Aloha Inspired Money Maker.

Thanks for tuning in.

If this is your first time with us, welcome.

If you're returning, welcome back to Inspired Money.

I'm your host Andy Wang, a.k.a.

Advisor Andy.

And I think I've mentioned this before, but when it comes to real estate, one of my biggest regrets is selling my apartment in Boston.

I should have held onto that and rented it out because I had such a low cost basis, but I have to not look back.

I don't know about you, but if you've ever dreamt about building wealth through real estate but felt overwhelmed by all the options, single family homes, apartment buildings, commercial properties, syndications, you are in the right place.

Real estate has long been one of the most powerful ways to grow wealth, generate passive income and hedge against inflation.

But today's opportunities go far beyond buying a rental house or flipping a fixer upper.

From data driven investing in private capital to to purpose driven development, the landscape is evolving and smart investors are evolving with it.

In this episode, we're going to unpack what's working now in real estate.

From emerging niches and advanced financing to the tech tools changing how deals are found and analyzed.

Whether you're just getting started or scaling your portfolio, you're going to hear how top investors are adapting strategies, managing risks and creating impact along the way.

Stay tuned.

We have five super high caliber guests who will show you how to think bigger, invest smarter and build long term wealth through property.

But first, let me take a moment to thank our sponsor.

Today's episode is brought to you by my investment management firm, Runnymede Capital Management because everyone deserves a clear path to financial independence.

Let me ask you, "Do you really know when you can retire, and how much income you'll have when you do?" Most people don't know and guessing is risky.

That's why we offer a free 3 minute tool that gives you real answers.

You can go to InspiredMoney.fm/getplan and you'll see your projected retirement age and income plus some strategies to cut debt, lower taxes, grow investments and protect your future.

There's no sales pitch, no obligation, hopefully just clarity.

These are some of the foundational strategies that I use with my wealth management clients every day.

And now they're free to you.

So take three minutes.

Just go to InspiredMoney.fm/getplan.

Try it out and let me know how you make out.

Now let's bring in our guests.

First up, we have Ken McElroy, one of the most recognized names in multifamily real estate.

He's the CEO of MC Companies which manages more than $2 billion in assets nationwide.

And he's helped countless investors achieve financial freedom through his books, YouTube channel and the Collective Advisors Mastermind.

Ken is also passionate.

He's a passionate philanthropist through his sharing the Good Life Foundation.

Welcome Ken.

Thanks, Andy.

Appreciate it.

Next joining us is Neal Bawa, also known as the mad scientist of multifamily.

Neal is the CEO and founder of Ugro and GrowCapitas, overseeing a billion dollar portfolio of over 4800 units.

He is a data driven visionary who uses analytics, prop tech and fintech to make real estate smarter, more efficient and more transparent for investors.

Neal, so glad to have you.

Thanks for having me on the panel.

Really excited to hear what everyone has to say.

It's going to be action packed.

We're also thrilled to have Jay Papizan.

He's with us.

Best selling author, real estate executive and thought leader, Jay has spent more than two decades at Keller Williams Realty International where he's led education, publishing and strategic content.

He's the co author of the One Thing which has sold over 3 1/2 million copies worldwide.

He's also CEO of Productive, Co host of the One Thing and Think Like a CEO podcast and co owner of Papazen Properties Group in Austin, Texas.

Jay, welcome.

Thanks for having me.

Our next guest is J Scott.

He's an entrepreneur, investor and best selling author of five real estate books with more than half a million copies sold.

Before entering real estate, he was a Silicon Valley executive at Microsoft and eBay.

Today he's a partner at Bar Down Investments where he owns and operates a $200 million multifamily investment fund with over 1,100 units.

I'm hoping today to avoid confusion, we're going to have Jay and J Scott.

J Scott, welcome.

Thanks Andy.

I appreciate it.

Rounding out our panel today we have Paul Moore, founder of Wellings Capital, which manages eight private equity commercial real estate funds.

Paul is a seasoned investor with over 100 completed property deals across multifamily, self storage and large scale developments.

He's also an author, speaker and trusted educator who's passionate about helping investors build wealth with purpose.

So good to have you here Paul.

Yeah, great to be here.

Thank you.

We have a lot to cover.

We've got an incredible panel so let's get started with segment one.

Commercial real estate goes far beyond office towers.

Investors are increasingly turning to niche properties like self storage, small bay, industrial and medical offices for stable scalable income.

Self storage benefits from life transitions like downsizing or divorce, making it recession resistant.

Small Bay Industrial supports local businesses and ecommerce, offering reliable cash flow through long term tenants who value functionality.

Medical offices provide perhaps the most stability.

Healthcare tenants invest heavily in custom build outs, resulting in long leases and high renewal rates.

These properties also respond well to demographic trends, especially an aging population.

Many of these leases are structured as a triple net lease, pushing most expenses to tenants and allowing for more predictable income.

When evaluating deals, look at cap rates, lease terms and tenant profiles.

By targeting specialized sectors, investors can access better yields, lower volatility and more passive income streams than traditional residential assets provide.

Paul, you've called self storage and small bay industrial "boring but beautiful" asset classes.

What first convinced you that these niches could outperform traditional multifamily?

You know, I had written a book that was humbly titled the Perfect Investment about multifamily investing.

And somebody got on a call with me and they said, I actually want to talk to you about self storage.

And I said okay.

And then I thought, oh man, I don't want to hear about this.

But what convinced me was he said, look, if I was renting an apartment to you for $1,000 a month and I raised the rate by 15%, you might move out rather than pay that extra $,1800 a year that you're locked in for.

But if I'm renting you a self storage unit for $100 a month and I raise it by 15%, you're probably not gonna spend a weekend, get a U-Haul, get your buddies together to move your junk, excuse me, down the street just to save $15 a month, especially when it's on a month to month lease.

That got my attention.

And then I realized there were a lot of benefits to self storage.

Our company started investing in self storage, mobile home parks and other asset types.

And we've been really happy with this investment class.

I love it.

I love the stickiness that it has.

Ken, you've scaled your, you've scaled from small apartments to $2 billion in assets.

What have you learned about choosing asset types that hold up in different market cycles?

Well, we've done self storage, we've done office, we've done development, we've done retail, we've done industrial.

I'm right now focused a lot on billboards because of the bonus appreciation you get in year one plus a cash flow.

And I'm trying to do that to offset tax.

