The Conscious Investor
Chasing after Financial Freedom often bankrupts other parts of life.
That’s why the Conscious Investor Podcast goes beyond Financial Freedom and helps investors cultivate Personal Freedom by featuring experts in the core areas of health, mindset, and investing.
If you’re looking to grow financially, if you long to unleash your full potential, and build a life of meaning without bankrupting the most important parts of life then this show is for you!
The Conscious Investor
Ep507 Journey From Chef to Real Estate Mogul With Teddy Mohlman
Have you ever considered that your next big real estate opportunity might be in Des Moines, Iowa? Join us as we welcome Teddy, a seasoned real estate investor who transitioned from the glamorous kitchens of Miami to managing over 600 multifamily units in the heartland of America. Hear how his encounters with high-net-worth individuals during his career as a private chef ignited a passion for real estate, leading him to build a diverse and successful investment portfolio.
Discover the strategic pivots Teddy made during the early days of COVID-19, shifting his focus from high appreciation markets to more stable Midwest cities. Learn about the importance of conservative investment strategies and how maintaining transparency with investors can build trust and ensure long-term success. Teddy shares invaluable insights into navigating the unpredictable world of real estate, emphasizing the need for resilience and preparedness when unexpected challenges arise post-closing.
From critical advice for Limited Partners on analyzing rent growth projections and managing insurance costs to delegating business tasks to avoid burnout, this episode is packed with practical tips and personal anecdotes. Teddy also opens up about his struggles with balancing hands-on involvement and trusting his team, offering lessons on how to scale a business effectively. Plus, we discuss the enriching experience of homeschooling kids abroad to expose them to diverse cultures. Tune in for a wealth of knowledge and inspiration from a true real estate veteran.
Access Julie's calendar, the investor club, Conscious Investor Growth Summit, social profiles and more when you CLICK HERE
Episodes referenced in the introduction:
- Repurposing Your Past
- 3 Things to Understand About Syndication
- The Gut-Health Connection: Holistic Approaches to Total Wellness with Brittney Oliver Baker
- Secrets to Achieving Level 10 Success for Busy Professionals
- Self-Directed IRAs for Savvy Investors
- Mineral Balancing: The Science-Backed Approach to Vibrant Health
Hello Conscious Investor and welcome back. I'm your host, julie Hawley. For over four years, I've paired my background in real estate, investing, education and coaching to create powerful content for you each week. This podcast is where we take a holistic approach to investing by focusing on three ingredients to a life of personal freedom health, mindset and wealth. We'll talk about everything from passive investing through syndication and how to use your retirement accounts to boost your investing, to mineral balancing and gut brain health, and into topics that cultivate your inner strength and resilience so you can thrive regardless of any of life's current events. And yes, those are all episodes currently available and linked in the show notes below. Join me each Monday for a mindset episode and later in the week for an interview with expert investors and health professionals, so that you can experience your greatest health, strongest mindset and build the wisest wealth. Teddy, so excited to have you on the show.
Speaker 2:Hi there. Thanks so much, julie, I appreciate being on.
Speaker 1:Yeah, Well, hey, you know what the Conscious Investor and I we like to just dive on in. So we're going to dive in and get started.
Speaker 2:Perfect.
Speaker 1:What do you do and how did you get started?
Speaker 2:Yeah, so I specifically am a real estate investor A couple avenues there. The majority of the portfolio is heavily invested in multifamily. Our thesis is typically value-add. Specifically, we look for more meat on the bone, more room to add that value through a robust renovation plan etc.
Speaker 2:I got here, funny enough. Generationally speaking, my family does have a real estate background. My grandfather had a very successful business of which he funneled that money into real estate. As time went on, that trickled down to my mom and she's now very happily living off of passive income and that kind of trickled down to me.
Speaker 2:I did not jump right into real estate after college or my younger days. I kind of did my own thing in terms of my own companies and I was in the food and beverage industry for quite some time but eventually circled back to real estate, funny enough. Main reason why was I was again in food and beverage and I was actually a private chef for many years in Miami, florida, which, as you can imagine, a lot of high net worth individuals there, and when I did get the opportunity to ask some of the owners of the residence what they did for a living, a lot of them did fall back on some sort of real estate, either commercial speaking, residential lending in real estate, et cetera. So kind of triggered a little light bulb in my head and started small scale residential fix and flip model. I do have a I'm a realtor as well, so I do kind of a residential arm.
Speaker 2:That's. That's pretty. I would call it an autopilot. Now I have a good team that runs that business, but started again smaller single family scaled up to smaller multifamily. Was broadcasting that on Instagram and social media, had a couple people want to get a little bit more involved and ask me some questions on that and, as you may know, julie, it's similar-ish to renovate a 100-unit apartment complex and instead they do a 10-unit. You just need more money and more manpower so that eventually scaled into larger and larger deals and as of today we have about 600 units plus or minus under management and of which about 450 of those were the lead GPs on. So pretty excited to share a little bit more about that.
