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Dec 1, 2021

George Roberts III is a Data Scientist and a Principal at Horizon Multifamily as well a Real Estate Investor and Syndicator who focuses on Value at Opportunities in Central Florida

 

In this episode we talked about:

 

 • George’s Podcast Details

 • George’s Bio & Background

 • Pivoting to Real Estate

 • The First Real Estate Deal

 • Financing Deals

 • Capital Raising

 • Effective Networking 

 • Sourcing Deals Approach

 • Ways of Reaching Out to Brokers

 • Real Estate Market Opportunities

 • Macro Perspectives of Real Estate Space 2021-2022

 • Mentorship, Resources and Lessons Learned

 

Useful links:

https://www.instagram.com/groberts0429/?hl=en

https://www.linkedin.com/in/georgerobertsiii/

 

Transcription:

Jesse (0s): Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, my name's Jennifer galleon. You're listening to working capital the real estate podcast. My special guest today is George Roberts. The third George is a data scientist and a principal at horizon multi-family as well as real estate investor and syndicator, or he focuses on value, add opportunities in central Florida, George, how's it going?

 

George (41s): Excellent. And thank you for having on the show, Jesse. Yeah,

 

Jesse (45s): Well, I'm happy to have you on, we were talking a little bit before the show. We heard you on the syndication show with Whitney Sewell. If you haven't listened to that podcast, it's fantastic. But George, you have a podcast of your own. Maybe before we get started, you can tell listeners where they can find that.

 

George (1m 3s): Sure. We're located just about everywhere you find the finer podcasts. We've got Spotify, apple. I love to find it on audible as well. So just take a look. We're also on YouTube. You can find us at the horizon multifamily channel. So it's called the Foundry where leaders are forged a daily. And I like to talk not just about a commercial real estate, but also about entrepreneurship in general. And that's, that's where we get the theme. The idea that entrepreneurship is an outstanding proving ground for leadership talent.

 

Jesse (1m 36s): Fantastic. Well, you have a bit of an interesting background, I would say, not a lot of data scientists on the show. So maybe for listeners, you can talk a little bit about your background in, in business and how you got started in real estate.

 

George (1m 50s): Yeah, sure. Well, I guess just to back it up two steps, I'm a recovering PhD. And so one of the things that you can do with an unused PhD is go into data science. That's possibly the best, best part to, to go into it. If, if you have that sort of analytic background, but how did I get into real estate is really, I just wanted something that was going to give me time to spend with the family. So I went more and more towards computer science that wasn't doing. It realized that entrepreneurship was really where I belonged started out maybe 11 years ago as a landlord, just loved that cashflow found that to be an amazing place to be help my sister launch a construction company about five years ago.

 

And I decided that, you know, this is, this is really my fate. I'm a serial entrepreneur. I just love to launch companies. I love to, to build things. And so it's the perfect place for me to be, but rather than going to the ground up, construction decided that value add is something a little bit better for me really loving my tech position. Didn't want to lose that. Didn't want to give that up. And so I wanted something that would be maybe just a little less intense, something that I could do on the side.

 

So value add multifamily ended up being just the perfect place for me to land

 

Jesse (3m 14s): Right on. So was there a, a, an inflection point or a light bulb moment when it came to kind of changing or pivoting or kind of moving into the real estate sphere, as opposed to staying on track with, with where you were focusing on in the PhD?

 

George (3m 30s): So I would just say it was basically a growing or gathering storm. Everything that I did in the entrepreneurial space really just clicked with me. You really don't have that sort of freedom as a bioscientist, you're really sort of chained to the benches. A lot of people say, and it's just amazing to have the idea that, you know, what I'm earning is not directly tied to the number of hours that I'm spending.

 

Jesse (3m 56s): Yeah. Fair enough. So your first deal, I think it was a, a deal in Orlando, correct me if I'm wrong, but for listeners, if you could talk a little bit about your first deal and what that, what that process was like.

 

George (4m 11s): Yeah. So it was almost two years ago, started looking for deals. A lot of people say, Hey, deals are hard to come by. They'll spend one or two years looking, you know, did what everybody else did. Looking at a couple of deals, underwriting, a couple deals each week have just an amazing team at horizon multifamily. One of our principals, who's also our GC and construction leader on the project. He was looking for properties in the area because he's very close to that area.