So I think being in these niches is really, really fun.

However, the learning curve is high and you know, there are things that are easy like, like for example, when, when I did a bunch of self storage.

It's easy to get in the game quickly.

You could build them quickly.

You don't need a lot of land.

So the barriers to entry are less, you know, than, than maybe a multifamily project which takes me almost two years to build.

So there are, you know, there are pros and cons to both, but I, I love all real estate classes and I think at any time in the cycle some are up, some are down.

So you really, really need to know how to run them.

Any surprising challenges with self storage?

Oh, for sure, yeah.

Yeah.

I mean, you know, one of the things with, well, self storage been my experience, the ones that we've built, the ones that I've owned, they, they really have a lot to do with single family home construction.

So as single family homes build out, people like to store their stuff.

Yes, you can always say there's divorce and all that kind of stuff and there always is those kinds of things.

But you know, but then what, what I've seen is you can, you can, you can do 2, 3, 4, 5 projects within a few square miles and then all of a sudden you're competing against each other.

Now the same thing can happen in multifamily, the same thing can happen in office, but the barriers to entry, I think for, you know, you can build a self storage on just 1 to 2 to 3 acres, you know, and, and so that's the difference with a scalable multifamily.

We need to build a good one, we need over 10 acres.

Right.

And then you, there's massive zoning issues and self storage is nimble because a lot of times they're infill.

You can rip down something.

We just had one done in Scottsdale where they ripped down an old restaurant that had been closed and you know, A location, you know, and so that one's crushing it.

So it really is like anything else, it's one of those sectors that you gotta be careful like, because if you have three or four or five, if you have, if you got an 8 x 10 and somebody's $10 less, you know, half a block or one block or two blocks away, that's a problem.

So you know, they're sensitive, price sensitive.

And also I don't like the value add side of it personally.

Like there is really no value add.

The market kind of sets the number.

Whereas apartments, if I buy something in the 90s, let's say that, you know, for, I don't know, $100,000, $125,000, $150,000 a door, you know, I can put 15, 20 grand into side of the unit and, and, and get that rent bump.

So there's kind of a forced equity that I never found in self storage.

I could be wrong.

I know there's, there's people that do it with tech efficiencies and stuff like that, you know, but, but from a physical, what does the customer get?

You know, I haven't found anything that, you know, works for value add in self storage.

Thank you.

Yes, it sounds like that low barrier to entry is a double edged sword.

Neal, you're a recovering technologist.

What data points or signals help you to identify promising but maybe overlooked property niches?

Niches inside of niches.

So here's what I'd like to say.

I like, you know, medical offices, I like self storage and I like, you know, small industrial.

I don't like large industrial, but I like small industrial.

But here's what I would say.

Self storage is dealing with one of the largest inventory releases in the US 8.8% of inventory in the last 36 months.

That's a lot.

That's, that's a huge amount.

As people have already said, it's very easy to build storage because you get approval sooner and you build it faster and so it can, it's very easy for there to be a storage glut in a particular market and there to be a storage shortfall in a market that's 10 miles away.

So I really want to point out that it's easy for investors to get carried away with, oh, self storage is the new multifamily, or industrial is the new multifamily or, or its medical offices.

None of these are the new multifamily and neither is multifamily itself the new multifamily.

What we are basically saying is the market is actually more hyperlocal today than it has ever been.

There are markets, Phoenix is a perfect example, where there's 15,000 multifamily units coming in the next 18 months.

That's not, that's a very challenging place to be.

And then there are markets in the US like Boston for example, where it's very difficult to build new things, where we have a shortfall of about 10,000 units in a single market.

And Boston is the lowest cap rate market in the US bar San Francisco.

So what I'd like to point out to people is, and people don't like to hear this because they want to hear us give you some kind of magical solution.

Paul Moore says this is the solution, or Ken says this is the solution really My message to all of you is these are all great asset classes and they're all horrible asset classes.

It depends on where you're looking.

So be hyper local and you will find lots and lots of amazing places where you can build or buy self storage.

And the same applies for all of these others.

Having said that, at the current moment, I would say small industrial is probably in the best space in terms of not having over capacity.

There's lots of over capacity in self storage.

There's lots of over capacity in multifamily.

I'm not so sure about the medical office.

It's a much smaller space.

But I would say that small industrial, I'm not seeing any evidence of over capacity or overbuilding in that space.

So big thumbs up from a point of view of just data analysis.

Jay, I want to ask you, how do you teach agents and investors to evaluate opportunity beyond their comfort zone?

What's the one thing that they need to focus on first?

Oh, yeah, if you've got something to add, jump in.

So the thing we don't ever want them to do is pretend to be an expert on something they're not.

So I think the definition of a professional is when I know the answer, I'll give you the answer.

When I don't know the answer, I will go find the best answer.

So we leverage our network and we try to teach people to not give fake answers.

I'm sorry, that's just like the worst kind of customer service you could possibly give.

But we have a network that we can tap into for all of that.

I wanted to piggyback on what Neal said there because the thing about niches in general, whenever I think about this class is I think of this.

And sometimes I get the yellow kind of warning light out.

I'm thinking a lot of times when we have this conversation, people are chasing trends.

And anytime you're chasing a trend, you may be by definition late.

And I would just always encourage investing whatever you're investing in.

Pick an asset class and learn how to understand value.

How value is made and created is even better.

And that'll shows you how to add value.

So, like, do you actually understand the value of what you're investing in?

Otherwise you're gambling.

And I just feel like if you're going to pick a niche, go be an expert in it in a local market because they are so different.

We see trends.

New Jersey is not like Austin, Texas right now.

You've got a seller market in one place.

We got a huge buyer market here.

A very important delineation between gambling and investing.

J Scott, how do you evaluate whether an alternative commercial asset fits into your long term strategy?

Yeah, so, I mean, just to piggyback on what everybody's already said, another thing that your audience should consider when investing in real estate is that every asset class is going to optimize for different types of returns.

So in real estate, we typically see four types of return.

We see cash flow, we see appreciation, we see tax benefits.

And we may see what's referred to as loan amortization, where your tenants, whoever's renting your property is paying down the loan, building equity in your favor.

And every real estate asset class is going to deliver these returns in a different percentage, a different format.

So you may invest in multifamily where you may end up seeing a lot of cash flow, a little bit of tax benefits, some appreciation, some amortization.

