Nic DeAngelo is a seasoned expert with over two decades of experience in investing and capital raising, specializing in real estate and debt markets. At Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications. Known as the “Fixed Income GOAT” in real estate circles, Nic manages a $206M+ portfolio, blending economic foresight with real estate expertise. His unique approach to Real Estate Asset Management, combined with a veteran team, ensures high returns and transformative projects for Saint’s investor community, making him a compelling voice for podcast audiences.
Here’s some of the topics we covered:
- Breaking Into Real Estate Investing 00:00
- Buying Commercial Distressed Deals 6:38
- Nic’s Two Favorite Markets 9:29
- Triple Net Real Estate Investing 13:49
- Lending Money with Mortgages 19:23
- Market Trends & Inflation 27:07
- The Impact of U.S. Money Printing 29:29
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
Full Transcript Below:
00:00:38:14 – 00:00:55:07
Rod
Welcome to another edition of Lifetime Cash Flow through Real Estate Investing. I’m Brad Cliff, and I am thrilled that you’re here. And we are going to go off on a tangent today. I don’t know if I should call it a tangent, but definitely a different asset class that we don’t normally talk about on this show. And I think you’re going to get tremendous value from the gentleman I’ve got on today.
00:00:55:13 – 00:01:13:10
Rod
Very, very sharp cat. His name is Nick D’Angelo. And, Nick is with Saint Investment Company and they, they do, in the industrial space. They also do mortgages. And so we’re gonna have a lot of fun digging in on those two topics, because they’re both very interesting to both me and should be to you as well. Welcome to the show, brother.
00:01:13:12 – 00:01:18:10
Nic
Hey, rod. Great to be with you here. Great. Catch up beforehand and look forward to talking about a lot of fun stuff.
00:01:18:11 – 00:01:36:22
Rod
Yeah, absolutely. So why don’t we get started with your bio, with your background in this business? And you know why? Real estate, when you got into real estate, if you, you know, if you had a progression or an evolution in your real estate life cycle to date, and then just do that at a high level and bring us current.
00:01:36:26 – 00:02:00:17
Nic
My background in real estate came from the entrepreneurial perspective. I always wanted to be an entrepreneur. I always wanted to lean into that. I always felt most comfortable kind of steering my own ship and driving ahead at my pace. but I hit on an interesting wall, and the wall was that future growth and the best things that I needed to do to take things to the next level for me and my team was to make sure that we were leveraging.
00:02:00:17 – 00:02:10:08
Nic
We were going into things with higher returns, that we weren’t tying our efforts directly to our returns, that those things weren’t intricately linked. So what we did.
00:02:10:11 – 00:02:18:22
Rod
Whoa whoa whoa whoa. Sorry, sorry, sorry that I please elaborate on that because that that that’s that’s confusing to me. Okay. Sure. Please.
00:02:18:24 – 00:02:36:12
Nic
So, for instance, we had a company that had, you know, and these these companies are sold. They’re not on the plate today with very lumpy returns, very high returns at one point and another points in the market cycle for this company, you know, seasonal, that it would, not be as high returns. We needed to balance that out.
00:02:36:12 – 00:02:43:13
Nic
So us investing with amazing operators and real estate, what that did was it balanced our cash flow right.
00:02:43:14 – 00:02:50:10
Rod
Oh, I got it, I got it. You’re talking about why you got into real estate. Forgive me for interrupting. Please continue. Okay. Got it, got it. Okay.
00:02:50:10 – 00:03:19:15
Nic
So, so, you know, on the entrepreneurial side, you’re always looking for what? The highest leverage, the highest opportunity to get a disproportionate return for X amount of inputs or efforts or investment. So real estate to me is the absolute top of the totem pole, the absolute highest leverage that checks the vast majority of boxes. And, so I was always trying to get over to real estate full time after selling some companies, we moved to the real estate sector full time and been focusing on that ever since.
00:03:19:18 – 00:03:23:16
Nic
And, yeah, it’s it’s, to me, it’s the best asset class you could be.
00:03:23:16 – 00:03:43:23
Rod
In, no question. Are you? I’ve also built 27 businesses and had a couple of exits. I, I when they fail, I call them seminars. As you know, you said you’ve suffered through some of my podcast and, you know, several, several worth a lot of money. Very many, you know, flaming seminars. But, you know, we fail our way to success as well.
00:03:43:25 – 00:03:54:11
Rod
So, did you talk about your progression in real estate, particularly? Did you start with single family like everybody does and move up to something else and something else? Talk about that a little bit.
00:03:54:12 – 00:04:11:06
Nic
I, I actually merged the two very early on. I saw that real estate was a huge advantage after, seeing some entrepreneurs that I had, you know, were ahead of me that were mentors that had exited companies and they went into real estate with their funds. So I followed in their footsteps, you know, standing on the shoulders of giants.
