Top Mistakes by Rookies with Paul Moore and Johnny Lynum

Episode 92 of the Diary of an Apartment Investor Podcast with Paul Moore and Johnny Lynum, hosted by Brian Briscoe. Transcript by – please forgive any errors.

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Brian Briscoe 0:00

So Johnny, we got a Paul on the line here. What do you want to ask him?

Johnny Lynum 0:03

As you kind of evaluate and talking to a lot of different people? What did you kind of see as like some of the top mistakes that you people are just inexperienced people make?

Paul Moore 0:12

One thing I think is really important is the intangible role of our heart and our gut and our decision making the truth is our hearts dragging us along, we think it's our brain, but are really we're doing what we want to do. And our brain follows it and makes these logical conclusions and then our gut typically is ignored. The problem is if you ignore your gut, you're probably going to get in trouble. And so what I would want to say in due diligence is it's really important that your brain, your heart, and your gut all line up.

Brian Briscoe 0:51

Welcome to the Diary of an Apartment Investor Podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey, with the sole purpose of educating listeners to make wise investment decisions. The Diary of an Apartment Investor podcast is sponsored by Four Oaks Capital, bringing you high yield returns through apartment complex investing. This is journal entry number 92. And part of our Ask the Expert series. Today we talked with experienced investor Paul Moore and aspiring investor Johnny Lyneham. Stay tuned as we talk about the mistakes that new investors most commonly make and how to talk to brokers. And now this show Welcome to the diamond apartment investor podcast. I'm your host Brian brisco. With frogs capital very excited for today's show. It's one of our Ask the Expert episodes. And we have two amazing people on the line with us right now. We've got a man with a tonne of experience in real estate and other businesses, Paul Moore, and a very motivated aspiring investor Johnny Lyneham. So Paul has worked in a variety of fields in businesses, including Ford Motor Company, he's been a founder of a staffing firm, a real estate investor and developer, podcast host, author, and much, much more. We'll put his full bio in the show notes for you guys to check out all the wonderful things he's done. But that said, Paul, welcome to the show.

Paul Moore 2:06

Hey, it's great to be here. Thanks for having me on. Brian. Look forward to getting to know Johnny too.

Brian Briscoe 2:11

Yeah, it's great to have you. I mean, I've actually followed you for quite a while on your podcast. I know you just recently published the last episode of it, but the how to lose money podcast, you know, I followed you and Josh on that for quite a while. And it's an excellent podcast. So thanks for everything you've done with that. You bet it was a lot of fun. Yeah, it's still out there. So anybody who wants to check it out how to lose money. And I will ask you just real quick, why, how to lose money.

Paul Moore 2:39

You know, for years, I would go to these events. And I would see the people up on stage telling their great stories. And I'm sure they were true about all their successes. But I actually noticed the people in the audience got really discouraged sometimes like, they would say, I'll never have those connections, I'll never have that opportunity up. I just, I'd maybe I should just quit. And that's a summary of a lot of conversations, but you get the point. And I thought if I ever get a chance to go on stage, I think I'll tell you about tell people about my failures and problems and hiccups on the way to the top. And so when I got to know some of these people, years later, I realised they had the same insecurities, pains, losses and failures on the way as everybody else. And I thought, wouldn't it be great to hear that. And so what we do is we interview people about those pains on the way to the top, and we find that it gives people hope and encouragement because they realise, hey, that successful person that I admire had the same problems I'm having now I can do it.