Other real estate asset classes may have a different mix.

You may see more tax benefits or less tax benefits.

You may see likely more appreciation value add or less appreciation value add you say?

Might see more amortization or loan pay down or less, depending on loan to value ratios in that asset class.

And so what I would recommend for any of your audience who might be looking to invest especially passively in real estate is to ask yourself, what are you looking for in terms of types of returns?

Are you looking for cash flow?

Do you need cash flow to live on?

Are you looking for long term growth appreciation?

Are you looking to offset some of your income through tax benefits and then tailor your investment, the asset class that you choose to invest in based on the specific types of returns you're looking for?

Neal, can you weigh in on this?

Because I understand that the tax benefits were a huge motivation for you to get into real estate.

Very much so.

And I think that nothing's really changed there from the time, you know, I had a big exit in 2013 tech company and I needed those tax benefits.

I live in Taxifornia and nothing's changed.

I mean, if anything, with this new Republican administration coming in and the return to 100% bonus depreciation, I personally find it very difficult to invest out of real estate.

I'm Excel spreadsheet driven and I'm looking at post tax returns.

When I compare my post tax returns with real estate with whatever I've invested, I've invested in lots of things outside of real estate, I can't really find anything.

There's one tiny exception to that rule.

You know, I invest in syndications that are, you know, were legal syndications.

With that exception.

I've actually never managed to beat my real estate returns as a investor myself.

I'm not talking about as a general partner, just as a limited partner investor.

You know, especially if you're in a higher tax state, it's going to be hard to beat real estate.

If you track every single investment you've ever made in your life, you're going to have a hard time beating real estate as an asset class.

It's a strong testimonial.

Anybody else want to weigh in before we move on?

JayPapasan said that it's really important to pick one asset type and become an expert in that.

You know, Warren Buffett talks about having a circle of competence and doesn't matter how large or small it is, you just need to know where your edges are.

Charlie Munger's friend John Aralaga picked a circle of competence.

He said, I want to be an expert at real estate within one mile of Stanford's campus.

And you know what, that sounds like a really small circle, but he became a billionaire doing that.

So I totally agree with you, Jay, on that.

I was just going to add, if you qualify as a real estate professional, cost segregation or bonus depreciation is kind of miraculous.

And we're back to the full benefit of it right now.

A lot of realtors out there don't realize they qualify as a full time real estate agent to get that bonus depreciation.

And it can offset a lot of income.

And the rates you can do, especially with small commercial, are basically offsetting a lot of your cost of entry.

So I just think it's one of the most miraculous benefits out there if you qualify.

I'll just add one thing, Andy.

I think, you know, a lot of people think that the deals are the problem, you know, and they would be right, like, like raising money because of people that are paying a lot in tax.

You know, if you just, if you just focus on that demographic that's basically most high net worth people, they're all trying to figure out how to pay less tax legally.

And so if you, you know, as Paul said, if you find your niche and you find something good and you, you build a track record, the money is there.

The hard part is actually finding a deal.

And when you jump all over the place into these different niches, your learning curve, like anything, is a lot steeper.

You know, we've been doing multifamily for 30 years.

We certainly don't know everything, but, you know, we've gotten the heck beat out of us over those 30 years.

And so, you know, so our saw is a little bit sharper than somebody who's just jumping in.

Yeah, Healthy reminder that we usually learn best by making mistakes.

So you have to allow yourself to make those mistakes in order to become an expert.

Let's move on to segment two.

Scaling a real estate portfolio means moving past conventional mortgages.

Once you approach the 10 loan limit, banks shift focus from your personal income to the asset's performance.

This is where portfolio and debt service coverage ratio loans become essential.

DSCR loans evaluate whether a property's income can cover its debt service, typically requiring a ratio above 1.25x.

For even more flexibility, private capital fills the gap.

Hard money lenders offer fast high interest loans for short term flips.

Private lenders, often individuals, fund longer term deals based on trust and your track record.

Syndications allow you to pool funds from passive investors to acquire larger properties with you managing the project.

To succeed, you need a solid deal, clear projections, and a strong investor pitch.

With these tools, you're no longer limited by personal income or bank ceilings.

You're financing like a business owner.

J Scott, in scaling to a $200 million in multifamily holdings, what have you learned about financing?

Or have you had to make changes once you pass that 10 loan limit?

Yeah, so I think for anybody out there that's looking to invest either actively or passively, it's important to understand this concept called the capital stack.

And the capital stack is basically just the proportion of money that's coming in from different sources, debt and equity, and understanding how and those sources of financing get paid their returns.

And so in any capital stack, any deal that you do is probably going to be some combination of debt, basically loans from either other people, institutions, banks, government agencies, or equity, your own capital, your partner's capital, your investor's capital.

But even within the debt and the equity pieces, there are different types of debt and equity.

And so when returns come into a deal, depending on how that capital stack is structured, certain people are going to get paid first, certain people are going to get paid second, and third and fourth and so on up the chain.

And depending on where you are in that chain, you're going to get paid different amounts.

And so understanding the capital stack, not just in general how capital stacks work, but understanding the capital stack for the specific deal that you're investing in and ensuring that the capital stack is, is built and designed appropriately to ensure that everybody in the stack is getting paid a reasonable amount at a reasonable time is really important.

When structuring deals.

And so I would recommend anybody out there that's listening to this do some research, research into how capital stacks work, the different types of debt that's out there, the different types of equity that's out there, and how they all interplay and work with each other.

Ken, in managing billions, how has your approach to leverage and liquidity evolved as your portfolio grew?

So we've done $600 million this year already.

So we've done.

We're really, really, really busy.

So we've done some refinances, we broke ground, some new construction, and we did five recaps with a company out of California.

And, you know, we're really active on acquisitions.

And so what we're seeing is the market is soft in multifamily.

You know, you can't deliver 504,000 units in a single year, which is the highest year on record, this year, for the nation, and not expect some softness.

Now, what that does is it makes it harder for the lender to underwrite these kinds of deals because you have almost no rent growth, for example, you have concessions, for example, your expenses are higher, for example, on a number of levels.

Property tax, insurance, marketing costs, those kinds of things.

So what they do is they pull back, and they pulled back a while ago.

So.

So, you know, you'd be lucky to get, you know, north of 60% loan to value, you know, and construction debt is, you know, in the 8, 9% range.

So, you know, so what you have is the market's already figured all this out.