00:04:11:08 – 00:04:32:26
Nic
And I just said, well, if I’m going to do this and I want to do it early and I want to be as close to the big money, the big deals, the big opportunities as possible. So what’s a bigger opportunity than learning from multi-generational family offices? Right. But if you go in with big family offices kind of lost in the crowd, it’s much more difficult to get to the the real players with the real decision making.
00:04:33:00 – 00:04:56:01
Nic
So I worked very early on for two smaller family offices but multi-generational wealth, multi-generational best operating practices, and I worked for free. I begged for a job, and guess what? I got turned down to work for free. So put that on the seminar docket, you know? And, at the end of it, it was in the middle of 2008, the 2008 crisis.
00:04:56:06 – 00:05:15:19
Nic
These guys were holding on for dear lives. They didn’t even have extra desks. They didn’t want to pay for extra internet. They were absolute holding on for dear life. And I just said, how do I be involved? How can I be involved in add value to you? Because you already turned me down to work for free. And it was if you can provide revenue, how can you provide revenue?
00:05:15:19 – 00:05:33:28
Nic
We don’t need operations right now. We’re losing those guys. We’re getting cut off. You know, we have to cut some of those guys if you bring in revenue. So, my leaned into marketing. I put together a list of 500 investors that, wanted to buy apartment buildings. I took that as a bartering chip to take me in as an employee to work for free.
00:05:34:05 – 00:05:55:05
Nic
And I said, even in the midst of the greatest financial crisis our country has ever had, here’s 500 people who want to buy apartments. They’re all doctors and dentists and professionals that are insulated to this huge market environment we’re in today. And, hand this to your brokers and have them freaking call these guys and do some deals and that should pay for my desk and my phone time and my internet.
00:05:55:12 – 00:06:14:20
Nic
And that’s how I got involved. And since then, I’ve been able to do a ton of deals with these guys. I did a ton of deals. I learned their acquisition styles, their off market buying principles. and at one point in my early 20s, I was carrying about 10 million a week in my jacket pocket, going to the courthouse steps in my early 20s, buying deals and distressed.
00:06:14:20 – 00:06:17:27
Nic
So those were my early days. I got to see, okay, like.
00:06:17:28 – 00:06:23:19
Rod
Can I stop? Can I stop you there? Sure. You buying deals in distress? Was it primarily single off single family at that time?
00:06:23:19 – 00:06:33:27
Nic
No. These they had too much money. So I started I, you know, we we jumped I jumped in my career. We we jumped over smaller deals and went straight to commercial.
00:06:33:29 – 00:06:45:28
Rod
Okay. So you were buying commercial distressed deals in 2010, 1112 that the time frame okay. Fantastic. all asset classes or specific asset classes you were buying at that time?
00:06:46:01 – 00:07:04:11
Nic
You know, we were partial to what we’re partial commerce. So non multifamily I’ll put it that way. okay. Family even today a lot of great operators that I have huge respect for. And there was just a different class of operator in some of these, these other asset classes that were lower tier. So we leaned into those.
00:07:04:13 – 00:07:09:04
Rod
I say, okay, fair enough. Like other
00:07:09:07 – 00:07:13:28
Nic
Commercial retail, industrial and office at that time. Okay.
00:07:14:01 – 00:07:36:09
Rod
But back then, that’s why you hesitated to say anything. I was wondering, I was wondering why you did throw it out there. Good. Got anybody that would consider office today unless they have a an easy transition, plan, is is is nuts. Okay. Got it, got it, got it. Okay. So, so when did you start focusing on industrial Nick.
00:07:36:11 – 00:07:59:01
Nic
So we, we let here’s a, here’s a rough lesson I learned is that the markets the markets bigger and smarter than anybody could ever imagine and times a thousand. Okay. So we did a mixed use retail and office building that we worked our tails off for years and we got a good return on it. But I learned that the economic forces in that market, this is almost my biggest loss.
00:07:59:07 – 00:08:00:06
Rod
Where was it, by the way?
00:08:00:06 – 00:08:19:12
Nic
Where was it was in Hemet, California. Okay. And if you don’t know where that is, God bless you, because it’s a very difficult market for for syndicators to, to say the least. We pulled the deal off because we worked with government agencies to get in and basically pay above market rents, as they typically do. And it was right next to a courthouse.
00:08:19:12 – 00:08:35:17
Nic
It had a couple tiny things going for it, and it had a mountain of things going against it. We pulled that off by threading the needle, and it was such a difficult deal for so many years that we got buy on the, you know, the, the thinnest of margins of everything to pull it off. Then I was like, never again.