Speaker 1:That's really excited. I love that you can see the golden thread of real estate and that through line of saying, hey, grandpa did this, it benefited him while he was alive, benefited my mom, I got to benefit from it and I see this it's kind of interesting, you know, like going all the way out to Florida, you know, private chef, like what? Just before we dive into some of the investing side of things, let's just dive into what were you thinking Like? What was the question? What was this problem you were trying to solve when you were asking these people, as your private chef, what they're doing?
Speaker 2:Yeah, I mean, I've always had that conversation. No, I think I've always just had. I think, you know, entrepreneurs have they're wired a little bit differently, to say the least, right, so I think I've always had that. You know what's next? Always looking for kind of next shiny object, as I always call it, although I'm always trying to stay in my lane, but that's pretty impossible for for us. And I just think, you know, as I was, you know as I was, you know, at that time I had a catering business that was pretty much on on autopilot, the private chef business kind of something.
Speaker 2:I did more on weekends, nights and weekends and just being able to kind of always, always want to ask other people. You know how they got to where they are, you know if they were, obviously you know, 20, 30 years older than me, maybe they can kind of share some, some tips, lessons learned, wins and losses. I was never really hesitant to ask those questions, you know. Obviously you know making sure it was the right time and place. But I just feel like, you know, never really need to reinvent the wheel. I guess I should say just ask kind of what they did right and try to follow that path and make it your own.
Speaker 2:And fortunately enough, just again, everyone just mostly fell back on some sort of real estate and that just kind of triggered that thing in my brain that said, all right, well, I already know it's, generationally speaking, it's one of the best wealth building tools out there. Maybe this is kind of my time to jump into it. So that's kind of what made me shift out of that Love. What I was doing. Food and beverage industry is very tough. You're working every day, 18, 19 hours a day, 365 days a year, so you know it was good money at the time, but I knew that wasn't going to be my forever job and I think the next thing for me was kind of look at that large scale. And real estate was the next, you know, next option for me.
Speaker 1:That's okay. I could totally just spend the next 15 minutes asking questions about transitions and careers and things like that, because I know a lot of people are interested in that. But I know you conscious investor are interested in. All right, what are we doing on the investing side of things? Now, you and I have a few things in common. One, we love fish tacos. That's a no-brainer. Two, we're adrenaline junkies. And three, we love investing in the Midwest.
Speaker 1:It's such a great market to invest in. I'd love to learn about the markets that you're investing in in the Midwest and what drew you to those specific markets.
Speaker 2:Yeah, of course I mean, just like you said, the Midwest markets. For me I sometimes call them like the flyover states. People don't really know about them, especially my investors in Miami. That's one of the biggest hesitations I have from those high net worth individuals is they're like I don't even know where Des Moines is, for example, or Iowa is, but I specifically love the markets. They're more stable in my opinion. Is, but I specifically love the markets. They're more stable. In my opinion.
Speaker 2:You don't see these massive swings of appreciation like you might see in San Antonio, texas, or Miami, florida, or these red pockets that a lot of investors like to solely focus on. And I always have to say you survive on cash flow, not appreciation. I'm very confident specifically in the markets that I'm in right now, where I'm not going to see too much of of a downturn in the multifamily space for the next, you know, foreseeable couple of years. However, in the worst case scenario does, I'm again very confident I'm going to survive on my cashflow versus surviving on that appreciation. So that's one of the main reasons why I personally love the markets. The Midwest nice is also different than the Miami nice or the East Coast nice.
Speaker 2:Seriously, yeah, and then the reason why I got into that market specifically was kind of early COVID days actually, when interest rates were at zero. We were seeing people going in I mean well over asking in the markets that I was heavily invested in, which at the time was in Miami and in Denver, colorado, and I just took a step back and I just said, hey, I don't want to be banking on grabbing this asset just to lock in a 2.53% interest rate and hoping that everything works out down the line. So I took a step back at that moment, looked at my portfolio personally, looked at our investors' portfolio as well, and just said, well, we're heavily invested in these appreciation markets, high appreciation markets, what is next? And we kind of looked at that yin to the yang and the Midwest market kind of was the next best step for us, analyzed a couple markets and eventually ended up falling into Des Moines At the time I was calling it Des Moines with an S, which I later found out is incorrectly said.
Speaker 2:So bought a smaller multi there, just a 10 unit in that property, just for myself and one of the partners. So JV Deal, tried to familiarize myself with the market, ended up turning out very well and then eventually scaled and now we have about 450 units in Des Moines, iowa, currently to date, nice. We recently exited a complex. I saw that, yeah, congrats, I'm excited for you. I saw that, yeah, congrats, I'm excited for you.
Speaker 1:So that's a lot of fun. I'm like golly.
Speaker 2:I wonder if your firm bought my firm's. Well, I assume yours is stabilized. We typically look for meat on the bone.
Speaker 1:Yeah.
Speaker 2:Yep.