So when we go out to find an asset, we just got another one awarded this week in Las Vegas, you know, a few years old, fully stabilized, that weʻll buy, hopefully by the end of the year.

And, you know, at the most, you're looking at 60% debt and 40% equity.

And so that is where we're at.

And, you know, when it starts to creep up, that's actually when we should.

That's actually when we should be careful.

You know, we all know that putting more money down is not a bad thing, right?

And so that's what gets everyone in trouble, is when they start to lever these things up.

There's one little small thing like rates went up and I'm on a floating.

I'm on floating debt, or there's a maturity and the cap rates are up or whatever it might be.

So that's what's happening now.

And so the softness has presented a tremendous amount of opportunities on the buy side because developers, builders, owners, landlords, there, a lot of them are in distress, a lot of them are not in distress.

But there's a lot of money on the sidelines right now looking to try to find good deals.

Paul, what are your thoughts?

Have you had to adjust your fund structures at all to adapt to changing interest rate environments this year?

Yeah, back in 2022 when interest rates started rising, we found that we were having a really hard time finding deals.

But we also found out, like Ken said, that there was a shortfall on the capital stack.

So we looked at a new strategy and that was providing preferred equity.

Because our goal is not to get the best return on investment.

It's the bet to get the best risk adjusted ROI.

And we think we can get a better return for each unit of risk using either preferred equity or what we call JV hybrid equity, which has control rights and it has, you know, protected downside.

It has other people in first loss position, but it still has the same upward potential of profitability as the LP investors.

And so we've been doing that almost exclusively for two and a half years now.

And this is not rescue capital, this is not development capital, but this is preferred or JV equity in the middle of the capital stack.

And by bringing a large check, for example, we're bringing a $12 million check right now and will be about half of the equity.

We get all kinds of control rights and budget approval rights and things we wouldn't get otherwise.

So that's what we're doing right now.

Neal, on that topic of risk adjusted return, how do you use analytics in your spreadsheets to model that debt risk and capital structure for really long term resilience?

Well, I'm going to piggyback on what Paul said.

So as an investor, you hear about common equity, you hear about prep equity and you hear about lending.

These are three common ventures.

Have you spent any time actually understanding the risk reward for this?

Let's say that the risk of common equity is 100.

Do you know what the risk of pref equity is?

Is it 40?

Is it 50?

Is it 80?

Is it 200?

Is it higher than common equity?

What's the risk of lending?

I think everyone looks at reward.

Everyone's looking at, well, common equity might make me 16% or 20% or at least what people are projecting is 20% or higher.

And pref equity might make me a little bit lower and then lending might make me even lower.

But I think what really needs to be done is you have to look at risk and reward together.

And I Don't see people doing that in spreadsheets.

So to me, a PREF equity investment with Paul Moore, I'm an investor with him, by the way, is actually giving me a higher return because what I'm doing is I'm looking at the return and I'm factoring risk into it.

This is actually not very hard to do.

One hour spent with ChatGPT and you'd have a spreadsheet that you can use for the rest of your life.

But what you should be doing is you should be taking common versus lending versus pref and you should be adding a factor to that and it's called the risk factor.

And you can work out a factor that works for you.

And then when you look at a pref deal, you're never looking at the returns, you're actually looking at your aggregated return once you've added your risk factor in.

And when you do that, you'll find actually pref actually makes more money than common equity.

This is the sort of thinking that you need to have, right?

You can't look at, oh, somebody's making 18% or 20%.

Yeah, but that 18% or 20% comes at a certain risk level and you have to factor that in to your return.

No GP will ever do it for you because they don't want to say something that's, that's opposed to their own benefits.

But you should be able to to apply a risk factor based on the type of risk you can.

Again, ChatGPT is a wonderful place to have this conversation.

Jay, you've written extensively about models and leverage.

What are your thoughts?

I learned from someone who'd been through two massive recessions and so risk aversion, it's like there is no move, no matter how rewarding it might be, that we can take, that can knock us out of the game entirely.

And so I kind of.

We've been very, very careful as we've grown our personal portfolio.

When we came into these high interest rates, we had an 80% equity to debt ratio.

So we've been able to basically lend to ourselves in this moment and tap with that equity to make acquisitions when other people are really looking for a way to get out.

I think that might been what Ken was alluding to.

There are a lot of people who got in expecting markets to rise and interest rates to, say, low.

They're in trouble, they can't refinan, and we can provide that for them.

So I'm just super risk averse.

There are people out there, they're like, what about the ROI and I'm like, nope, I'm playing a long game.

We've done very well.

I'm probably the smallest investment portfolio here, but I, I love to de risk it.

You want the tortoise, not the hare.

I, well, he always wins, doesn't he?

Always wins.

And I've just never seen the hare win in a long enough race.

Thank you.

Let's go to segment three.

Owning rental property isn't the same as managing it like a business.

Landlords focus on repairs and rent collection.

Asset managers focus on long term value and cash flow.

The shift begins with tracking key metrics like net operating income and cash on cash return.

From there, it's about strategy.

Raise income through rent increases, cosmetic renovations and ancillary revenue like pet fees or storage rentals.

Reduce costs by implementing ratio utility billing systems, also known as rubs, to bill back utilities and budget proactively for capital expenditures.

Every dollar added to net operating income increases the property's value.

For example, a $3,600 annual increase in NOI can add $60,000 in value in a 6% cap rate market.

This approach, value add renovations, tenant upgrades and operational efficiency turns your portfolio into a scalable investment, not just a set of properties.

The goal is manage each asset like a business, not just a building.

Oh man, we've got AI Drones.

Ken, you've taught thousands how to move from owning property to owning a business.

What's the first mindset shift that every landlord must make?

We're rolling right into a great topic which is, you know, I think the property manager and the asset manager really need to be connected by the hip.

And let me tell you, there are people that manage tenants and manage the physical plant.

Then they're extremely important.

As you know, that's how I came up through the business.

In college I was on site manager, you know, I was collecting rent for on behalf of ownership.

Then I moved to the other side of the desk and at that point that's more asset management.

And now you're actually managing the investors, you're actually managing the debt and you're managing the property manager.

So it's good to have a little bit of tension between the two in my opinion because the, the role of the asset manager is to preserve the investor capital.

Was that a difficult shift for you?

I think you had like 9 years experience on the property management side before you kind of.

No.

Oh gosh, no.