 

His son is working down there and just thought it would be amazing to, to find something that would Tuttle those threads together. And it was an amazing deal because it was during the coronavirus pandemic. When we had, you know, shut down one, we had this sort of interregnum for a little while everything seemed okay, people started shutting down again, nobody knew it was going to happen. We didn't know that there was a vaccine coming in a few months and there was some real deal fatigue, couple deals had fallen through and we had this great opportunity to get a really decent discounts on a 14 unit, just in, in south of Orlando, the south, I'm sorry to say, south, south Orlando, just south of the downtown area.

 

And it's an amazing area it's gentrifying. And, and again, we, we got in at literally the lowest per unit price in Orlando that year. It was, it was an amazing transaction. Yeah.

 

Jesse (5m 35s): And we're for listeners and myself where our prices on average in Orlando for, for that type of product.

 

George (5m 43s): So here I'd have to update. I've been looking into that. I'm looking at a couple other deals right now, but again, we got in, I think it was at a, if I do the quick mental math we were in at about 57 per unit and a class B even at that time was trading, you know, more like 120. So you can figure, we can put in a pretty decent rehab on that. And, and we have, I mean, I just, just this morning I was taking a look at some Google earth pictures, and it's amazing to see how the place looked with the old wooden fence now been replaced with aluminum.

 

So again, yeah, it was, it was a pretty amazing deal. And again, we're, we're looking at quite a bit of a higher quality product now after this heavy repossession.

 

Jesse (6m 37s): Yeah. Fair enough. So in terms of the strategy itself, so we kind of alluded to value add, I was, I was reading, I think it was earlier this week. I liked the phrase ology of, you know, there's buy and hold there's value, add, and then there's, there's a there's buy and watch and what the author meant by that was that they buy properties, they do value add, but then they watch the market. And if that means that it, you know, refinancing and holding or if it means having a sale. So when you approach these assets, what, what is your philosophy?

 

George (7m 13s): So I tend towards the, the buy and hold. I'm a big fan of Warren buffet. And one of the things that I really hate about real estate is the friction and the transaction. Ideally, we would buy assets that we can buy and hold for long periods. And again, total case by case basis. I love that quote. I'm going to go look that up because you know, it, it all depends on your plan, right? If you're in the syndication model, you're kind of locked in. People want that money back in five years.

 

And if they don't get that back in that timeframe, they, they feel like, you know, that you haven't been holding up your end of the bargain, but this was a joint venture. And that, that worked out just perfectly because there was some damage to the property during our due diligence period, we were not able to get a discount or any further discount because the seller was actually trying to wiggle out. Which again, I love that, you know, you got to feel like you're making a good deal when, when the seller is looking for every excuse to scuttle that deal.

 

And, and, and that felt pretty good. So what I'd like to get that discount, but again, we had some damage to the Eastern portion of the building and we really had to, we had to gut it and that was not in the business plan. So having put in a significantly larger amount of cap X than expected, you, you got to say that this is going to be a longer term hold. And with the joint venture, we can do that. So this one could be a, an indefinite hold.

 

Jesse (8m 43s): Fair enough. So in terms of the, the raise for this one by joint venture, I assume not your traditional syndication, how was the, how was the capital raise or the, how did that go for the, this particular property?

 

George (8m 58s): Yeah, well, that was amazing because mark, he actually negotiated seller financing for this. So our requirements were rather small, whereas many other deals that were getting done during the COVID pandemic timeframe had a lot more onerous restrictions. So that really helped us to get in at a decent price at a decent cash price. And so it wasn't very hard at all our down payment. If I remember correctly was only about 30% and again, there was no reserves required or anything like that.

 

We got a good interest rate and, and we got to, you know, get out of all the things that would normally happen with an under million transaction. We had a non recourse loan. And then of course, if you do with conventional financing, you know what happens? You have all these requirements, it's a very expensive loan. So it was really amazing to be able to do away with all that.

 

Jesse (9m 53s): Yeah. That's always helpful where there's, there's less training wheels, especially with when, depending on the type of debt that you get. So that's interesting. You did a, a vendor take-back or seller seller financing. Did that come about as, as something, as a sweetener to, for the, for the vendor to increase the price? Or was it, was it, you know, who, who approached to, to put forward the, the seller financing?

 

George (10m 17s): I remember we asked, but I think it was much in his favor because he had gotten this many, many years ago. And again, I can't remember the exact transaction date, but at this point there was going to be a pretty hefty tax bill. And I want to say he made like at least three acts on this already. So it was very much in his favor to do that. And without a doubt, a sophisticated seller. So there wasn't much pushback on that. Oh, if you don't mind, I have another great story about seller financing, doing a deal in east Tennessee that she closed in December 1st.