00:08:35:22 – 00:09:01:20
Nic
I’m not doing this ever again. So where’s the market going? And we need to drill down on the economic forces in a much heavier way. So I was able to reinvent that for some of these, offices I was working with. And now we have about 50 factors that we follow on the economic side. And industrials where it took us because the future, what it looks like today, if you look at the U.S., a geopolitics and the future of the US economy, a lot of things are on shoring and near shoring.
00:09:01:27 – 00:09:09:24
Nic
And I love that. I’m a patriot. I love the U.S, I’m super bullish on the U.S long term. I got some concerns in the short term right now.
00:09:09:29 – 00:09:12:28
Rod
oh. Let’s not go down that rabbit hole, okay.
00:09:13:01 – 00:09:24:25
Nic
I know, so so industrial to us was one that was in key markets, a couple key markets absolutely fits in the trends that we’re seeing and we believe has the highest upside in the next two.
00:09:24:25 – 00:09:28:16
Rod
Decades. Okay. So first of all, what are the two markets you like?
00:09:28:16 – 00:09:51:03
Nic
One I hesitate on the state level, which is California, but on the local level I like Southern California for industrial. It has the Port of Long Beach and the port of L.A, which is roughly between the two, is about 40% of U.S. imports. And it’s right next to the Mexican border, which has a huge amount of imports and growing from the Mexican, manufacturing industries.
00:09:51:07 – 00:10:12:21
Nic
So I love that convergence of so many things in one place. Again, I have plenty of thoughts on California state level government, but, the second is I love the Texas Triangle. So, you know, the bulk area of Texas, again, they have, you know, great port systems. They have great distribution. They hit a huge chunk of the U.S, they have better governance at the state level in many categories.
00:10:12:27 – 00:10:18:05
Nic
So between those two, that’s the vast majority of our focus on the industrial sector.
00:10:18:07 – 00:10:30:15
Rod
Gotcha. So, so for, for for the people that don’t understand industrial, can you give us a better description, a micro description of what you mean, what your definition of industrial is, what that looks like?
00:10:30:17 – 00:10:50:27
Nic
Sure. So we have this massive economy in the US, the biggest in the world, in fact, by a very wide margin. So the question is how do we feed people? How do we clothe people? How do we provide, industrial or excuse me, manufacturing, manufactured goods in the US? How do we provide construction materials? How do we get those places?
00:10:50:27 – 00:11:13:04
Nic
Those are the big questions so that you, me and the rest of the US citizens can live our lives and do our daily routines. All of that has this huge, huge backbone that’s misunderstood or not known at all by most Americans. And that’s the industrial sector. You know, we have shipping containers coming from every country in the world coming through only a select few ports in the US.
00:11:13:08 – 00:11:25:13
Nic
Right? We have a huge network of rail systems and highways and infrastructure that sure could use some improvement at times, but is still pretty damn good compared to many other places in the world.
00:11:25:14 – 00:11:26:08
Rod
Yeah for sure.
00:11:26:08 – 00:11:51:10
Nic
And we have a consumer driven economy where people need and want the things that they need and want, and they and we consume a lot of them. So the industrial sector is the backbone of that. It’s the left. It’s, you know, if you were if you’re if the scale of sexiness and real estate, if there was a scale of sexiness, it might be on the less sexy side because multifamily, clearly it’s always a frontrunner of these beautiful buildings and these, you know, industrial.
00:11:51:10 – 00:11:58:12
Nic
It’s typically concrete, literally poured and tilted up and put together into a gigantic square.
00:11:58:17 – 00:12:17:08
Rod
So you’re talking about large warehouse space is what you’re talking about. That’s what I was looking for. Just so if you guys didn’t know what he meant. It’s large warehouse space. So big space. you’re not talking about the small, office warehouse environment where you’ve got a little carpet, installer with a big warehouse behind him or something like that.
00:12:17:08 – 00:12:32:05
Rod
That’s not what you’re talking about here. We’re talking big storage, which, of course, it ties into the whole Amazon dynamic, the whole, you know, online purchasing dynamic. no, that’s sex. That actually is sexy as hell. Honestly.
00:12:32:05 – 00:12:37:28
Nic
On on the the it looks great, right? I got I have no right more attracted to the financials of it, but, Yes.
00:12:38:09 – 00:12:57:07
Rod
give us a let’s go a little more micro on your acquisition strategy, if you don’t mind. So, how do you identify specific deals in one of those two markets you describe which sound like, fantastic legwork that you did to identify those two? I couldn’t agree more on that. But how do you identify deals in those markets?
00:12:57:10 – 00:13:05:07
Rod
What sort of buying criteria do you have? let’s start with that and then we’ll go from there. I’d like a little more micro if you don’t mind.
