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The #1 Real Estate Investments Nobody Talks About - Arthur Hood · The Hannah Hammond Show

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Welcome back to the Hannah Hammond Show.
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I'm here today with Arthur Hood, who is a serial entrepreneur and
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real estate developer and investor, and he's been through
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a wide arrange of businesses and still owns and operates multiple
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different companies. And we just spent 8 hours
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touring. Was it four or five of your
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projects between? Five projects between here and
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in Las Vegas. Yeah.
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So we got up early this morning, watch their new project
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development in downtown Phoenix, right by the stadium.
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And then we hopped on his plane and flew over to Vegas and
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walked four projects there, one that was completed and a few
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that are just sites. So I'm super excited to be
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sitting with him here today and to hear his story and share his
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journey with you. And you're currently the VP of
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your Space America, which is a large.
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I'm currently AVP of Capital Markets, member of Board of
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Directors and one of the three original shareholders.
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You said better than me, yeah, of of of your space America,
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which is a large storage brand and they are raising capital for
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their projects and have completed some projects.
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And so it was really cool to see what you got going on today.
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And you flew all the way here from Dallas, TX?
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Jumped in the jet, flew out last night from Dallas, got in here,
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met you with you this morning. We went out to our Phoenix site,
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then we went up to Vegas and we went out to our site on Owens,
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which is almost done. So you saw two of the four
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Opportunity Zone projects and then you saw a completed project
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up there, Rancho and then two in the pipeline, the Mount Hood
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project, which we are currently raising capital on.
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That'll be a 15 acre storage development, a huge site, boat,
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RV, climate controlled and even some old non climate controlled
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out there next to the Air Force Base.
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And then a very nice site over in Henderson.
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It's going to be a very modern but not really look like a
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storage. So it's going to look like an
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apartment building. And that was the one by the
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residential. Residential neighborhood there
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in Henderson. Yeah, it was so cool to see
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these projects. And most of these projects other
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than the really big one, Mount Hood, are about 150,000 square
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foot so. These, yeah, they're all 120 to
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160,000 square feet, 1000 to 1200 units.
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So cool, so cool. I'm excited to be a part of it.
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It was cool to to go look at them all so but yeah, thank you
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for being on the show. You're just awesome and it's
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been so great to get to know you today And I know we were
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connected through a friend, through one of the masterminds
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that we're a part of and I just really would love to dive into
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your story 1st and then we'll get into some technical stuff
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about your deals. But I mean, you're as serial
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entrepreneur and you have been forever and you started
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businesses really young. So can you walk us through kind
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of that journey and what led you to get into entrepreneurship and
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how you just progressed down that path and ultimately ended
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up in real estate development I. Think it was it.
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It was just kind of a natural progression.
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We talked about a little bit in the airplane.
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My dad was an entrepreneur, had a manufacturing company
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engineering background, like to invent machinery and equipment
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and things like that. Never really wanted anything to
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do with a chemical plant manufacturing business.
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I just didn't got interested in real estate at a young at a
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young age. And I knew that I didn't really
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care that much for school and nor did it care for me.
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And I knew I wasn't going to be a doctor, lawyer or engineer.
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So that wasn't going to happen. And I decided I wanted to work
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for myself because I valued freedom over anything.
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And then I just kind of grew into different, different,
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different things. You tried some things that
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didn't work, tried some things they did work.
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And then I overtime, you know, I built up a real estate company.
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I'm involved heavily now and self storage development, but
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I'm still own a home building company.
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I'm still in land entitlement land development.
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I also own multifamily, single family rentals.
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Got a little industrial, so pretty heavy in the real estate
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space. I've got investments with a
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couple of other partners and some industrial metal and other
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mining operations across Africa where a couple different mining
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operations have been in earlier years, it was in coal business.
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I had some coal mining operations that kind of
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transition to how I wound up with some of those same people
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in the industrial metals mining in Africa, been oil and gas,
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still have some ENP production done a little bit of metal
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rights, still own some royalty rights.
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And then I started getting in the last couple years started
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getting into a little more industrial metal manufacturing.
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We we're now have, I have an equity investment in a company
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that does manufacturers truck bodies.
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They're in Southern California called DS24 and we manufacture
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truck bodies, refrigerated bodies, containers, roll offs,
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everything that you can, that you can mount on a cabin
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chassis. We're even doing some some fire
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bodies and some other things like that.
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So that's a manufacturing company.
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We're trying to grow that have a glass installation and and
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cutting and manufacturing company in Birmingham.
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We do some residential showers and that's kind of how it
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started. But over the years, last year or
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so, we've we've done a lot more commercial storefronts, a lot
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more buildings, a lot more complicated glass.
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We do some high end conference rooms and that's kind of fed
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into the home building company. We supply our own glass and
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showers. So pretty wide variety of
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things. And then I've been a private
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equity investor and I'm telemedicine company in Latin
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America and some other deals. So I'm always involved in just
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different things. That's so awesome.
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When did you get, I mean, obviously your dad was a
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entrepreneur and when did you, did you have that bug right away
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just watching him or when did you?
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I think so. As we went over earlier, he was
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much older. So there's definitely some age
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difference there and other reasons, but I think I always
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saw doing something on my own, I always saw owning the store
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instead of working in the store. I think that was the biggest
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difference. I just never could see myself
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working for anybody other than me.
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Yeah, and you think it was him that instilled that in you?
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I would say half him and half me.
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Yeah, just in your blood. Yeah, I know.
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I always wonder that right is if, if I was in a whole
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different environment, a whole different childhood, whole
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different situation, would I still have ended up being an
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entrepreneur? And the answer is 100% yes,
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because it's just in my blood. I'd agree with that.
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I think, you know, like I said earlier, most people don't do
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the entrepreneurial journey because it is easier to get a
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job. This is the most difficult way
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to earn a living and for a long time you won't make as much
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money as somebody else, but eventually you'll make way more
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money. You just have to go through and
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pay the time to get there and somebody says, well, how do I
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teach you how to do or can you teach me to do it?
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Not really. You know, I can help you do it
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if you're already predisposed to be an entrepreneur.
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I can help you become a better entrepreneur if you're
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predisposed to be a real estate developer and you're, if you've
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done, you know, flipped some houses, maybe, you know, bought
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a lot, done a lot, split, you have some basic knowledge.
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I can help you grow and become a lot better.
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But I, what I can't do is take somebody from the couch who
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wants to, who's never done anything, who in their mind
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wants to do it. They're not committed to do it.
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Can't fix that. That's different.
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I can't do that because you've got to be to be an entrepreneur.
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You have to be part attorney, part accountant, part stubborn
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is a mule, which helps. And you've got to be able to
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figure out everything. You know, I always go with fit
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fo figure it the fuck out. There isn't any.
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There ain't a damn thing I can't figure out how to do.
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And you've got to be willing to figure it out.
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Put in the blood, sweat and the tears.
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Fight the UPS, fight the downs, some of which are out of your
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control market cycles and you're in real estate.
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You could have finished a project that's worth $3,000,000.
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Well, market cycle, there's no buyers for it.
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I mean, there's there are things that are beyond your control.
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You have to be willing to work hard, be stubborn, work more
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than anyone else, put in 100 hours a week for years before
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you start seeing the real reward of that lifestyle.
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And it takes a toll. People that are married, they
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got kids or whatever, you know you're not going to be there for
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every baseball game or football game or whatever.
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You have a business to run and you run that business through
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building connections. You're going to travel, you're
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going to be with people. You know, you may not be home
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for every holiday. And when you are, you know, I
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can think the number of holidays that I've been on the computer
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doing emails are on the phone. There's a lot of some of the
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very successful guys I do business with, they work really
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hard. They'll answer the phone on
8:25
Christmas morning, not that you should, but they do.
