Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have George Roberts. He is the founder of Roberts Capital Enterprises, which purchases value-add multifamily properties alongside its investors and currently owns 550 units. George is also a passive investor in over 600 multifamily units, carwashes, early-stage companies, as well as triple-net real estate. George has a PhD and previously worked as a data scientist and bio scientist, with over 800 citations, before becoming an entrepreneur and launching his podcast, “Passionate Living Through Passive Investing.” Thank you so much for being on the show!
George:
It’s my pleasure Charles. Thanks for having me. So
Charles:
You have a very interesting background prior to kind of getting bitten by the entrepreneur and real estate bug. Can you tell us a little bit about that background and what brought you into what you’re doing now with real estate? Yeah,
George:
Absolutely. So I was a bioscientist. I published in three different fields, loved it, saw myself as a tech guy, never imagined anything else for myself. However, my sister one day said, you know, hey, let’s, let’s go build some houses. And it sounded like fun. So I joined her on that and I realized, you know, entrepreneurship, I think that really is the calling for me. It’s it. That was my call to adventure and from that day I decided to launch my own company, which essentially focused on purchasing a multifamily value add. It allowed me to keep my job ’cause I was already a data scientist at that point. Making good money didn’t seem to be any point in trashing that career right away. Nice.
Charles:
Okay. So with your construction company, can you tell us a little bit more about this this venture you had, what you were constructing where it was located kind of a little bit?
George:
Yeah, so it’s in Troy, Michigan one of the finest counties in our country, Oakland County. And we built 12 units. Just finished that project this year in 2025. So really cool to exit that. Beautiful to see. We were gonna name the street after our father, but unfortunately there’s a similarly named street. So it ended up being named after the city of his birth Westminster. Okay,
Charles:
Nice. Nice. So tell us a little bit about what you’ve got going on now. Like how you got into actually, I mean, doing your construction business developing there, what got you into real estate investing and kind of what kind of like made a little bit of a turn from constructing and actually owning the properties and adding value to those.
George:
So it all gets back to being a data scientist because I did have such good pay, I thought, well now I can’t really follow my sister into construction. I mean that is literally a full-time job, but multifamily is a bit more hands-off. And so I thought, well, I’ll do this. And I did it for a while and the interest rates shot up and all of a sudden we had layoffs in FinTech. So it was perfect. I sort of been constructing my runway and I thought, well, it’s a little sooner than I wanted to take off, but let’s just go.
Charles:
Nice. Okay. Okay. And what was kind of your first real estate investments? Were they properties that you purchased yourself, like as an active investor? Were you a passive investor in those?
George:
So I really started out as an active investor, single family home depths of the great recession. My dad said, Hey, you have to buy a larger house. And I’m like, dad, I’m working on a bioscientist salary, I can’t do it. But he said, you know, prices, you’ll never see these prices again. It’s crazy ’cause we, we negotiate $180,000 for our house. It was a short sale. Now it’s probably worth a half a million and it’s just nuts what happened in 15 years and we will probably never see that again in our lifetime. So he encouraged me and he said, no, you’re not gonna sell that house for the down payment. You’re gonna be a landlord be. And he was right, you know, because he really understood markets. He, he was a lifelong investor. Like I said, at that time I was just the tech guy.
George:
I was maybe super smart, but not at all plugged into how investments work. And that was really my trial by fire. It’s like, hey, just become a landlord. But of course it was easy, you know, there’s all these things you can do. I mean, if you, if you don’t have to charge cutting edge rent because it’s, it’s not really what you’re doing. You know, you have a day job, et cetera. We kept the same tenants for like seven years. I mean, I would’ve done things differently looking back, but in the end, I really didn’t have a whole lot of trouble from it Anyway, I talked a lot about the single family thing. So I did that for a while, but later on I thought, you know, hey, if I wanna do this, let’s, let’s steal from data science. Let’s do it at scale. So for me, that’s apartment investing. You know, you can buy a house, a house, a house, a house. And really what you do is you buy yourself a lot of trouble, but buy yourself five apartments and you know, pretty much your sets, you know, you can sell ’em from time to time and you’ll get, you know, a huge windfall. But you, you don’t really end up with the sort of headaches of these single family landlords when they’ve got, you know, 15 or 20 units and they’re really trying to turn it into a living.
