:47:20:21
Jack
So this is.
00:47:07:04 – 00:47:20:21
Rod
Argentina?
00:47:07:18 – 00:47:20:21
Jack
Yeah, this is Argentina. So, yeah, overall, he’s just very on the U.S. that we’re in a pretty good place. Let’s hope.
00:47:12:15 – 00:47:38:06
Rod
He’s right. Something is a little it is a little sobering. You know, when you see everything that’s going on, they’re still printing money, inflation, insane. They’re talking about that. What is it Fed now program for digital currency? You know, it’s a little sobering.
00:47:25:01 – 00:47:51:04
Jack
Yeah. I mean, look, over the next 20 years, something’s probably going to break. Yeah. I mean, there’s there’s a there’s a crisis every ten or 15 years. I don’t think either party is has the wherewithal to actually run a surplus. It’s going to take a crisis or.
00:47:40:03 – 00:47:51:04
Rod
Really.
00:47:40:09 – 00:47:51:04
Jack
A reset. It’s going to.
00:47:41:07 – 00:48:12:17
Rod
It’s going to take a reset. I think, you know, I would listen, we’re not trying to scare the hell out of you actually trying to get you excited because with crisis always comes opportunity. And and I think, you know, everything’s going on sale, in my opinion. I think there’s a credible opportunity to buy businesses. There’s 80 million baby boomers.
00:47:57:11 – 00:48:12:17
Rod
A lot of them own businesses that they’re going to want to sell and they’re going to have a hard time selling. Of course, any real estate asset class except office, you know, would be something I’d consider. I’m not even sure about retail a little questionable retail as well. What are your thoughts on retail? Just curious.
00:48:10:10 – 00:48:40:21
Jack
Yeah. I mean, I so the former CEO of Best Buy spoke at Kellogg. I did an executive MBA program a few years ago. I was waiting out my non-compete and you know, he still you know, retail is not going fully away right? Well no, it’s multi he just looked at as multichannel marketing for every person that just buy something on Amazon or goes to Best Buy plays with it and buys it at Amazon.
00:48:31:23 – 00:48:58:01
Jack
Right. There’s someone else is shopping on Amazon for a week and says, you know what, I want it now. I want to go into the store or I want to touch it and play with it and I’m going to get it immediately. So retail is going to change and you’re seeing kind of co-location like you going to a macy’s now, it’s like they’re selling real estate space to a bunch of brands and that’s really what Best Buy model became is actually selling space inside there.
00:48:50:23 – 00:48:59:21
Rod
So you have little, little like little little areas that are that are brand specific. I’ve seen that in some of the department stores now, of course, in the high end stores, you see it with the high end stuff.
00:49:00:03 – 00:49:29:17
Jack
But yeah, so it’s not going away completely, but it’s got to change. You know, there is there’s random suburban strip malls that are the site. The highway are probably not the highest and best used anymore. I mean, you want like a mixed use where you’ve got apartments for the grocery store and maybe a couple of select retail stores and some Amazon lockers, too.
00:49:17:07 – 00:49:29:17
Jack
So it’s the best of both worlds.
00:49:19:03 – 00:49:35:04
Rod
So no, I agree with you. That’s that’s very interesting. You know, I don’t know how the what is it what do they call it where they have a bunch stores, factory outlet stores. I don’t know how those are doing. May be interesting to know that.
00:49:31:13 – 00:50:03:00
Jack
But yeah, at the right price. I even think of covered land place. You know, if you if you have a long term playbook and you could buy something if it’s retail at a ten cap or 12 cap or something that’s distressed, but just for five or ten years, you might be able to reposition it right? You know, maybe it’s worth maybe it’s worth something as well.
00:49:48:23 – 00:50:03:00
Jack
You just got to be, you know.
00:49:50:06 – 00:50:03:00
Rod
In the path of progress. You know, if if for sure. I get absolutely say that.