I, I, I, you know, I learned the school of hard knocks for sure.

You know, like, like I, I, I mean, I grew up in the construction business, so I did understand how to fix stuff.

And you know, so by the time I started buying assets, I did understand how to fix them.

That is actually the competitive advantage that most asset managers.

I have asset managers in my company, So I have 300 people, I have blue blood, highly educated, you know, very smart folks.

I sit across from the desk and I just shake my head.

They have no clue what goes on on the property, but they can look at spreadsheets and that's how big the difference can be.

So you need both.

And you know, but I had to learn, you know, the other side of it.

And thankfully that's really all I do now is how do you preserve the asset?

Because at the end of the day, if the asset is in really, really good shape, it's well capitalized, it's maintained, financially maintained, you've got adequate reserves, and you have a whole asset management function, then it actually helps when you start to exit that whether it's, it could be cash out, refinance, it could just be a sale, it doesn't really matter what it is, you know, but the asset needs to be the you.

You know, I like to buy distressed assets and like, like probably everyone here, there's a reason that they're distressed and it's because typically poor asset management.

Yeah.

And I guess on that note, let me ask J Scott, what systems or tools do you implement first if you're taking over a poorly managed property?

Yeah, so.

Well, keep in mind, when you people like to think of real estate as something different than a regular business, a lot of people go into real estate and they think, okay, I can buy a property or two properties or five properties and I can run them.

I can do everything myself.

And as Ken alluded to or, and as you allude to as well, Andy, is that real estate, estate, just like anything else, is a business.

And to be a good business owner, to be a good business leader, you have to understand everything that happens in business.

You have to understand how inventory works and how cash flow management works.

You have to be able to read financial statements and do financial analysis.

You have to be able to work with vendors.

You have to be a good leader and be good at hiring people.

All the things that, that go into running a restaurant or a tech business or any other business that you might run are applicable to being a good real estate operator.

And so the first thing I would recommend to anybody that's looking to get into real estate is to learn the basics of running a business.

Learn how cash flow management works.

Learn how to read financial statements.

Figure out how to be a CEO, a CFO, a marketing person, whatever it is that, that you're going to be doing in that business.

So that when you actually start jumping into the day to day, you can hit the ground running as opposed to thinking of it as a hobby where real estate is somehow different than any other typ type of business on the planet.

It's not.

Paul, you've written about the Perfect Investment.

What does operational excellence look like to you?

You know, it's funny, I actually, after writing that I, I had a show on Bigger Pockets and on their Instagram Live and YouTube channel and I said timeout, the perfect investment is not perfect.

And, and that's it.

You know, if you get a property, if you get an asset manager who doesn't know what they're doing, a property manager who doesn't know what they're guys have said a great property, a great asset can be ruined by a mediocre operator and a mediocre asset can be saved and prosper under a great asset manager.

And so we think that the more we go on, the more we realize it's the people that make the difference, like you guys have said, and great people hiring great people, even if they don't have experience in your field, they can be trained and they can be, you know, they can do a great job in any asset type.

And we've have found that repeatedly.

Yeah, the importance of human capital.

Yeah.

Neal, what technology or KPI dashboards have changed how you manage assets day to day?

I think on the front end we tend to now be more obsessed about supply.

It doesn't matter what we're looking at, whether we're buying an industrial building or it's BTR (build to rent) multifamily, it doesn't matter.

We really, really tend to be obsessed about supply data.

Obviously we get them from paid sources like COSTAR or Yardi, but we also get them from unpaid sources.

So we built a lot of dashboards.

These dashboards are built using an AI software called N8N which is similar to ChatGPT.

So I suppose you could do a lot of what we are doing in ChatGPT before you sort of graduate to building apps yourself.

I find asking the right questions to be indispensable.

So we have turned our entire company into an AI first company, all employees are required to spend one hour on AI every day.

And what we're saying to them is any dashboards that you build, any metric that you use.

You must use artificial intelligence to power it.

So to give you an honest answer to our question, what's really changed for us is not the change in metrics.

Yes, supply is a much bigger deal for us now that we've learned the hard way.

But I think it's about empower using artificial intelligence to improve both the metrics and also improve the way that we look at our dashboards.

That's really what's changed in the last year.

We're really obsessed with AI and we feel that it has immense potential in helping us be better money managers and also better property managers.

I mean, so much of what we are doing today in terms of reporting, I'd say nearly 100% is AI generated with humans.

Obviously coming up with the data and improving the AI.

Jay, I want to tap into your The One Thing expertise again.

What's an important daily or weekly action that an investor should focus on to become a better asset manager?

Can I go monthly and quarterly?

So I would say for us, stop wondering and start asking, which I think is what.

I can't remember who said it earlier on.

We've had investments with property managers, and when we get the reports, we wonder, well, I wonder why that happened.

And when you're earlier in the game, you just need to be unafraid to ask really stupid questions and get the answer.

And that's almost every time we found out that a property was mismanaged because the moment we saw a change, we picked up the phone and now we have rules.

If that fourplex ever has more than one vacancy, we pick up the phone and call.

If that fourplex has, like there's just a set of rules.

So it's a monthly discipline of looking at the numbers and asking the questions that often go unasked.

And it's a quarterly meeting with our financial advisor.

We get our CPA, we get our attorney, we go through our portfolio property by property.

Most of the time, nothing's changed.

But the forced viewing of that and having other people look at it often makes us so much smarter.

So I just like visit with the dashboards you create, don't create them, and assume that it'll go well.

And if you look at them and ask questions, you'll get smart.

Over time, paying attention matters.

Let's move on to segment four.

Real estate used to be about who you knew and how well you could eyeball a deal.

In 2025, that model is evolving.

Today's top investors are using artificial intelligence intelligence to find deals before they hit the market.

And to analyze them with precision.

AI scans public records to flag properties with high sell likelihood, probate tax liens, divorce, and delivers them directly to your dashboard.

Predictive analytics go a step further, identifying zip codes with rising incomes, new permits and shrinking days on market.

Automated valuation models offer instant property values while rental comp tools project cash flow.

With platforms like PropStream, Localize.City and CompStack, you're no longer guessing you're executing based on real time data.

This shift turns investing from speculation into strategic decision making.

The AI investor doesn't chase deals, they target them with precision and speed.

Neal, you recommended to your people using AI daily.

Where are you seeing the biggest impact right now and how is it changing how you find or underwrite deals?