Speaker 1:Yep, exactly it was. It was. We invest in what I happily call vanilla. You know, in my own personal portfolio, In my you know, you and I adrenaline junkies I have a high threshold for risk and risk tolerance. But as soon as you're bringing your investors capital in you and I know the moment you lose money, you know I'm like you're out of the game and so. And that means if personally, or if you're out of the game and so, and that that means if personally, or if you're invested in something, and so it's like let's find, let's find boring vanilla where it cash flows and it's just beautiful exactly yeah and that's the tough part too.
Speaker 2:I mean circling back to your last comment. I mean having having multiple hats, right. I mean I, I invest a little bit differently when it comes to my own money and my own projects, right, versus one, like you said, managing other people's money. It's every decision you make when you're managing a portfolio like that it's called a syndication is you need to look back and say is this the right decision for my investors? Right, because sometimes I think of it like for me, it's well, I'd do it, let's go for it. But let's take a step back, right. Look at this as what is the best decision for your investors at the end of the day, and you have to commit to that, that decision, and go with it, right?
Speaker 2:So, um, because I, again, I have personally some properties that I own by myself or one on a partner in in denver and in des moines, and we, you know, we structure those a little bit differently. We, we might be a little more aggressive. It's interesting to have multiple lenses like that to really set yourself up for success, especially, again, being a sponsor or a syndicator managing a decent amount of other people's money. It could be the smaller checks that you think for us a $25,000 check is smaller compared to maybe the larger $100,000 or or 200,000 checks you get from other individuals, but you need to remember that those that $25,000 could be a majority of their investable money at that time. Right, and that's, and that's a big thing and you know you got to make sure that you take care of that money for that person.
Speaker 1:Oh, my goodness. Every single time. And you know, sometimes investors like to sample deals, so you know, and sample teams and such. I've done everything from just putting somebody into a. You're curious about assisted living, but you're nervous about it. Why don't I just put you in the emails? You can join the emails of all the updates that we send out and you can see what's going on. That's fine.
Speaker 1:You want to just put in 25,000 accredited, easy when they're accredited, right. So it's like hey, here, start with 25,000. Let's just basically date first, you know.
Speaker 2:I like that comment that you said about that Like even adding them into your investor updates.
Speaker 2:On a, we do it on a property level, cause it's not a fund, right. So it'd be interesting to kind of include some of those that are maybe on the fence a little bit more, um, because I will say, a lot of our good conversions are typically the ones that do follow me on social media. Right, they see us boots on the ground renovating the units, walking through the the good, the bad and the ugly. Um, that's a good point to kind of maybe circle back with some of those that were always maybe on the fence a little bit and just say, hey, listen, I know you're maybe second guessing, you're not not right time right now. Let me at least just include you in some of those updates just to see how the process looks like and you know what. What it looks like as maybe being an investor and I, I would say your conversion rate would probably maybe double there for sure I definitely think that it's interesting and I've even thought so conscious investor, weigh in.
Speaker 1:Shoot me an email, julie, at juliehollycom, and let me know do you think this is a good idea to just invite passive investors to just join into different properties, different assets, and just see what the cadence is, see what the flow is, see what the flow is?
Speaker 2:Yeah, yeah, Because sometimes I do also when we get those little distribution emails. We personally use Cashflow Portal as our all-in-one software.
Speaker 2:And those are always kind of fun. It has the confetti in the email. It shows distributions are on the way. And sometimes I'll add that to the Instagram as well. And just social media, because people just oh wow, it's actually happening. They follow the closing process of the property. Now they're saying, wow, maybe six months later or however long it takes until your first distribution, they see that distribution come in and they're like, oh wow, maybe if I actually invested at that one I would have been here now getting the distribution. Maybe I'll kind of circle back with that individual and see if there's maybe another opportunity coming on the horizon. So I like that.
Speaker 1:Yeah, yeah, that's really interesting. Okay, so I mean you showcase everything, the good, the bad and the ugly, out there on the socials. So I don't typically do this, but I'm going to give you a kind of hot seat moment to share about like best deal, worst deal, you know.
Speaker 2:Okay, yeah, Best deal, Best deal. Let me think about the best deal. I would say I'm going to bring up the latest one, although we can't really say it's the best deal because it hasn't gone full cycle. But I'm going to say there's a lot of luck in that one, and I'll bring up a couple reasons why this was 360 units in Des Moines. We recently closed on that one, February 16th. Good news on then. Since then we've actually hit year three performa already on renewals, which is great. We're getting about 5% or 7% over our performa on our renovated units, which is great.
Speaker 2:But the reason why it would be the best is right now we got a plus or minus between $8,000 and $10,000 below the last traded property in terms of a basis, which is great, and we got the property under contract when the treasury hit five. I mean LOI and PSA purchase sale agreement was signed when the treasury hit five, which for your listeners, that's when interest rates pretty much were at the highest level in a very, very long time, and we actually locked our interest rate when the treasury hit at 3.85%. It was a come December I forget what month that was and we got a little bit of a buy down as well. So we ended up buying. We ended up getting all in rate at 5.45% interest only for five years. So that was super exciting, I think our debt we probably saved nearly $110,000 per year in our debt service in terms of interest payments. So for that one so far, I think it's a good category for best deal.