Brian Briscoe 3:43

Yeah. You know, and like I said, I really, really enjoyed the podcast. You know, your coach, Josh and I have talked several times about that and other things, but I think that that's absolutely true out there. Most podcasts you listen to talk about roses, you know, it's like the rainbows and unicorns version of multifamily investing. But everybody has little trip ups. And incidentally in the diary and apartment investor podcast trailer, I actually mentioned your podcast specifically. So anyway, that's it's one that's always been a favourite of mine. And for anybody listening, you know, go back and listen to some of those episodes. Anyway, that said, let's let's dive into your background and history and talk a little bit about what what makes you tick and how you got into apartment investing to begin with? Yeah, so

Paul Moore 4:32

in the year 97, I sold my company with a partner to a publicly traded firm and bounced around it some nonprofit stuff, and in 2000, decided to learn how to flip houses. So we went to the courthouse steps, bought the first house we saw and made about a $25,000 profit on it with virtually no effort and we thought Oh, this is really easy and We thought we could do one of these every couple of weeks. Well, of course we lost money on two of the next four deals and realised it wasn't as easy as we thought. But I went from there to flipping a lot of houses than flipping waterfront lots at a place called Smith Mountain Lake here in Virginia. Okay, then I started a real estate firm. I have like seven realtors that work there. I do that passively on the side still. I started I did a small subdivision and I was wondering over the years, how do I get involved in commercial real estate? I didn't really know how I did know that a lot of wealthy people and institutions invested in commercial real estate. And my friend and I were investing in oil and gas in 2010. And we realised there was a big housing shortage in North Dakota for oil workers. Yeah, so we decided to buy a 75 acre piece of land in a rural location that had 1000s of employees or workers looking for housing. And we built two apartment multifamily, I shouldn't say apartments but multifamily properties side by side, they were a lot of cabins actually. And like for plexes. And we in that kind of stayed in keeping with the rural nature of North Dakota where we were, and it was wildly successful. We had a great time doing that he went on to build a Hyatt Hotel which was wildly unsuccessful, and we decided I decided I wanted to stay in apartment so I end up doing a mentoring programme. And after the mentoring programme, wrote a book on apartment investing little presumptions there and then decided to jump in we started a company called wellings capital, which was an apartment syndicator and we've done some different things since then in wellings Capital but that's how we got into apartments.

Brian Briscoe 6:52

Nice nice so kind of a roundabout way but real estate was the was the common trend. And you know what I like about that is not many people are looking at places like North Dakota or South Dakota, you know, but you're able to go in there find a place where supply and demand didn't quite match up or or match up in your favour, actually, and fixed a supply and demand imbalance. I added North Dakota get on your map, how do that little town get on your map.

Paul Moore 7:19

So I in 2008, nine and 10 I had a really difficult time as you can imagine being in real estate I decided to learn to do copywriting marketing copywriting and I linked up with people like Perry Marshall and some other copywriting gurus. And while I was doing that one of them presented me with an oil and gas opportunity in the Balkan, horizontal shale fracking world of North Dakota, I didn't know anything about North Dakota didn't even know they had oil. And it turned out they were the fourth largest oil producer in America. And they I think they were second. Then a couple years. I had a petroleum engineering degree. I didn't mention that from the you know, mid 80s. And so I thought maybe I know something about that. Well, I didn't really know anything about it at all. But that's what got me to North Dakota. The funny thing is, you know, if you look across America, I could argue that apartments generally rent for about $1 per square foot per month, you know, 1000 square foot apartment might in the heartland of America rent for $1,000 a month, we were renting these now fully furnished with all the utilities, we were renting them for $13 per square foot per month. Wow. And we were staying full because they were the nicest option in this whole area. Other options were our V's and people living in these little metal cans called man camps. And we were charging 4000 a month, which turned out to be $129 a night. And the hotels in the area that were similar to ours. Were you know, like three or 400 a night so it was a discount compared to going to a hotel.

Brian Briscoe 8:58

Yeah, wow. Yeah. Good on you for jumping on that opportunity. I mean, those numbers are outstanding. And I assume the construction costs were in construction costs also hover, you know, pretty, pretty low in some areas. Like right now we're looking at about $100 a square foot in a lot of places.