00:13:05:10 – 00:13:34:21
Nic
Absolutely. So again, we are pencils down, pens down. At this current market environment that we’re at today. We’ve set our hands down and we’re letting the market, shake through a few things because multifamily, for instance, a mini, with many units in a single building has the advantage to ride market cycles up and down. So if you buy at the low of multifamily, you can ride that market cycle back up and capture a lot of that upside, even through rents along the way of an improving market.
00:13:34:24 – 00:13:41:05
Nic
That is not the case with industrial. We gotcha part of our buying criteria. Single tenant triple.
00:13:41:06 – 00:14:01:18
Rod
Not really, really single tenant. So you won’t divide up one of these buildings in half and have multiple tenants. Well I was going to say triple net guys means that they pay for everything. The taxes, the common area maintenance, the insurance, everything. You know, bottom line is that your tenant is paying everything. Bottom line. So so so so single tenant triple net okay.
00:14:01:18 – 00:14:06:05
Rod
So so you’re buying you’re buying a building that’s already occupied then sometimes sometimes not.
00:14:06:05 – 00:14:26:18
Nic
We’re okay with either. We’re okay with either scenario as long as we’re compensated for our, our additional risk if there’s, if it’s vacant. But, the real driver for us right now is the fact that we buy deals, meaning we buy discounts, we buy things with a basis. If if we only have 2 or 3 levers that we ever pull.
00:14:26:24 – 00:14:43:20
Nic
It’s that simple for our acquisition style today, right? Sometimes we’re buying at a low basis because industrial buildings that we buy are around 50 to 150,000ft². Right. How much do you think a renovation costs on a building that size?
00:14:43:23 – 00:14:55:20
Rod
Right. Well, I guess if it’s dated, it could be a problem. But if it’s not dated in the end and the bays are the right height, the ceilings are the right height and all that stuff like nothing. I mean, what do you do? Holds it out, right, am I right?
00:14:55:22 – 00:15:08:07
Nic
Yeah. I mean, but usually these are hard uses, so they’re banging stuff up with their big trucks. They’re beating thing and that’s fine. That’s part that’s part of business. Right. Right. On our side though, some of these renovations can be millions of dollars. Right.
00:15:08:08 – 00:15:16:28
Rod
Oh, you do have big renovation. So I thought you wouldn’t. Oh yeah. Oh you do. What the hell would you be renovating in a in a 100,000 square foot building?
00:15:17:01 – 00:15:26:13
Nic
So I’ll put it. I’ll tell you an extreme example. We’ve, we’ve redone power for a building. Right. That took a several million dollars just for that in five years.
00:15:26:16 – 00:15:28:12
Rod
Okay, okay. There you go.
00:15:28:12 – 00:15:35:20
Nic
Okay, so there’s things like that. Now, a lot of times you’re dealing with, you know, just a paint job on these can be 50, 60, 100 grand depending.
00:15:35:20 – 00:15:37:03
Rod
On the size I see I see.
00:15:37:09 – 00:16:00:15
Nic
The scale kills the numbers. And many landlords are not running this with, you know, they’re not accruing for expenses. They’re not they’re not really balancing their books and managing things like a professional. So we come in off and say, look, you can’t even renovate this building to market standards. We will buy this at a discount because you don’t even have the money to renovate this.
00:16:00:15 – 00:16:25:06
Nic
You don’t have now, a lot of people have 3 million bucks just sitting in an account for one building just to get money, just to rig it, just to release, to get their income back. So that’s one entry point that we buy it at. The second is we work very often with businesses that maybe towards the tail end of their business cycle that say, look, we still like the business, but we know that this building can be sold for a big profit, so we’ll sell it at a discount to market.
00:16:25:13 – 00:16:28:01
Nic
But you have to give us five years of favorable rent.
00:16:28:01 – 00:16:46:11
Rod
Yeah, I, I, I was gone I was thinking self storage model where you just hose the thing out and you’re done. But no. So let me ask you this. Do you, do you find that you’re very often doing like that electrical job? Was that a tenant finish type of a relationship where you had the tenant that needed that beefed up electrical and that was that?
00:16:46:13 – 00:16:48:22
Rod
Please describe that. Oh, that was correct.
00:16:48:22 – 00:17:22:25
Nic
Okay. It was a it’s a high, high, high energy use manufacturing. that is a niche of a niche. But they were paying significantly higher than market rent. So there was an offset that made it all worth it. it was you really have to really trust your tenant. You have to trust the credit and all that. But here’s the biggest issue is that in a market cycle with highs and lows, like any market cycle in real estate, if you buy too early in industrial, it’s the same as being dead wrong because you have a five year lease, and if you lease early to somewhat of a market peak on a higher end, you’re stuck
00:17:22:25 – 00:17:41:08
Nic
with below market rents for five years. Wow. So that’s why we love industrial dearly. We think there’s a 20 year plan for industrial that’s rock solid. But in the near term, in the short term we’re looking at, you know, we we look at the second asset class of of mortgages mortgages.