00:49:54:10 – 00:50:03:00
Jack
Before I forget. You mentioned the buying of businesses. That’s actually another alternative investment. I’ve done so.
00:49:59:13 – 00:50:03:00
Rod
Oh, no kidding.
00:50:00:10 – 00:50:22:21
Jack
Through Kellogg, actually, there’s a conference called Entrepreneurship Through Acquisition, and it’s somewhat like venture capital, but it’s not venture because it’s not nearly as risky where private equity funds are backing MBAs from, say, Harvard, Stanford, Kellogg to buy existing cash flowing businesses. So they’ll actually put a bunch of MBAs on the payroll for two years to go out and network with businesses that are for sale.
00:50:22:06 – 00:50:35:12
Jack
And it’s a lot of baby boomers who are family and their kids don’t want it right. And a lot of these businesses, it’s almost its own value add because, you know, a lot of these all these guys are comfortable. They’re playing golf three days.
00:50:32:23 – 00:50:51:10
Rod
They haven’t embraced they haven’t embraced online marketing to the fullest extent, social media, all that. And you get a youngblood in there that can take that and run with it.
00:50:42:02 – 00:51:01:02
Jack
Exactly. So and so. So I’m actually invested passively in a fund that backs these businesses. So they own a portfolio of like 15 different cash line businesses. They’re buying them between four and six times earnings.
00:50:54:18 – 00:51:01:02
Rod
Wow.
00:50:55:16 – 00:51:23:21
Jack
So reasonable multiples. And these are not venture deals. We’re nine out of ten fail and you make all your money on one. These are businesses that know they’re already existing. Ten should stay. Maybe every once in a while you’ll have the owner who just you know, so much of the business was his personality. And, you know, maybe that.
00:51:10:16 – 00:51:23:21
Jack
But I think most of these they’re doing a very, very good amount of diligence and they they generally grow. So one of the cool examples was someone bought the third largest commercial roofing company in Ohio.
00:51:20:08 – 00:51:23:21
Rod
Wow.
00:51:20:22 – 00:51:43:09
Jack
And commercial roofs have a lot more subscription work. It’s not it’s not just new construction. It’s a lot of it’s flat roofs. So it’s a lot of service contracts, a lot of recurring revenue. Sure. One of their key landlords also owned in Florida prior, didn’t want to like go and go to Florida, create this new business unit. But this company used their one of their key clients to open a division in Florida, and they’ve tripled their earnings.
00:51:43:03 – 00:52:01:10
Rod
Hurricane Ian You’re welcome. Yeah, that’s that’s a no brainer in my my I’m very familiar with that business. My brother owns a fairly large roofing business in Denver, and my son actually works for him. They’re killing it. They had huge hailstorms there. My son had sold half a million so far. I think she’s going to hit six or 700,000 this month in sales.
00:51:59:13 – 00:52:01:08
Rod
So I was like, don’t know what to do with them.
00:52:01:12 – 00:52:10:14
Jack
You better get him some depreciation.
00:52:02:14 – 00:52:21:06
Rod
Well, yeah, no kidding. And here’s the problem. You know, I thought he was going to come work with me and and he’s now he’s now he’s got I think he’s going to have golden handcuffs at this point because I wanted him, you know, to help me with multifamily. And he’s been participating in our meetings. But yeah, that’s interesting what you said about businesses.
00:52:20:16 – 00:52:33:18
Rod
And they’re like, yeah, I absolutely think there’s some opportunity there. Fascinating program that you were mentioning. I love that program. Are you are an MBA from one of those schools?
00:52:29:20 – 00:52:45:11
Jack
Yes. So while I was my non-compete, I did a Kellogg executive program. I did their global program as well. So I was back and forth. I flew to Hong Kong a number of times. I did one class in Tulsa. So were you.
00:52:40:12 – 00:52:45:11
Rod
Working with Kellogg?
00:52:42:05 – 00:52:45:11
Jack
Oh, no, I did. There it was their executive MBA programs.