There's no particular area.

And please note, I do not recommend to my employees using AI.

We are forcing AI on our employees.

They have no choice.

We set quarterly milestones.

We are like many of the folks here.

We are an EOS (Entrepreneurial Operating System) company.

So our EOS quarterly rocks.

There are quarterly rocks on AI.

And we basically told the employees that if you are not completely AI empowered by the end of this year, even if you're the best employee in the company, we will let you go.

So we've been very blunt and very straightforward with our employees and that's really helped.

We have now built more than 400 AI applets.

We call it mini apps, they're called applets or power strings in just the last four months.

So we are not aware of any aspect of our business that has not been changed by AI.

Obviously some are sort of ahead of others.

Marketing definitely has built about 200 applets.

They're ahead of everybody else.

The way that we market has changed drastically because of AI.

But in terms of underwriting.

Right.

So all of our rent comps are now done by a tool called Manus.

I think most people don't even know this tool exists.

It's a Chinese tool.

We have not been able to find a US equivalent.

Manus basically does all of our rent comps.

And so we are not spending any time doing rent comps anymore.

And that allows us to to underwrite a massive number of properties.

Most of our underwriting is also now done through AI.

There's still components that humans do.

We have not laid off any employees.

Just so you know, we.

And we don't have any intention of laying off any employees.

With one exception.

We laid off a copywriter about 12 months ago simply because we felt we could copyright better than them.

And that happens to be the case.

But with that exception, we haven't laid off any employees.

We're just processing 2x or 3x the volume that we used to be able to process.

And we're able to manage our properties better because we no longer, for example, write, you know, our weekly reports on, on asset management.

Those reports are now written by highly trained AI that we've trained using custom GPTs.

And doesn't mean that the asset managers are not doing their job.

It means that their hourly meetings are recorded.

One other thing that I would tell you is that in the AI world, you should never ever go into a meeting without a AI note taker.

So we do not allow any meetings of our company in person or over Zoom, without every single person's AI note takers to be present and to actually make sure that everyone has them.

Every single employee in our company has to give their AI note taker a name.

I'm a huge fan of Ironman, so mine is called Jarvis.

So Jarvis has to be present 100% of the time and, and you know, other people have their, their own names for these things.

And the combination of having an AI note taker taking 100% of our meetings and, and you know, AI basically processing everything that we do allows us to do more with the same number of people.

J Scott, how have you integrated technology into your process?

Yeah, so I'm very much on the underwriting side of the business, so I run our underwriting team.

And so for me, it's looking at deals and being able to use AI to enhance our ability to analyze deals.

And we do that in a couple ways.

Number one, we can look at more deals than we were previously looking at.

So when you start to look at larger commercial deals, and especially when you're in the value add space where you're projecting what a deal is going to generate two, three, five years down the line, it can take literally an hour, two hours to do even a first pass underwriting of a large deal.

Using AI, we've been able to get that down to 10 or 15 or 20 minutes.

So we can analyze a lot more deals.

But the big thing that I found AI to be useful for is, and one of the biggest risks as an investor is when you buy a deal, you're relying on the seller to provide you some information.

The two biggest pieces of information in the multifamily space is a rent roll and a trailing 12 months of profit and loss.

And using these two documents, we can basically model what the property is likely to be worth now and in the future.

But you can't always rely on what the seller is giving you or telling you to be true.

And in a lot of cases, a seller, especially a smart seller, can hide information.

Hide, I don't want to use the term fraud, but they can hide some things that are, that can be unethical, like renting themselves units to make the occupancy look higher or giving concessions on, on the back end to make rents look higher.

Using AI, we can analyze T12s and rent rolls a lot more efficiently to determine if there are anomalies that the seller is is in the data that the seller is providing us.

Are they doing things that might distort the actual performance of the property or try to distort it so that we think the property is worth more than what it actually is.

And so for us, AI, the two big roles is being able to underwrite more deals and being able to find anomalies in the data that the seller is giving us that can potentially help us avoid making a mistake and overpaying for a property.

Ken, how do you balance automation or technology with gut instinct, especially in high stake decisions?

Well, it certainly helps a lot.

Like, I'll tell you a great story.

I had a unsolicited offer on one of my businesses from a big company called Greystar.

They sent me, and I know all those folks, and they sent me something and said, you know, would you be interested in selling this?

And it sat in my inbox for, I don't know, almost two weeks before I got to do anything.

I forgot to send in my attorney.

We're in the middle of other stuff and it just was a low priority.

So he called me and he's like, hey, I'm in town, can you meet this afternoon?

I was like, oh no.

So I pull up with the, the LOI and I said, I ran it through ChatGPT and I said, how, how would Chris Voss renegotiate this?

And it kicked me back there like three page.

And I, I brought it with me to the meeting and it completely worked.

And I think, you know, that's just a interesting example of, I think, you know, where the legal profession is, where the securities profession go.

You know, I have a friend that's an SEC attorney, he just sold his practice.

You know, I have friends that say they don't need paralegals anymore.

So, you know, so we're starting to see these tools I think that you can use, including, you know, but the end of the day, here's what I would say.

Andy, you know, Jay and Neal are right on.

This stuff is, is because it's not there yet for exactly what we need.

But at the end of the day, it's still the same thing.

If it flushes out some things that need to be attended to, then you still need people to do it.

And that's actually the biggest issue.

You know, we've got all the metrics and all the stuff being pulled out through AI and all that stuff, but at the end of the day they might get the report.

But then it's still a people issue from that point.

So, and I, so I haven't completely taken my hat off to it yet.

I still think, you know, you know, the, like, like for example, we're going through our budgets for next year already.

And I told my whole company, I said, listen, you better not me on, on rent growth.

And, and, you know, and, and I said we're gonna have expense growth and flat rents and that's how you need to budget.

You know, I, and, and so, you know, that's, that's a nuance.

For example, that chat GPT might not catch.

You know, what, what, what, what next year, what's going to happen next year?

We know the softness of the market today.

So those are things I think that you still need to put your touch on.

Thanks for that prompt.

I'm definitely going to bring a virtual FBI negotiator with me next time I'm going somewhere.

Jay, what are your thoughts on this one?

Are you going to J Scott or me?

I'm going to you.

Okay, great.

I'll put in a vote for Manus.

I've used Manus and I'll just go in a different direction.