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You know, it's, it's just people work might be a short call, but
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everybody's doing something because the people that are very
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successful, it's part of their life.
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That's what they want to do. Yeah, I know.
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And I, I say that and we were talking about that on the plane
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is just the relentless tenacity to just keep going because it's
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going to be hard and you're going to lose.
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And you're going to work a lot, and you're going to not know the
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answers, and you're going to make bad mistakes, and you're
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going to work for free or work for losing money, but you just
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keep going. You have to keep going.
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You have to decide that's what you want to do.
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It has to be in your blood. Somebody that's that it's in
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their blood that they want to do it.
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I can help them and help them grow and learn.
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But somebody who thinks they're just going to go from making
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nothing to all of a sudden having the magic formula to get
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rich and, you know, have all this stuff, They don't see the
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years it took to get there and they just want the result
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without the work. They just.
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Want to get rich quick? Take the next pill, Take the
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next business opportunity, jump on the next fad.
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Whatever. Yeah, and not put.
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In the and not build a core foundation, I have a core
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foundation of businesses. I have income producing real
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estate, have some bar and entertainment venues that
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produce cash flow. I have some other businesses in
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manufacturing and and in other areas that all produce revenue
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that then I can go and deploy and invest in real estate.
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Then as we grew the real estate company, now that we're doing
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these large storage projects, now we raise outside capital, we
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bring in family offices at private equity investors, people
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that have sold businesses, people that need to deploy
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capital for tax benefits or, or what have you.
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And then we really build the storage business out of that.
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So it's, it's everything going towards a reason.
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Yeah. And what were some of the early
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struggles that you experienced in your life that that you had
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to face and overcome? I think the earliest, probably
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the earliest struggles were just figuring out what you didn't
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know without a lot of help because you know, I'm only 43,
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but I'm a little pre everything being on YouTube and and you
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know, that wasn't all there. So you kind of really did have
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to figure it out. Luckily I had a decent network,
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some good attorneys that helped send some deals my way, some
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good Realtors. So just you had to work your
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network. Your biggest strength in any
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business is your network. Having people in your Rolodex
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that you can reach out to when you need something, but also
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they reach out to you when they need something.
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You help them, but you also wind up with deal flow.
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Opportunity comes in groups and in waves.
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You're good at something. Things happen your way.
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Right. And what gave you, I think I was
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reading about you, that you, you started a drilling farm and a
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catfish farm early. On before you.
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Early on I had a couple 100 acres in just outside of Utah,
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Alabama that we turned into Catfish Commercial.
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Catfish Farm ended up selling that and then I had a small
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trucking company running about 6 dump trucks and then that grew
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into a directional drilling company.
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So we installed the fiber lines for like Level 3 and a few of
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the other telecommunication companies.
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We would do the road and the river and the Creek crossing
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things as you couldn't open trench.
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We would drill underneath and run fiber lines.
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How the hell do you get into this stuff?
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I don't even know that that one. I don't know.
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I just I did. That's so wild.
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And then what got you into real estate because you also showed
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you got into land entitlements? Just understanding a little bit
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of, you know, you got the 20 acres on the corner isn't worth
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much as a hay field, but 20 acres on the corner approved and
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subdivided for the gas station, the fast food restaurant, the
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mini center a mile up the road from the Walmart that had value.
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And I learned early on you could option or tie up the property
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for not that much money and then you could work the entitlement
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improvement process relatively easily.
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And then you had a piece of property that you know, value
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might have doubled or tripled just because now it had an
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entitled use. And how did you learn?
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That I have no idea. I just figured it out.
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Somebody tried to say, well, how did you learn that?
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I saw people do what I grew up in a fairly affluent community
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of Mountain Brook, AL and which was very old southern in lots of
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ways. But people there were either
12:45
doctors, lawyers, engineers, or entrepreneurs that owned
12:48
businesses. So you saw people do lots of
12:52
things that made money, you know, as a wealthy family there
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that owned a scrap metal business.
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They literally, you know, owned 7 houses, including Aspen out of
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scrap metal. So you just saw growing up,
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people making money from not the sexiest businesses, but they
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just made money. Yeah, yeah, it's really cool to
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see all the different opportunities out there to make
13:14
money and to grow and build wealth.
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And that's awesome because I think about that, you know, I
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came up, I grew up in a not affluent neighborhood or a
13:22
family. And so but I still had that bug
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of like, I want to be successful, I want to push, I
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want to build. And I had a friend who had her
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parents owned a general construction company.
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And that's what ended up giving me the idea of like, oh, I'm
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going to start a construction company and I'm going to get
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into real estate and all that stuff.
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So it's always fascinating to me to see where people come from
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and how those early days influence, like what path they
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take in their life. And I think it just helps bring
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out more of who you are as you lean into the things that bring
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you energy and like that you get excited about when you're
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younger and you just start to follow those types of paths.
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You know, I think I, you know, I knew I never really wanted to
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School never really fascinated me.
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I was really good at history and math, not so much in English.
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I still can write a probably the only guy that can write a three
14:05
page sentence. This was never my stronger, but
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I can do mental math easily. Math has always done well for me
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and I liked history studying the past, studying successful people
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throughout history. I found that fascinating.
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When I was younger, we had some family friends that had a, a big
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farm in Utah, Alabama, and, and then the guy that used to a lot
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of their excavating and construction work.
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I helped out a little bit just for fun.
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And so when I was little, let's say little 8910111213 years old,
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you know, I was driving tractors, 4 Wheelers,
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bulldozers, excavators, lowboy, 18 Wheeler around moving
14:44
equipment, just stuff when I was little and I still liked running
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equipment, but I knew early on I liked doing that, but I wasn't
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going to make a living doing that.
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And then kind of full circle now I still make a living with
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equipment, I'm just not the one running it.
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Make a living with equipment on our construction sites, on our
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subdivision developments and in the mining business.
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So all of it kind of came full circle.
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I just still get to play with a bulldozer when I want to, but I
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don't have to run one for a living.
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Right. It's the best way to be.
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You can still enjoy it when your hobbies become work, they're not
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so fun anymore, right? Yeah, so and so.
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I mean, how did you make your first million?
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First million was like everybody was hard.
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It was combination of doing a little bit of everything.
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The trucking and the drilling company made me money, put money
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in my pocket, took some of that money, started investing little
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bits in real estate and I had built up a little money from
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that. And then I had first time I
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flipped a couple of entitled piece of properties across the
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million. Oh nice.
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Yeah. And then and then for a while I
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did a lot of loan brokering, financial loan brokering on
15:52
larger commercial deals. I did a with me and incidentally
15:58
one of the guys, the third partner in your space is a guy
16:02
used to do some with and we did a couple of pretty big
16:04
transactions. We did a 30 million land loan
16:06
that I got paid well on down in Gulf Shores.
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We did a 36 million refinance of a building 30 over span a couple
16:15
years, did a couple $100 million in financings.
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Well, you know, pick up all that stuff was complex.
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A lot of the stuff was 2 points. Yeah.
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Yeah, there's a couple of 1,000,000 bucks in your pocket.
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You take that money and then you start doing things with it.
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But that gave you the first influx of real cash.
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Yeah. That I didn't have, you know,
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because you know, you, you close one loan, you know, all of a
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sudden you got 300 grand in the bank.
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I know. Tell me about it.
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I love this business. You.
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Close a complicated loan and that you got 2 points on on 20
16:43
million you have 400,000 yeah overnight.
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Now at first it goes to your head and you waste a little bit
16:49
of it because you know, I'll make another 400,000 next week.