 

And there was a little pushback. So the, the lead on acquisitions and that deal, Tom Kirkpatrick, he went to the seller and said, Hey, would you like to give us seller financing? She said, no. And he said, well, Hey, you might having a conversation with your CPA to see what they think. And she came back and said, you know what? You know, we're open to that. And we had a feeling because this was again, another long-term hold something in which again, you're going to expect there's going to be a major tax bill. So I think that that's a great approach.

 

Again, you know, you don't want to go at it, you know, from a rough angle as always. It's, it's always, win-win, it's look from the other perspective. And I just got to say that in negotiation, I think that's been just about the best line I've ever heard. Why don't you talk it over to the CPA and see what they think?

 

Jesse (11m 42s): Yeah, that's great. We, we kind of on the brokerage and we were just dealing with a, with a client, very similar situation. We're basically saying, and the thrust of this was more on the environmental side. As you know, you probably know in and listeners, if they don't know a lot of times, the, the vendor take back is, is utilized when there is problems with the environmental, oftentimes you can't get traditional financing. So we often ask either the vendor, or if in this case, our client, would you be open to it and very bad taste in her mouth from, I guess, something in the past with, with maybe a VTB, but this is exactly what we said, you know, talk it over it with your CPA, see if it's beneficial for you.

 

And then I think oftentimes I think the reason that's so helpful is because it takes you out of the, kind of the pushy stance. And you're basically saying talk to your professional because part of it, wasn't just the tax deferral. It was the legal aspect, the worry that you're not going to be in first position or second position with the, with the asset. So I think once those things are alleviated, oftentimes sellers do want to engage with seller financing.

 

George (12m 54s): Yeah. Great story. I love it.

 

Jesse (12m 56s): So in terms of, you know, fast forwarding to today from that first purchase in Orlando, how, how has the strategy evolved if it has at all?

 

George (13m 7s): Well, for me, things have really taken off from just having great partners. So I got to be involved in two amazing deals over the last couple of months deals that people have brought to me. And so for me, I would like nothing more than just sit down with the numbers and underwrite deals. And I could do that all day if that's what I was allowed to do, but I do have a day job and it is difficult for me to be consistent with that. So I've moved a little bit more towards capital raising and sort of being the face of the company.

 

And I've just absolutely loved having these opportunities. And again, these are, these are deals that people had brought to me. And just again, in the last couple of months to be involved in two syndications is just amazing. So, I mean, one people take off in this industry, it's almost like a vertical climb.

 

Jesse (13m 60s): Yeah, for sure. So in terms of the actual capital raising from the joint venture, as opposed to doing more formal syndications, how was that a transition for you?

 

George (14m 11s): Yeah, well, there was a lot to it. I knew that there would be, and so I've done a lot. I launched a meetup in person in Detroit. We do the first Monday in Shelby township. I also have a Wednesday zoom call. Again. It's all about just building the brand. I've been building up the podcast, the YouTube channel, and it's been a lot of reaching out. I just reached a 2100 connections on LinkedIn. And I want to say even maybe six months ago, I might've been, you know, 15, 16, 1700.

 

So it's just been a matter of everyday building that network going out there and realizing that LinkedIn is not enough. It may be your best channel. A lot of people they're hanging out on Facebook. A lot of people these days that on Insta and I'm, these, these channels may not appeal to me, but you got to just get right out there. But anyway, there was one more wrinkle. Everybody starts out with 5 0 6 B. So just for your audience, I'm sure most people are aware, but those who are not, that allows you to raise money from just about anyone provided that you have a substantive relationship.

 

So your friends, your family, you get out, you jump on a call, you build that up, you get to learn their goals, and then you can include them in their deal. But both of these deals, I had experienced partners and they insisted that we do a 5 0 6 C. So that was a completely unexpected dimension after months and even well over a year of building up these substantive relationships, realizing that all, but a couple of those were not going to be useful moving forward.

 

But again, it was, it was all getting out there and networking, building the podcast, building the brand and really meeting people in person. So to start with a five or six C deal, what I found is really, again, these are people that I know or have reached out to in almost every case, but it's been going out to those meetups again, that was really key. So totally saved me and allowed me to make that transition.

 

Jesse (16m 15s): So, George, I always ask guests that come on the show, when it comes to meetups and networking, obviously the, the last year and a half has been a completely unprecedented time. Hopefully we're moving in the right direction and continue to do so. But for those that are just getting into real estate investing, or maybe transitioning from a partnership or bootstrapping to raising capital, you know, where, where should those people be looking in terms of networking and, and these meetups w you know, would you say go to the local Rhea, or would you say start online?

 

How would you approach it?