00:17:41:11 – 00:17:57:05
Rod
So yeah let me let’s wait to talk about okay. Let’s wait to talk about mortgages for a second. I want to go back to a couple things. You said number one. So you buy distressed, you buy discounted assets, you know, and I will tell you, let me, brag for a minute. We just closed on a, beautiful asset in San Antonio.
00:17:57:07 – 00:18:31:01
Rod
The units next door sold for 137,000 unit. We bought this one for 100,000 units. Same vintage everything. Screaming deal, screaming deal. And by the way, if you’re accredited, text partner to 72345. We still got a couple slots left in that even though we’ve closed scream, it’s like I call it a unicorn. It’s only one we bought in 18 months, but the other thing that you said that actually relates to multifamily as well is you talked about where, a seller wasn’t planning for, big upcoming expenses, big renovations, roofs, paint, whatever.
00:18:31:01 – 00:18:50:02
Rod
And you said they weren’t accruing money. You know, in our space, typically, if you’ve got a loan, a lender will require you to, have an escrow. You’ll do an escrow every year to to take care of things like that. They’re not going to assume you know what you’re doing. Now, I assume very often you’re dealing with sellers that have paid off their debt and, you know, and they haven’t thought about it.
00:18:50:02 – 00:18:52:16
Rod
You’re nodding. That’s that’s correct. Yes. Okay.
00:18:52:16 – 00:18:54:20
Nic
So pick up your ownership, etc..
00:18:54:24 – 00:19:16:17
Rod
Right, right, right right. Okay. All right. Well, let’s shift into, into mortgages. So, you, you you guys are you put a fund together to raise money to, to and then you basically, make the, you make the spread between what you’re paying your investors or, and what, what you loan the money out on or you provide a return based on the total return.
00:19:16:17 – 00:19:23:25
Rod
I don’t know how you do it. Structure your syndications, but what type of asset classes are you loaning money on? Was B my first question?
00:19:23:25 – 00:19:53:29
Nic
That’s a great, great, great lead. Into it is we buy on the secondary market of single family mortgages, meaning banks originate, right? Banks and lenders originate. And then we buy on the second hand. So when they have a hiccup like let’s say for instance, Covid happens a global pandemic and maybe there’s furloughs or layoffs etc. and someone doesn’t pay for six months, but they live in the home with their family, you know, they have good credit other than that period of time where they had a hiccup.
00:19:54:02 – 00:20:19:03
Nic
We step in for those lenders and say, hey, we’re happy to buy that at a discount, right? And the reason for this and the reason we went that direction was, again, I bought foreclosures for so long on the courthouse steps that one step above foreclosures is buying the actual mortgages, buying the actual notes. So that was a progression in our business previously, we built wrong long term relationships with a lot of these amazing lenders that trusted us.
00:20:19:03 – 00:20:34:17
Nic
We’re showing up with big checks we had long term. They knew if we showed up we were going to deliver. And it was going to be paid right. And so we had the credibility of that, space. So now where we’re at today is our investors. Many of them were aging and they’re getting older. And they said, look, Nick, you had great returns.
00:20:34:17 – 00:20:59:20
Nic
We really enjoyed the syndication side. We really want to something that’s more stable, more fixed, high return still that’s dependable. What could we see? That’s just rock solid. We get a check in the mail every month. And so our solution to that question was to lean more into the mortgage space, which look, we have a unique market in this country, right, where 98% of mortgages are fixed rate mortgages in the United States.
00:20:59:20 – 00:21:22:14
Nic
That is not the rest of the world. So the rest of the world, if they have low rates, two, 3% mortgages, those get sorted through every 5 to 7 years because rates adjust the shorter term mortgage terms. Right. not in the U.S and I love the long term status of our markets, our of our mortgage market. And I see a huge, compelling, strong long term trend there.
00:21:22:16 – 00:21:26:16
Nic
While we have the lowest inventory in history for for housing at the same time.
00:21:26:17 – 00:21:47:16
Rod
So I I’ve got some questions and, and some a little bit of pushback just because I want to I want to add I want to push back and see what you how how you respond. But let me, let me, let me ask the questions first. So when you’re purchasing these mortgages, what sort of discounts can you anticipate? is there a range or is it, you know, deal specific or can you speak to that a little bit?
00:21:47:16 – 00:21:48:11
Rod
Let’s start there.