Charles:
Yeah, I think I only know one investor maybe two investors that have really been successful in straight single family houses. I know some that are like duplex, triplexes, but single family like, and this has like a hundred of ’em and you know, the team that goes with it, the amount of infrastructure, it’s, it’s a very difficult thing versus people that have purchased like syndicating five apartment complexes, larger buildings, and it’s a much easier runway for it. ’cause You get immediate scale. And the thing though is you don’t get immediate scale with small, small single family obviously, or small multifamily. And it becomes, it’s easier to get in and it might be easier to sell them little by little as you need funds. But the thing though is that the management, I mean management, I just had someone on the show earlier today and it was, it was one of the things like the management on ’em is, it’s a difficult thing figuring out the management on those smaller properties. And the problem I think too lastly is them being spread out. You know what I mean? It’s, you know what I mean? If you, if you maybe very rarely people like strategically buy ’em in a small area, well
George:
That can be a bit difficult too because then you have, you know, an issue like a disaster like Flint for example. Great example, Flint, Michigan, half the houses end up getting knocked down over maybe the last quarter century. And it was all because GM left. So when you have a situation like that, boom, I mean, you can just literally be flattened. But if you don’t mind, Charles, I like to tell you my aha moment. Everybody says, oh, I bought five, you know, single families. And I realized it didn’t scale. But for me, I was at a, a single family meetup and I asked the speaker, well, wait, why don’t you leverage? I mean, isn’t leverage one of the most important things in real estate? That’s why people buy real estate. He said, listen, if I leverage these single family homes, I’m only making $200 a month. And then to manage all that, forget it. And I thought, thank you, I’m done. <Laugh>,
Charles:
<Laugh>. It’s true. Yeah. I mean it’s, the margins get very tight. I mean, margins in landlording are very tight, is, I don’t think people understand that there aren’t landlords. But the thing though is that yes, it’s, you have $200 and then so if nothing goes wrong, hopefully you still make that $200, but then you’re talking, you know insurance taxes that you have to check on it. You’ve got LLCs for these pro you know, like all these things are multiplied versus having one insurance policy for one larger property, you know, one tax bill that you have to fight or whatever it is, <laugh>
George:
<Laugh> man, I hope you do fight it too,
Charles:
<Laugh> versus like, you know, 10 of ’em or whatever. But, you know, everybody has different things that like with that risk lever you know, how far they can push it and still be comfortable and you know, so I do see some people that are like, oh, I’ll buy five houses haven’t paid off. And then perfect, whatever kind of strategy works for you. Everybody’s a little different. But the thing is, if you really wanna scale, like you said, you kind of really have to get behind that leverage unless you start off with a huge war chest. Yeah. So let’s talk about now what you’ve got going on, George, with your, like with your current business, your investment strategy is and criteria for investing.
George:
Yeah, absolutely. So I like smaller properties, less than 80 units. I like tertiary markets. This is where I find the mismanagement and mispricing. That’s huge for me because it really protects me and my investors. That’s where I’m finding the margin of safety. Now, for those who are great at being the big fish, you’re the first to see the deal from that major broker. I mean, maybe you’re doing well right now and, and that’s great, but I mean, I just see so many opportunities out there. I think it’s totally worth it. And you know, the great thing is really then you don’t need to bring out a whole lot of partners. You can own a larger proportion of the total. And again, you talk about the, the issues of owning too many properties. You know, if you’re starting out as a cog, great way to start out of course. But if that’s where you’re at, I mean, you’re gonna end up with tiny slices of this and that and you end up kind of with the same problem.
Charles:
Yeah, it makes perfect sense. When, when you’re putting together larger deals how are you putting together your team? Like what are, what are some importance to building a team and kind of figuring out maybe your highest and best use for being on that team while filling out the rest of the positions?
George:
Yeah, well the first thing is obviously boots on the ground. Anybody who tries to do that and they say like, oh, I got somebody two hours away. Oh, I don’t know about that. The other thing is I’ve got a great property management company, but do you, I’ve even seen some of the best. And they’re in markets where they’ve operated before and they hire somebody and it’s horrible to get rid of them. So yeah, your team is very important. I like to talk about favorite college football coach Bo. She butler the team. The team, the team. If you haven’t heard that speech, look it up. It’s totally worthwhile. Yeah, all about the team. So how do you find out your highest and best use of your time on the team? Well, first of all, just look at what you’re already good at.
