property

The Fundamental Principles Of Life, Liberty And Property

TWS 1 | 2018 Wrap-Up

 

Life isn’t perfect, and it’s never going to be. We’re all human beings and we’re fallible. At the same time, we have so much capability, and where we thrive is typically where things are the most disruptive. In this 2018 wrap-up episode, take a look back at the fundamental principles of progress and prosperity, namely, life, liberty, and property that led to why we have experienced so much prosperity in our day and age. Notable guests like Garrett Gunderson, Jaireck Robbins, Peter Gray, Connor Boyack, George Gilder, James Arthur Ray, Angela Duckworth, Jonas Sachs, Mike Cobb have graced the show to add value, share important resources, and help you understand what your goal is. As 2019 kicks off, Elizabeth’s vision is for you to understand the principles of capitalism and how it relates to you at an individual level so that you can achieve the goals and ambitions that you have. Join us for another year of high-impact discussion about capitalism, not just from Elizabeth but from other people that are authors, organization presidents, and intellectuals.

Listen to the podcast here:

Watch the podcast here:

The Fundamental Principles Of Life, Liberty And Property

The 2018 Wrap-Up

We are going to be officially wrapping up the final season of 2018, actually all the three seasons of 2018. Introducing the new season and the theme that we’re going to be using. I think you are going to love it. First off, happy new year to everyone. I hope you guys had an amazing holiday. I wanted to kick everything off with a story. First, I believe that as human beings, we have some incredible things that we’re capable of. At the same time, we have these subconscious habits that rule our lives. It’s the majority of our thinking, the majority of our behavior. If you look at the limitations that we often have that prevents us from getting to the next level, whether it’s in our career, whether it’s in relationships and so forth, it’s because of some preconditioned habit.

This is a funny story about my family. We spent Christmas with my wife’s family. They drove up and they hadn’t had Christmas together in years. Then on the 26th, we went over to Denver where my brother lives and his family. We drove from Salt Lake to Denver and it was a pretty long drive. It was awesome. The kids get along well. We didn’t have any issues or the drama, but on the way back is where we had some drama. My wife for better and for worse got my four-year-old son in the habit of if he had to go to the bathroom on some of these long trips, and we’ve driven him to California before and to Arizona. Instead of stopping every half an hour or an hour, she’ll have him pee in a cup. The condition was that if you have to go to the bathroom typically in a long trip, he would pee in a cup or pee in a bottle and throw it away when we got to our stop. We were coming back from Denver. It was on New Year’s Day and Synthia, my wife, was on the passenger seat and she was sleeping. My two older girls, Hannah and Meghan, were sleeping too. I had my headphones on. I was listening to information about this upcoming 2019 season.

Before I knew it there was this screeching scream that disrupted me. It got everybody awake. What had happened is Jack, my four-year-old, had realized that everyone was asleep, and I was on my earphones and couldn’t hear him. He had to go to the bathroom. His habit was to find a cup. He found a cup and he essentially started peeing in the cup. I had hit a bump and he accidentally dropped the cup and couldn’t stop peeing and peed all over Hannah, my fourteen-year-old. The hysterical screams did not come from Jack. They came from Hannah who unfortunately had her sleep disrupted and Jack was sitting there frozen. It was one of those traumatic events for him most likely that the habit is broken. At the same time, Hannah, obviously I had to pull over and calm her down a little bit because she was pretty hysterical.

We're meant to produce. We're meant to create value for as long as possible, not stopping at some point in the future. Click To Tweet

The Fundamental Principles

Anyway, this is a funny story relating to the principle of habit. The reason why I’m bringing that up is that all of the previous year, the idea was to talk about some of the fundamental principles that led to why we have experienced so much prosperity in our day and age. What we experienced on a daily basis, they were dreams. They weren’t even dreams. It’s something that people 100 years ago couldn’t even conceptualize. If you look at the roots of how that occurs, what principles that progress and prosperity is based on; life, liberty and property, is the reason why I wanted to bring that to the surface so that you would understand those foundational principles. They applied as much to the future as they did to the past. I would say even more so to the future. The idea was, as far as life, liberty and property, is to bring it down to the individual level.

We had guests like Garrett Gunderson was on there. We talked about The Law of Success In Sixteen Lessons which was an instrumental book for me, understanding a lot of these principles and what’s possible for a human being. What would it be possible for me? We had Jairek Robbins on there who is one of the most inspirational guys that I know, younger guys. He has some incredible things to say about what we’re capable of and also what holds us back and practical things that we can do to overcome our limiting beliefs and some of those habits and subconscious behavior that we all have. We talked to Peter Gray who was a BC professor. He specializes in education for children and had a completely different view than the typical view of our education system right now, which has more flaws than we can discuss on multiple podcasts. That was a fascinating discussion with him. We had John Rampton on there, who’s a serial entrepreneur that I know. We had the Founder of UGG boots, Brian Smith.

Liberty

TWS 1 | 2018 Wrap-Up

Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream

We kick off with liberty, which is the second principle. Life is the first principle. Liberty is the second principle, with Connor Boyack who is the President of the Libertas Institute. The idea of liberty as we framed it in an individual level is the pursuit of financial freedom, the pursuit of freedom as an individual. Not the financial notion of retirement, which is to stop working, to stop producing. This is where a lot of the companies that I spend the majority of my time do is educate people that the typical financial planning model is principally flawed because it’s getting people to defer life until some future date. At that point in time, instead of being dependent on an employer, now you’re dependent on market performance and a financial advisor in Wall Street to help you with your income throughout retirement. It’s one of those things where I’ve seen it to be destructive to what is capable of a human being. If they would realize that the notion of retirement is not in alignment with our human nature. We’re meant to produce. We’re meant to create value for as long as possible, not stopping at some point in the future.