00:21:48:14 – 00:21:53:15
Nic
So I’ll frame the answer and then I’ll give you the exact answer. Very rarely do you buy one off mortgages.
00:21:53:15 – 00:21:55:17
Rod
You can’t right. Yes. No I you buy a pool.
00:21:55:17 – 00:22:14:28
Nic
Got it. Right. Exactly right. You buy a pool. And, that’s the most common, purchase structure that you buy in under as many mortgages at a time. So under that pool, you can get away with some deeper discounts on certain assets that maybe they value less and others, they’re just kind of like pound sand. If you want the gold, pay for it.
00:22:15:00 – 00:22:38:16
Nic
Right. And so on our side we typically budget in the mid to high 20s percent discount. So I think our last calculation was around 27% discount that we get on different, on different deals. And some of that are very, very, very rock solid mortgages. Others are ones that we have higher concerns of foreclosure. We at saint our business model, we don’t like the foreclosure side.
00:22:38:16 – 00:22:51:24
Nic
We’re thinking long term. We’re not trying to get a short term bump. We’re looking for a long term yield. So oftentimes we’ll just resell those. But on average, to answer your question directly, it’s around 27% I think was the last, calculation on that.
00:22:51:26 – 00:23:10:17
Rod
Okay. And then you’ve got the future value of that money that comes into play when you’re discounting these mortgages. Correct. It’s a big factor. do you have a do you have a team that that tries to work with some of these distressed borrowers? Do you have that you have a back office team? Because I know that’s very common for people that do what you do.
00:23:10:18 – 00:23:28:11
Nic
Yes, absolutely. So there’s things and you know this I don’t need a you know, I but but just for the audience to give my perspective on something you already know, there’s things that you can outsource very effectively. Property management. If you manage your property managers well they can be fantastic. It’s a harder you know, it’s a hard position for anyone.
00:23:28:15 – 00:23:59:26
Nic
But you can outsource. You can outsource that in a big way. The things we never outsource at Saint are things that have the highest leverage for returns, right? So asset management we do in-house, inevitably we always do in-house, even key leasing, we manage either doing the actual negotiation ourselves or doing it in-house. That’s this. What your question was, is, is in that category, we’re we’re extremely close to the workouts of these loans because that each tiny variable does matter for the yield.
00:24:00:01 – 00:24:15:28
Nic
To make sure that our investors can get a good return, we can get a good return and we can pay that highest that makes sense to the banks so that you have a win win win scenario in that that’s a long term business strategy that we want to lead. So okay we’re very close to it okay.
00:24:15:28 – 00:24:25:28
Rod
So the next question pre frames my my push back loan. loan loan to value that you look for in a portfolio.
00:24:25:28 – 00:24:50:09
Nic
This is a key question because we could go out there and push really really, really risky deals that are you know let’s say breakeven deals on loan to value. Our average equity is 29% on the loans we try. So we we tend to keep it pretty conservative. We want the homeowner to have a lot to lose because that means they have a lot to gain by paying their mortgage every month.
00:24:50:12 – 00:24:52:28
Nic
And all of us working positively together.
00:24:53:00 – 00:24:56:28
Rod
Or have some spread to be able to sell. If the shit hits the fan.
00:24:57:00 – 00:25:01:28
Nic
And if you look at like, Vegas in 2008, in the wake of 2008, you need some spread, right?
00:25:01:28 – 00:25:22:20
Rod
You know, let me let me know. You need more than some spread, which is my pushback. Okay. On this model, because if the proverbial shit hits the fan, which I’m anticipating, frankly, I, I’m excited about because I think there’s going to be incredible opportunity. you know, it was it was these homeowners that got in trouble. And I can tell you my portfolio here, this is going to shock you.
00:25:22:26 – 00:25:45:13
Rod
I had 800 houses along the Gulf Coast of Florida, and I was at a 30% loan to value, okay? 30%. That’s all I owed. I went upside down by the end of 2009. That’s how much it dropped here. Okay. So it dropped about 70% here in Florida, which people are like, that’s insane. Yes, it was insane. And I think we had, you know, significant drops elsewhere in the country.
00:25:46:02 – 00:25:58:04
Rod
do you look at and I even I didn’t even ask you this. Do you? I think when you buy a pool, you pretty much get them all over, don’t you? It’s not like you can be geographically specific. Can you speak to the geography of this, of your portfolio? Sure.
00:25:58:04 – 00:26:15:16
Nic
We are in 21 states. No, excuse me, over 21 states. It fluctuates, but we want to be in about half the country at any given time. There’s another half that’s, a little less interesting. There’s a little less upside on, on, growth, etc. but we’re in about 20 plus markets at any given time. We like the spread.