Speaker 2:But it was strictly just timing and being at the right place at the right time. A lot of luck. Obviously, we worked our butt off to get that one over the finish line. However, it was just a lot of luck in what the markets were moving and you know we did also factor that into the.
Speaker 2:You know, when we were working and negotiating with the sellers and the PSA was this is our number, and it's hard because, let's just say, during due diligence, the interest rates go up Like I don't want to be that investor that's going to retrade within the first 30 days. So I did try to set that expectation up front, but we just got very fortunate that it turned the other way around, and that was when everyone thought the rates were going to be, the Fed was going to cut rates and all that jazz. Inflation reports were looking good and fast forward to where we are now. It's like the complete opposite, so that would probably be one of the better ones. I don't know if you have any questions on that before I move on to the next.
Speaker 1:You know, I just want to comment that it's not luck. You know, it's a matter of when we're in the trenches, when we're doing the work, when we're showing up and we're putting out the effort. Yeah, you know what? There is blessings, and there are blessings in all of that, I mean that's a huge. That's the name of the game. I mean, if you're not on the field playing, you're not don't see any of that.
Speaker 1:But you're on the field, you're playing, you're putting out all the effort and you don't get it every single time. So now you're going to share a time when maybe it wasn't as easy yeah.
Speaker 2:So I mean, again, it's just right place at the right time. So we were excited, but it was. It was a fun ride. I felt like those guys on wall street that are about to lock in the best interest rate that they can get. We were actually in an Uber at NMHC, which is the Multicam Conference in San Diego this year, and that's when we locked it in driving to a meeting in an Uber. So it was a great experience. And then the flip side of the coin this one is a smaller deal, it's one that I personally own, um with one other partner, kind of a jv deal, um, and it just it's. It's kind of wrong place at the wrong time for this one um more specifically and that was just post close.
Speaker 2:You know, we had a couple leak issues within a couple, uh, a couple units which, as you know, an apartment. Water goes down thanks to gravity, so that did damage a lot of the units right after that, and all from that silly little plastic ring that goes below the toilet that, if not replaced correctly aka the previous owner probably had a very cheap plumber do the job that ended up with, you know, a drastic capex injection. Obviously we had to pull from our reserves etc. So it ended up being kind, know, a drastic capex injection. Um, obviously we had to pull from our reserves etc. So it ended up being kind of a process there, um, and that just kind of shows, like we just talked about kind of the dealing with the right place the wrong time. But the flip side of the coin too is just that could have happened during due diligence, maybe you know, prior to closing that property beforehand. It just happened to happen right after, um, obviously that property is still performing now, but at at the time it just ended up being one of those things where post-close everything went wrong. But as a team we just have to come together and just figure out what are the actual items that we do right now to mitigate the problem, fix it and see how we can recoup those costs and go from there, because I think a lot of people sometimes get in their head a little bit. Maybe they think it's just a bad deal, etc. It's just part of real estate. It's going to happen eventually.
Speaker 2:At the time we ended up putting our own money into it because right now insurance is obviously I would call it upside down in some places, so we did not want to go in and actually file a claim with our insurance. So it was just right off the gate ended up being a very, very messy project. We were able to eventually turn it around but, as you can imagine, it's just one of those things where you typically take over the property. You really are, you know, below rents, expenses are high. You need some time to kind of turn that around and we went straight into it. Uh, and I think it was within the first couple of weeks that we had to deal with that. So that was the ugly part of real estate, but it's part of the fun.
Speaker 1:It is. I mean we win most of the time, but every once in a while there has to be that little you know reminder that, hey, it is work and some of you know so much more of it is out of our control than we actually think it's like most of this is not within our actual control and I know we want to think it is, but we can't find absolutely everything in due diligence, Unfortunately one of my friends was sharing.
Speaker 1:at an event in Denver, he and one of his business partners presented a deal that's been a headache for the last three years. And there were things that were just. You know that, just through the hold period it was like, oh my gosh. And they realize now there's no correction unless you take everything down to the sets.
Speaker 2:So it's you know strategizing.
Speaker 1:What are they going to do?
Speaker 2:It's part of it and I think it's great that you're actually discussing that now too, julie, because a lot of these most of the podcasts at least I listen to or similar ones they're always discussing the good about real estate, right, the law of the first deal or when you became financially free and all this stuff. And a lot of people may think, wow, that guy's so lucky, he owns this many units and he's probably sitting in the beach just doing nothing with his life because he's just sitting on passive income. There was a lot for us to get to where we are today and just to kind of piggyback on that comment. I mean, I've been in crawl spaces covered in mold, we've done it all and it's just headaches and there's so many irons in the fire and you're putting fires out daily and by the time you're done you open your computer again there's another 100 fires to put out. But honestly, I love it which is crazy to think that, but I love that part, I love the fires. It's so weird, it's not so weird.