Plus, if you look at longevity and the amazing innovation associated with healthcare, we’re going to be living longer. The idea of saving 5% to 10% of your income for 30 years and then living off of that for 30 years, the math doesn’t make sense. Market performance has shown that it’s not capable of providing the returns that will allow you to do that. We went through the second season and talked into great detail about how to achieve financial freedom. That was around the time where my book was released, which was the first one I’d ever written. It took me a couple of years to do it. It’s Heads I Win, Tails You Lose: A Financial Strategy to Reignite the American Dream. Thank you so much for all those who provided tons of feedback and bought the book. It took a long time but I’m grateful that it came out and did emphasize a lot of the philosophy that you, longtime audience, had been hearing, but put it in a more organized, condensed fashion. That was in the summer.

We finished off the year with interviews with George Gilder who is an investor and an author and is a lot older in age, but his experience shows the cyclical nature of how things work and what is on the horizon. That was a fascinating conversation with George. Then James Arthur Ray, if you guys are familiar with him. He had a fall from grace in a sense a number of years ago and went to prison but is one of the most profound types of speakers on personal development. It was awesome to hear his story and all that he went through during those times and how he got back on track and what he’s focused on now. Then we had Angela Duckworth who’s the author of Grit. She has the second or third most-watched TED Talk of all time, it’s behind Simon Sinek. That was an awesome conversation. She’s a psychologist and has a lot of training in human behavior and how we behave and how we act.

Then we had Jonah Sachs who wrote Winning the Story Wars and he has another book called Unsafe Thinking, which is targeting how disruptive the employment industry is and how people are not taking risks. It’s a fascinating idea. Then finally, Mike Cobb, I’ve known him for a number of years. The coincidence was he had wrote an article talking about John Locke’s life, liberty and property and how that pertained to the real estate investment industry globally. It was fascinating to have a discussion with him, which was the second to last episode of 2018. Then we ended with David Neagle, who is instrumental in creating the personal development space and industry.

Maximize who you are, your human life value assets, which are the assets that are the most valuable to other people. Click To Tweet

It was an awesome season. I benefited personally because I got to talk all the time about these three foundational principles of our well-being, of what we’re all after and the foundational things. If they’re there, if they’re focused on, then essentially they could be maximized whether it’s life, use your best asset, figuring out ways to invest in yourself and be of more value to other people which will bring more money. The best investment you could ever make is to maximize that. The idea is to achieve this profession or career where you’re doing what you love that gets you out of bed in the morning but also is in an environment where it’s conducive to how you operate that gives you that fulfillment and achievement. Most people aren’t focused on that. They’re focused on sacrificing now for the benefit of tomorrow and differing life now. Rationally, it doesn’t make sense if you think about it. Figuring out how to leverage what’s going on in the US now and in the world, where we’re becoming this online society.

Property

There are opportunities to provide value to other people in so many thousands of different respects. Being able to pursue how to maximize who you are, what we consider your human life value assets, which are the assets that are most valuable to other people. They’re different for all human beings. Then also discovering your human life value liabilities, which is the stuff that you’re not good at, that people typically put up with instead of finding others that could provide that service and value better than you. That’s the idea of creating financial statement around who you are, your human life value assets, what you’re best at, your talents, abilities, strengths and your human life value of liabilities, which is the stuff you’re not good at, delegating that and maximizing the assets. That’s going to create this notion of freedom. Then finally property, which is the physical world. I’ve talked about this for years on the show. Putting it into the context of what John Locke talked about. This was during a time where there wasn’t much difference between that time and the zero AD, as we came into this new era. People rode around on horses and buggies and they ate in a very similar fashion, they had similar clothes.

John Locke had discovered right through his mentors and thinking and going to school. He discovered some principles that ultimately influenced the Scottish enlightenment, with David Hume and Adam Smith, which ultimately influenced the creation of the United States in our foundational documents, The Declaration of Independence and The Constitution. Getting into the property helped me identify that when you have the principle, the right of life and celebrating that as well as liberty, your freedoms, that property, the resources of the world can be used and aligned with those two other principles. Let me give you some examples. Back then with John Locke, how he understood property wasn’t just a piece of land. It was the material world. Look at what humankind has created with first understanding their mind and the value of that asset. Then looking at the world around them and using those resources to create value for others.

TWS 1 | 2018 Wrap-Up

2018 Wrap-Up: Capitalism, according to Ayn Rand, is the ideal structure so that humankind can progress at the maximum level possible.

 

The abundance that we live in right now is hard to fathom if you take a step out of the here and now. We have incredible technology for communication. We have incredible technology to leverage people around the world and their strengths to form a business. You have transportation technology, healthcare, technology, all things that are allowing human beings not to have to be afraid of surviving which has been a fear of society for a long time. We don’t have to even think about that anymore. The idea then and how the world was then and how it is now and associating our progress with all of that was valuable to me because I started to look at the world in a multitude of contexts. How much we’ve benefited from these simple ideas.

Hopefully, you got some value out of it as well. Maybe some of you had gone into reading some of John Locke’s texts. His treatises of government as well as some of the other books by some of those that were revolutionary in the ideas that help spawn the United States formation. I hope you’ve got tons of value out of that. I certainly did, and it’s led into a new theme for this year, which is I believe a taboo word or concept or idea that fits right alongside politics and religion. This is the word, capitalism. That’s going to be our theme for 2019. What it is? What it isn’t? Why it’s so reviled but also so celebrated? The structure of capitalism is the embodiment of what we talked about in 2018. Understanding it from a macro level, a group or a global level, as well as an individual level, is what my goal is.