16:52
Well, not really, but you know, but that was the first start to
16:55
having liquidity to do something.
16:58
Yeah, Yeah. I like those complex loans
17:00
because you can, you got to work hard, you get paid more.
17:03
The easy loans you don't get paid much, especially on the big
17:05
deals. They try.
17:06
No, we've done some, we've done some big loans at 1/4 and 1/2 a
17:09
point. But I mean we're basically we're
17:10
pushing them to banks. I mean, but I like the
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complicated stuff that not everybody can do because you get
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paid well for it. Yeah, and land is tough and.
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Land is extremely tough and. Horizontal work and.
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And horizontal financing, horizontal construction is tough
17:27
land, Horizontal construction, which is just another facet of
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land, you're just improving the dirt, but you don't have a true
17:32
exit. And most of your home builder
17:35
takedown contracts are at best Hope certificates anyway,
17:40
whether if you look at the contracts of most any of the
17:42
national home builders, and I've done subdivisions that I've sold
17:45
to them, you know, they agreed to buy so many lots at a certain
17:48
time or so many lots at a certain price, but you have to
17:52
provide the infrastructure and keep building for them.
17:55
But if they ever want to stop buying, they pretty much just
17:58
forfeit a deposit and stop buying.
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So that's what makes those hard to finance.
18:01
Yeah, especially if and especially if you're in turmoil
18:04
in the market, correct and you're in a down market and.
18:07
They, you know, luckily I just sold AA600 lot subdivision last
18:11
year to Dr. Horton in Baldwin County, Alabama, a little over
18:14
600 lot subdivision, 300 plus acres.
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Was a little nervous about them closing because the market had
18:21
just started to slow. But it's Baldwin County is a
18:23
strong market for them and they went ahead and closed and I did
18:27
quite well on that deal. Gee. 600. 600 lot subdivision.
18:32
And. That one was in my personal
18:33
company HV properties. HP.
18:36
HV. HVI got HP, so HV and HP, so
18:42
that's so fast. And now you have like 200
18:44
rentals and all these come. I mean, you've just absolutely
18:46
exploded. And so you got into
18:50
entitlements, then you got into the same business I'm in, you
18:53
know, capital brokerage, and then, yeah.
18:54
I was doing capital brokerage probably since O 6.
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For how long did you do it? I still do a little bit of it
19:00
now, but not as a not as a job or under an entity.
19:06
Had a company called Global Capital Solutions.
19:08
I did a bunch of it way back. I think I still own the entity,
19:11
but I don't really use it anymore.
19:13
Haven't probably done that since probably 2015 when I just
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started doing mostly my own projects.
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But I'll still help out if a developer associate of mine is
19:24
really having some trouble, you know, I can help structure
19:27
something. I'm not cheap, but I can make a
19:30
couple of points on 20 or $30 million and pick up half million
19:33
dollars quick. And it's something that I
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believe in the project and it's doable.
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Then I'll sit there and figure it out.
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Yeah, that's cool. I love this business.
19:42
I have so much fun. But and so when did you start
19:45
buying single family rentals or were you like just buying one
19:48
house at a time or are? You just buying one house at a
19:50
time. I've had at different times I've
19:52
had portfolios. I'd build up 10 or 20 of them,
19:56
sell them off, build up 10 or 20 more, sell them off.
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I'd buy rundown crap, fix them up, refinance them.
20:03
Keep them for a while. I got out of most of them about
20:07
four years ago when the market went crazy three years ago, four
20:10
years ago, I sold most of them because I was my upside was
20:14
huge. And then here recently, I did a
20:18
deal where I picked up controlling interest of a pretty
20:20
big portfolio and I'll probably do the same thing with that.
20:26
Is it stabilized? Some of it is, some of it is and
20:28
we'll probably refinance some of it.
20:30
We'll stabilize some of it, fix up some of it, keep some, sell
20:34
some cool and cherry pick the good stuff that's that's close
20:38
enough to home to manage and get rid of the outliers.
20:41
You know 4 houses in Fayetteville, NC can go away
20:44
just because I'm not going to mess with it.
20:46
Yeah, and the nice thing about being on the capital side and
20:49
being a mortgage broker in the commercial real estate business
20:51
is you get to really understand the development process because
20:54
you're the one you see it all. Yeah.
20:57
I mean, before I did a lot of development deals, helping
20:58
finance them definitely help understanding the business.
21:02
Yeah. And understanding what is
21:03
financial when it's not, because one of the biggest problems that
21:06
entrepreneurs have, especially development entrepreneurs, they
21:08
get not deal fatigues and tired of the deal, but they believe so
21:12
much in their deal, they don't necessarily understand why it's
21:15
not financeable because everything has to be
21:17
financiable. You have to be able to
21:18
underwrite it, put it on a piece of paper, understand what the
21:21
backup exit is, understand what the alternative value if it
21:24
doesn't work for the lender is, how do they recover their money?
21:27
Regardless of how successful the developer's been in other
21:29
projects, you have to understand the deal and a lot of developers
21:33
have trouble seeing it. They have trouble taking off
21:36
their developer hat and then they put on their sales hat, but
21:39
they can't get the sales hat off to actually understand the
21:43
underwriting in the deal of why it may or may not finance the
21:46
way they want it to. Most good deals can obviously be
21:49
financed, but not always the way the developer likes.
21:52
You know, you may have to have prep equity, you may need
21:54
mezzanine finance, you may have to raise a little bit of
21:57
additional equity. You know, senior debt at a cheap
22:01
rate. It's only going to take so much
22:02
of each deal. Right.
22:04
And especially right now, it's getting a little bit lower and.
22:06
Lower. It is.
22:07
Yeah, it is. I mean, three years ago you get
22:10
85% on infrastructure development.
22:13
Now you're at 50% on infrastructure development.
22:15
Yeah, the equity checks bigger. Yeah.
22:18
And as the developer, you have to be willing to sit on,
22:20
especially on the single family, you've got to be willing to sit
22:23
on it for a while. I have fairly low leverage on
22:25
most of the single family I build.
22:27
I'm definitely under 50% debt and I and I prefer to keep it
22:32
that way. If I have to sit on it, that's
22:34
fine. I can refinance to turn it into
22:36
a rental. So far that hasn't happened, but
22:39
I'm not levered to the point that it would that it won't cash
22:42
flow as a rental. Now if I got more cash tied up
22:46
than I should, probably, but I don't have to worry about it.
22:50
Being able to sleep at night is priceless.
22:52
It's a fine balance, definitely is.
22:54
Because we were talking about this too is like debt is part of
22:57
the some of the biggest part of the America dream.
23:00
Like their ability to borrow money and not have to go work
23:03
for it to do projects is huge and be able to scale and
23:06
compound our wealth using other people's money is awesome.
23:09
But with big risk comes big reward too.
23:12
So that fine line of like what's, you know, safe and
23:14
cautious. It's like I always say, for me,
23:17
the Dave Ramsey method isn't what I want to do, but for some
23:20
people, they should do that. They're not equipped to do that.
23:24
But if you can manage debt correctly, understand your
23:27
leverage, match that leverage with cash flow so the payments
23:31
always are a little bit less than the cash flow and have
23:35
enough reserve to cover vacancy, release up an air conditioner,
23:39
repair or whatever. You can build massive wealth
23:42
using controlled debt. If you can get cheap bank money,
23:46
you can build massive wealth off of it and make a good cash flow
23:49
spread between the debt, the taxes and and and and frankly
23:54
get a lot of tax breaks. But some people don't know how
23:57
to use debt, and they really should be cash because.
24:00
They're responsible and they're going to make.