 

George (16m 50s): Yeah, I'm an, all of the above kind of guy. So I would say definitely, I mean, how many good meetups do you have in your area? I don't know. I'm in Detroit and we do have, let me see, we've got good meetups and some of them are run by multi-family professionals, but in my area, I'm just about the only one at this time. I know there's one in Troy, Michigan, about 15 miles from my house. And I think they're going to start up again in person.

 

But again, what I've found though, is that when you do go to your local, REIA, you'll find a lot of people who may be interested in multi-family. They may say, and this is what I was told. Hey, multifamily, that is an advanced strategy. And it is by the way, but you do have people that do start out in multi-family. And if you're willing to have maybe a longer on ramp, you may see your success grow much more quickly. And even if you take down, say like a 20 or 30 unit apartment building, just imagine, how long would it take you to get 20 or 30 single family homes under contract to do all that negotiation?

 

And then you're going to have a couple of different types of financing, right? Cause he can't do all conventional. They're going to cut you off at the bank. You got to go to the credit unions. You know, again, it's it's, I mean, at this point, sort of commonplace to say, you've got the economies of scale with multi-family, but again, if you're willing to have a slightly longer on ramp, you know, there's no reason why you can't start up there. So you're gonna find a lot of people like that. That may be a little apprehensive, but if you say, Hey, you know, I've done this. And my biggest, you know, I've been a landlord for over a decade.

 

My biggest regret is just not jumping into this earlier. I let people tell me, Hey, this is advanced, but what they didn't tell me is that, Hey, it's a team sport, so you're not going to play every position. You're not the quarterback and the receiver and the lineman you're going to, you're going to essentially pick your, what you're doing on the team. So yeah, I like capital raising. I also love the due diligence. I mean, just fascinating to go through a deal and see, you know, what works, what, doesn't the negotiations, the legal documents.

 

That's something most people don't like, but I love it because I see the law is how you get things done, right. That understanding. So you just find your place and you're not going to play every position on the team. You're going to figure out where you fit in. And so you can bring those people along and, and I've had success with that. So if you don't have a great multifamily meetup in your area, still go ahead, go to, to the single family meetup and see who we can bring along.

 

Jesse (19m 26s): Yeah. I mean, that, that makes a lot of sense. And in terms of, you know, raising capital and putting yourself out there now that you kind of have this, these networks, sorry, this network and these relationships establish when it comes to sourcing deals, what's your approach there? Just given the fact that it seems like there's always an inverse relationship between the, how easy it is to finance deals versus the amount of supply. And you know, when financing is very easy, supply seems to be constrained. And when supply is abundant, it seems that financing is challenging.

 

So from that perspective, when, when sourcing, how, how are you approaching that?

 

George (20m 5s): So, yeah, again, I mean, I've had people bring me the deals that hasn't been a bottleneck for me. And so I haven't really been looking a lot, but again, I do love reaching out and I've had a great time meeting, so many real estate brokers and, you know, getting that deal flow in. But again, lately I've been working not so much on the thin edge of the wedge in that equation.

 

Jesse (20m 30s): And in terms of the, the relationships you establish from the brokerage perspective, is there anything in particular you would recommend or suggest when you are reaching out to brokers in your area or, you know, even potentially out of state?

 

George (20m 45s): Yeah. Open houses are, that's the way you can meet people. And some of the most famous advice I'd ever gotten from a broker Joe LaFleur, he says like, don't, don't give me feedback on the deal, write me an offer. You know, don't, don't invite me out to coffee, just come to my open house. You know, let's take a look at this property. And I think that especially a lot of the elite brokers, they do think like that, sure. They might meet you for coffee, but again, if you're out there, they see at the open house, they see you writing the offer. And, and again, that's, that's hard advice because a lot of people, there's so many beginners in this industry because quite frankly, it's a great time to be in the industry.

 

And it makes sense that we would be expanding, but again, you know, stick with it and, and you will establish those relationships. And again, from the beginner's perspective, if you're out there establishing a relationship, realize it's going to be really hard unless you have a mentor or somebody very experienced on your team to meet those brokers that are handling the a hundred and up deals and that's completely different ballgame. So, you know, go ahead again, go ahead and follow the advice from, you know, your mentor or your coach or whoever you're, you're looking at your guru that says, you know, Hey, go get something a hundred units and up and enjoy the economies of scale.

 

If you can do that, that's great. If you can find the partners to take it down, but if not realize, you know, even five units, that's commercial, right? You get all the benefits of commercial real estate take down what you can. And before, you know, it, even, even taking down one commercial property, we'll give you a whole lot of respect with those hundred, not they're going to see like, oh yeah, this is not some tire kicker here. We've got a real player in the game and you'll find it so much easier to make those relationships with a hundred and up.