George:
So a lot of people come to real estate as a second career and we have a major housing crisis. And so it makes sense. We are still net drawing people into real estate. And I’m looking over a longer timeframe. Last couple years we’ve lost a lot of players from the field. But I do think that over the long term, you know, forget 20 22, 20 23, 20 24, that we are gonna continue to draw people in ’cause we’re not building the houses. And then, you know, we’re also kicking out a lot of the people who have been building the houses and interest rates are still high. There’s all these reasons why we are not going to get ahead of the game with buildings. So we’re gonna need people to come in. Okay, so a lot of you, you are in your second career, what are you good at? But more importantly, I would say, where, where’s your desire?
George:
Okay, look at your inclinations because over the long timeframe, or even the medium term, your inclinations will greatly outrun your current talents. So where do you want to be? You know, whether you want to, you know, build a front facing style of things. Like, you know, I ended up becoming an author because that’s who I was at my first company. Nobody wanted to do that. Or whether you just, you know, Hey, I’ve always loved numbers and you wanna be an analyst or something. Hey, great, you know, we need people to underwrite. So look, look not only at what you’re good at, but but what you want to do. And don’t discount that. Yeah.
Charles:
Okay. When, when you’re doing a deal with your first new partners and I’ve done this before several times, and you’re doing a deal these, your first time you’re doing it with these, with this team what are some ways you have of kind of, I mean, what would be some advice you would offer to people from really minimizing your downside? Making sure all your boxes are checked. Because when you’re, when you’re, I, I’ve realized it’s like a two part thing. It’s like buying a condo where you’re reviewing, you know, you’re inspecting the individual unit, but you also have to look at the HOA and make sure you’re not getting the problems there. ’cause If one of them, you both have, you have an issue. And the same thing here is you’re making sure the deal’s good, which is where most people spend their time. Hey, it’s a good deal. It’s a good deal. But I haven’t really vetted out my partners. What would be some advice you would have for people doing their first deal with new partners?
George:
Well, speaking of vetting out your partners, obviously that’s the big thing. No matter how well you think you know, these people, no matter how they present, I mean, you just absolutely have to do the background check. 200 $500 is totally worth it. Even if you’re investing passively, it’s totally worth it. Maybe get a lower level background check, but do it, do get a background check particularly if it’s you’ve got one main sponsor that you can identify, I think it’s totally worth it. But, you know, I think there are some, some other things that you’re gonna want to do too because you know, some people, they just kind of get into bed with somebody and they just keep running and you don’t have to do that. Let’s see how the first deal goes. See where things shake out because you have all these ideas of where everybody’s gonna end up.
George:
And you know, that’s where you make your percentages in the oa and then, you know, things shift. They change somebody, you know, they get divorced or something and you know, they, you know who they are or who you thought they were. That’s not who they are or who they’re able to be anymore or they get sick. So just slow down, do a deal, see how it works out. And you know, the important thing, and I’ve done deals with various groups various geographies, and you know, that’s really worked for me. But again, a lot of these people I knew you knew from a mastermind or something I knew them from some time before. You just don’t go too fast. <Laugh> like, I think the analogy of getting into bed is, is very apt,
Charles:
Right? I think I had I had a mentor a few years back there was saying that if, if it’s with, you know, if you’re actively or passively partnering with people investing with them, it’s one of the things is like, do a deal but don’t do more than one per year with them. And it really capture downsides, a really smart way of doing it. If you, like you said, do your background, stuff like that. But one way of really, you know, you’re minimizing your downside in the sense of like, something’s gonna come to light in that first two years and instead of doing three deals in your first year, maybe if you spread it over three years you’re gonna be able to kind of see how stuff, how they really, how it works. You know what I mean? Because it’s much easier. Hey, we just made acquisition fees and then three months later we’re doing another one.
Charles:
But we haven’t seen how that the years of really just getting it ready and getting going through the whole business plan, they haven’t developed yet. So you don’t really know how that’s gonna work as an investor passively. But I think also as a, an active investor alongside those people, One thing, George,is you being a data scientist and kind of using a data-driven approach,what have you used? I think one thing that when I am looking at deals myself or when I’m working with students,it’s really filtering out bad deals early. And there’s not lack of a better word, there’s not like a perfect science, I guess, to doing it. What, what are some ways that you’ve done? Because the majority of the deals we’re gonna look at aren’t gonna be ones that check the boxes of what we’re looking at and getting those outta there so we can spend time on the 10, 15% that we really wanna spend time on really allows us to spend more time and really do thorough underwriting. What have you used in that situation?