24:02
Decisions and there. And there's probably also a
24:03
point if you use debt well and you built a massive net worth,
24:06
you're 60 years old and you don't want to work anymore,
24:09
well, OK, maybe you sell off a third of your portfolio,
24:12
generate a bunch of cash, pay off the other 2/3, and then
24:15
you're debt free. Yeah.
24:17
That's more of an individual question.
24:20
Right. Where are you at in your
24:21
journey? And it changes as you go through
24:23
each quarter of life. Correct.
24:25
Yeah. And so were did you get into
24:27
development while you were in the capital?
24:29
I did. OK.
24:30
And what was that first development project that you
24:32
got? Well, the way I got in
24:34
development because I had done some more complicated deals, I
24:37
had some deals where I in lieu of a cash fee, I took small
24:41
equity percentages in the deal, some of them not so small.
24:45
So that's kind of the the first four way into that And then
24:49
during the O 8 crisis, a few of the deals that I was in, you
24:53
know, stalled out. Couple of them I wound up owning
24:56
the whole damn deal. Oh geez.
24:58
Because they, the developer basically walked away.
25:02
So I learned from, you know, the bottom back up as far as how to
25:08
recapitalize and fix some deals. What were some of the things you
25:12
learned or some of the strategies you used to
25:14
recapitalize and? Figure out everything you can to
25:16
get the cash flow quickly. You know, if you've got a
25:18
project, a property that well, you could master plan it and
25:22
it's going to sell off at this and this and this and this.
25:26
But if you just go and sell that corner right there and not owe a
25:28
damn thing and sit on the rest of it free and clear, sell off
25:31
the damn corner, a lot easier to carry it because land isn't free
25:34
even if it's paid for. You got taxes, you got
25:35
everything else to carry it. Right.
25:38
And me personally, I try to use very limited debt on land deals
25:43
because it has no cash flow. So I don't like a lot of debt on
25:46
land. The couple of those big
25:47
subdivisions I did now they were big.
25:49
I had to have some debt on the land, but I only had a little
25:53
over 2 and a half million of debt on it.
25:55
And my other operating businesses could cover that
25:59
cover that carry. Otherwise, I wouldn't want that
26:01
kind of debt on dirt. Yeah, I don't mind debt on
26:04
something that pays, but something that costs, I don't
26:06
like a lot of debt on. Liabilities.
26:09
Liabilities that taking money out that aren't putting money
26:12
back in your pocket. Yeah, land is tough and it's
26:15
hard to lend on. Because and in the right
26:17
scenario, if you, you know, if you catch the land just at the
26:20
bottom of the cycle and then as the cycle starts to increase,
26:25
you know, every demand picks up, you get the land entitled and
26:28
you're exiting the land mid cycle, you're great.
26:30
You don't want to buy and entitle a bunch of land end of
26:33
cycle and have to sit through the next three to seven years.
26:37
Yeah, that's not fun. And So what were those first
26:39
projects that you did you you said you end up taking a project
26:42
back? That you just a couple of small
26:44
subdivisions in Baldwin County that I was involved with and
26:48
then I wound up with a couple of beachfront property deals where
26:51
I went up with some condos in lieu of payment.
26:55
Were these the ones that you had given?
26:57
Gotten equity in lieu of the loan?
26:58
Payment the loan. Fee.
27:00
I did. Oh wow, you got the whole
27:01
properties back. One of them got the whole
27:03
property back, the other one I just got some selected condos in
27:06
the building. Gotcha.
27:07
Cool. And and then what happened from
27:10
there? I just kept working That angle
27:13
was it ran a small company that did complex financial
27:17
structuring for for debt deals, helped raise a little bit of
27:20
equity and at that point started transitioning into some bar
27:24
restaurants and and some entertainment venues that were
27:27
that had come my way. One was through a shopping
27:29
center development. I've started doing that.
27:32
I was also involved in another couple shopping center
27:34
developments where I helped put the tenants in and ended up
27:37
owning a piece of that. And then started doing some of
27:40
the single families buying, you know, the original fix and flip
27:43
junk houses, fixing them up to at least be inhabitable rentals.
27:47
And then it started moving more into, OK, well, you know, I've
27:50
been through four or five cycles on development deals, helping
27:53
provide initial financing and permanent financing.
27:56
So then I started doing my own deals.
27:58
And then I take a little bit of cash and said I want to
28:02
diversify a little bit. And I started, you know, looking
28:05
at operating businesses that were going to pay me money
28:07
because the one thing I did learn, the real estate business,
28:09
make a lot of money this month, starve for six months, make a
28:12
lot of money this month, starve for six months.
28:16
So I started getting into operating businesses really
28:20
heavily in the last seven years where I'm in various industries
28:25
on stuff that's, you know, has sales, generates revenue every
28:28
day, makes money every day, makes money while you sleep,
28:30
makes money while you're awake, you're generating money every
28:32
day. All that, you know, combines
28:34
together. And now that gives me the
28:35
ability to go out, tie up bigger parcels of property entitled
28:39
bigger pieces of property, hold stuff for development, build
28:43
more multifamily, build more storage.
28:47
Now generally the storage I may, you know, pick up the property,
28:50
entitle it and then may flip it to our storage development
28:53
company. But it gives me some flexibility
28:55
because I have cash flow coming in.
28:57
One of the one of the things that I think some real estate
28:59
entrepreneurs miss is they don't run enough cash flow businesses
29:04
or invest outside of their niche of real estate so that there's
29:09
always money coming in the door. That is a fact.
29:13
You need money coming in the door.
29:14
You need operating businesses that are paying you money every
29:19
day. That way you can invest in
29:21
apartments, hotels, whatever you do, but you've got money coming
29:25
in the door every day. Yeah, Yeah.
29:27
I see so many sponsors get in those situations where they're
29:31
developers, you know, on these big projects and they're equity
29:34
rich, cash poor, and they're always running into cash issues
29:36
and having to inject cash back into the projects and they're in
29:39
this really not fun situation and they work so much.
29:42
And I've made some great deals that way.
29:44
I've had developers come to me that need a chunk of cash, and
29:46
they're very wealthy on paper. You know, guys worth 100 million
29:51
bucks on paper, but was out of cash and I was able to cut a
29:54
very sweet deal for myself because I was able to inject the
29:56
cash at a time they really needed it where if the developer
30:01
had had other cash flowing, businesses might not have wound
30:04
up in that position. So I think it's important that
30:08
every entrepreneur, if they're heavy into real estate, also has
30:11
other sources of income that are paying money every day, every
30:14
week. There's there's always money
30:16
coming in. Yeah, 'cause these are long ass
30:18
projects, you know, 345710 years.
30:21
Yeah, some of these subdivision developments could be 15 years,
30:23
three phase major developments and you may not really see money
30:27
coming into your pocket till the latter 5 or 6 years.
30:30
Yeah. And how do you recommend people
30:33
navigate that? Because you we all hear the
30:35
thing, Jack of all trades and master of none.
30:37
Just focus on the one. Thing the true statement of that
30:39
is not that you know, the true statement of that.
30:42
What is it? I'd have to Google it.
30:43
Somebody have to Google it, but it's it's Jack of all trades,
30:46
master of none. But better to be somebody
30:49
actually should Google that really quick because it's
30:51
actually cool because it is not what it says.
30:54
It's the opposite. It is absolutely the opposite of
30:56
Jack of all trades, master of none.
30:58
The full statement is completely opposite of that.
31:02
Because it's an entrepreneur. You pretty well are a Jack of
31:04
all trades. Yeah.
31:06
And you better be pretty damn good at all of it.