 

Jesse (22m 27s): Yeah. And it's hard to, it's hard to say to somebody, if they haven't kind of broken into that, that space of when, you know, so many times we have people on that are just like, I wish I scaled earlier, or I wish I, you know, I just did those larger deals quicker. It sounds, you know, it sounds, I guess, from somebody that hasn't done it that, oh, you know, that's, you're already doing it now, but the reality is oftentimes those deals are simpler at the end of the day when you're, you're raising money, debt or equity. And it's asset based rather than, you know, personally based when, when you're dealing with single family George, when it comes to, I mean, first of all, I, I totally agree with you on the fact that you got to get out, to see spaces and put, you know, it's about writing an LOI or offer.

 

We always say paper talks and our industry. And I mean, that's the brokerage community in a nutshell, they want to know that you're real. I kind of want to pivot to the, the, your outlook on the market. And like I said before, it's an upset, a number of times on the show, we are in a unprecedented time and the real estate, various real estate classes are doing better than others. Some are doing okay. Some are doing not so good. Your philosophy when it comes to dealing with a downturn or, and kind of navigating even the timeframe we're in

 

George (23m 47s): Right now. Right? Yeah. I'm totally analytic from my background. I mean, going back to a PhD in 2005, always look at the data. I love what Neil Bower says, that data beats your guts by like a thousand miles. Right. So go out there and get the data, look at that. Look what happened in, in prior downturns. One of the mistakes I see people making today is saying like, oh yeah, you know, real estate, market's going to crash. Well, well, it might, but it's really only done that about once in the last hundred years, you know, you can't keep fighting the last battle.

 

So we can't just look at what happened in 2008 in the financial crisis, which was very much a housing driven recession and expected the same thing will happen. So you want to go back and get those historical analogs, but again, take them with a grain of salt, a history doesn't repeat itself, but it does rhyme, you know, as for what's a, you want to be invested in or how you want to navigate that. You got to remember. And again, I'll just start from the very get-go remember that having cash reserves beats having a lot of equity in the property, it just does.

 

And I hear a lot of people and I, I, I don't really get where this comes from. Hey, just don't over leverage. Well, whoa. The only thing you can really do when things go bad, when it really hits the fan is if you have cash reserves, you have multiple streams of income. Other than that, there's really no way to, to navigate that. So make sure that you have a decent cash position. I mean, that goes into your underwriting. Of course, it's also something I would take a look at from the personal balance sheet perspective. But I love that you bring up other types of commercial real estate, because I think multifamily gets so much play these days.

 

I get so much love just because it is it's very stable and it's something that you can get into from the value, add perspective. Some other things that are very stable would be a senior and assisted living. Very, very stable. I heard a lot of people explain that more as a construction play. I've seen people do it successfully from the value add perspective or from the conversion perspective. But again, I think that I see that as maybe a harder way to go, but definitely a worthwhile.

 

And I think you've got to look out for those opportunities. A lot of people think that investing is just about like buy low and sell high, but you have to remember the first rule of investing. Is that just because it's cheap or just because it's priced as low doesn't mean it's cheap. So you got to look at some of these things and you've gotta make your own determination like hospitality. I personally think that's going to come back, but again, remember if the recession comes, that's going to be the first thing to get hit and you, and you got to consider that.

 

So when you, when you look at some of these asset classes right now, again like hospitality, you gotta ask yourself, Hey, is this a place that I belong in? Do I have the cash position to, to sit it out? If we get a major recession?

 

Jesse (26m 51s): Yeah. I liked that. I I'm just finishing a rereading a book by Howard marks and I'm basically talking about mastering market cycles and he's got another great book. I think it's the, the one thing or I'll, I'll figure it out

 

George (27m 6s): To ask you what's the most important thing,

 

Jesse (27m 8s): The most important thing. That's the one. And I love the, I love his view on risk. Just generally speaking, in terms of the, you know, more outcomes will happen than can happen. And I know that, you know, another quote, he has very kind of very Warren buffet of investment success. Doesn't come from buying good things. It comes from buying things well, and I think it's something in real estate that it's not necessarily the fact that you buy this AAA asset. It's that when in the process that you're buying it at an adequate price, that you're, you're buying it in a place where you feel comfortable, that you can provide the returns either to yourself or your investors, if you have any.