George:
Yeah, well first of all, I love it and I have my own rule for that. I call it triage. Triage, always triage. The quicker you get rid of all the deals that you’re not going to analyze, the better you’ll analyze on the rest. And I mean, I think, you know, so like a simple five minute sort of deal analyzer sort of thing is helpful, but what’s even better is that, you know, after a while I think we all kind of start out as underwriters, but over time many of us move on and we, you know, like you and I, we have a sort of a front facing role in our business and people bring deals to us. And what I tell people, people, oh man, I’ve seen a hundred presentational. People start out like, well this should have a 15% IRR and you know, look at the sell C 17.
George:
Are you kidding me? What is the story of the deal? So if you can kind of coach your people, the people who are bringing the deals, you know, hey, I don’t want to start talking about the numbers. The numbers don’t make any sense to me and tell you tell me, hey, this, this is you know, a distressed asset. The seller is under a lot of pressure, we’ve gotta close in the next six weeks. But guess what in this market for this quality, we will be expecting 80,000 per unit, but we’re gonna be able to get in at 65 cost basis. Boom. Now I understand what’s going on. Now when you tell me that, hey, the first year looks a little rough, I get it, you know, we’re gonna have some vacancy, et cetera, but the idea is we got the proper cost basis.
George:
It’s, it’s like we’re buying by the pound here because we’re getting a good pre-unit price. So, you know, those are the sort of things that I wanna know, like what makes this a deal? Do we have a good per unit price or is, is this something that’s just simply way undermanaged and you know, we just think we can, it’s an operations play. In other words, is this something where somebody painted it pink and green and just having a better color scheme, some very simple light cosmetic rehab is going to make a big difference. You know, just a sentence or two like that makes a big difference. I feel like I’m already starting to harp, but yeah, these are the things that I see when people bring me deals. Just tell me the story of the deal because if there’s not a story behind the numbers, you know, I, I don’t care about the numbers,
Charles:
Right? Right. And that’s also, it’s kind of like, if it’s such a great deal, why somebody not holding onto it or something like this? And that’s where the story comes and explains, well, they’re going for a divorce, someone just passed away and these people are, you know, the, the heirs are 1500 miles away, whatever it might be. And I think that’s super important to kind of making your decision and if you wanna move forward with it and if it kind of like kind of follows what you normally buy for properties. Because if it’s a, you know, we’re in for doing value add multifamily, I mean, we’re looking for deals that have some issues, you know what I mean? Whether they’re operational and or managerial. And we need to get in there and we need to change stuff around. And I kind of, you know, the first year being rough, as you said, it’s kind of odd if you’re investing into a value add property and the first year is looking good because, you know, it takes several months just to figure out what’s going on at the property per se.
Charles:
I mean, we can do all the underwriting checks, but we don’t know who’s, we are not going in there when we’re doing our due diligence and asking people at the door, is this you on the ID that I have here from this application? And we’re gonna find that out later. And that’s why we have reserve funds and that’s why it takes several months to a year to really kinda get that initially stabilized before we start really pouring money into those units. So it’s, it’s a huge process,
George:
You know, that’s fine. If you don’t mind me mentioning Charles, I like to say that talking to enough brokers in my life, I feel like every seller is distressed and under fire. But you know, you gotta really dig into it. Like, I remember one deal came to me, it’s like, you know, hey, he’s had it for 10 months. It’s a terrible property management company. All we gotta do is hire a new property manager and everything’s gonna be kinda like, wait a second, they spend 10 months pretty much, this guy’s only gotta wait two more months and you don’t even have to go to court to fire. So does, you know, does it all add up <laugh>?
Charles:
Yeah. Yeah. It’s also when you make tweaks, it’s kind of, it’s kind of one of the things too is checking out if a prop new property manager is working or if an old one’s not you, you really have to give them that year. I mean, you’re, you’re never gonna see a difference because for someone to come in there because they could be taking over a lot of, a lot of tenants that weren’t even, weren’t even checked and how are they going to fix then? Right?