Speaker 1:I love that part, I love the fires. It's so weird. It's not so weird. I think that's what makes I think that that's part of the ingredient for a successful investor. You have to love it enough. Okay, I mean, we always say that partnerships are very much within business, are very much like marriages and such, and really when you purchase an asset, that's also another type of marriage. It's like I love you asset, you know, like let's work together to make some money together.
Speaker 2:You know? Yeah, we all have the same common goal is work with me here.
Speaker 1:Yeah, yeah, yeah. And then there's that whole okay. Well, you know, in any relationship you have high ups and downs and you work it out. Right, in any relationship you have high ups and downs and you work it out. That's the entrepreneurial journey. I love what I'm doing so much that, no matter what comes, I'll cry a little bit, I might get hurt feelings, I might go sleep on the couch or something figuratively speaking and then come back yeah no, you know, figuratively speaking, and.
Speaker 2:And then you come back. So, yeah, well, I mean I think you also, you, you learn well what's uh. Gary keller always says, uh, pressure makes diamonds, right, you learn from those mistakes. I always say you win, or you learn, there's no losses in our, in our world, right?
Speaker 2:And and taking those losses and we typically do that as well, like post-closing, we have like an after-act report and, uh, we look at what we did right, what we did wrong, what can we do better, if there may be some better systems we can plug and play in, if there's maybe something that was missing on our due diligence checklist, that we might have skipped out on this one, for example, because those are things that you can eventually learn from those mistakes and do it better. I mean, again, there's always things that are out of our control, but I think that's a really important kind of piece is just like it's not going to be all peaches and rainbows, and being able to take those hits to the face consistently A makes you stronger and then B just helps you get better, and that's why a lot of individuals hire mentors right To be able to lean on them from their experiences and they're already big losses and mistakes, right? I think that's really, really important.
Speaker 1:That is, but they came at least to an interesting question. This is fun, teddy, because I'm asking you questions that I really haven't asked guests for a while, like a long time Conscious investor. You're probably noticing this and don't worry if you are listening and you're not watching over on the YouTube channel YouTube watchers, listeners you're noticing kind of a little bit about Teddy's environment. We're going to get there, don't worry, because his comment about the beach was not just a passing comment at all.
Speaker 1:But before we get there, let's just talk about, you know, your advice for LPs, you know for our limited partners Like do you have any you know words of wisdom for them at this point in the economic cycle of investing in real estate.
Speaker 2:Yeah, it's a great question because I think there's also many different LPs. You have LPs that obviously do their due diligence and go with their gut. We have LPs that are very analytical and are strictly to the numbers and their gut doesn't mean anything. But at the end of the day, right now, I think the key word you ask is in this cycle is looking at where you're going to be investing in and when you're looking at those numbers. Are the rent growth year over year? Is that attainable? Or are these guys factoring in either a flat or some markets negative rent growth over the next couple of years? In addition to that, looking at these core line items in our P&L, we're looking at right now insurance, Again looking at that insurance number and realizing all right, well, 2%, which typically used to do back in the day, is 2% is kind of the inflationary number. I don't think 2% is a payable number for year over year growth for insurance. I think, personally, we're kind of out of the craziness now and it won't be as crazy in the following years. However, you need to plan for that.
Speaker 2:In addition to that as well, property taxes have been a big oopsie for some operators over the last couple of years, right. So having them really analyze that whenever that market you're in is being reassessed, and how that's calculated. There are companies, third-party companies, you can even hire to kind of really get more granular there. I think that's a big one. And then obviously you can have a great deal. You can have a great basis, great deal. Everything can crush right off the bat. However, if you don't have good managers, you don't have good contractors for the value add position, your deal is going to go bust overnight. And I think in my opinion, operators obviously work hard and I'm not trying to bash any of us here, but the property management and the contractors are, for sure, the backbone of your business when it comes to value-add multifamily.
Speaker 2:So not only just vetting the team but really honing in specifically on who is managing that asset, what's their experience? Is it a 400-unit apartment Great. Do they manage large-scale apartments? Or are they ones that manage 3,500 units? Only up to 30 units, right, they're really getting granular there and then really kind of asking questions on the contractors and seeing if they specifically know how to do what we do here in multifamily versus just a fixing flip single family, Like they need to be burning and turning and keeping costs low and managing whoever. Let's just say you're working with Lowe's, managing with Lowe's and making sure that you're getting the best prices possible every 30 days, because typically that's when your price locks expire after 30 days. So a little bit of a rant there, but I think those are going to be kind of the key items because it's I mean again, you can have an incredible deal and property taxes, insurance can make you go underwater we're seeing it right now and then property management and contractors as well.
Speaker 1:So big time. Yeah, that's really interesting. That's one reason why I love that we have management in-house, so it's vertically integrated on our multifamily portfolio. Vertically integrated my company invests with two different different companies, one for multifamily, one for assisted living. Vertically integrated in both instances because in like the moment there's something going on right now and the moment it gets handed off to a third party, it just there's just a lot more um room for error and miscommunication and misallocations, and so it's like I think right now, part of this market cycle really means a lot more hands on, like just being in the thick of it.