 

But what I like about his view on risk is this the, you know, there's this just idea that more risk equals more return. And by definition, if, if more risks equal more return than it, then it wouldn't make sense. Like the idea of that, there wouldn't be any risk because you can just, you could say, okay, there's a guaranteed return and average out. Exactly. And, and this idea of quotations expected return. I think we, we forget that key, key word of when we're analyzing things that, you know, might be a value add opportunity.

 

Yes. Your expected return will be higher based on the higher risk, but it's really one of those things where you need to analyze, I think more granularly. And that's why guys like yourself are great to have on your team because you, the analytical mind is usually the mind you want when you're, when you're analyzing risk.

 

George (28m 37s): I love it. And here's another buffet ask quotes that volatility and risk are not. So now it's anonymous, right? I mean, a lot of people look at the beta in your portfolio and say, oh yeah, you know, high beta portfolio really risky. But think about it, do the thought experiment. Let's say that you're investing in company a and the stock price declined by half volatility just shot through the roof. But, and this is assuming that the, the selling was over done. Your risk has actually declined. And you know, I think, again, it's, it's, it's hard.

 

If you want something that's easily testable in academia. Sure. You can look at volatility and things like that. They're very objective. And there's a reason that people do this because it leads to publications. But when you're dealing with investment again, your, your average investor is already probably smarter than the average bear. And then when you look at the ones that are successful, again, these are things that are hard to replicate hard to necessarily pin down an algorithm and think about it. What would buffet, if he could put his thinking into an algorithm and let some academic test it, what he'd do it, of course not.

 

That would be proprietary, never going to happen.

 

Jesse (29m 50s): Yeah. And it's funny just on that point, not to, not to completely nerd out here, but it's funny when Howard marks talks about how, you know, economy attritions or financial, you know, the professors that came up with a lot of these equations, the black Shoals model, different different algorithms and equations that they use in the financial markets. That beta was just, the volatility was just the easiest thing to use for their equations, like from, from a mathematical point of view. But Howard marks will say the intuition though, that risk equals volatility should, should kind of strike you as not necessarily perfect.

 

And I think he, I think the way he flushes that out in the book without having to get so technical, I think the, the lay person, that's why I think so many people find both him and buffet just very easy to, to kind of digest that information.

 

George (30m 42s): Yeah. I love it. Risk is, comes from not knowing what you're doing. I think that's the best definition, but again, yeah, there's, there's a fair correlation between risk and reward, but yeah. Fair enough to say that it's definitely not quite perfect.

 

Jesse (30m 60s): So in terms of kind of the way you're looking at the market for opportunities in 20, 22 and beyond what, what are you looking at or what, where are you seeing opportunities? Whether that's from specific verticals in real estate or geographically?

 

George (31m 19s): Yeah. So geographically, I continue to evolve. I continue to analyze, I really love Neil bow. I point everybody to his real focus course because it's free and it requires literally nothing but free, publicly available data. And if you look at that, you'll see that the, the ideal market moves around the country. Not easy for someone who's not yet to say Neil bow is level two to go around the country and to make good on all those predictions.

 

So again, I'm going to focus on the Sunbelt, the Southeast, I like this area. It's beautiful. It's great that when I have a business trip, it's someplace, I don't mind going December through March. And I love to continue to look at these growing markets. I do love Orlando. I'm looking a little north to, I'm starting to look more at Gainesville. I would love again, you look at Florida for those that aren't invested in the area in the south, your cap rates are supremely.

 

Compressed prices are super high. And a lot of people who invest in central Florida will say, yeah, south Florida just doesn't make any sense to me. But now I feel like, you know, I'm looking at central Florida and I'm thinking, does this make sense to me? Do I want to stay in central Florida? Am I going to be looking deals in central Florida in two years? I don't know. Maybe the best thing to do is move a little north and, and see what those cities have to offer. So yeah, definitely moving, but again, as someone a bit newer, I'm not going to go to Idaho.

 

I don't care what the numbers are. It's not going to be easy for me to make that sort of a jump.

 

Jesse (33m 0s): Fair enough. And in terms of the outlook from a macro perspective, nobody has a crystal ball, but is there anything that you're kind of just being cautious or, or kind of looking at as we proceed out of, out of what a lot of areas have been in lockdown, how are you, how are you looking at that?

 

George (33m 20s): Right. So speaking as somebody who makes predictions for a living, I've learned the humility is my greatest assets. And when I try to look and make projections again, everything is conditional. You know, say, you know, if inflation goes through the roof, Hey, real estate will be an extraordinary investment. You know, am, am I prepared for that? Well, when I do my underwriting, we have to consider what happens if we don't get to refinance this.