Capitalism

My vision is for you to understand the principles of capitalism and how profound of a system it is and how it relates to you at an individual level so that you can achieve the goals and ambitions that you have. I always benefit from seeing, not conflict, but when there are very widespread opinions where you have at one end of the spectrum an opinion and then another. Both are very strong but on both sides of the spectrum. This is definitely capitalism. It’s been blamed for all sorts of atrocities, let alone the 2008, 2009 great recession. It’s been blamed for the exploitation of children.

Life isn't perfect; it's never going to be. Click To Tweet

Ayn Rand, who I came to understand in 2005 and 2006, celebrates it as the ideal structure so that humankind can progress at the maximum level possible. Her strong opinions versus the other side of the spectrum are evident in society now. As you guys learn about capitalism, not just from me, but from some of the people who are authors, organization presidents and other intellectuals. They’re going to be guests. You’re going to learn a ton of what it is, what it isn’t and how it relates to not only the macro side of the world but also at an individual level for you specifically. Some of the guests that we have, Yaron Brook from Ayn Rand Institute. We have Lawrence Reed from the Foundation for Economic Education. We have Joel Skousen, Connor is going to be on as well. G. Edward Griffin who wrote The Creature from Jekyll Island is on there. My buddy, Jason Rink, is going to be on there. There are going to be some incredible guests and some incredible dialogue associated with capitalism. You’ll definitely see where I stand as far as the philosophical point of view and what I’m doing about it. Organizations I support, how I analyze investments and how I analyze businesses and opportunities as well as my own business and own investments. It’s going to be beneficial to you too.

I have a bunch of other notes as far as some of the ways in which I view capitalism and view how important it is to me. I’m going to leave that for the season. I’m going to talk about one more thing. If you guys want to start to follow along with this theory. I would recommend that you pick up Ayn Rand’s book which is Capitalism: The Unknown Ideal. Milton Friedman also has an incredible book called Capitalism and Freedom. If you haven’t read Atlas Shrugged, maybe we’ll do a season on that one of these days. That’s a profound book that is very misunderstood as far as what the messages are and aren’t. If you want to pick up some literature and dive into this topic, then I definitely think that those books will give you a good idea of what some of these principles are and how they apply to the modern world.

I’ll leave it at that. If you have any comments, make sure you’re emailing us at Podcast@ParadigmLife.net or Hello@TheWealthStandard.com. We’re going to do something different. We’re going to keep doing these seasons. The seasons are primarily based on philosophy. In 2018, it was life, liberty and property. That’s what we’re going to continue to do this year with the main podcast, but on Fridays, we’re going to do something called Financial Fridays. I’ve been accumulating some interviews that I’ve done with specific financial strategy. We’ll have investment strategy on there. We’ll have specific investments, not typical mainstream investments like a mutual fund or a stock. We’re going to use more of the alternative investments that are out there. There are a number of people that I’ve interviewed and we’re going to play those. We’re going to kick it off with how I look at investment, which is from a hierarchical standpoint as far as tearing the different types of investments and how do you categorize them. That will be the first episode. I have some people I invest with as well as those who have participated in the Cash Flow Wealth Summit, which is a virtual event that we put on every year.

TWS 1 | 2018 Wrap-Up

2018 Wrap-Up: As human beings, we have so much capability, and where we thrive is typically where things are the most disruptive.

 

That’s going to be on every Friday, fifteen to twenty minutes, sometimes 30 minutes. I tend to want to do some short episodes. I love talking. I love conversations with people, especially stimulating conversations. Sometimes those will bleed over from 15 to 20 to 30 minutes. We’re going to try to keep them shorter, but they’re all focused around practical financial strategy. That’s it. Hopefully, you had a great end to 2018. I hope you’re ready to crash it in 2019. I look at what’s going on with the government shut down. I look at a lot of signals that are showing me that there is major disruption on the horizon. I don’t think what we’ve experienced over the last couple of months with market volatility is anything. I think that’s a blip on the radar. I believe that we’re going to have an incredible five to ten years of disruption from a technology standpoint, from an education standpoint, from a tax standpoint.

It’s going to be awesome. It’s going to be hurtful for others and painful for others, but I believe that there are going to be some tremendous opportunities that arise because of it. That’s awesome for you. It’s awesome for me because that’s what it’s about. Life isn’t perfect, it’s never going to be perfect. We’re all human beings and we’re fallible. At the same time, we have so much capability. Where we thrive is typically where things are the most disruptive. Thank you for your support. Thank you for allowing me to do this. Feedback is always appreciated as far as questions or things that we can address or other elements to add that you think would be valuable. Make sure you reach out to us. If you haven’t given us a review on iTunes, that helps. It gets the word out. Apple has these algorithms that did help rank and improve the listenership based on the success of the podcast. If you like what you’re hearing, definitely give us a good rating. That would mean a tremendous amount. That’s it. We’ll talk to you next time.

Important Links:

 

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Property As A Wealth Strategy with Paul Moore

TWS 7 | Property

Wealth isn’t simply a bank account balance or a dollar amount of monthly cashflow, rather, it’s a state of mind. John Locke, the philosopher whose words we used as the backbone of this season, argued that the law of nature obliged all human beings not to harm another in their inalienable pursuit of life, liberty and property. He lived at a different time period, the mid-1600s, yet the liberties he fought for would produce a similar mindset we are seeking when it comes to wealth. One of the keys to wealth is the principle of property. Paul Moore, managing director of Wellings Capital and host of the podcast How To Lose Money, talks about the importance of understanding knowledge, education, and experience, and how that relates to property.