George:
Yeah. And they always stuff at the end, right? You know what I’m talking about? Like, is this really you? And, and you know, we got things like estoppel, but what does that really do? I mean, basically you’re just trying to catch some blatant out, out lies, and hopefully you do. But yeah, it’s, it’s pretty crazy. I wanna tell you the, the interesting advice that I, most interesting advice I’ve ever received is don’t do any renovation for the first 60 days, because you wanna make sure that you bought what you think you did. And if you have gotten a surprise, you’ll need that budget. And, you know, I thought that’s interesting. I’ve never actually followed that because I want to push the IRR, but I think the other way to do it is just make sure you have adequate reserves because you, adequate reserves, you always have a little bit more than you think you needed. It
Charles:
Goes both ways too because when you’re doing those renovations, it’s one thing if you come in there and you’re like, someone’s told you, Hey, there’s a leaking roof in building four. Well, if we’re gonna take care of that e either way, because that’s not gonna help the property just keep on leaking and building for, but it’s also, I kind of get a little worried when I hear people like, oh yeah, we’re gonna, we’re not gonna renew these people. We’re gonna move ’em out. We’re gonna rechange. And you’re like, whoa, hold on here. You know what I mean? Like, now we’re gonna have a huge dip in your numbers that aren’t there. So like for you saying maybe not putting so much money initially into those value add pro into the actual units and maybe spending that maybe a little bit on some of the, the really deferred maintenance in common areas that has to be taken care of, that’s a st that’s a very good idea. And as people move, maybe we’re renovating them as we’re kind of getting a real feel of the property. That’s that’s great advice. Right?
George:
And for the beginners out there, I mean, you mentioned renovating the common areas first should be obvious why you do that, but that’s what adds some bang for the buck to everybody if you raise everybody’s rent, you know, depends on sometimes we’re actually going backwards now in the middle of 2025 towards the end, but you can maybe even in a time like this, if you’re actually making improvements in common areas, maybe you can actually raise their everybody’s rent 20, 25 bucks rather than just the the units that you’re renovating. But another thing that I see, like when I look at underwriting, if you don’t mind a quick foray into that, well, people will make their first year’s projections. And if they’re not projecting high vacancy in the first year, I mean, I, I don’t understand. Like even if you are not going to do a lot of renovations, you, you might have a tenant stuffing issue or they may not like the new management. Everybody says they’re gonna come in and raise rents. I mean, I have never met a broker that sold a deal where the rents were not already under market, you know? But you know, all kidding aside, we buy these things thinking that we can raise the rent. And so you’re gonna tell me people are not gonna leave. Forget it. Yeah.
Charles:
<Laugh>. Yeah, I remember I was talking to a very well-known investor, syndicator it must have been like, it, it must have been like 2019, end of 2019. It was right before COVID and we were at an event and he was telling me, he is like, oh, we just bought a place in Orlando or outside of it, whatever it was. And he was like, and we’re gonna, we can raise rent $500 and people will stay. I’m like, I was like, oh, okay, okay. You’re like thinking yourself. Like no one’s staying right? No one’s staying if you’re raising the rent $6,000 a year. Like yeah. Are you insane? Like that’s that’s insanity. It’s nuts. Yeah.
George:
Payment. Well the other thing is people just look at the, the rent roll and the easiest way to see can I really raise the rents $500? ’cause You know that the comps you’re always giving are garbage. And it seems like all too often I see a syndicator and you put those same comps in there where two are slightly comparable though a little bit above. And there are three comps that are like sky high, like way you’ll never touch that. And I’m thinking like, are you joking? And so the first thing I want to do, I just look at the rent roll and I don’t see people, a lot of people like 20, 30% that have been there five years or more. Forget it. You’re not jacking up the rents, but those are the people that are gonna move because when you jack it up, they can, they’re, they’re able to afford to live to this place because the rents haven’t been raised in the last five years. And yes, you’re gonna see a lot of attrition.
Charles:
Yeah, exactly. So let’s kind of dig down a little bit more into kind of your background data scientists bringing into real estate. And you mentioned Flip Michigan, and one of the things there obviously is they had too many people, if you were a landlord there, you got harmed because the majority of their tenants probably, or the whole town worked in one in employer. So let’s talk about key data metrics to, you know, that you utilize for market selection.