Speaker 1:Okay, I'm going to throw one more expense out there that I am personally watching, and that is our property management expense and just management experience. Like all of that, just watching what is payroll, because as inflation goes up.
Speaker 1:I mean we're seeing that payroll goes up. We're seeing so many different things about, you know, rising wages and such and so I think that pressure is something that hasn't totally hit our sector yet and that's why I'm looking forward into it, saying hasn't hit us yet, but it's probably going to hit us if we're under contract now and we're holding five years. That might just knock us upside the head, like in year three and a half year four or something.
Speaker 2:It makes sense. I mean again, depending on your model, your payroll expense should follow the rate of inflation head, like in year three and a half, year four or something. It makes sense. I mean again, depending on your model, you typically your payroll expense should follow the rate of inflation. But I think that that would be an incorrect projection right now. I I would 100 agree with you there, yeah, but the problem is, is what? What is that number? You know you put in five, you lose the deal. You put in two payrolls more expensive, it's that expensive.
Speaker 2:That's the hard part of our job, right? It's really trying to find that sweet spot between making sure you aren't too conservative or you miss out on the opportunity but you're not too aggressive, where it's going to bite you in the butt in three to four years when those costs do go up. I will say, specifically in the markets that we're in, obviously, in my opinion, I think that inflation is a little more stable. I think just the low cost of living in Des Moines, for example, or the Midwest, is definitely helpful. We don't see these massive swings like we do in other states, but at the end of the day, inflation is hitting everyone, no matter where you are.
Speaker 1:I just think maybe not as heavily specific in the Midwest, but I think that's a really good point yeah, yeah, it is interesting and I think our investments in multi-family I think that, I'm sorry in the assisted living space wages in that specific niche are are very much more like you are watching those costs substantially because you have an entire staff right of you, Of you know 75 to 110 people, you know, depending on the size of a complex.
Speaker 1:So that's. That's interesting, because I think that there is a translation. It's not as massive on the multifamily side, but that's where I initially got that. Okay, we got to watch this.
Speaker 2:And they're already. If you're going third partyparty management, they're already on such tight margins. I mean, in my opinion, they make their money on sending out the text out there to fix the thing and they make the spread on the hourly. They pay their guy $20 an hour. They charge the property $60 an hour. They make the spread. They're making 5% on our Denver properties. It's insanely low. They're making their money on the back end, but it's five percent. It's insanely low. Um, they're making their money in the back end, but it's also I see it too sometimes. That's where my partner I always joke they whack the pinata right because they think that they can take advantage of it's constantly saying oh well, the guy was there for 12 hours.
Speaker 2:It's like well, help me my favorite things to ask. Help me understand how patching and drywall and paint is going to take 40 hours. You know what I mean. It's so, and that's the thing too, as operators really kind of take a, you know, take a microscope at some of those numbers. But I agree, I mean I think it's, it's, it's interesting. Uh, we're personally trying to go uh strictly vertically in-house in management, but that's uh, we keep pushing it back. So far we've been everything we've been working with now with Indigo you probably know Indigo Living in the Midwest. It's been great with them, but it's just bringing in houses is kind of the secret sauce. It's just a lot of work, it's a lot of work.
Speaker 1:I was going to ask you you're so accomplished and you have lots of different branches on your business. It's interesting. It's interesting you haven't done it yet, but I know I'm like, oh yeah, in the next year or two you're going to be all dialed in.
Speaker 2:Oh for sure. Yeah, I think the biggest one too is, you know, going back to staying in your lane. Um, it's another shiny object syndrome for me, my partner and I. I think 2023 was our goal end of year to go vertical. That didn't happen. We pushed it to 2024. And it just comes down to the fact where, obviously, for us to continue to scale at the level we want to scale, we would realistically have to build an entire team that is running the management, obviously day to day, and that's not really babying that new arm of our real estate business and that's not really babying that new arm of our real estate business. But when you are starting a new company or starting new management, in my opinion you're starting a new company. You still have to be there in the early stages to create those systems, to get that foundation right. But that's going to pull me away from the 20% that I should be focusing on. To continue to scale the business right. It's not worth it, but we'll see. Sometimes it's not worth it, but we'll see.
Speaker 1:Sometimes it's not worth it. You know, if it's going to pull me away from building this, it'd be better for me to just. I'm already an expert over here. Let me stay in this lane and let me just build this out and let someone else do it, cause, yeah, there's, yeah, there's a lot of going on in property management, so much.
Speaker 2:We can keep it light. We can keep it light. I know you're trying to go. We're trying to stay there we'll keep it light.
Speaker 1:So, um, but this is interesting. All everything that you do opens up a path for a lifestyle, and you and I were talking off air about you know it. It's like we work, and I know I work hard. I'm pretty confident that you're working really hard also. So it's not that we don't work, but it's kind of nice being able to say where do I want to work, what do I want to do, how do I want to appropriate my time. So tell us a little bit about you know, like the inside of the softer side of life, like how has this affected your lifestyle? Just being in the real estate space?