Listen to the podcast here:

Property As A Wealth Strategy with Paul Moore

What is the key to wealth? Is there a magic bullet or a fast track? This year in the podcast, my focus has revolved around these questions. 2018 is almost over, as is season three where we are focusing on the principle of property, where are we? First, I chose the phrase, “Life, liberty and property,” because it’s a simple way to describe the foundational principles to achieve wealth. What I came to realize is that there is a natural human inclination to be wealthy. There always has been. There is an essential variable to consider when determining whether or not there is a key or a magic bullet. That variable is the definition of wealth. Ultimately, what I believe we are seeking is the combination of two mindsets, the state of mind that comes from being free and the feeling of certainty regarding your vision of the future.

Wealth isn’t simply a bank account balance or a dollar amount of monthly cashflow rather than a state of mind. Think about it. John Locke, the philosopher whose words we used as the backbone of this season, “No one ought to harm another in their inalienable pursuit of life, liberty and property,” lived in a time period, the mid-1600s, that’s impossible to fathom. Yet, the liberties he fought for would produce a similar mindset we are seeking when it comes to wealth. This mindset is available to all and is why I wrote the book and why I do this podcast. It’s so that you too can believe that it’s possible for you.

Season one, life. Do you consider yourself your most important asset and invest in ways to be more valuable to others? Season two, liberty. What are you pursuing? Independence and freedom or retirement? Season three, property. Does your wealth strategy, including your investments align with what you know or do you delegate that responsibility to someone else? My guest is the co-host of an insightfully charming podcast, How to Lose Money, which is one of the best ways to learn about business and financial strategy. Paul Moore is an experienced businessman, a real estate investor and the Managing Director of Wellings Capital. Let’s turn our brains on and get ready to learn.

TWS 7 | Property

The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing

My guest is Paul Moore. Paul is the Managing Director of Wellings Capital. He’s also one of the hosts for the How to Lose Money Podcast. He is an acquaintance of mine and I can’t wait for this interview. Paul is also the author of The Perfect Investment. Paul, welcome to the show. Thanks for taking the time.

Patrick, it’s great to be here. Thanks.

I had a wonderful time in your podcast when I was invited to it. I had heard of it before, but the theme is amazing. It’s an incredible opportunity for you as a business person to learn from the failures of others through the theme of losing money. It’s pretty fascinating. I told the story on it that I’ve never told before and it was a great opportunity. I’d love to hear your background and how you got to the point you’re at right now with your real estate investment company as well as the podcast.

I wanted to be a parapsychologist in junior high. I’d seen the movie Ghostbusters at some point and it seemed like a good idea. I didn’t have any counsel. No one told me, “You’d probably be good at this or bad at that.” I found out there was no degree in that, especially not at the University of Utah or out in that area. I went and got a petroleum engineering degree, which sounded like fun drilling oil wells but I never used it. I went on and got an MBA. I went to Ford Motor Company for about five years. After that, I started my own company. We’re an HR outsourcing company, a staffing firm. About five years into it, it turned out that a lot of publicly traded companies were interested in gobbling up companies like ours.

When we sold our company after five years for almost $3 million, I thought, “We are smart.” I started investing and I thought, “I’m an investor now. I’m semi-retired at 34 and I’m an investor.” I found out that I wasn’t an investor at all and I wasn’t at all qualified to make the decisions I was making. I confused investing with gambling. I ended up losing a lot of the money I had made in that company, but I did get into real estate, which was a great move.

It’s much easier to avoid failure than it is to copy success. Click To Tweet

Losing money is one of the best investments you can make. We approach life knowing certain things and we try to go to school. We try to gain an education by reading books or listening to podcasts, but there’s nothing that’s a better education than losing and feeling a level of pain. From a human standpoint, it’s an indicator that something needs to change. You experienced that firsthand as do most successful investors. What was the early lesson that you had that woke you up to the fact that you weren’t necessarily the investor you thought you were?

I started losing money. I invested $100,000 with a guy who had this amazing foreign options trading thing. He was showing us how we could make 3% a month on our money. He was doing them. At least my paperwork said I was getting 3% a month. It’s $3,000 a month and it looked great on paper. Then I went down to visit him in Charlotte and I had this funny feeling. Something he said didn’t add up with what I had heard about him. I had this gut. I went to consider investing another $100,000 and I left there with a distinct impression, “I should not invest more with this guy.” I wish I had followed my gut and withdrawn the $110,000 or whatever I had in there but instead I didn’t.

About two months later, the FBI caught up with him. He still won’t tell me and the other 2,000 investors where he hid the $18 million offshore. He’s even faced with 153 years in the federal penitentiary. He still hasn’t told anybody where he hid the money and I’m not sure why. That was one of the many examples of things I invested in where I confused investing and speculating or gambling. I think investing is when your principal is almost completely safe, and you’ve got a chance to make a return. Gambling or speculating is when your principal is not at all safe and you’ve got a chance to make a return. I confused the two and found myself about $2.5 million in debt for those reasons and other reasons ten years after I sold my company in 2007. It was a tough time.

How did you piece it all together? I introduced you to the theme of this season’s podcast where we are combining the first two seasons, which talk about the importance of understanding knowledge, education, experience and how that relates to property. That combination is what creates an element of value. Looking at investments or property, you experienced investments that didn’t create value, they did the opposite. You have seen successful investments now, I’m assuming. What are some of the differentiating factors between the investments that lost money and the investments that gain money? We’ve talked about gambling versus investing. What are some of those variables that determine whether it’s a successful investment?

There was this guy on a TV commercial from the ’70s. He was a little whiny guy. He was sitting across the desk from this guy with his huge chair and he said, “Son, we only hire people with experience.” The kid turns around the camera and said, “How do I get the experience?” The experience of losing money and the experience of doing a lot of these things gave me a lot of the wherewithal I needed to make money now and to make smarter investments. Lack of due diligence was a big part of it. Trusting one other person’s word who was investing or who was paid to tell me to invest with them was helpful. This is the experience thing and the reason I told that little story is I was always surprised.