 

Because again, Hey, if you get a decent rate, locked in, you definitely want to take some cash out. But what happens if rates go up like crazy? And we did see in the residential market just yesterday. And again, just for those, when, when this may come out, referring to November 10th, we did see quite a big spike. We saw that spike because we have inflation woes, and we have good reason to believe it. We've had two major statistics come out this month.

 

We had the producer price index come out first and then confirmed by the consumer price index. So we're seeing essentially both the yin and the yang are telling us that inflation is real. I think a lot of us who have a sort of a financial mindset, that's no surprise. But if you've been listening to those pundits, those talking heads, it's been listening to the fed and their projections on what interest at what inflation would be. Maybe you are a little blindsided, but again, we gotta remember a lot of things.

 

First of all, those inflation statistics are correct. Whatever they tell us inflation is going to be, it's going to be higher. Fed is even targeting higher inflation than they have in the past. And they often overshoots and that's even using their own statistics. But again, you know, if you want to understand how inflation works, what I find most compelling, go to YouTube and check out Ray Dalio, the economic machine, and talk about somebody who has taken their thinking to an algorithm. Ray Dalio has actually done that again.

 

Totally proprietary. He won't tell you what said it, but an amazing thinker. So take a look at that. And what he'll tell you is that you've got these giant macrocycles, that might be like a hundred years and what we call a cycle, like an economic cycle. Those are micro cycles. They're riding on something larger than our lifetime, hard for us to even contemplate. And so I look at something like inflation, like I lived through the 1970s. Okay. And I'll tell you that when I think about inflation, I think of it. It's something that may be difficult to get started, but when it does, there's really no, there's really no way to stop it.

 

I mean, yeah, if you remember, Paul Volcker jacking up interest rates and the recession that caused, I mean, literally caused this, this is like, don't try this at home. This, this is serious. And, and we can't do that again. Right? If, if our debt was high in the late seventies, early eighties compared to GDP, I mean, it's just going right through the roof and we are not going to have another poll Volcker to stop at this time. So I don't know what's going to happen next. But again, we have to prepare for inflation.

 

You, you may not be able to refi out of these things. Cap rates may have to go up because people need a risk premium, right? I mean, when you see those risks, premia get compressed. And if that's a new term, what I'm essentially talking about is, you know, what are you getting out of an investment? Let's say multifamily real estate, compared to the risk-free rate, which is essentially treasuries. If you're not getting anything out of that. And again, these, these risk premium do get compressed usually just before there's a major financial crash.

 

And the thinking behind that is just that, Hey, it, when people are not demanding a premium, right, then again, we were talking about how risk and reward or return are, are in some way correlated. Yes, largely. But when people start getting greedy, they stopped demanding much of a premium. They're like, yeah, I just want, you know, a little bit more and, and they go for it and then boom, that's when things drop off a cliff. So, so look out for those sorts of things. And, and again, they, they, the risk premium can get compressed, but they can not go down to zero.

 

So at some point, you're going to have to see that these cap rates are going to go up and you're not going to sell your, your asset for what you thought you would.

 

Jesse (37m 42s): Yeah, for sure. And I mean, that's part of the reason we're in this way, whether it's, you know, risk, premium, liquidity, premium, whatever you want to call it, like, it's the reason we're in this business. Know if that is, goes to zero, you know, what is the, what is the, what is the enticement to actually move into real estate if you could just buy T-bills. But yeah, I totally agree. I don't think there was another Paul Volcker to break the back of inflation in our current climate. We, we typically ask four questions to every guests at the end of the show, George Bubby, before we do, I'd like you to just talk a little bit about the, the podcast that you have.

 

You mentioned, it's not just focused specifically on real estate. What do you guys chat about?

 

George (38m 24s): So I always, I asked this gender questions. I like to ask how people get into it, like what you have that aha moment, what really led you to realize that entrepreneurship is the way to go. I love to hear people and how they talk about their markets. Why did you choose that market? I'm fascinated because people make money in all asset classes, they make it in all markets. And I'm just fascinated to go through another investors, a way of doing things, how they finance their deals. And again, I found some pretty amazing things.

 

People who are able to finance their deals entirely with debt, it can be done. And I think these people are really brilliant. I'm gonna interview somebody who's doing that himself. You under rots, upcoming episodes. So just fascinated again, by different ways of doing things. I want to get beyond the syndication model. Because again, I think it's wonderful, especially if you are really focused on building wealth, but again, it's not the only way of doing things, but again, really like to focus on what I call chicken soup for the entrepreneurs soul.