00:26:15:16 – 00:26:37:21
Nic
We like the distribution of that also. Yeah, there’s some states that are less desirable. Right. You deal with like, certain states like, you know, maybe New York’s a little tougher, maybe California’s a little tougher. you have some Ohios and some others in there that are a little bit tougher. But generally speaking, you know, the distribution and the spread of our, portfolio is part of the strength of it.
00:26:37:21 – 00:26:38:18
Nic
Yeah. Right. Yeah.
00:26:38:19 – 00:26:59:24
Rod
You know, that makes complete sense. And that’s good because, you know, like, even even when 089 happened, the Midwest wasn’t as crushed as the rest of, you know, the coastlines, Vegas, you know, they got frickin crushed. But, but the Midwest, you know, puddled along. So, you know, if you’ve got some diversity there, that absolutely is. some safety for sure.
00:26:59:26 – 00:27:16:07
Rod
Okay. Fair enough. Good answer. So let’s talk about your opinion about the market right now. I told you before we started recording, I’m very bearish. I think the proverbial, you know, what is going to hit the fan here, after the election specifically, but, because I think they’ve been prop ended up. But I’d love to get your opinion.
00:27:16:09 – 00:27:39:00
Nic
I I’m, I’m not as doom and gloom, but I’m doing gloom very heavily in a few points. For me inflation has been the least managed, the most poorly communicate dated and you know, I don’t know. I mean, if you really wanted me to drill down, I don’t know if the Federal Reserve has been, just not saying correct information.
00:27:39:00 – 00:27:41:21
Nic
And they know the opposite meaning lying through their teeth.
00:27:41:21 – 00:27:48:07
Rod
I was going to say misstated. I didn’t want to interrupt because I do that too much. But I was going to add misstated to those other things you just said.
00:27:48:12 – 00:28:05:18
Nic
So let’s say, you know, let’s say if you were to use an extreme on one hand, they could be lying through their teeth. On the other hand, there could be a wide, massive amount of incompetence as far as their communication or their tracking, etc. it can only be one of those two, right? It can only be one.
00:28:05:21 – 00:28:25:17
Rod
And it could be. It could be both, frankly, especially on the incompetent side. But, don’t get me started. So, so so, what’s your crystal ball, brother? What’s your crystal ball? I mean, do you do you feel like there could be opportunity for people like us that, you know, are in some cash, have access to cash?
00:28:26:05 – 00:28:42:13
Rod
and if so, you know what asset classes? I mean, I know I feel very strongly is going to be deals in multifamily is a lot of operators with bridge debt that are struggling. I’ve got a couple myself that are that I’m dealing with the lenders on right now. So so you know sorry, I’ll stop talking. What are your thoughts?
00:28:42:13 – 00:28:59:24
Nic
I’m very similar to what you’re, the sentiment that you’re going through to to give you the backdrop of what we’re seeing. Again, we track a ton. You know, we have economic trap trackers, you know, flying out of our ears for what we’re looking for. This is what we’re seeing here are the big trends. And then this is what we’re seeing in the US.
00:28:59:26 – 00:29:33:00
Nic
The green economy re militarization of the entire world, including the U.S, heavily supporting that infrastructure build outs, restructuring of of global and domestic trade, fiscal deficit. These are all super inflationary. Every single one of those. Right. If you if you think about the entire history of the United States, right. The the US Empire that we’re in today, 20 since 2020, 80% of every dollar in history has been created.
00:29:33:02 – 00:29:47:22
Nic
So in hundreds of years, we printed only 20% of every dollar that ever existed. And in, let’s say, four ish years, we’ve printed 80% of every dollar that’s ever existed in the U.S. history. Go ahead, go ahead. You have. It was awesome.
00:29:47:22 – 00:29:57:29
Rod
No, I, I am shocked by that one, buddy. I’m actually getting interviewed myself later this week, and I’m absolutely still in that one. That is. Holy cow. That’s crazy.
00:29:57:29 – 00:30:24:00
Nic
God. And so in perspective. So in 2020. So at the beginning of 2020, we had around 4 trillion in circulation. Now today there’s 19 trillion in US dollar circulation around 400% increase in just a few years. So while we’re scratching our heads going, gee whiz I wonder where inflation’s coming from right? Yeah, that’s one number at the beginning.
00:30:24:00 – 00:30:42:10
Nic
Just again to set the table for this at the beginning of 2021 rod inflation was at 1.4%. Now again I won’t get political. But just so we understand timelines here, that is the same time that Joe Biden took office okay okay.
00:30:42:12 – 00:30:47:10
Rod
Not you won’t get political but we will throw that in and and I’m glad you did. And I’m glad you did.