00:52:45:09 – 00:52:53:22
Rod
Okay, Yeah. Yeah. I’ve always wanted to do one of those, which literally, you know, you do case studies and Harvard even has an executive MBA program.
00:52:53:00 – 00:53:07:03
Jack
Yeah. Yeah, it was it was great. You know, I was for about ten, you know, I was in really heads down in real estate for most of my adult life. So it was a great time to just get a larger global perspective and be able to spend some time in Hong Kong.
00:53:04:17 – 00:53:07:03
Rod
That’s cool.
00:53:05:04 – 00:53:11:01
Jack
And yeah, this was Hong Kong 2019. So the protests were going on and it was just interesting to have, you know.
00:53:11:05 – 00:53:20:22
Rod
How long did you finish the program?
00:53:13:04 – 00:53:20:22
Jack
Yeah, it was an 18 month program.
00:53:15:00 – 00:53:20:22
Rod
And.
00:53:15:14 – 00:53:39:14
Jack
We finished in June of 2020, so we got most of our classes were live. We did finish the last few on. Yeah, but I’m actually going back in July for our graduation. We never had a graduation.
00:53:26:09 – 00:53:39:14
Rod
Right, Because of course.
00:53:27:00 – 00:53:39:14
Jack
So three years later. Yeah, with a bunch of the classmates.
00:53:30:06 – 00:53:45:08
Rod
So, So just out of curiosity, just for my own personal edification, how much time did you have to spend on a weekly, monthly basis for that program? Because that’s always intrigued me as well.
00:53:40:04 – 00:54:07:23
Jack
Yeah, it was. It was definitely we would meet for class like once every 4 to 6 weeks. So there was some homework and some prep where, you know, maybe you’re spending 5 to 10 hours prep before class. It was basically Friday, Saturday, Sunday, back to back weekends. So I’d go over for about ten days. And can you take two classes in that ten day period?
00:53:58:20 – 00:54:07:23
Jack
And then you’d have maybe a little time and there’d be like a take home final or something. So it wasn’t insane. I mean.
00:54:04:14 – 00:54:07:23
Rod
It wasn’t consuming. You could actually have a full time gig and still do it.
00:54:07:17 – 00:54:45:04
Jack
Exactly. Exactly. And I actually, as I say, like campus in Coral Gables as well. It meets once a month and there’s people that fly in from Peru and Colombia and they’re in addition to, you know, there was a couple there’s two neurosurgeons. So it’s an interesting mix of people. And, you know, certainly you’re far enough in life that you don’t need it, but it’s actually pretty rewarding.
00:54:27:05 – 00:54:45:04
Rod
I would do it to enjoy it. I’ve been really thinking about it for myself. I literally I’ve been threatening it for a couple of decades now. So, you know, it’s interesting that is circling back. So you through this process, you know, of your evolution. Did you have any mentors?
00:54:42:09 – 00:55:04:08
Jack
Oh, absolutely. I’ve had a number of them over the years. I mean, starting with my first, you know, my first college landlord who, you know, got me into my first number of properties and then, you know, over time, you know, a few others in in various stages. And one of them actually, Brian Dugan, who was in the mortgage business but had previously been working for a developer in Chicago and got into multifamily.
00:55:04:10 – 00:55:11:00
Rod
I know that name, the name triggered.
00:55:06:14 – 00:55:28:12
Jack
Me. Yeah. Yeah. He’s he’s in he’s definitely in some deals. He doesn’t really, you know, go to the conferences as much. But yeah, he’s definitely, you know, been around the block. So, you know, he was one of the first people who, you know, because he was in the mortgage business too, and then sort of pivoted into, you know, back into multi.
00:55:23:13 – 00:55:52:01
Jack
And when I was trying to figure out my progression in this was, you know, 2017, 2018, 2019, as I was trying to figure things out.
00:55:30:06 – 00:55:52:01
Rod
Right.