Paul Moore 9:15

Yeah, I think we were learning less than that. Maybe it was an unzoned area and we were actually able to bring these modular built cabins and for duplexes and for plexes in on trailers and just plop them on the ground without ease, you know, virtually no effort these these are actually movable, you know, they're on steel skids. So it's quite easy to do.

Brian Briscoe 9:38

Well, I love how you did that. I mean, you you you were in the market for other reasons. You know, the copywriting thing and you just saw an opportunity so supply and demand imbalance and figure out a way to capitalise on it. Do you still on that investment or did you guys come full circle on that

Paul Moore 9:52

one? Yeah, we sold that to raise money for my friends Hyatt Hotel development and so when we say That he, I invested other places, and he invested all his money back into the Hyatt Hotel deal. Okay.

Brian Briscoe 10:07

All right. Well, sounds good. So that said, You know, I know you've done a couple other apartments and everything else, you want to give us an idea of some of the other stuff that you've done recently.

Paul Moore 10:17

Yeah, so we got concerned, you know, I know, I look like I'm in my 30s. But I'm kidding. But for those watching, you probably think I'm in my 70s. I, I'm 57. And my partners and I were really concerned about not overpaying, you know, there's a big difference between investing and speculating investing is when your principal is generally safe, and you've got a chance to make a return. speculating is when your principal is not at all safe. And you've got a chance to make a return. And we thought that overpaying for apartments through the last eight years or so would be speculating. And we didn't have the team and the experience to really take that chance, especially when you consider you know how debt plays a great role if things go up in a terrible role if they go down. And so rather than beat our head against the wall and continue to try to chase apartments, we thought, what if we could find an asset type that had a lot of mom and pop operators, a lot of meat left on the bone, a lot of you know, potential upside for taking a poorly run facility and make it a well run facility. And we saw that in apartments, we found out 93% of apartment buildings above 50 units are run by companies who typically have you know, a better operations team. But that wasn't the case in self storage and mobile home parks. So we decided to expand into those arenas. And of course, mobile home parks are a form of multifamily. Yeah, it's a property that has multiple families on it. And so we expand into those arenas. And we actually, after doing a few investments, we formed multiple funds that allow people to invest with us. And then we spread their money across multiple operators, geographies, asset types, and of course, assets. And so investors who invest with us today get to spread their money across 76 properties, for example, nice.

Brian Briscoe 12:17

I think for the investor, that's a good deal. Because you spread the risk over a lot of properties, you're much less likely to lose, are you still seeing the same types of returns that you would see on on property? Right, right now, I think most of the deals that I look at the come across my desk from other operators, you were looking like mid teens as as average returns, when you're doing that across 7576 properties. How do your returns compare?

Paul Moore 12:44

Yeah, so we actually offer diversification across strategies as well. So we've got a couple operators, an operator, I should say, that buys fairly well run properties, and then just makes them a little better than holds them long term. We have another operator who's definitely in I won't say opportunistic, but for sure value add category. And they're buying properties that they can significantly increase operations on and marketing and your one, increase financial in year two, and often get a really high offer on in your three and they sell in three years. So even though we have a 10 year fund, they might be selling in three years, we might be turning that money over and reinvesting and getting another three year pop out of it. Let's say we're projecting 8%, annual return from operations, and then an additional seven or 8% from appreciation. So 15% total annual return is what we're projecting.

Brian Briscoe 13:47

Yeah, that's very consistent with what I'm seeing, and just the the B class C class value, add space. But, you know, once again, it's spread over multiple properties. So the likelihood of hitting those numbers, just using statistics, And oh, by the way, you talk about your petroleum degree, I've got two math degrees. But just looking at the numbers, I would say the likelihood of hitting those numbers is a lot higher than investing in one specific property or not. But yeah,

Paul Moore 14:13

anyway, yes. That also mutes the great deals, you know, you can have a phenomenal deal. Like we recently had one with a 340% IRR. Wow, it was only a 10 month hold that helped. But is you know, when it's one of 76 it's it's good, but it doesn't look like it doesn't return the investor that kind of, you know, huge return that you would expect. But anyway.