I've used it to literally create a blog of summaries of podcasts that I don't have time to listen to.

And I can go through there, look at the summaries, and then say, wow, that's a really good one.

I need to go listen to that episode.

So I'm using it to kind of advance my own education.

And the big question we're asking as a team, everybody's looking to this to save cost and improve efficiency.

And if you could go back to 1995 and be one of the first movers in SEO (search engine optimization), would you do it?

And I've not asked this to anybody else.

As messy as it was back then, if you could be a first mover for SEO, you would do it because that, like, GEO (generative engine optimization) is happening now.

So I've seen some of my friends blog traffic.

The Google traffic has dropped off by 80% in the last two years.

So now Gemini is making the choice not the Google algorithm.

So we are asking the question if we want to get leads from the web, how do we optimize for generative optimization?

Right.

I want to know that ChatGPT chooses us and the second place, I'll just, I'll stop here.

Unless we want to unpack it is we're looking really hard at how do we train our salesforce on it.

You can take Grok or ChatGPT and go to audio mode and you can role play situational.

I need you to role play a seller who is indexed too high on the value of their property and you can get live practice and reps.

And I'll tell you, ChatGPT can be a little too friendly.

Grok is actually much more aggressive but you can get lots of reps for your people to educate them faster.

So those are the uses that I think are really interesting right now.

But we're playing full speed.

Thanks for sharing those insights.

In the interest of time, we're going to bring it home and go to the last segment.

Investing in real estate can yield both financial returns and community value.

Impact driven strategies like green building affordable housing and community land trusts deliver measurable social or environmental benefits alongside solid performance.

Green certified buildings typically command higher sale prices and rents enjoy stronger occupancy occupancy and lower operating costs which boosts net operating income and asset value.

Affordable housing using tools like the Low Income Housing Tax Credit offers predictable tax advantaged returns while meeting critical housing needs.

Community land trusts preserve long term affordability by separating land and building ownership, ensuring generosity endures.

This approach reframes developments from extractive ventures to purposeful investments.

Stronger tenant retention, positive social outcomes and operational efficiencies become part of the return equation.

Doing well and doing good are not at odds.

They reinforce each other.

Strategic impact investing opens access to new opportunities and aligns real estate holdings with long term value for investors and communities alike.

I'm going to go to Jay Papazan first because I think you have to hop off at the top of the hour.

I know that Keller Williams has long emphasized building wealth to fund a life of significance.

How does that philosophy shape your own approach to purposeful investing?

Thank you for jumping before I have to jump.

The money is good for the good it can do.

I think whatever baggage you have, I think that wealth is great because we can make great change with it.

And I know that some of the people here that I know personally are doing great things with their money to change the world.

And as investors we can look for opportunities.

So my wife and I set goals around time given, money raised and how much we donate.

And we also try to be ethical investors.

Right now in a lot of urban areas, Austin is one of them.

They want urban density.

It's better for the environment.

It's also better for their tax base, which is why they do it.

And so you can take a single family lot and if you've got the investment income and the know how you can take a single family home and turn it into three units and you talk about an amazing return on investment for about 12 months of work.

So we've got a couple of those projects that we're doing.

I love it because it is urban density which is good for the town, it's good for the tax base, is good for the world and it's very lucrative.

Love it.

Profitable and doing good.

Thank you, Jay.

Paul, you've written and spoken about investing with integrity.

How do you define profit with purpose in your own investing journey?

Yeah, so we're not a developer and asset manager, so I can't speak to some of the green building.

But I can tell you that one of my heroes, William Wilberforce died about 200 years ago and he affected effectively.

You should check out his story.

There's a movie about him called Amazing Grace came out in 2007.

He and his group effectively ended slavery in the UK and then eventually in the western hemisphere.

But here we are about 200 years later and there are more enslaved people that any time in world history.

And listen to this guys.

If you took the records, not the average, but the record profits of ExxonMobil, Nike and Walmart added those record profits together tripled that number.

You'd come up with the approximate annual profitability of human trafficking.

It is a tragedy and we've got to do something about it.

So we can't fix the problem.

But what we can do as real estate investors, we can get the word out and we can also what we did, WellingsCapital we analyzed different non profits to see who was most effective.

We found one called AIM.

Their website's aimfree.org We've helped raise about $900,000 for them in the last four years.

They are able to free children from trafficking in Cambodia and now Belize for a thousand dollars per child.

Now there's more costs after that, but they put bad guys behind bars.

They free children.

And I recommend, you know, I'm a little older than some of you guys, I know I don't look it, but but at any rate, the older I get, the more I view my significance and the legacy I'll leave.

And this is one way I want to do it.

It's amazing how $1,000 can make such a huge impact.

Way more beyond what you would think $1,000 could have, depending where it's being put.

Neal, do you believe technology can accelerate more equitable and sustainable investment models?

And if so, how?

I think it can, though it tends to do the opposite.

So from what I have seen in the last 30 or 40 years, technology increases inequality across the world.

Certainly in the United States.

We're one of the most unequal nations in the world at this point of time.

And a lot of that is because we use a ton of technology.

So it's a natural focus.

The answer is absolutely 100%.

technology can reduce inequality, but there needs to be a focus on that.

There needs to be a focus from their political perspective, there needs to be a focus from the corporate perspective.

And I'm going to basically break from the group and say not necessarily to donate money.

I'm not suggesting that the way to reduce inequality is to donate money.

I'm suggesting that you basically, look, you try to solve problems.

You know, I'm not a huge fan of Elon Musk's politics, but I am a huge fan of his ability to solve difficult problems.

And I think inequality is one of the most difficult problems of our time.

And I think it can be solved by technology, but it requires focus from both politicians and corporations.

We're doing that in our little niche.

We're building 10,000 homes for the middle class families, the baristas, and giving them brand new townhomes.

We've already seen succeeded in doing that with hundreds of townhomes.

And we want to get to the point where we are at 100,000 townhomes, and that's a process.

And we're doing it not by engaging the government.

We don't have that level of capability, but we are succeeding by engaging family offices and corporations.

And they're helping us with basically something very simple, cheaper debt.

With just doing cheaper debt and nothing else.

And all they're doing is helping us get cheaper debt.

We're able to basically picks inequality in a small way.

And I love that.

I like finding solutions to very hard problems.

And this is something that can be fixed.

It's beautiful to hear.

And I surmise that if you were working with the government, you would not be able to move so quickly or nimbly.