00:55:30:14 – 00:55:52:01
Jack
You know, really got me thinking heavily about, you know, just getting into the multifamily and syndication.
00:55:36:15 – 00:55:52:01
Rod
Such a gotcha.
00:55:37:15 – 00:55:52:01
Jack
And there’s many more. I mean, I’ve just been fortunate and, you know, I think I’m a you know, I’m an outgoing person. And I also, you know, we go and just happy to always learn and have.
00:55:47:18 – 00:56:11:14
Rod
Obviously, if you if you put yourself through that executive MBA, I feel the same way learners are earners. I mean, we stopped learning. We’d start dying, you know, that’s that’s it. You know, I think you’ve addressed a couple of these, but just out of curiosity, just curious if anything else comes to mind as as a through this journey, did you have any like epiphanies as you through this growth process where you’re like, Holy crap, I get that now I get it on?
00:56:11:07 – 00:56:14:10
Rod
Is anything come to mind when I.
00:56:12:10 – 00:56:32:04
Jack
Say, Yeah, I mean, so not being afraid to invest in marketing when I was just getting started first there’s about a year where was like, Oh, we should send postcards out, We should send postcards out and just, you know, it’s like, oh, it’s go it was it cost us less than $1,000 and this is to a 2324 so.
00:56:28:01 – 00:56:32:04
Jack
Right, Yeah. We bought a thousand stamps like a roll of stamps.
00:56:30:20 – 00:56:42:07
Rod
Oh yeah we did. Did them all yourself stuffing them. Yeah. Yeah.
00:56:33:16 – 00:57:02:01
Jack
You’re going on for less than $1,000. Yeah. We probably made six figures on and so early on it’s like okay you know, and then fast forward 20 years later, the marketing is different these days. It’s now, you know, social media podcast, right? Getting out there. And you know, again, I had like a bit of a resistance. Maybe it was in New York, it was a little more secretive.
00:56:51:10 – 00:57:02:01
Jack
I mean, I couldn’t speak to the media or go on a panel without getting permission from the general counsel because, you know, we would be in a fundraising cycle and you had to be careful what we’d say, the media. So, you know.
00:57:01:13 – 00:57:16:19
Rod
Did you have your series licenses?
00:57:02:22 – 00:57:32:19
Jack
Oh, no, no. This was all just private equity. But the parent company was always in a capital raise more institutional money. But yeah, they were just hesitant or they just thought I was a loose cannon, was afraid. What I’d say is a little bit. But yeah, fast forward 20 years and just, you know, embracing the social media and posting and putting things out there.
00:57:21:07 – 00:57:39:12
Jack
If I’m one on one, I don’t shut up about, you know, Puerto Rico and multifamily and investing outside the system. But I was hesitant to put it out there for a while. And, you know, now that I started to do that and, you know, I flew here for this just, you know, it was a awesome opportunity to meet you and have a likewise.
00:57:36:00 – 00:57:39:12
Rod
Yeah, I mean, I appreciate it, let me say that.
00:57:38:06 – 00:58:03:21
Jack
Yeah. But, you know, to, to actually put myself out there has been super rewarding. You know, I’ve gotten, you know, emails and thank you’s from, from people who’ve, you know, learned about something that I’ve, I’ve mentioned. And, you know, I enjoy being that evangelist and getting the word out there.
00:57:52:01 – 00:58:03:21
Rod
So that’s the way it works. Whatever you give, you give back a thousand fold. So, I mean, you’re you’re you’re not only you’re enjoying it, you’re going to you’re going to reap the benefits of it.
00:57:58:18 – 00:58:20:20
Jack
So, yeah. And for for a listener, that means, you know, getting out of your comfort zone and going to a live event and or joining an organization.
00:58:05:01 – 00:58:29:17
Rod
You know, I’ve got I’ve got a huge event. Well, huge by my standards coming up September 15th through the 17th. It’s a boot camp to only live when I do a year because they kill me. It’s me on stage for three days. But you guys, if you can come to that, I would highly recommend it. It’s going to be about 1000 to 1200 people there and it’ll be a blast.