31:07
And you just find the right, who's the right operators or the
31:11
the masters in their craft. I guess you could see it that
31:14
way. But as entrepreneurs, we have to
31:15
wear every single hat. As you said, the the CFO, the
31:18
CFO, the CTO, the CEO, like you have to be everything at some
31:21
point. I always say your HMFIC had
31:23
motherfucker in charge and you better figure it out.
31:27
Yeah, yeah. I mean, how do you advise
31:29
people? Because like, if you're somebody
31:31
who is. Like I said, I'm really good at
31:33
advising people that have already done something and are
31:36
growing. I have a really hard time
31:39
advising people that have never done anything to get started
31:43
because just the knowledge gap is so far.
31:47
Right. No, I'm talking about already
31:48
successful people that are successful real estate
31:50
developers and don't have that reliable cash flowing enterprise
31:56
Oregon business OR or means over here.
31:59
How do you advise? But they're already working
32:01
12-18 hour days 7. Days they need to figure out how
32:04
to work a little more and how to buy some cash flowing
32:07
businesses. There are entrepreneurs,
32:09
investors and business owners in in boring blue collar businesses
32:13
that want to retire every day. Figure out a way to start buying
32:17
those businesses so that you have that cash flow coming in.
32:21
And so do you normally buy businesses versus start them?
32:23
Usually I've done both, but I'd always like to buy something
32:27
that's got a little bit of cash flow and grow it, then start
32:29
from scratch. And what type of industries do
32:32
you like outside of real estate from just the cash flow
32:34
perspective? Just cash flow perspective.
32:37
I like certain entertainment venues, bar, nightclub, live
32:40
music. Very particular on that.
32:43
I like manufacturing, domestic US manufacturing of something
32:48
that's got a decent barrier to entry that nobody's just going
32:51
to create tomorrow. And then I like home services,
32:55
heating, air conditioning, electric, you name it, any of
32:58
the trades because as we talked about earlier with the foreman
33:00
on our Phoenix site, people aren't in the trades that will
33:04
not be replaced by AI at any point in time.
33:06
It's jacks. It's Jack of all trades is the
33:09
master of none, but it's sometimes better than the master
33:14
of 1. Yeah, it's always better, I
33:16
think. It is, that's why I always hate
33:18
when people quote that because they only quote half the fuck
33:20
it. Though, Yeah.
33:22
Because it's Jack of all trades, but better than a master of 1.
33:26
Yeah. I mean, you have to be to be an
33:28
entrepreneur. And most people who are become
33:31
very successful at some level own their own businesses or
33:33
invest in businesses. They're not just doing the one
33:36
thing even, you know, if they're a doctor that's a master heart
33:38
surgeon, they're still investing.
33:40
Their money and other we'll talk about it more with when Jeff
33:42
comes on a little bit. But the tax codes not written
33:45
for anybody except business owners and entrepreneurs.
33:49
If you work a normal W2 job, you get fucked.
33:53
The government fucks you. There's no two ways about it,
33:58
but if you're an entrepreneur, you own your own business and
34:01
you spend a little time educating yourself on the tax
34:03
code, you can keep a lot more of the money you make because you
34:06
get to spend money, invest money, take care of growth
34:10
expenses before you pay tax. Where AW2 employee you just tax
34:14
man's there for the first for the first penny, you know, and
34:18
I'm not here to debate whether right, wrong or indifferent.
34:21
I don't get into that. I'm just stating tax codes
34:24
written for you to own a business.
34:26
Yeah, I remember when I became an engineer for CAT, 20 years
34:30
old or yeah, I think it was 20, The first paycheck I got after
34:34
four O 1K, taxes, insurance, all these things.
34:37
It was nothing. And I sat there at my desk and I
34:41
literally started crying. I was so pissed.
34:43
I'm like, I work so hard, where'd all my money go?
34:46
And I was like, there's got to be a better way.
34:48
I'm not doing this. No, there is a better way.
34:50
Yeah. Oh yeah.
34:51
And it's way better. I mean, if you look at a
34:54
compound calculator and you can compound your wealth tax free or
34:58
with very little taxes over time, it's a game changer versus
35:02
going and being AW 2. And if you are AW2, there's
35:06
strategies. In real estate you get equity
35:08
growth, so you get appreciation and depreciation on the same
35:12
asset. You don't do that on your W2
35:16
job, so the depreciation generally covers most of the
35:19
rental income, so that's more or less tax free.
35:21
Then you get other depreciation that covers some of your other
35:25
income while the property is becoming more and more valuable.
35:29
And then at a later date you can refinance the property, take
35:32
cash back in your pocket, which is in the form of debt and
35:35
that's tax free exchange. So you buy a property for 100
35:38
grand, put 100 grand in it's worth 200 or cost basis is 200.
35:42
Now it's worth 400. Go to the bank, you borrow 300,
35:44
you put 100 in your pocket tax free.
35:47
Plus you get to depreciate the asset to offset your other
35:50
income. I mean, the system is rigged for
35:53
owning a business, not for AW2 job.
35:56
So if you really want to see the in the compounding difference is
35:59
massive. If you make 100 grand a year in
36:02
real estate business, if you keep most of it, versus if you
36:04
make 100 grand a year in a job and you pay a good chunk of it
36:08
to the government, one's going to grow a lot faster than the
36:11
other. Yep, yeah.
36:12
I don't know how everyone is an entrepreneurs, but it's just
36:15
they're not that everyone's cut out for it.
36:17
Unfortunately, everyone's not cut out for it.
36:19
I'll agree with that. But also there's no financial
36:21
education in the school system. Yeah, I mean, people to barely
36:25
people don't know what a checkbook is, a credit score.
36:28
They hear a lot on the Internet about credit, but they really
36:30
don't understand it. But they have no idea how to
36:33
structure themselves as a business.
36:34
I mean, even AW2 employee can do certain things, they can invest
36:38
with one spouse, can become a real estate professional and
36:40
they can take advantage of passive losses.
36:42
But nobody teaches this. I think one of the biggest
36:45
failures we've made in the school system is we just create
36:47
employees. We do not create free thinking
36:50
entrepreneurs. I know it's so sad and that's, I
36:54
mean, I know that's Robert Kiyosaki's.
36:56
Mission. But that's another.
36:57
Yeah, that's another. That's a whole.
36:59
I know. That the subject of.
37:00
Box, but I think it's rigged like that.
37:02
They don't want to create you. Don't you want employees?
37:06
Yeah, well, I, I don't I, well, big.
37:08
Corporations would. Yeah, right.
37:10
Big corporations, right. I like 1099 contractors because
37:13
then they can have their own business and write off their
37:15
expenses and they get to act like an entrepreneur, like an
37:18
entrepreneur within the business.
37:19
And I like that. And then I don't have to pay
37:21
their taxes and they don't have to pay their taxes because I can
37:23
teach them these strategies to help them grow.
37:25
Because I want all of my team members to be successful and
37:29
make tons of money. I don't want to be like sitting
37:31
on my ivory tower and everybody's miserable and giving
37:34
all their money to government. So I try to you made a
37:35
commentary, you know, millionaires are very good at
37:37
making themselves money. Billionaires are very good at
37:40
making everyone around them a lot of money and that, and
37:43
that's a key difference. Yeah, yeah.
37:46
And that's what you do now with raising capital and you make up
37:50
people a lot of money. And it just makes yourself more
37:52
money. Right.
37:53
I mean, that's what you've always done.
37:54
The foundation of the business, the the money that you make is a
37:58
direct correlation of the size of the problems that you solve
38:00
for other people. Correct.
38:01
Yeah. So I've always liked that
38:03
saying, yeah. Solve big problems.