But I will steer clear of the politics.

J Scott, what advice do you have for investors who want to align their capital with their values, but they don't know where to start?

So definitely talk to other people who are investing that have the same values as you.

We have to rely on our networks.

We have to rely on those that, that can do research faster, better than we can.

None of us knows everything.

And so when I'm looking to invest, the first thing I do, and whether it's it's aligning values or just ensuring that I'm de risking who I'm investing with or what I'm investing in, it's doing research by talking to other people that have to or working to achieve the same goals as I am.

And so, yeah, talk to your network.

Form a network and ensure that those you're speaking with have the same values that you have and find who they're investing with and what they're investing in.

And once you find that, go out to your network and recommend those investments.

Be proactive in helping other people find those things that align with your values.

And you're walking that walk, right, because you've built educational communities and mentorship programs.

So I'm assuming that you view that as part of your impact beyond financial returns.

Yes, certainly.

We like to pay it forward.

I couldn't have been successful in this business if I didn't have a lot of people who helped me be successful.

I also say while Paul and what Paul and Neal said is amazing and I can't match it in terms of scale, it's also important to look on a local level.

We do a lot of local outreach.

We help our tenants in our multifamily properties interact and work with private businesses around us for the benefit of both sides.

So we do a lot of community outreach and we bring a lot of businesses into our properties to provide services and to enhance, again, both sides, the tenant value that they're getting from the community and private businesses and the benefit that the private businesses in the community are getting from our tenants.

And so focusing local is just as important as focusing national.

Ken, your foundation, Sharing the Good Life, integrates philanthropy into your business.

What inspired that model?

Yeah, so we have a full time director of philanthropy on staff and she started, I guess seven or eight years ago now.

You know, it started organically, just like, like everyone's talked about here.

We all have our own passions and I, I think the need is great.

And, and the other thing that I believe is this is a team sport.

So we said, all right, like everyone on my team, like, all the way down.

Whoever does anything, they all have something that they're passionate about.

So how do we include everybody?

So that's, so we, we start off with my partner and I monetizing it.

Then, you know, from our property distributions and also from our vendors.

So let's say we have a vendor that supplies paint or carpeting or appliances.

You know, we literally say, listen, you can have our business, but there's 1 or 2% that you need to put into our foundation.

So a lot of it just has grown over time.

It's fully employee run.

And one of the things that we did during the pandemic is we actually had a lot of money in there.

So we've given away millions at this point, but we actually were giving tenants rent money.

So imagine that like literally, because we're not in the business to evict people at all.

And people go through hard times and certainly that was one of those periods.

So, so, so you, there's, there's things that you can do when you have a collective effort.

You know, essentially it's a 501(c)(3), it's a whole business has a board of directors and you know, it's employee run and all that.

And so there's initiatives, there's one year, three year, five year, ten year plan at all.

And then from there they decide, okay, we think this is important.

We think that is important.

And as you know, things come up and you know, sometimes you just don't know and then you learn about things and then all of a sudden you're passionate about that as well.

So I just love the whole piece.

I think it's been such a, it's one of the biggest things we've done in our business is to have that focus.

And it's also helped help with employees like the people that want to, that come to our company and work for us.

You know, there's, there's a certain caliber of employee that goes.

And when they're looking at where to work, you know, they can work a lot of places and, and they're like, okay, we like this company.

This is what they stand for.

And that wasn't why we started it, but that's been a really, really nice offshoot.

Yeah, that sounds like a positive side effect.

And yeah, great.

I love hearing that.

It's a team effort.

This has been a fantastic conversation and I hope that you Inspired Money Maker, are walking away inspired and maybe even rethinking about how you look at real estate.

One of my favorite takeaways from today's discussion is that successful investors don't just buy properties, they buy systems they think about or they approach it as business owners.

They focus on cash flow, efficiency and long term value instead of just the number of doors that they own.

Although as that increases, that doesn't hurt.

Here's my Inspired Money challenge for the week.

Take one step to move from "landlord thinking" to "asset manager" thinking.

Review a property that you own or one that you're considering and calculate its net operating income.

Ask yourself what simple change could increase cash flow or reduce cost.

That simple shift in mindset can transform how you invest and accelerate your path to financial freedom.

If you found this episode valuable, please be sure to subscribe, share it with a friend and join the conversation online.

A few more things before we part ways.

If you're on LinkedIn, find me by searching for Advisor Andy.

Inspired Money is created by yours truly and Bradley Jon Eaglefeather.

Bradley is behind the scenes during the live stream and and edited the segments.

Chad Lawrence does our graphics, animations and editing.

And last but certainly not least, I want to give a big shout out to our amazing guests today.

Go follow their work and keep learning from the best you can find.

Ken McElroy at kenmcelroy.com.

Don't miss his podcast, The Real Estate Strategy Show for Data Driven Investors.

Go to grocapitus.com to follow Neal Bawa, the Mad Scientist of Multifamily and check out Multifamily University Live.

Lots of great resources there.

To go deeper on mindset and focus, head to Jay Papasan and listen to the One Thing Podcast with Jay Papasan.

I saw some great episodes on YouTube, but you can also listen wherever you listen to your podcast.

If you're looking for practical advice on scaling your portfolio, explore jscott.com and pick up one of the of J's best selling real estate books, including the book on estimating rehab costs.

Listen or watch his Drunk Real Estate podcast.

That's another fun one.

And finally, connect with Paul Moore at wellingscapital.com where you'll find his books the Perfect Investment and Storing Up Profits.

He has the new book what's it called Boring Investor coming out.

Boring Investor is coming out.

Yes.

Plus great educational content on commercial real estate.

Does anyone have anything that they want to plug or promote?

No, it's not a promotional group.

Just my Limitless Expo in Phoenix August 14th and 15th and 16th.

Just my LimitlessExpo.com It sounds like a great event.

Well, thank you to all of our panelists for sharing their expertise and insight today.

Thank you Inspired Money Maker for joining us and being part

of this journey.

We have great shows coming up, the Power of Giving: How Philanthropy Impacts Financial well Being and

The Psychology of Money: Understanding the emotions and behaviors that Impact Financial Decisions.

We have those upcoming Inspired Money returns next week on Wednesday.

That's October 8th at 1pm Eastern.

I look forward to seeing you then.

Until next time, do something that scares you because that's where the magic happens.

Thanks everyone.