We put together a lot of successful real estate deals through the 2000s and beyond. I was always surprised when people say, “No, I don’t want to invest in that. I don’t know anything about it.” I’d say to myself at least, “You’ve got tens of millions of dollars, but you don’t want to invest $200,000 in this wireless internet project?” Warren Buffett said, “I invest in things I understand. I don’t invest in general on the internet because I don’t know where it will be in ten or twenty years. The internet will never change the way people chew gum.” When I stopped investing in things like the wireless internet or throwing money down to a bottom of an oil well or things that had a risk and things I didn’t know the outcome of, I began to do much better. The bottom line is I stopped swinging for the fences and I started trying to hit singles and doubles and that’s when everything changed.

Tell us about Wellings Capital. What are some of the projects? Who’s on the team? How do you determine who’s on the team? Tell us the story behind how you put that company together, which has resulted in some successful investment.

TWS 7 | Property

Property: The experience of losing money and doing a lot of things gave me a lot of the wherewithal I needed to make money and to make smarter investments.

 

Wellings Capital has three principals: Wade Myers, Dr. Brian Robbins and myself. Wade and I had been talking since 2007. He’s a Harvard MBA. He’s got a property management firm that has 220,000 doors under management. It’s not multifamily. It’s doing condos, HOA, POA type of work. He bought quite impressive companies. He’s had some big failures and big successes. He told me he never had any experience in real estate. He didn’t understand it. When I showed him a draft copy of my book, he read about four chapters and skimmed the rest and two hours later he said, “I want it. I want to invest.” We invited him to join our team because he’s got an incredible 55 different M&As and startups, acquisitions, plus some failures. He has invested a lot of money in Hollywood films. A big hit was I Can Only Imagine. The big money guys were behind that. He’s done well over the years and made a lot more money than he has lost.

My other partner, Dr. Brian Robbins, has been a serial entrepreneur as well as a pain management physician. I had asked him to invest with me in a multifamily project I built from the ground up in North Dakota and he said, “It’s too risky.” A Hyatt hotel that my friend built that I helped him with, “It’s too risky,” wireless internet, “It’s too risky,” something else, oil and gas, “It’s too risky.” When he heard about multifamily and I showed him the demographics that I think are going to make multifamily a great investment for decades to come, he was fairly stunned. He said, “This is something I can get behind,” then he jumped in with both feet.

What year was that when he joined up?

That was in 2013.

What’s your take in the multifamily space now? I’ve observed, and I have a personal investment in several multifamily projects in various states. I look at what the market has done even in the last four years and how much money has come into it, how much syndication is being done to either do a ground up or acquire and remodel and value-add play. I see more and more as weeks go on. How are you looking at the multifamily space these days? What are some of the conclusions you’ve come to?

First of all, we’ve concluded at the title of my book. It’s The Perfect Investment because it does a great job balancing risk and return. The Sharpe ratio measures return divided by risk for a whole lot of different asset classes. Multifamily and self-storage are at the very top of the list. They’re performing about 460% better than the Dow Jones and the S&P 500 in the return divided by the risk because the beta, the up and down of multifamily is much more stable. It’s much more predictable. Freddie Mac and Fannie Mae, according to a report I read, haven’t had a single foreclosure in multifamily in three or four years. Where else can you get something like that? We’re talking about nationwide. That does speak to the great underwriting and the conservative underwriting that they do.

Multifamily has got a lot of big things going forward. Number one, in 1995, the government tampered with the housing market and they thought that anybody who could fog a mirror should be able to get a loan. Homeownership skyrocketed from its historical low 60s to 69.2%. In 2005, I had a friend who was making $40,000 or $50,000 a year who bought a $600,000 mansion as his second home. He had no business doing it, no way of paying the mortgage. It was before Airbnb. I don’t know what he was thinking. He lost that back to the bank in a matter of months. That was happening all over the US homeownership. When things plummeted from 69% to about 63% from 2005 to 2015 and every percent dropped meant a million new renters.

Fall in love with the numbers. Don't fall in love with the property. Try to be as objective as you can. Click To Tweet

There were all kinds of other renters coming into the renter pool as well. Number one, Baby Boomers, the smallest group of renters are the fastest growing group. The statistics say that when a Baby Boomer starts renting, they’ll never purchase a home again on average. The second group is Millennials. That’s the largest demographic group in US history with about 80 million strong. In general, they don’t see the reason to be tied down to a 30-year contract on a seemingly overpriced home when they might have new friends, new opportunities, new jobs in another part of the city, the state or the country next year. They’re much more transient and they have much more debt as well. They’re on the position with the slightly more difficult qualifications than 2005 house standards to qualify for a mortgage. They’re not quite there. Even though Millennials are starting to get married, starting to move into homes, on average, they rent far more and for far longer than Baby Boomers historically. Third, we’ve got immigration. Immigration is still playing a very significant and increasing role in the US demographic picture. Immigrants rent more often and for longer than people born in the US. I think we can look out for many years and say that this is a great investment.

In my book, I called it the perfect investment because it seemed to balance. It was a property, which is a big thing. You own a hard asset. You get all the tax benefits. There are twelve significant tax benefits you get from owning real estate directly and you get this fairly stable, fairly predictable, single or double typically. Although a lot of multifamily syndicators have been hitting homeruns for a long time. I see that coming to a place where maybe they won’t happen anymore. I’m even wondering how people are affording and why are people even investing in multifamily right now because the perfect investment is no longer perfect if you can’t find a deal that makes sense.

That’s where I was going to go because what I talked about on your show was the product could make all the sense in the world. There could be the right cap rates, there could be the right market. It doesn’t mean the investment is going to be successful or the apartment complex is going to be successful. My first question is going to be around not necessarily the market or the metrics that you do due diligence on, but how do you know you’re working with the right person? Then the second thing is there were a lot of apartment investors back in 2007 and 2008. I know in the single-family market why people were leaving their homes.