George:
Well, if you’re a multifamily or commercial real estate in general, you don’t have to work in your backyard. That’s really a problem I mentioned that happens with these single family investors because look, wherever you live, if it happens to be a one company town and you’re single family, you just have to do that. But I can invest anywhere in the country. And so yeah, I definitely want diversity of employers. I wanna see that they’re growing their jobs. I look at things like population growth and you know, Neil Bau is great if you go and find his real focus course or location magic, totally free takes 40 minutes. You can go through a market in five minutes. If you’re not doing that for dozens of markets and watching his seminar about the best markets to invest in every year, you’re just crazy. So, you know, talk about that’s another thing, you know, if somebody comes to me with a a deal, I wanna know what are the demographics? Because if we don’t have demographic tailwinds, we better be buying at an extraordinary discount because otherwise I can’t make syndication quality returns. And if I can’t make syndication quality returns, I don’t even want to be myself. I wouldn’t want to operate as a joint venture, just forget it. So, you know, look for those tailwinds, first of all.
Charles:
Yeah, yeah. That’s, that’s, that’s a great thing. I think one of the things that like you were talking about people giving you comps that are so far out that aren’t close to where it is, and real estate being so hyper-local. And I think the other thing too is kind of when people say they’re talking about they, they’re telling you about a city why I should invest there, the rent I’m, when they get there and they’re talking about one specific city as everybody’s inside of it in the same place, but you’re not, you know, it’s all broken up into different neighborhoods. So let’s go one step further, you know, what are some parameters around neighborhood selection? What things to look out for, because there’s a lot of times that you can just without any special software, and there’s a lot of free stuff online that we check, like Justice Map stuff like this.
Charles:
And you can see the lines and you’re like, oh, what’s that line there? And I have it on another screen overlay of like of Google Maps and you’re like, oh, that’s a train track. So that’s changing now. My rents just went down. You know, they’re, the people are making 20% less on this side than they are that side. My building’s over here in the lower, you know, lower income place, much can be much harder for me to raise rents versus, ’cause I’m not, not in the best part of town where that property has to be. So what are some other things that maybe you’ve used or you utilize for doing that?
George:
Yeah, well, again, yeah, you have to know your neighborhoods. And particularly once you pick your market, which should be the first thing you do, you wanna know what neighborhoods you operate in because then the brokers are dealing with, you can say, Hey, you know, we’re, we’re interested in downtown or we’re interested in, you know, these up and coming neighborhoods. And that’s another great way to triage when you know where the hood is in, in your area, just say like, I don’t want those deals. But that’s, there’s another side of that too, because if you grew up in the hood or if you are local, you know, maybe you are comfortable in those areas and you know how to get along safely and that could be your advantage. But again, you need to know thyself. So figure out which neighborhoods you’re willing to work in and which you’re not.
George:
And city-data.com is a great place to do that. Look for the poverty level. When you see, and again, it’s crazy, but other side of the tracks, it’s a cliche, but it’s so true that it really does divide people. And so you will see that one side of the tracks is a lot poorer than the other. So you know, ask yourself and just look at the aerial view in Google. I mean, this is what I do because look, think about what it costs to actually buy a plane ticket and go out someplace. I love to do the demographic research before I do anything else. Like if I think a deal looks like halfway okay, like yeah, cap raise is about right. Story behind the thing looks about right. You know, just go down the street and just, you know, do it 3D with Google Maps and see like, what do you see? Because if you see a whole bunch of, you know, pawn shops, massage parlors and all that, it’s like, well, you know what you’re dealing with. And again, it better be a, you know, a deep value discount. And if you think that you’re gonna improve it to class B, you’re, you’re nuts. So make sure that it fits you, the investor and make sure it fits the plan. So, I mean, some, some areas of town, you’re just not going to make a major rental,
Charles:
Right? Right. Yeah. It’s when you’re pulling that map and you’re seeing where the, where every, all the different businesses are and there’s a rent to own furniture place here and that liquor store here and all this kinda stuff, it might not show you that this is gonna be the up and coming place whether or across the street there’s like a Whole Foods or a Starbucks or a wine shop, you know what I mean?
George:
Chick-Fil-A, all those people. Mcdonald’s particularly, ’cause they’re everywhere. You know, if when you see those things, you know that somebody else who has a lot more money in time than you, they’ve got a much larger staff. They say, Hey, this is an up and coming area.
Charles:
Yeah. And there’s people that can pay that amount for their products that might be higher than normal. So definitely. Oh yeah, but she
George:
Starbucks.
Charles:
Exactly <laugh>, you’re not gonna be in, you know, there’s not gonna be a Starbucks next to a Rent the center. So it’s gonna be one of those things where you know that people driving by or near that vicinity, whatever it might be, you are on the way up, not on the way down for the most part. But so further going into like underwriting you, you kind of, you know, what do you think, you know, what does margin of safety mean to you when you’re doing underwriting or when you’re investing?