00:58:23:02 – 00:58:44:22
Rod
But on that note, you know, do you have any and we’ll just wrap it up here pretty quick. We’re going to go a good bit. I’ve really enjoyed this, by the way. You know, Do you have any words of wisdom for an aspiring real estate investor now on the entrepreneurs? I’m sorry, on the operating side, not necessarily just the passive side.
00:58:40:02 – 00:58:58:06
Rod
Any words of wisdom for an aspiring multifamily investor? Because I have a lot of people that are sitting there thinking, Man, I should do this, but they just never done anything with it.
00:58:48:23 – 00:59:18:08
Jack
Sure. So, you know, you definitely need to be self-aware enough to know what type of personality you have and what you’re going to be able to give. You know, are you the sales person that’s going to be the capital raise or are you the Excel guru who’s going to be modeling and underwriting? You know, do you the property management construction experience?
00:59:04:04 – 00:59:18:08
Jack
Right. And you’ve just got to it is a team sport. You got to get out there and you’ve just got to you’ve got to take some action one way or another. Right? Whether it’s, you know, it usually it’s events. It could be virtual, but, you know, nothing substitutes.
00:59:17:12 – 00:59:34:11
Rod
Meeting people, networking, Right. When you say that’s one of the biggest pieces of this.
00:59:20:21 – 00:59:52:08
Jack
Business, 100%. And if you have that fear or limiting beliefs, you know nothing nothing solves that more than meeting someone else who is in your position a few years ago that has actually gotten to that next step. You know, you’re surround yourself with people that are that are, you know, where you want to be and, you know, then things happen organically.
00:59:37:14 – 00:59:55:15
Jack
You don’t have to be an extrovert either, You know, networking every every extrovert like me. I see you down a list. I’m an analytical, but at the same time, I’m not going to spend 20 hours on an Excel spreadsheet. I’m not organized enough mentally to my Excel sheets would like make it actual investment banker sick to their stomach.
00:59:53:17 – 01:00:19:06
Jack
I can I can get to a number, but it’s not right, You know, it doesn’t look pretty. So. Right. Yeah. You just you just got to take action. And things happen because of that. You know that $3 billion of mortgages happened because I was selling ten loans on LinkedIn, and the CEO of the company just saw that I was out there and I was active and everything builds upon itself.
01:00:11:14 – 01:00:19:06
Rod
Cool. Very cool. Now, do you have a team or is it just you now?
01:00:14:21 – 01:00:19:06
Jack
Yeah, there’s there’s six of us and all my marketing guys are part time.
01:00:18:06 – 01:00:28:00
Rod
Gotcha. But same.
01:00:19:11 – 01:00:54:19
Jack
Here. But yeah, I have a business partner who is, you know, his wife’s a doctor and he actually when he just got out of college, he was a financial advisor. So when we drop on financial advisors, he, he lived it and has that same mentality of buying that, you know, more, more people’s money should be outside of the, you know, traditional stocks and bonds.
01:00:38:11 – 01:00:54:19
Jack
Then, you know, another, you know, just investor relations. My wife is a CFO does does the books and compliance and all that.
01:00:47:05 – 01:00:54:19
Rod
Wow.
01:00:47:14 – 01:00:54:19
Jack
All that good stuff. And yeah, it’s a great it’s a great close knit team.
01:00:51:09 – 01:01:19:13
Rod
And they all in Puerto Rico or most everybody scattered.
01:00:55:05 – 01:01:19:13
Jack
Okay. Okay. Yeah.
01:00:56:03 – 01:01:19:13
Rod
Actually just so beautiful thing about this virtual world we live in. I mean, it’s I remember I hired some guy and met him virtually, and we communicated for a long time as he was in the company. And then we’re at one of my bootcamps and and he’s like, Hey, what’s going on? And we’re walking about 50 feet down the hallway before.