38:04
Make big money, solve little problems, not make much money.
38:09
Yeah, I had one of my my mentors is a billionaire right, right
38:13
around there. And he said that same thing.
38:14
He's like, don't worry about your own growth, just worry
38:18
about the size of the problems that you can solve for other
38:20
people. And your growth is a byproduct.
38:23
Like you grow as big as you want to grow.
38:25
So is it interesting viewpoint and it's true.
38:29
I think it's just solve the. Problem and be careful how you
38:31
spend your time. You know, like we talked about
38:32
earlier, you know, I don't, you know, I have a housekeeper that
38:35
comes in a couple of days a week.
38:36
And it's not because I'm too good or not going to do that
38:39
stuff, but my time is better suited to doing other things.
38:42
So I've, I've kind of learned that, you know, I have a couple
38:45
of assistants that work for me and they take care of a lot of
38:47
things and that, you know, basically, if it's not making
38:50
money or growing the business or the goal of one of the
38:54
businesses, I don't do it. I'm better off big vision
38:58
thinking, putting people in the right places, meeting new
39:02
people, understanding opportunities, underwriting
39:05
deals, doing the things that I know how to do and let somebody
39:08
else take care of everything else.
39:10
Do what you do best and delegate the rest.
39:12
Correct. Yeah.
39:13
What? So moving into your space,
39:16
America, what got you into the storage space because you were
39:21
doing land, Were you in a specific asset class when you
39:24
were brokering loans? Or not really.
39:25
I just any form of, I mean, whatever came through the door
39:29
to some degree, got into the storage space heavily.
39:32
Russ Colvin, my partner in the storage company, had built
39:36
another big storage company as an employee and really was the
39:40
only one building their storage business, built it up quite
39:44
large. It sold, made a lot of money,
39:46
but he was still an employee for it and didn't it got some, we
39:48
got a nice bonus, but it was what it should have been.
39:51
And then he started wanting to do it on his own.
39:54
He created your space. He partnered with a guy named
39:57
Robert Pepiri who knew me and then Robert and I came in and
40:03
helped Entitle Help, put up the deposits, tie up properties,
40:08
finance the land acquisitions, which are, you know, tough to
40:10
finance as you know. So we bought some of the dirt
40:13
and then I put some some of my core investors, some of my
40:16
friends together and we all had cash and we were able to take
40:19
down the initial properties in cash and then internally we
40:24
raised the equity to build these.
40:27
And that's how I wound up on the board and as a as a large
40:31
shareholder of your space. And we're just decided to grow
40:34
that. You know, our goal I really
40:36
think over the next five to seven years is to do at least 2
40:41
to 2 1/2 billion of construction cost of within seven years and
40:46
hopefully have an assets worth in excess of 5 billion within
40:51
seven years. We have the deal flow for that.
40:54
We're starting to get you know traction on the equity and
40:56
institutional equity to get there.
40:58
And then you know, we'll be a very large player in the storage
41:02
space. But we're we're we're finding
41:04
that it's better and we've all done one off deals that are
41:07
value add or storage conversions.
41:10
But the equity gain of a ground up deal buying raw dirt
41:15
entitling it. You know, we had a property that
41:18
we, we purchased for $700,000 and after we got entitled we it
41:22
was reappraised at 3,000,000. So our biggest value is
41:27
entitlement. And then of course taking that
41:30
entitled property, building something because our equity
41:34
upside. I mean we got deals that will be
41:35
in for 25,000,000 that'll be worth 50 shortly after
41:39
stabilization. You know, that's allowed us to
41:41
generate an average IRR of 39%. That's insane.
41:45
A 2.9 multiple on equity, you know we got one deal that'll
41:49
probably a four multiple on equity.
41:51
Most are going to be in the 2 and 2.7 to 3 three times on
41:56
equity, so a million and two nine back.
42:00
Yeah. You know, we're working very
42:02
hard to make most of the deals. You put your money in, you earn
42:05
a 10% pref or an 8% pref depending on the deal from day
42:09
one that'll accrue until there's cash flow.
42:12
But once the deal is completed, built and starts to be leased,
42:16
we'll then refinance the deal rate, rate dependent on this.
42:20
And you may get 100% of your money back or 70%, but some
42:24
large chunk, if not all of your money will be returned and then
42:28
your prep stops. But now you still have your
42:30
equity in the deal. And then if you got all your
42:33
money back, the return is infinite.
42:34
So if you got a deal that you put $1,000,000 in, two years
42:37
later you get most of that money back and then three years after
42:41
that. So by Year 5 we flipped a deal
42:44
we built for 20 million for 45,000,000 and your 1,000,000
42:48
gives you a total of 3,000,000 over the history of the deal.
42:51
It's a 3X return between cash flow and equity appreciation.
42:55
It's not bad. You know, storage to me is one
42:58
of the best asset classes because you have multiple
43:01
tenants. So you got diversity of tenants.
43:03
You know if I've got a warehouse and I lose a tenant I'm going to
43:06
feel it and it could take a year or two to re rent a warehouse or
43:10
or a shopping center space where I have to redo the space and to
43:13
put money in for 10 improvement. Even an apartment I may have to
43:16
replace carpet or I may have to do this that or the other.
43:20
Well in the storage I sweep the fucker out and move somebody
43:24
else in. It's easy.
43:25
So. Nice and we don't have to worry
43:26
about eviction in in most states.
43:28
Not every state, but in most states they don't pay.
43:30
You lock them out after a certain notice time, you can
43:34
sell, sell the locker, you know, storage wars, sweep it out and
43:37
rent it again. You don't get the down loss
43:40
time, which I think is is very valuable to the investor.
43:43
Yeah. And then as Jeff will talk about
43:45
in a little bit, you know storage has one really good
43:49
opportunities for accelerated depreciation.
43:51
Do you think more so than other asset classes or just in cost
43:54
segregation in general? More so than certain asset
43:57
classes. Way more than certain asset
43:59
class. Because a lot of that building
44:01
that you were in is all quickly depreciable things.
44:04
The garage doors, the roll ups, the non structural walls, the
44:09
landscape, all of those things can be written off on an
44:11
accelerated schedule. Yeah.
44:13
I guess I never thought of it like that of the different asset
44:15
classes and how that might change the depreciation on the
44:19
cost segregation. Absolutely.
44:22
I really like this whole because I love the idea of entitling
44:25
because I, I, I know so many people that entitle land and
44:28
they triple the money, the value of the land once it's entitled.
44:30
But I don't know really much about that space.
44:32
I've just seen people talk about it and do it, but I've never
44:35
really dove into it. Right now it can be a great
44:36
space, but the problem is right now with a little bit slower
44:39
market, you may be sitting on that dirt for a little while.
44:41
You may get it entitled and triple the value, but you still
44:44
have to have somebody willing to transact and pay you that value.
44:47
Right. And it's not cash flowing until.
44:49
It does, yeah. So what is the process to
44:53
entitle land and what are some of the risks involved in did and
44:56
like if someone wanted to get into this business of land
44:58
entitlements and make land worth more money 2 or.
45:01
Three, work with somebody that's done it.
45:02
I mean, can the land, what is the land zone for?
45:06
You have to do a zoning change. Is it an administrative change?
45:10
Does it have to go to the county Commission of the City Council?
45:13
Are you going to get public neighborhood, put resist, push
45:16
back and resistance? Do you have to do public notice
45:20
where you're going to get a hearing with every Karen in the
45:22
county showing up because you know, she doesn't want anything
45:26
built there. She got to know what you're
45:28
doing and navigate it correctly. And you also need to entitle for
45:32
things that are not only needed and that will make you economic
45:35
money and whether it's the corner lot for the gas station
45:38
or the subdivision or whatever, but you, you don't want to swim
45:41
upstream and entitle for something that the county's
45:44
going to push back on. You know what they don't want in
45:46
a certain area? How do you know?