00:30:47:13 – 00:31:13:20
Nic
Just to know I’m an I’m a lifelong independent. But I think it’s very important to understand political timelines on things as well. Now. Yeah. From 20, from January 2021 when inflation was at 1.4% to when Janet Yellen came out and said resoundingly the famous phrase inflation is transitory. Remember this, you know this, I know this. Real estate investors that are professionals know this.
00:31:13:23 – 00:31:44:06
Nic
We all wanted to puke because we knew that was not the case. It couldn’t exist in the world we lived in. You speed up 18 months, rod to the middle of June 2022 9.1% inflation. So we went from in a short period of time, 1.4% inflation to 9.1% inflation. And the Federal Reserve’s largest talking point, their largest sound bite was inflation was transitory.
00:31:44:09 – 00:32:07:14
Nic
So again, I go back to the saying you have to pick a path. Is the fed incompetent on one side or were they line I don’t know, I’m not in those meetings. Right. But you can’t be one of those. It can only be one of those. So since then we have seen a reduction, thank God. But that’s on the heels of the largest and steepest rate hike in history.
00:32:07:16 – 00:32:30:20
Nic
Now, in the 70s and 80s, there was a higher peak of what the total, the total market rate was for mortgages. But we saw a steeper peak in the post 9.1% inflation era, where I think we went up like almost 4% on, on interest rates in a short period of time. Yeah. So now we’re stuck right around 3.5% where we’re at today.
00:32:30:22 – 00:32:38:02
Rod
I’m sorry. What do you mean inflation at 3.5%. Correct. So if we but if we believe what they give us there is that.
00:32:38:04 – 00:32:59:02
Nic
I couldn’t even unpeel that, you know, I couldn’t undercut onion because there’s so many layers to exactly what you said. But if you take it at face value of the CPI, that there’s no fudge in there and, and all that, you’re looking in the mid threes. But we still even with what they’re telling us if it’s accurate which there’s a lot of concern as to the contrary if that’s accurate.
00:32:59:05 – 00:33:36:11
Nic
The precursors to CPI things like PPI the producer price index is still increasing. Right. So even the even the forward looking estimates show that inflation is not just sticky. It’s getting worse. So just to drill it back down into, you know, give it to the audience of what all this means because there’s a lot there. It means that inflation is not solved for when you look at the indicators that the Federal Reserve looks at CPI, which are the main ones that they look at, and then the precursors, which are PPI, the producers, what the manufacturers, this is important to me, rod and industrial.
00:33:36:17 – 00:33:45:01
Nic
I want to know what producers are experiencing in their businesses, the cost increases that they have to deal with because that comes back to us, the consumers. Right?
00:33:45:02 – 00:33:46:00
Rod
Course it does.
00:33:46:03 – 00:34:05:18
Nic
The whole country is impacted. So that’s what I’m seeing in the market. Now to answer your question, what to do about it? It’s great that we can talk about doom or gloom or highs or lows. What would I do about it? What’s my thoughts? there’s this old saying that you was going around when the fed was just pumping out money before we got hit in the face by inflation.
00:34:05:23 – 00:34:27:19
Nic
Don’t fight the fed. Remember? That was such a popular saying. I’m still on that boat. Not because they’re so competent and they’re so forward thinking, but because they control such a big freaking wallet. So on my side, with inflation being what it is, I think there’s only two paths. You either invest in assets that a appreciate with inflation or you invest.
00:34:27:26 – 00:34:29:15
Rod
At real estate. Real estate.
00:34:29:15 – 00:34:49:26
Nic
Yeah it’s all real estate baby. Right. Like I’m a I’m a real estate dog. Right, right. And then the other is you invest in assets where the underlying value is propped up by increases in value. So that to me, I’m either in mortgages syndication is in real estate or mortgages. That’s where we have found the most value. To answer that question really well.
00:34:49:29 – 00:35:08:04
Rod
I believe it’s the safest as well. for sure. And so. Well, listen, brother, I really appreciate you coming on the show. This has been a delightful conversation. And and, and on that note, let’s, let’s let’s do this again when you can come to Florida. Okay? I love it just that much. Okay, let’s let’s definitely do this again.
00:35:08:06 – 00:35:25:15
Rod
Well, listen, I appreciate you coming on and, and look forward to continuing this dialog. You know, let’s plan to do it after the election or like first quarter first quarter next year. And let’s circle back and just see if we’re complete idiots or I am, you know, because I, I think it’s going to get frickin very interesting.
00:35:25:15 – 00:35:31:12
Rod
So we’ll see. But really enjoyed it, brother. So thank you. All right. Take care. Yeah.
00:35:31:14 – 00:35:32:14
Nic
Thanks. Thanks again.