Another tangent that’s interesting and this came from the chief economist at Fannie Mae where people during 2008, 2009 weren’t even in default about leaving their homes. Fannie Mae went into bankruptcy or was taken into receivership. Because of that, people thought that they had to leave their house. That’s another side issue. My underlying question is what constitutes a good investment, not necessarily from the return, cap and market standpoint, but the operator’s standpoint? Talk to us about how important that team is.

We think that the right property manager and the right market make up about two-thirds of the likelihood of success in buying a multifamily asset. It’s incredibly important to have a market that’s large enough to support multiple significant national or regional property managers. If you might have one that goes South, and we’ve had that happen, you want to have other options. That’s one thing, the property manager. Going back to more of the philosophical level, it’s incredibly important. In our design, we have a built-in gut check thing, like the guy who invested $100,000 within Charlotte years ago. It’s incredibly important to follow your gut. I don’t know about you. I know you’re married. If you’re like me, your wife might have better instincts in some ways than you. She may not know anything about business and my wife doesn’t, but she can somehow spot a phony or a fraud and say, “I don’t know why.” I go, “I want reasons.” She goes, “I just don’t think you should invest with them.” We need to learn to listen to our gut and sometimes it sounds like the voice of our wives.

TWS 7 | Property

Property: Our brain at a very deep level allows us to be able to see things in a deeper and a more sensible way than we do.

 

Have you done that with your wife, had her do gut checks with the people that you’re doing business with?

Yes. I ignored her many times. Those were some of the things I lost money on. The wireless internet company in North Dakota, several of us started that company. She was like, “I don’t think that’s going to work.” I said, “It’s got to work. Let me show you.” I thought we were going to make a huge profit in the third month and here we are seven years into it, shutting it down. There are other times I have listened and now I eagerly seek her out. Even if she doesn’t meet the people in person, I lay it all out for her and I try to get her feedback. Now that she knows I listen, she’s way more likely to try to take a deep breath, be reasonable and not let fear drive for what she had some in the past. That’s why I was able to discount her advice. I said, “That’s just fear. I’m not listening.” That was not a great thing. She didn’t go with me on that trip to Charlotte but she if she had, I know she would have seen through that guy.

I’ve had my wife be part of business discussions and retreats and off sites but as far as bringing on key people, I’ve never had her involved. That’s an incredible idea. It depends on your spouse and their knowledge of people in business investment and so forth. I would definitely agree that she’s one to understand body language and understand the tonality at a level that is almost instinctive.

There are 3,000 signals we send off between tone, eyebrows and body language and all this stuff. We don’t consciously know what those things are, but our brain at a very deep level can make 40 quadrillion calculations per second. Our brain at a very deep level is involved with some quantum physics that I don’t understand. It allows us, and especially our wives in general, to be able to see things in a deeper and a more sensible way than we do. I’ve found that over the years, I’ve often shut that part of me off because on paper it looked like such a good profit and the wireless internet was a perfect example. It was a lot of greed on my part and it was one of the worst investments I ever made of time and money.

The balance of human emotions. That’s a game we’ll always be playing. Maybe talk through some of the elements of your book because using the word perfect could be a slippery slope in a sense. Talk to us about how and why you chose that word to define the core theme of the contents of the book.

One of my favorite internet marketers is Perry Marshall. We had him on as a guest on our How to Lose Money show. He has a book called The Ultimate Guide to Google AdWords so I named my book The Definitive Guide to Multifamily Housing. I thought it was great but everybody I talked to about it seemed indifferent or yawned. I had a friend who goes, “Multifamily, after skimming your book, it’s like the perfect investment. You should call it that.” That’s too big of a claim.

Age, wisdom, and counsel all goes into the mix of knowing when to cut your losses and get out and when it's time to start another business. Click To Tweet

I didn’t know much about self-storage at the time. I realized that I couldn’t think of any investment I’ve ever seen, and I was a couple of years into this that was a better investment with a better balance of risk and return. That’s why I had the audacity to name it that. It’s selling quite well. I just don’t know what to do with my next book because I might write a book on self-storage someday. A lot of people in BiggerPockets, which is the ultimate forum for real estate investors with a little over a million strong, a lot of people want to come in and they want a house hack. They want to be a single-family landlord. They want to build up a portfolio of 100 single-family homes and they don’t realize the incredible toll it takes emotionally and in every other way on you to do that.

I’ve seen one person after another who gets up to ten or twenty single-family rentals of whether they’re duplexes or mobile homes or whatever. They sell off the portfolio in frustration. They never make any money because there are so many hassles involved. My argument in the book is there’s a better way. There’s a better way than dealing with toilets, tenants and trash, and that is to invest with a great trustworthy syndicator. The book goes through all the different reasons. Multifamily is a great investment and then a lot of the demographics, a lot of the reasons Freddie Mac and Fannie Mae love it. Then how to find a great syndicator using that same test, that gut-level test. One of the great things toward the end is I talk about a couple of things. Number one, I talked about the various tax savings that commercial real estate provides, which are incredible. I talk about my big why which is my, “Why I’m doing this?” at the very end.

I look at the Trump tax cuts and a lot of the stuff that went through a lot. There are some big benefits to investors, especially in commercial.

A friend of mine showed me how you could take $20 million and turn it into $211 million and throw off $130 million in cashflow over twenty years. He said, “Where else can you get returns like this?” I was like, “That’s amazing.” He said, “If you play your cards right, this passive investor might pay virtually zero in taxes over those two decades.”