Speaker 2:Yeah, I mean I think it pivoted heavily when I automated my residential arm traditional buyers and sellers, for example, and just real estate. I have a team that helps run my showings, listings etc. I obviously deal with all the negotiation and the contract work. Once that went a little more autopilot, it really gave me the opportunity to be more remote, working off my computer, and obviously I fly to the Midwest all the time. I'll be out there for a week in the next couple of weeks here now. So for me I just think I guess the opportunities definitely opened up when I was able to kind of be anywhere. I really wanted to be as long as I had Wi-Fi and obviously building on my team to be able to do that as well. My partner, he's strictly accounting and finance. He's kind of the CFO behind the scenes. He focuses on that arm. I'm more operations in terms of value-add renovations et cetera and investor relations as well. So we kind of structured that in a point in a way where now we're not as buried as we should be, you know, given all the work and stuff, and obviously we have, you know, some assistants and admin people that kind of help us out with all like the busy work. So that fueled me to be able to at least let go of that 80.
Speaker 2:I'm not perfect, I'm nowhere near letting go all 80, but you know, reading books like uh, right now I'm reading uh, buy back your time. Uh, 10x was the is the is easier than 2x is another one that I read about. That specifically, where it's like you need to let go of that 80 to focus on the 20, and me going remote and me being able to kind of travel around actually forced me to delegate. Um, that's probably one of my biggest, biggest weaknesses is delegating and I think, uh, I'm getting a little better, although my assistant says otherwise. Um, when your assistant's asking you for more work, typically that means something. So, um, but it's been able to give me the freedom to again travel a little bit. Uh, this month out of every year.
Speaker 2:I typically work in the RV, so I bounce around all over the US. Right now I'm currently I'll share my screen for the list or for the people watching Currently in Baja, mexico, where tacos are a quarter and beers are 50 cents. So it's been, it's fun, it's great, but at the end of the day, too, it's still hard work. It's fun, it's great, but at the end of the day, it's still hard work. I've been on back-to-back it's almost 2 o'clock my time. I've been on back-to-back calls since 8.30 this morning, but I was able to get up early and go surf and get back. It's a beautiful thing to do. However, it does come with a lot of work. This wasn't an overnight thing. It's been many, many years to get where I am today and it's going to continue to be hard work until I get to the next chapter of my life.
Speaker 1:I'm actually thinking that my family is going to go and I'm just going to pull the kids from school. We're going to homeschool for one month and go hang out down. You're inspiring me because it is so cold up in North Idaho that I'm like I'm pretty sure that you know. I mean we love tacos, we love Mexico and we love tacos. I'm like let's just go rent a house and hang out for a month.
Speaker 2:You would love it, you wouldn't regret it, and it's also for the kids too, I think, them seeing. My mom was from Central America, so I was growing up going to a kind of a third world country, right, and I think it's good for the kids also. Kind of see, you know, what's out there. Why are they burning their trash? Oh, they don't have trash service. What do you mean? They don't have trash service, right. So I always think it's kind of important for the younger ones to kind of be able to live this lifestyle and see what else is out there and, you know, be a little more remote. It's kind of neat and I love it. You know we've seen a lot of that post-COVID, you know, rush of Americans into Mexico because they sold their house at the peak and now they work remote and their house, teaching their kids, and it works out great, so a good get up.
Speaker 1:Okay, I have a final question for you and that is because Benjamin Hardy's book youX is better than 2X. So, conscious Investor, I want to encourage you just Google Ed Milet and Benjamin Hardy 10X is better than 2X. Or you can shoot me a text and I'll text you a direct link to it. So you can text 208-944-1938. You text that number, I will text you back with the link to this podcast episode. So, if you're not a reader, conscious investor, or you feel like you already have an audio book you're into, you already have a book, book you're reading and you just want to listen to this real fast. It's a fantastic, high level, great conversation, high level of that concept and I think I listened to it like three times because I was so impressed by the conversation and you know, just hearing Benjamin Hardy go through it.
Speaker 1:So the question for you, Teddy, is what's the 80% that you need to let go of?
Speaker 2:Oh man, in this moment, at the time of this recording, oh man, oh gosh, you know what?
Speaker 1:Just head over to YouTube and watch the response.
Speaker 2:Okay.
Speaker 1:Conscious Investor. I know you love listening on the podcast. Just go to YouTube and watch the response.
Speaker 2:Yeah, maybe you can call me in a month and make sure I actually do it. I just think at the end of the day my business is still my baby and being able to hand off the busy work it's tough for me. The little things like the monthly investor reports that go out, those little crumps right Hold on Wait.