George:
Well, what it means to me, Charles, is that I’m not infallible. I wish I could tell you about my crystal ball, but I can’t. And whether it’s the market or like you mentioned, you know, they might have just stuffed the place with tenants and you know, you got these garbage tenants and even though you know, all, all in all, it’s a good deal, man, do you have a hard first here? Do you wanna be in the situation where you’re gonna lose the property or whether you have to go and subsidize it? No. So make sure that you’re buying at the right price. And you see this happening. A lot had happened 20 22, 20 23 people were buying these deals. It didn’t make sense. Hey, are you doing deals? I’m still doing deals. I think it makes sense to do deals. Good people are always doing deals and you know, they were signing just to get these acquisition fees and now these people are in a lot of trouble.
George:
So that margin of safety, a lot of it has to do with being humble. Okay? If you wanna just grow, grow, grow, grow, grow, you know, hey, you may do well in an expanding market, but then you may be one of those people that’s left by the wayside. And you know, there’s always this issue with survivorship bias. Everybody that you see who’s successful in business, they’ll always tell you to be super aggressive. And that’s not bad advice, but it may not be the best advice because a lot of people who are super aggressive fail. So make sure you are really careful. So again, I wanna see below market rents and truly below market rents. I would rather spend an hour getting rock solid comps and actually calling up and making sure that everything makes sense. ’cause For example, I saw once I got really excited about a property, I saw the worst pictures online and I thought they’re getting that rent for this.
George:
But then I, when I looked on another site and I saw, wait, they just did a reno. So you, when I say get rock solid comps, I’m saying look at five places, call up, find out, hey, oh, do you have any like maybe older units that are going for less? Like ask every foolish question, not so foolish question that you can ask. Well, you got that property manager on the line, I’d rather have rock solid comps because if I know that I actually can raise the rents $200 going in, then I know that just almost nothing is gonna sweep me off the playing field. Then I’ll go into the numbers in great depth. But that’s the most important one because people, they base everything on the rents.
Charles:
Yeah. The other thing too is that when you’re talking earlier about the comps as well, and about right now it’s, I think mistakes new investors make is they’ll just say a two bedroom is a two bedroom. And nothing could be further from the truth because we talk about we have amenities, we have the years they were built, we have square footages, you know, you don’t know the height of the ceiling. It’s not like something they’re putting on the Zillow listing or whatever of the height of the ceiling.
George:
That’s huge. Yeah. That could be another $25 a month. We have some that have the cathedral ceiling because, you know, on the second floor and that, you know, went for. But yeah, it’s totally huge. And then what is the premium per square foot? The quality of construction. I mean, I, in every comp I list, not only what are the amenities, but what’s superior, like, hey, this one has a better pool, it has a nicer you know, I forget what you call it, but the the, you know, where everybody goes clubhouse. Yes, exactly. The clubhouse. Does it have a gym or does it just have like a lot of places I go to a hotel and it’s like, hey, we got a gym. And I’m like, really at that rate? I go in there and it’s got like a treadmill. It’s like, this is why I bring my free weights when I’m staying at a place, you know, that’s not like a five star hotel.
George:
But anyway, yeah, you, you have to compare all that and, and not just by category, like for everything you know, which has the kitchen cell, that’s the most important thing, which has the nicer kitchen, you know, which then next has the nicer bathrooms. And yeah, all of that matters and you cannot spend too much time get, if you think that you’re gonna move forward, can’t spend too much time on those comps, make it crystal clear how much you think. And the other thing is when you’re gonna renovate, you’re gonna, oh, we’re gonna add back splashes. But really how much is a backsplash worth? I mean, if you say that that’s your business plan, I wanna know how much research you put into what a backsplash is worth. I want a number for what that backsplash is worth before I’m gonna convi commit tens of thousands of dollars of investor capital to we’re gonna put up backsplashes and we’re raised the around $50 <laugh>.