01:01:14:01 – 01:01:47:00
Rod
I’m like, Hey, we’ve never actually even met you guys. This is, you know, you just you just assume, you know, the relationship gets pretty tight. So let’s end it with this question that I love to ask. Super successful people like yourself. You know, if you go back and told 18 year old self something, knowing what you know now, is there anything you do differently or would you do it the same?
01:01:38:19 – 01:01:47:00
Jack
I mean, I’d certainly say sell all real estate in 26 and buy there.
01:01:44:07 – 01:01:47:00
Rod
Is that. Yeah. Right.
01:01:45:14 – 01:02:11:18
Jack
But yeah, I wouldn’t actually anything though because those lessons that that pain from 2008 is that that’s never going away and you know and look I in a couple of deals on the bridge loans now too so it doesn’t mean I’m still not taking you know some risk and investing it’s you know for for as bad as bridge loans can be at the same time, there’s no prepayment penalties and sometimes it beats the business model.
01:02:06:06 – 01:02:11:18
Jack
But, you know, I think you need to have that pain of losing money because it informs.
01:02:11:19 – 01:02:39:21
Rod
It doesn’t kill you, makes you stronger. Right. That’s how I look at it. I mean, I you know, I it wasn’t fun, you know, and I’m sure it wasn’t fun for you either. You lost millions as well, right? Yeah. Yeah. And, you know, and I tell people, you life’s about meaning and, you know, you can decide what meaning you place on what happens to you as well.
01:02:31:00 – 01:02:45:00
Rod
And you’re you’re meaning right there was a major stronger and mine as well for sure and either I place on is I never would have met my wife and I’d give it all up again for her. So, you know, if you’ve had something negative happen to you, you have the choice to choose the meaning and place on it.
01:02:44:14 – 01:03:13:19
Rod
It can be a disempowering meaning, an empowering meaning. I choose to put empowering meanings on, you know, the things that are perceived as negative, that have happened in my life. And I hope you do the same. But listen, brother, I appreciate you coming down here. There’s been a lot of fun and I definitely want to stay in touch with you.
01:02:59:03 – 01:03:13:19
Rod
I’ve really enjoyed this.
01:03:00:03 – 01:03:13:19
Jack
Absolutely. I did as well. And I’m actually going to bring a client or two to your event as well.
01:03:03:13 – 01:03:13:19
Rod
Oh, I’d love that.
01:03:04:06 – 01:03:13:19
Jack
I’ve got that longtime friend who made a lot of money in the mortgage business is looking to pivot and love it, you know.
01:03:08:21 – 01:03:13:19
Rod
Oh, he’ll he’ll.
01:03:10:03 – 01:03:23:22
Jack
Bring it to a live event and, you know, get them from 0 to 1 much faster than you know, then than looking at a.
01:03:16:04 – 01:03:23:22
Rod
Fire among.
01:03:16:19 – 01:03:23:22
Jack
Most.
01:03:17:05 – 01:03:32:23
Rod
I’ll fire them up. That’s what I do. You know, we spent a lot of time on mindset and psychology. That’s that’s what I’m known for. And I spent 20 years with Tony Robbins and invest in the world at it. But really 80 to 90% of a person’s success. I’m sure you agree with me on this. 80 to 90% of a person’s success in anything is their mindset psychology.
01:03:33:01 – 01:03:42:20
Rod
Only 10 to 20% of the mechanics have to actually go do it. Push through the fear, push through the limiting beliefs, you know, get uncomfortable to go make stuff happen. And so I spent a lot of time on that. It’s a lot of fun.
01:03:43:04 – 01:03:44:06
Jack
Absolutely. It’s great stuff.
01:03:44:06 – 01:03:45:03
Rod
Pleasure to meet you, brother.
01:03:45:03 – 01:03:46:02
Jack
You is all. Thanks again.
01:03:46:02 – 01:03:46:09
Rod
Yeah.