Your podcast is fascinating and some of the topics are fascinating. I’m going to definitely start listening because I had seen the best lessons in failure, especially when money is lost. As you have experienced, you’ve learned firsthand 100 ways that people are losing money. What are some of the primary lessons you’ve taken from that and applied to your businesses?

It’s great because it’s a weekly reminder of what not to do and that’s a key for this. I could tell you how we grew our company and sold it for $3 million in under five years in Detroit. That was great. That seemed smart and everything, but I couldn’t replicate that. If I heard that story, if you heard that story from me, it worked out well. The timing, the relationships, all these things, there’s no way to easily replicate that. The lessons I learned from that and the lessons I could teach from that, were pretty small. If I hear all these guests and if they hear me talking about how I lost $500,000 or how one guest lost $70 million, I can say, “I’m not going to do that.”

TWS 7 | Property

Property: Making a good investment comes down to not just investing because of an idea, but investing in the people that are actually supporting and running it.

 

Failure is much easier to avoid than success is to copy I think. People like Tony Robbins might say, “No. I can show you how to get successful.” I agree that’s a point as well. For me, it’s been easier to replicate not failing than it is succeeding. One lesson we’ve learned is lack of due diligence, jumping in quickly and falling in love with the property. A lot of our investors, a lot of our How to Lose Money guests are real estate investors. For some reason, a lot of them seem to lose a lot of money in 2007, 2008 and 2009. That’s when I was $2.5 million in debt. Thankfully, that was all tied to real estate, so I was debt-free thirteen months later right in the middle of the recession. Speculating versus investing has been another big lesson. Picking things for wrong reasons, like saying, “I like the Buffalo Bills. I want to invest in Buffalo.” Not that Buffalo is a bad market, I just picked that out of the air but you get the point. It’s easy to do things like that or it’s easy to justify things. It’s easy to fall in love with the property. Donald Trump when he was about 30 or 40, I heard an interview with him. The only thing I remember about it was he said, “Don’t fall in love. It’s so easy to fall in love with the property and then use every argument after that to justify why that’s a great purchase.” We all do this with cars. We do it with future spouses. We do it with investments, “It’s got a leaky basement, but the kids need a wading pool. Right, honey?” It’s maddening in all the way we justify what we want to do. My thing on that will be fall in love with the numbers. Don’t fall in love with the property. Try to be as objective as you can.

Another piece of advice would be to get great counsel. I know you spend a lot of money every year on coaching and masterminds and all that and I am starting to dive back into that as well. We’ve got a mentor. We paid $25,000 one time for this mentor and they’d been worth their weight in gold. That’s in the multifamily space and I recommend them to people all the time. We still use them four or five years later for questions. Another harder to quantify thing would be what you do with the lessons you’ve learned. I can argue both sides of this. I’ve heard both of them on the podcast. You’ve got somebody who says, “You just paid all your tuition in this horrible loss. Are you going to quit and start some new business?” Ours was, “Are you going to start out as a freshman in another business, a freshman in college again? Or are you going to dive back in and take all you’ve learned since you’ve paid the tuition and go deep and use that lesson to expand on and succeed?” That’s one argument.

The other argument on the other side of the coin is you’ve got to know when to cut your losses and get out. I’ve heard guests passionately tell that story of why you’ve lost enough and that with the wireless internet business. If we would have cut our losses four years ago and had just taken the $300,000 or $400,000 loss, then we would have been way better off than where we are now. That’s another argument but those don’t seem the same. Years, age, wisdom, counsel, all that goes into the mix and we’ve got to know when to do the one and when it’s time to do the other. Those were some of the main lessons we’ve learned from our How to Lose Money guests.

We’re in this information sharing world and oftentimes information has a candy wrapper on top of it. I thought it was refreshing to see the theme of your podcast. It was a pleasure to be on there because that’s when things get real and that’s where the true education is not by the shiny objects on the surface, but what went on to create them in the first place. There are so many points you’ve made throughout this interview that I would echo. In the end, financial tools, whether it’s real estate. Whether it’s a stock, a business, some startup or venture, it’s one of those things where the less you understand, the less involvement and value you can bring to the table the more risk you have.

As it pertains to real estate, it’s a fundamental need that we have and it’s always going to exist. It’s not necessarily just investing because of that idea, but it comes down to investing in the people that are supporting and running it. It is where I’ve seen the majority of issues. It’s not just your failure to learn from but one of the criteria I have is I won’t ever put money with people that I’ve earned who have not failed. It’s understanding what happened, what they learned from it and what they did in those moments of failure. Oftentimes it’s not even what they say but what those who were involved as an investor said during those times.

That’s what tells the story about things not going as planned, which tends to be the case with humanity. You want to know what their principles are, what their mission is and what drives them. Also what values they have so that you can get a barometer as to what decision they’re going to make and how it will affect the money you’ve given them and invested with. In your book, you talked about real estate. You talked through certain details of your story. One thing you said in there was where you talked about your purpose, the purpose of that company, your why with what you’re doing.

Real estate is a fundamental need that we have so it's always going to exist. Click To Tweet

I don’t know how much you’ve heard about human trafficking, but people are starting to hear about it thankfully now.

The Operation Underground is here in Utah, the big one that Tony Robbins sponsors. There are tons of money in there. The ex-Special Forces guys.

If you took the total record profits from General Motors, Nike, Apple and Starbucks and combine those, double that number, and that’s less than what is believed to be the annual revenues from human trafficking worldwide. It’s a big deal. They say there are over 30 million people trafficked and a lot of those people are sex trafficked. I want to believe that if I was alive years ago, pre-civil war, that I would have been fighting for abolition. I’d be fighting to free slaves. If I would have been an adult in the 1960s, I want to believe that I’d be fighting for civil rights. We’ve got an emergency here that doesn’t get headlines and it’s not caused a civil war. It’s not causing marches on Washington, but it’s slavery and it’s a big deal.