Charles:
Yeah, no, it’s, or the, the smart or putting USB plugs in something like that and get an extra $50 a month. The yeah,
George:
Or the other thing is they think they’re gonna do everything. It’s like, we’re gonna charge more for pets, we’re gonna charge for our parking spots. And it’s like, but you can’t do everything and then you want to add you either want to add the the concierge trash. I didn’t wanna do it all in the first year. No
Charles:
<Laugh>. Yeah, no, for sure. And the other thing is that you know, a lot of people, I think rubs are one of these things too, and people start like, oh, we’re just gonna build back utilities, and that’s a rent increase, so you can’t do a rent increase and rubs together at the same time where people are gonna get like a double digit return, like a double digit, like increase on their rents. It’s insane. You know what I mean? So you can’t do that if you want to keep people.
George:
Yeah. And exactly. And are your comps places, you know, where the, you know Yeah. See if it’s already included. Because when you’re not making those, you know, really you gotta think everything through. I mean, just think how many dollars you’re putting into this deal and how many investor dollars. I mean, you should have a price on what everything is worth.
Charles:
Yeah. I remember when I bought my first rental property, I was talking to my attorney, this is like 2006 or seven, and I was gonna raise rent just a little bit of money. And he was like, well, it’s not that easy. You’ve got a, you know, this is, you have to, he was going through the whole process. He’s like, you can’t just do that. If you have to have them yet have to raise, you know, you got a new lease, you gotta do this. Are they doing this? Are they gonna allow you to raise these rents this far? And you’re like, oh, wow. Didn’t, didn’t he never heard this at any real, at any seminar since then. You know what I mean? But people are just nonchalantly saying, we’re raising rents. Yeah. 10% and everybody’s gonna stay and it’s gonna be great. Sure. Not really true. You know what I mean? Yeah, sure. And I think you start seeing the people that are a little bit more seasoned when they tell you Yeah. ’cause What you’re talking about the under under market rents, it’s also when we’re going through renovations are great when markets are going up and rents are going up, they’re not so great when we’re in a, what we’re in now, which is like a sideways type market, you know what I mean? Right.
George:
Or when you can’t cash out, that’s another thing because interest rates are going up and then boom. It’s like you don’t wanna be locked into those higher rates and not be able to pull all that cash out major. Yeah.
Charles:
So George, thank you so much for coming on today. Let’s talk about your book and how our listeners can learn more about your business. You wrote this book called The Passionate Living Through Passive Investing. Why did you write it and kind of give us an overview of what you’re covering in that book? Yeah,
George:
So I saw a gap in literature. I see all these people talking about how to build passive income, but, and I do see people talking about lifestyle design, but I really wanted to put the two together because I see all these people thinking, you know, I just, they work so hard and I think that they’re gonna, you know, get this pile of poker chips and they’re gonna cash it all in at the end. And you don’t know, I mean, arthritis, can you still go out skiing? Are you gonna be dancing? You know, it’s just not worth the risk. You gotta go out and you gotta live every day. The other thing is I see people and all they want to do is buy toys, and I know why they’re doing it is because they’re working 24 7. And when you’re working like that, then you just wanna drive the fanciest car.
George:
You wanna have the perfect house because you don’t have any time to go out. You spend all your time in, in your, in your car and you, you don’t actually really experience life. So I, I really want to put the two together. And I also felt like I had a lot of experience with it because I’ve lived a lot of low-cost adventures. I mean, I was raised in the middle class, I raised my kids in the middle class, and I think it’s important to have those values because once you get into luxuries, you know, you never have enough money. So I, I just wanted to go through that with people because I just think that it’s not necessary. You just, you don’t have to show off. And if you don’t show off, you can retire early and you can have a lot of fun.
George:
But anyway, so, so that’s a lot of what the book is about. But I also go through other asset classes as well. It’s not just multifamily. A lot of multifamily people do that, just multifamily, multifamily, multifamily. But I mean, you’re gotta be a passive investor at some point, if not all already. So go ahead and look at other asset classes and see what you’d like to invest in to diversify. So it was a couple things that I, I wanted to do. And I think you also mentioned, you know, how can people reach me? I think, you know, reading the book is probably the best way that you understand who I am, what I’m all about, and whether my investing philosophy works for you. But you can also find me at www.robertscapitalenterprises.com and that’s where you can book a call with me, you can see some of my free material and get to know me and hopefully, you know, join our mailing list, take a look at what we have to offer and maybe we’ll invest with it at some
Charles:
Point. Okay. George, thank you so much for coming on today. We will put that link into the show notes and where you can pick up the book right there. And thank you so much. Looking forward to connecting with you here in the near future.
George:
It’s been a great pleasure. Thank you so much, Charles.