Speaker 2:I'm sorry, sorry are you writing those still? You're still doing this, yeah, I know, and my my assistant probably better write than I am. I'm a terrible writer. So, um, those things that you know, again, I just it's, it's not hard, it's just taking information from our you know financial analysis and our wins and losses from that month and plugging it in, which has been very time consuming. Um, those little things, uh, I'd say that's probably a big one for me. Um, being maybe a little bit less uh involved on like those daily pm calls that we have with our management or property managers, right, uh, maybe having my assistant kind of work on those or I call her my assistant, but she's's really kind of head of operations at the end of the day but having her take those calls and reporting back. She sends out the recap of the call anyway and action items at the end of the call and she tags everyone in the email so I can just read those emails and instead of being on the call for 30, 45 minutes a day, I could just read it in two minutes and say do this, do that, do that and on the next, I think that would be a big one.
Speaker 2:Um, being a little bit less involved on like audits. So when I say audits, maybe like our, our contractor audits, qc, etc. And the renovations, right, um, but it's also one of those things too, like, whose eyes are going to be better than the person that actually owns the asset, right? So, training someone to see it the way that I see it, uh, you know, it's just those little things. But at the end of the day too, I don't want to get to a point and maybe this is a double-edged sword I don't want to get to a point where I'm just so above, like, flying so high above the business, where I'm not even in the weeds anymore. I think it's important and I say that because when I had my catering business, I was so we were pumping out and everything was so busy I was never really actively involved in like, really in the weed stuff. One day we had a couple of call outs and I ended up doing deliveries for our catering business that day and, uh, I realized, like, what a terrible route that we were running for deliveries and it's just like someone that's getting paid X amount per hour. They wouldn't have voiced up and said, hey, like, I recommend maybe we do it this way, cause it just makes more sense. So little things like that. I think it's important to kind of like be in the weeds that you know, help systemize your business better, build a better foundation, etc.
Speaker 2:Um, but at the same time too, again falling back to scale. I mean, I know the guys that I own thousands of units or a thousand units. They're not, they're not flying out and doing qc uh, on a random basis. So, um, so that that I would say that would be kind of like most of the work I want to give and my 20% is just focusing on raising capital and making sure that we're crushing the plan at the end of the day. And if we are seeing financial reports come in and we're under here and we're in a position where we're now not on track, then it's all hands on deck right. But if things are working out great, then maybe I don't have to be as actively involved there and I can focus on finding other deal flow, finding off market deals and getting money for the equity stack. So we'll see Text me in a month and see what happens.
Speaker 1:I love it. I just want you to know. I appreciate you. You answered that in a really transparent way and I really appreciate that because I think it also just shows, demonstrates, like, how involved you are, like you're actually thinking about these things in your in the background of your mind for sure, because you know what they are and you're able to just like surface that oh, I have a list.
Speaker 2:I have a list. I have a list. It's things I need to delegate and the list keeps getting bigger and they don't transfer over to the assistant role. So, um, and that's why I've been heavily rereading these books, like the two. I've read those before, I'm rereading them now, just so like hammered in my brain, like if you really want to get to that next spot, you need to drop the 80.
Speaker 2:It's just, it's tough, yeah it's tough, it's a mindset shift, but for sure oh wow, and it's going to be one of those things, too, where you think you're going to say you wish you did it earlier, right? Um, when I hired my first assistant, my business coach at the time told me you're gonna, you need to do, you need to do it. I said I don't have, I don't have enough revenue. And I eventually got to the point where, as soon as I hired her on, 6 months later, I just said this is one of the best things I've ever done. Why didn't I do this sooner?
Speaker 1:Okay, we heard it. In a month we're going to circle back and find out what's going on.
Speaker 2:Perfect. Okay, I say that out, loud, so I can keep myself accountable.
Speaker 1:Right, yeah, it does. It's amazing, when our integrity is on the line, we tend to show up and get stuff done For sure.
Speaker 2:I love it.
Speaker 1:Teddy, we have to wrap this up, unfortunately, but I know that this resonates with a conscious investor, and so where can they go to learn more about what you are investing in and such learn?
Speaker 2:more about what you are investing in and such yeah. Our website is highergroundig, like investment group, so highergroundigcom. And then my Instagram handle is just teddymorealtor. I have a lot of stuff on there. You can reach out to us through that. All Happy to help anyone that's either looking to get into real estate, even if it has questions. I don't even care if you're already investing with other groups. I'm happy to be a resource. A lot of people help me get to where I am today and I'm more than welcome to offer the same service to other people as well.
Speaker 1:I love it. Thank you so much, and Conscious.
Speaker 1:Investor thanks for hanging out with us and I know this is a really fun conversation. A lot of different terrain was covered, and so let us know what stood out to you by leaving a review down at the bottom. So you just have to go to the main show page. If you're on Apple podcasts, you have to go to the main page, not the episode. Scroll down to the bottom. You'll see reviews and in teeny tiny purple letters you're going to see, right, a review. So go ahead, leave us a review, let us know what stood out to you and remember sharing is caring. It makes the show grow organically and, um, it's always appreciated. Until next time, please remember, adventure belongs on the trail, not in our investing, not in our personal lives. So if you need support in either capacity through uh, you know learning about our either capacity through you know learning about our investments, or through you know looking into what does coaching look like on the mindset side then make sure you reach out julie at juliehollycom. We will talk soon. Bye, thank you.