My company Wellings Capital and I are dedicating ourselves to donating a significant portion of our profits to fighting human trafficking and rescuing its victims. We’re identifying organizations we can back and we’re already doing that. I’m also part of a group called FreedomPlaceProject.com. Our goal is to build a billion-dollar office complex in Dallas, to use that as a prototype and then build other office complexes around the country and say, “We’re giving 100% of our syndicator, of our internal profits to fight human trafficking.” That’s in the works and we’re excited about that. There’s nothing to do with that now except maybe visit the website, but I’m excited about that. My goal is to donate $1 billion to fight human trafficking and rescue its victims through my influence and personally over the next years.

Can you give out those website addresses again and if there are other new sources, feeds or groups that are out there that people can learn more about the human trafficking problem?

One I would go to is ExodusCry.com. They’re based near Kansas City. They’ve got an incredible gut-wrenching movie out called Nefarious. If anybody wants to get ahold of me, I’ll send you a copy of the film. I’m friends with the director. He’s got 800 hours of film footage and he’s making a lot of films. He’s made other ones since then but Nefarious is the one that had opened my eyes. We also have FreedomPlaceProject.com. We’re looking for a CEO to run that company. Then my company is Wellings Capital. We’re at WellingsCapital.com.

I knew it was a problem and you travel around and in airports there are signs everywhere to keep your eyes open and pay attention. From the numbers side of things, I didn’t know it was that big.

We talked about Apple, Starbucks, Nike and GM times two. Let’s go down to small. One preteen or teenage girl can generate up to $500,000 a year in revenue for her trafficker, for her slave owner. Think about that. Think about what that means to that girl.

I didn’t know it was this prevalent and this big. Thank you so much for sharing that and at a minimum, helping me be more aware of it. Thank you for what you’re doing by dedicating some of your profits to that cause. What are some of the groups that are getting together and what type of impact are they having? Is it slowing down or is it going to take a while to eradicate as it seemed like a social epidemic?

There are some great groups. There’s one well-known group that’s rescuing girls in places like the Philippines, but the reports I have are that 99% of those girls are going back to prostitution later. It’s a tough situation and now it’s becoming more prevalent. There are more ways to kidnap these girls and social awareness in airports and all over the place is going up. However, the problem I think is probably getting a little worse.

Where’s the concentration in the world? Is it international or is it the US?

It’s both. There are some statistics that say one out of every 500 girls will be trafficked. I don’t necessarily believe that because I know of people of the places I’ve visited, but I don’t know anybody in my personal sphere or anybody that I’ve ever heard of personally be trafficked, in the news but not myself. I think it’s probably more prevalent in other countries. This documentary, Nefarious, goes over some of that.

The Operation Underground Railroad, which is out of Utah, they have a documentary out as well. Hopefully, the awareness continues to rise. I didn’t want to end on that sad of a note but still inspiring that you are trying to do your part to make a difference. Thank you for that.

Thanks. I’m glad you asked about it. We all have a part to play in this. They asked Mother Teresa how to feed a billion starving kids and she said, “One mouth at a time.” We are making a difference and good will prevail. I’m sure of that.

Paul, we appreciate your time and thanks for joining us.

It’s been great. It’s been an honor to be on your show. Thank you so much.

Important Links:

About Paul Moore

TWS 7 | PropertyAn expert in the real estate space, Paul Moore of Wellings Capital graduated with an MBA from Ohio State and entered the management development track at Ford Motor Company. After five years, he departed to start a staffing company with a partner. They sold it to a publicly traded firm five years later for $2.9 million.

Along the way, Paul was Finalist for Ernst & Young’s Michigan Entrepreneur of the Year two years straight (1996 & 1997). Paul later entered the real estate sector, where he flipped over 50 homes and 25 high-end waterfront lots, appeared on HGTV’s House Hunters, rehabbed and managed rental properties, built a number of new homes, developed a subdivision, and started two successful online real estate marketing firms.

Three successful developments, including assisting with the development of a Hyatt hotel and a very successful multifamily project, led him into the commercial multifamily arena. Paul is the author of The Perfect Investment – Create Enduring Wealth from the Historic Shift to Multifamily Housing. Paul also co-hosts a wealth-building podcast called How to Lose Money, is a featured guest on numerous real estate podcasts, and is a regular author for Bigger Pockets. Paul is married with four children and lives in Central Virginia.

Love the show? Subscribe, rate, review, and share!
Join The Wealth Standard community today:

Is A Housing Market Correction Imminent? Episode – 192

During his time as a faculty member at The Summit At Sea, Patrick had amazing discussions with many of the greatest minds in the financial space.  A fair amount of those conversations took place away from the classroom with Dr. Doug Duncan, the Chief Economist for Fannie Mae.

Dr. Duncan shared some insightful information about the housing market & the Federal Government.  He says we are in the longest housing expansion in history without a correction.  Is a new market correction imminent?  Did the government really correct the problems of 2008?

Listen now to hear what Dr. Duncan and Patrick talked about!

Here’s some additional links and info from this episode:

Dr. Doug Duncan

http://fanniemae.com/resources/file/aboutus/pdf/duncan-douglas-fmbio.pdf

Henry Hazlitt – Economics In One Lesson

Inside Job – Narrated By Matt Damon

www.sonyclassics.com/insidejob

 

Tune in to our weekly shows onYouTube and Tunein!  We also love to receive your feedback, thoughts, and comments on Twitter,Facebook, and the iTunes store. Or, you can email us at info@paradigmlife.net

Visit: http://paradigmlife.wpengine.com and join the newsletter to stay updated
Email: info@paradigmlife.net
Call: 801-532-3660
Follow: @paradigmlife