 

Like I like to ask people questions about, you know, what's your advice for a new entrepreneur? What's your advice for your younger self? What inspires you to keep going? A lot of these people that I interview, same as you, I'm sure these are people you don't really need to be working, right? They're doing this because they're creating a legacy for their children or for their communities, or because they just love the rough and tumble of business. Just love making really big deals. And for me, it's all of the above, but regardless I love talking about entrepreneurship.

 

It's something that really lit my world on fire. And I just want to share that it's not just about investing. It's not just about multifamily. It's about how you, wherever you are in your life, you can get more out of your life by being an investor.

 

Jesse (40m 10s): I like it. Awesome. We'll in terms of where people can go to reach out or find that podcast, what would, would be the best path?

 

George (40m 20s): Yeah. So you can, again, just search for us. It's I misspelled a word on purpose. It's a plan word. So it's all about being a founder. So it's like founder with a Y not like an actual metal casting plant. So it makes sure you misspell it in the title. It just look for me online in LinkedIn. That's where you can find me. You'll find everything that I've been doing there as well.

 

Jesse (40m 44s): Okay. So we've got our final four here. If you're ready, I'll send these questions your way. All right.

 

George (40m 48s): Hit me. Okay,

 

Jesse (40m 50s): George, what's something that you know now in your career, whether it's business or real estate that you wish you knew when you first started out.

 

George (40m 57s): Sure. I'm going to say relationships. I've known relationships have been important throughout my career. And every year I grow older, I grow wiser in terms of making more and better relationships with people. So it's relationships, it's not the numbers. People will bring you the deals. People will bring you the money that you need for the deals. It's all relationships.

 

Jesse (41m 21s): I like it in terms of mentorship and for people starting out in our industry, what is your view on mentorship and what would you suggest to those individuals?

 

George (41m 31s): Yeah, so I wouldn't suggest to be cheap about it. If you can get a good mentor, somebody that works for you and looks, there are some great people in the business who may not be great mentors. And there may be some people who may be moderately successful in the business who may be natural teachers. So you want to go and talk to it's just like vetting a sponsor, right? Go talk to some people who have been in their program. Look for some testimonials. I mean, I hope you go beyond the testimonials, talk to people who are in the business and they'll tell you, Hey, you know, this program is good.

 

Or they might say, Hey, that program, those coaches haven't even closed the deal don't go in there. So again, you want to look around and do some due diligence, just like you would on a property,

 

Jesse (42m 12s): A book or two that you could recommend to listeners.

 

George (42m 16s): I have always loved the seven habits of highly effective people by Stephen Covey. I love Dale Carnegie, how to win friends and influence people that I think could be the best business book of all time. It's really a self-help book, but again, he keeps tying it into business. If you are building those relationships, if you are a people person or become a people person, whatever you are good at, you will make tons more money by doing it.

 

Jesse (42m 46s): All right. Last and final question. First car, make and model.

 

George (42m 50s): Oh, love it. Thinking way, way back. I want to say that it was a reliance. It was essentially the clone of the K car. It got me around. It was, it was pretty amazing camera. This was my first or second because I did also get a great hand-me-down. I got a, a Ford grand Marquis. So I can't remember which one actually came first, but I lived through both of those automobiles. And you know what, when it's your first car, doesn't matter.

 

It's just amazing.

 

Jesse (43m 22s): That is fantastic. I don't think we've ever had somebody say that they've had a reliant on the, on the show, reliant motor company. That's funny. That makes me think of a, in the seventies or eighties where they had checkered cab came out with their own car. That was supposed to be like the, the Volvo, the safety car of a, of the industry. But didn't do very well, but all right, reliant, that's a first for us, George, aside from the podcast. Is there any other place that you'd like to point listeners, if they want to know more about your story or more about what you're doing in real estate?

 

George (43m 56s): Sure. You can head out to horizon. Multi-family it's a great place to establish a relationship. Reach out to me on LinkedIn. If you are a syndicator, love to have you on my show. Best advice I've gotten last year is don't just have these 30 minute introductions with people. You know, when you get somebody qualified, somebody who's done syndication best way to get to know them better, you know, bring them on your show, go on their show and you really get a double, triple TEDx of what you would get from that half hour.

 

Jesse (44m 25s): My guest today has been George Roberts, George, thanks for being part of working capital.

 

George (44m 31s): Thank so much for having me, Jesse.

 

Speaker 2 (44m 33s): It's been a pleasure.

 

Jesse (44m 41s): Thank you so much for listening to working capital the real estate podcast. I'm your host, Jesse for galley. If you liked the episode, head on to iTunes and leave us a five-star review and share on social media, it really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for galley, F R a G a L E, have a good one. Take care.