Brian Briscoe 14:36

Yeah, I understand that. I understand that. I think overall, it depends on people's what what their investment strategies, investment goals are as to whether or not the fund works or I think some people are looking for that big pop as well. So it depends on what people are looking for. There. I think. I'm guessing you have a lot of demand for your fund, just just based on on your track record and performance and everything else.

Paul Moore 14:58

So yeah, we've been really pleased And very appreciative of the opportunities we've had, we mainly consider ourselves a due diligence company. Now we do a lot of due diligence on behalf of a lot of individual investors who don't have the time or the knowledge to do that.

Brian Briscoe 15:15

Just out of curiosity, how much of your due diligence is on the operating team versus the actual deals themselves?

Paul Moore 15:20

The vast majority is on the team, because a great team can take a mediocre deal and make it work well. But a terrible team can take a great deal and ruin it.

Brian Briscoe 15:31

True. True. I'm glad you said that. That's something that I've said many, many times and good to hear. I feel the same way. I mean, that the team is probably the the focal point for any, any passive investor, any anyone looking to invest in real estate in general. So

Paul Moore 15:47

yeah, a quick story on that what Warren Buffett says he bets on the horse more than the jockey. But if you look back in 1979, he had become very good friends with a gentleman who is who he considered the top CEO in America, the smartest guy in America. And so when that guy called him, and Tom Murphy, he said, hey, I've got a chance to buy. ABC. What? Yes, I've got a chance to buy the entire ABC Broadcasting Company. Wow, Warren Buffett in 15 minutes on a phone call, from what I understand, decided to throw in a huge chunk of money because he believed in him. The person turned out really, really well. For Warren and his investors. Yeah.

Brian Briscoe 16:36

Yeah. So good enough. Good enough as a great, great example, right there. And, I mean, or the oracle of Omaha. There you go. I almost lost last word. Yeah. I mean, the oracle of Omaha, that he earned that title by doing what he does, and by turning a little bit of money into a lot of money over and over again. So yeah, well, I said, What's your big burning? Why for doing all of this?

Paul Moore 16:58

You know, I found out about five years ago, someone asked me what I knew about human trafficking. And I said, not much. I think it's a horrible I imagine it's a horrible thing in the Philippines or somewhere. But I found out that it's right under our noses. It's happening in places like Gaithersburg, and here in Central Virginia, where I am. And what I didn't know is I did the math on this. And if you took the record, not the average profits, the record profits, from Apple, General Motors, Nike and Starbucks, record profits, added those together double that number. That's the approximate revenue generated by human trafficking every year. And I'd like to believe that if I was around in the 1800s, I would have been an abolitionist fighting against slavery. And if I'd have been an adult in the 1960s, I would have been fighting for civil rights. Well, this is a civil right. It is slavery. And it's happening right under our noses to 10s of millions of people. There have been dozens of people trafficked sold into slavery since we started this podcast 15 minutes ago. And so I am trying to get the word out about the horrors of human trafficking and trying to encourage people to invest in fighting human trafficking and rescuing its victims. That's one of several big why's for me.

Brian Briscoe 18:24

Yeah. And that's, that's a great cause. It's something that it's it's such a big issue that I mean, God makes every service member go through and Johnny shaking his head right now. Yeah, it's something to do every year, we have to do a one hour class on how to recognise human traffic. Is that right? Yeah. So and it's it's just, it's such a problem in the world. And you know, the little that I know about it is, you know, the the people who are into the trafficking are basically preying on people who are in a bad spot, you know, somebody is in a bad spot. They they basically say, Hey, I can I can help you get out of this bad spot. And you know, a lot of times that turns into basically kidnapping and forced labour and slavery as you say it. So yeah, good, good cons, and definitely something that needs a little more awareness in society, and more people fighting against it. So thanks for that. Appreciate that. So that said, Paul, what's next for you?