45:48
Pay attention to learn that the area.
45:50
Find out the local attorney that helps with entitlement there.
45:52
A lot of times you'll hire somebody local that's not really
45:55
an attorney, but they work on entitlements.
45:57
We we have a company in Vegas we use we have some guys around the
46:00
country that we use that specialize entitlement.
46:02
They'll work with a law firm or work separate, but they help you
46:05
navigate the political process of entitlement on property.
46:08
That's what that was going to be.
46:09
The next question is how political is it really because
46:12
everyone that. I Everywhere is different, but
46:14
it's always a little political. Yeah.
46:16
I mean, you're changing zoning. It's it's always going to be a
46:18
little political. Yeah, I know people are like,
46:20
yeah, you know that building, it's supposed to be 3 stories,
46:23
but it's five. It's because of who I know or
46:25
whatever you know, there's a. Little bit of that and I've
46:28
worked in some political stuff over the years.
46:30
You know, as we talked about, I did the ibogaine, I worked on
46:32
the ibogate thing in Texas to, you know, help PTSD and veterans
46:36
and substance abuse with Brian Hubbard and Governor Abbott and
46:41
some other people. Actually cash a bunch of people.
46:43
We all kind of came together about 8 months ago and, and kind
46:48
of work together everybody and they and some people did a lot
46:52
of stuff. They brought in a lot of
46:53
military veterans and got that done.
46:55
But everything, if you if you get everybody on the same page
46:58
to a same goal, same thing with land entitlement, you can get
47:00
things done. Yeah, I guess what would the
47:03
first step be like if, if let's say I would not want to go out
47:07
and there was a piece of raw land and I wanted to build a
47:09
storage facility on it, who, what's the process from start to
47:12
finish to get it entitled in a? Call us, we'll do it. 32nd.
47:16
Call us, we'll do it if it can be done.
47:18
Make sure that it's not something that it that's
47:21
prohibitly prohibited on the property of #1.
47:23
For the current zoning. For the current zoning, because
47:25
now you got to go for zoning variances and that can be done
47:30
potentially, but now you're into public notice of hearings and
47:33
the Cairns get to show up. You try to want to stay within
47:36
the guise of what is allowable under that zoning.
47:39
And but then if you do have to change zoning, which is OK, you
47:42
know, like farmland to something else, just make sure you you
47:46
understand the county rules and and get buy in from the county.
47:50
Show them how it's going to benefit them, their tax base,
47:53
the revenue base and the population.
47:55
Yeah. And what does that process take?
47:57
It's different, different municipalities.
48:00
What? It could take you 3 months to
48:02
two years. Do you have an?
48:04
Idea of California. It could take forever, yeah.
48:06
But how do you, where I'm going is how do you mitigate risk if
48:09
you're going to lock up a property and.
48:11
Try to get you want to lock it up and have a contract where
48:14
maybe you go hard on small amounts, but you don't buy the
48:16
property to get it entitled. Yeah, you know, I know close on,
48:20
but just because you got entitled, sometimes that can be
48:22
a little bit of trick as let's say you tied up the property for
48:25
1,000,000 bucks, put up 25 grand, you're paying 5 grand a
48:28
month option fee. All of a sudden you get it
48:30
entitled. Now you get paid the $1,000,000
48:32
and it may be another year before you sell it.
48:35
So you definitely don't want to close unless you have to until
48:39
you get it entitled for the intended use.
48:42
Then you still have to market it for that intended use and
48:44
liquidated and find a willing buyer.
48:47
So now you may be able to make a lot of money at you in peace.
48:49
You paid a million for. You may sell it for 3,000,000,
48:51
may have a half a million tied up and carry an entitlement
48:54
cost. You may double your money, may
48:56
triple your money, but you got to have the stomach to carry it,
48:59
right? That's where the cash flow
49:00
businesses come in, where you can't afford to carry it.
49:03
Yeah. And then you can not worry about
49:05
it because. You're not relying on it.
49:06
For your cash flow, what are some of the biggest mistakes
49:10
that you've learned throughout your life and entrepreneurship
49:13
and real estate? Hire people when you need them
49:15
and get rid of them when you don't or when you find out they
49:18
don't meet the culture, get rid of them.
49:20
If somebody has a doesn't see the vision you're going towards,
49:25
get rid of them. You know, if you're if you're
49:28
growing the business too big for their comfort, fuck them.
49:30
Get rid of them. Yeah.
49:32
How is their work against you without even realizing it?
49:35
How do you find a players? How have you found them?
49:38
I've done everything from the headhunters to connections to
49:41
people and and like I've said, hire fast, fire faster.
49:46
You know, I I've made the mistakes in some of the business
49:47
keeping people too long because you like them or you think you
49:50
can change them, but either they're going where you're going
49:53
or they can go out the door. Yeah, that's something Pace
49:55
Morby told me too. Is just you're going to have to
49:58
go. You could might have to go
50:00
through 20 people to find one person that's really good for
50:02
one role. That's correct.
50:04
And you and you've got to be willing to say, you know, your
50:08
values are great, but you don't align for the business.
50:11
And then you get people say, oh, you're going to try to grow that
50:13
too big. I don't want to see it that big.
50:15
They may not say that verbally, but you can tell by their
50:18
action. They don't want to see you get
50:20
there. So if they're not a cheerleader
50:22
to where you're going, they're out the door.
50:23
That's good. What else?
50:25
What other mistakes? No negative activity, no
50:27
negative attitudes, period, because it just effects
50:29
everybody around them. Yeah, everything is energy.
50:34
And when there's good energy, when you're going to state of
50:36
flow, your productivity is 5X and if one bad apple rot the
50:40
whole bag. Just get rid of them.
50:42
They got a bad attitude, bad life at home, you know, can't
50:46
fix everybody. Move on.
50:47
Find somebody else. What other good lessons have you
50:50
learned? Never give up and just figure it
50:52
the fuck out one way or the other.
50:54
Make it happen and just continually make it happen, you
50:57
know, and it. And then sometimes you'll see
51:00
people that you don't necessarily think you should get
51:02
rid of, but you just found a better a different role for
51:05
them. Some people will fail in one
51:07
role, succeed in another. Right, it's got to be right
51:10
person, right seat. It might be the right person,
51:13
but not the. Right.
51:13
The right person, right seat, and you got to do a little bit
51:16
of ego management, especially like me where I'm running a
51:18
bunch of different businesses. You've got to make sure that you
51:22
put people in the right places with enough authority to do what
51:25
they need to do, but not so much they hide the problems from you.
51:28
Because one of the things that I've I've said is me on my
51:31
phone's on 24 hours a day, you can, everybody can reach me.
51:35
Preferably I don't want idiots reaching me, but I'd rather have
51:38
an idiot tell me a problem that I can step in and deal with the
51:41
not know about the problem. So you, you know, and then, and
51:44
then I show up at all my different businesses at
51:46
different times and listen even not directly by asking
51:51
questions, but just seeing what's going on and see if you
51:54
know something needs to change because you've always got to
51:57
keep everything moving towards something better.
51:59
Do you run your businesses office Specific operating system
52:02
or no? No, Probably should have looked
52:04
at it, but we should do the OS but I haven't yet.
52:07
Yeah, there's a bunch different out different ones out there.
52:10
There's a guy in Genius Network that has a company called Next
52:13
Level Growth where he kind of creates a custom system based on
52:17
each business and what they need.