Paul Moore 19:30

We're going to continue to evaluate new asset types. But right now we're so happy with self storage and mobile home parks that we feel like we'll probably close this new our fund to new investors in March. And then we'll probably open a new fund that's almost entirely similar, with similar operators similar plans and more projections. By summer is that would be our plan. We'll look at other things like senior housing, RV parks. Other air asset types, but right now, we haven't seen anything better than these two. I mean, mobile home parks are the only asset type that have an increasing demand and decreasing supply every year. It's a powerful asset type.

Brian Briscoe 20:15

Yeah, they they're not making new mobile home parks. And more often than not, they're taking mobile home parks and getting rid of the little infrastructure that's on them and putting up apartments and other developments. So that's right. It's absolutely right. So Good, good. So let's shift gears right now and bring Johnny on the line. Johnny's a real estate investor, entrepreneur, and now CEO of Lyneham enterprises, Herod's property partners and operation invest. The journey started his real estate career in 2015, and has experience in programming, project management, operations, marketing and negotiations. He currently has 21 single family properties, and very recently finished the acquisition of an 18 unit apartment building. So other than that, I would also like to note that he is a lieutenant colonel in the United States Air Force, which is almost as good as being a lieutenant colonel in the United States Marine Corps. That's all So that said, Johnny, welcome to the show. Thanks for glad to be here to do yes. Both you and Paul. Yeah. So hey, it's it's good to finally get you on the show. I know we've been talking about this for quite a while now. And I'm excited to talk so excited to hear a little bit more about you and your story. So let's start out with that. Let's talk about your background and history and what got you making the switch from that single family to the to the multifamily?

Johnny Lynum 21:34

Yeah, so for me I kind of got started with real estate You know, a lot of people say the purple book Robert Kiyosaki Rich Dad, Poor Dad, no reading that after, after commissioning, getting out of college and started my, my career in the Air Force. And, you know, I had a friend approached me, you know, living, I was living in apartment, pay, I think was paying $700 a month reading like, Hey, I found this duplex, you need to buy side by side, like, okay, like, so what my mortgage is gonna be? It was like $450 for taxes, insurance, right? Okay, I'm actually got paid I got a check a COVID. Since I use my VA law, and after that, man, I was just hooked, you know, I started going to seminars back near 2000s. We, I think it was William Timbo was the substitute guy, he was there in Macon, Georgia, not too far away. So with their investor club, and you know what, after our PCs, it turned into a rental property for me. And, you know, that just started to snowball effect with, you know, the next station, finding a foreclosure and, you know, living in a couple years ready to get out and doing the same thing, you know, the foreclosure when we moved to the DC area, in 2013. And, you know, 2015 was kind of a sweet spot, whereas myself give being confident and, you know, doing brave new job and the skills that I learned the project management that I kind of, took a bit of myself to start doing pizza route, and we did our first Alexandria Virginia area, and was a big deal knows a lot of work. And we learned a lot. And after that, we started doing virtual flips in Birmingham, where my wife is from through 2017, just kind of one at a time, and going through and just learning, you know, we learned a lot, and we just kind of built it into our lifestyle. And you know, and for me, it was always the freedom factor, where's the real estate was the ticket to have that freedom to get my time back, you know, with love in my job with the military is like, Okay, what am I doing? Check it out, you know, I continue to want to serve, and I want to be able to serve my family, you know, first and foremost, real estate allowed me to do that, you know, and so my last assignment in Panama City, you know, came back to deployment was doing my lead generation, things like that, and, you know, hired a virtual assistant and was ready to go gung ho. And then October 2018, three weeks after I got back home, Hurricane Michael hit Panama City area, category five hurricane, and we were displaced six months, and you know, all the everything I put together with the BS is hired a virtual assistant, and I kind of just knocked the breath out. But I had built up a lot of resiliency, you know, after that we kind of hit the ground running. We did nine properties that year. 2019. We did for last year, we actually did a first multifamily ATV. And you know, the 18 unit, you know, you know, started with single families, and I tore my ACL to yours will too. So physical therapy, I didn't get to go to any networking events, and I found Jake and Gino in Orlando, October of 2019. And it kind of opened my eyes to multifamily. And, you know, I told the guys networking that they're like, Hey, I'm doing multifamily, giving myself a year to do my first deal. Lo and behold, 45 days later, as I was preparing for appraisal, my duplex ran across this multifamily because he had been on the market, over 90 days just Sydney and reached out to the broker call somebody had met at the conference like hey, semia lol sent me a deal deck I got, you know, put this together. And, you know, when I had my calculator from, you know from Jake and Gino and I went through and conservatively made an offer I put a little I in for a million dollars, it took like four weeks to get a response back. No question broker, Davidson owners, you know, they were older couples to couples retirement age both had separate businesses and were exhausted from the insurance claim that didn't belong. And no, we made it work, it took five months to close and a lot of due diligence and in the middle of the pandemic, to make it happen.