52:19
That's it. Seems to be cool too.
52:20
That'd be cool to check out. Yeah, because the OS is just
52:23
like, that's just what it is. But different businesses might
52:25
need a little bit of a different variation.
52:28
I know you said you're using the OS.
52:30
Yeah, I implemented it recently and it's been good.
52:32
It's been good. I just need to find that.
52:35
I think yeah, I don't know as I grow, I eventually want to find
52:40
that COO operator like really own that operational role, but
52:44
we're just we're not at that point yet to where we're so new
52:47
on on the capital side. So but cool.
52:50
So we're going to wrap up here and I'm going to interview Jeff
52:54
with. We're going to talk all about
52:55
cost segregation and. Tax about our number one cost
52:57
set guy, the one that makes sure we're going to have negative K
53:00
ones the first couple years so you can take your your passive
53:03
losses. Speaking my language yeah,
53:06
negative K ones is what I get excited about.
53:09
So what what is your goal for your space America?
53:13
I mean, you had, we had one project that was already
53:15
completed and you're somewhere in the high 30s of IRR, which
53:18
is. My goal is to try to maintain
53:20
our high 30 IRR, try to maintain 2 1/2 to 3X multiple on equity
53:26
and just keep growing that till we become a massive owner of
53:29
self storage. Developer and owner of Self
53:31
Storage. And at that point, do you plan
53:33
to sell them off into a REIT? Or we might sell them off into a
53:37
REIT. We may package some up and sell
53:39
them to private equity. We may keep some forever.
53:45
At this point, we're in a growth mode.
53:47
We're in a mode to make ourselves and our investors a
53:49
lot of money and we'll see where that goes.
53:52
It's a little too early to state how you're going to, you know
53:55
start talking about dispositions prior to knowing exactly where
53:59
the market's going to be at the time.
54:00
Yes, we are going to sell some so we can generate cash for the
54:04
company. We are going to hold some, but
54:06
if we mass a big enough package, maybe we do go to a, you know a
54:10
REIT which would be a tax free event, but we'll figure that out
54:13
as we go. Our number one goal make money,
54:16
passive cash flow and capital appreciation.
54:18
Love it and for those out there who are listening that either
54:21
are newer developers or want to get in development or want to
54:25
scale their development company. Do you have any lessons off the
54:28
top of your head that you've learned that that might be
54:31
valuable for them to to mistakes that maybe they shouldn't make
54:34
or lessons you've learned that'd?
54:36
Be understand having enough cash reserve for double the time you
54:39
think you need and if you're not going to have the cash reserve,
54:42
have the cash flow businesses that can fund it.
54:45
Yeah #1 cause of business failure is lack of working
54:48
capital. And I think another thing is pay
54:50
a little more for a better contractor.
54:52
We are. We're using Arco Murray pretty
54:55
much exclusively now. Nobody's perfect, but they've
54:58
done a massively good job for us.
55:00
And when the little problems arise, they just take care of
55:03
them. And you heard some of that
55:04
today. You had a problem with some of
55:06
the corrugated steel. They took care of it, got the
55:08
manufacturer, and then we fixed it.
55:10
I mean, they just do a little bit more and when you got
55:13
projects all over, it's it's it's good to have a contractor.
55:16
You can count on A plus players, A+ players.
55:19
And you met both of the superintendents today, Both of
55:22
them kind of knew what they were doing.
55:24
They were amazing. I was like, Oh my God, these
55:26
guys are really good. Yeah, it was cool to see.
55:29
And hopefully we'll start seeing some young people decide to get
55:31
into the trades because as you can see, they're getting a
55:34
little Gray. Yeah, I know.
55:36
It was nice that one Superintendent was younger and
55:38
he was a, you know, aerospace. Engineer like Foreman?
55:40
Yeah, under the other guy, but yeah.
55:42
That was, yeah. It was really cool to see.
55:45
And out of the Dallas area. So how has it been?
55:47
Yeah, your area, your hood, no fun intended.
55:50
How has it been? Because you sound like you've
55:53
had a lot of, you know, self funded projects in your your
55:56
days and our partnerships and things like that.
55:59
So the world of capital raising is a whole new world for you,
56:02
right. Over the past recent years, how
56:05
has that experience been? And it hasn't.
56:07
It definitely hasn't been the best market either, like raising
56:09
capital. It's definitely been different
56:10
because in the past I either did projects all on my own or with
56:15
three, 4-5 people that I knew that we just text each other and
56:18
I'd do some of their deals, I'd do some of mine.
56:20
So it's very close group of people or a friend of a friend
56:23
that you know, hey, I got this, can you split it with me?
56:26
That type of thing. And I also do some hard money
56:28
lending. So I'd done stuff with outside
56:30
people, but not that much. This has been different because
56:33
I've had to kind of rethink how we do it.
56:37
We've had to go out and raise private capital from individual
56:41
investors from other entrepreneurs.
56:43
Now we're getting deals with family offices and and larger
56:47
quasi institutions and private equity groups because our equity
56:51
need is much larger. You know our average deal is
56:55
probably 7 or 8 million of equity.
56:57
You can only do so many of those yourself or with your small
57:01
group. So you know we're probably at
57:03
about 70 million raised give or take.
57:05
Go would probably be break 100 million by the end of the year
57:08
in in equity using our ratio of about 3035% equity, that's a
57:13
significant amount of construction will be underway.
57:15
Yeah, significant amount of structure.
57:18
What are some of the lessons you've learned in capital
57:20
raising? What are some of the roadblocks
57:21
that you weren't anticipating? And what are some of the
57:23
strategies that you're doing to raise?
57:25
Capital easier to raise from other and other developers that
57:28
are kind of retiring. They don't want to do new
57:30
projects but have a lot of cash. That's the least because they
57:32
understand what you're doing. The hardest part is when you
57:36
have a lot of smaller investors, which we welcome.
57:38
We love the smaller investor, but it's it's, it's more
57:41
challenging when you have more people in a deal than fewer
57:44
people. But overall, we have a great
57:46
group of investors so far and we have a great group of projects.
57:50
So I'm pretty happy with it. That's cool and I'm still
57:53
learning the capital raising every day, but.
57:55
Yeah, it's a whole different world and I know it's when you
57:58
have a lot of what's your minimum investment. 50,000 but
58:02
really it's 100. Right, Yeah, that's my my fund
58:05
is the same structure, but it's it's a lot more challenging and
58:09
we're starting to see people start to get away from the small
58:12
check writers because it's a lot of work.
58:14
I mean, if you have 1500 investors and they all don't
58:18
really understand development and you really have to educate
58:21
them. And if one thing is or one thing
58:23
doesn't happen perfectly, they don't necessarily understand it.
58:26
And it's a lot of money for them sometimes.
58:28
And they it can be, yeah. Definitely, you know, anybody
58:31
that sees this, that wants to reach out, that is interested in
58:33
investing, you know, they can reach me directly, which is
58:36
Arthur at arthurhood.com or Arthur at your spaceamerica.com.
58:41
But it's easier just to do be directly.
58:44
Yeah, perfect. Well, thanks for sharing your
58:46
information. And so 50,000 minimum
58:49
investment, Arthur knows what he's doing.
58:52
He's got an amazing team. They have the best contractors,
58:54
amazing sites. They're adding so much more IRR
58:57
and value through entitling the sites versus already getting,
58:59
getting them entitled and paying a premium for them.
59:02
So it's cool. I'm super excited to see these
59:04
projects break ground, these other projects that are coming
59:07
up that you'll be raising capital for and start to see
59:10
some more of these get completed.
59:11
Awesome. Thank you very much.
59:12
Thanks, Arthur.