Brian Briscoe 25:36

Yeah, and that's, that's a big jump, you know, from from single family to 18 units. So, you know, very, very commendable. And I mean, the other thing that's, you know, notable and near and dear to my heart is you did it all while being active duty, you know, which there, there's probably a little bit of time factor right there where, you know, you're required to be somewhere for a certain amount of time a day, you know, especially as a lieutenant colonel, there's a little bit of demand on your time from the Air Force. So, you know, congratulations on that, and definitely huge step in the right direction. So let's, let's talk you, you kind of mentioned, I think you briefly brushed by the topic, but let's talk about your big burning, why your motivation for all the investment activities you're doing,

Johnny Lynum 26:19

you know, for me is, you know, it's all about freedom, where's that I don't have to trade my time to work, you know, my vision, or willing to nose to do 20 years of service to the Air Force. And then from there, we'll transition to real estate, and be able to spend more time with my family and friends travel and do meaningful experiences are the best. That's my number one driving factor. And, you know, and that's, you know, they can talk about with the engine colonel in the military, but he had the day job. And so from day one, I had to think about systems building, the team had no power and the right people to align, align us beside me, in order to, you know, to make sure that, you know, that we were successful. And it's worked out pretty well, to allow me to be freed up to not be over burden to my family, where's that I'm working, you know, come home, get on board away for another six, seven hours, you know, either vo properties are down in the basement, you know, working on the next deal, trying to get him. You know, so that always keeps me motivated. And I think my wife has been instrumental with her being able to help as well, too. There's been a lot of time for me, and just allowed us to be able to be successful at this point. We're doing it and, you know, just kind of growing organically.

Brian Briscoe 27:34

Yeah, I think time is what most people who when I asked that question, I think most people, time is probably the number one answer. And if this were a family feud, game Thing number one answer, right? So yeah, it resonates with a lot of people, you know, you love people work, either. They're in the rat race, as we call it, and working 4050 hours a week. And you just want by that time back, you know, be able to spend that time doing something more meaningful, and a lot of cases are great. So Johnny, we got Paul, on the line here, where you want to ask him

Johnny Lynum 28:06

are you doing Paul? Hey, great, Johnny. Awesome. You know, it was great hearing your story. And I know, I wrote down a couple a couple questions you haven't experienced across like multiple asset classes and you know, dealing with relationships with broker, what have you kind of seen as being the number one factor contributed to building those relationships with brokers Come on the other side of the seller side. And

Paul Moore 28:30

I'm probably going to tell you something you didn't expect. We tried that. And that's one of the reasons I think we've failed as a multifamily syndicator. We're in this tremendously overheated market, where there's so much more demand than there is supply. And so brokers are going to sell to the people they know are going to put the gas in their BMW put food on their table, and they're not going to mess around with people they don't know very well. They're not going to even present offers, as we all know, in the commercial space. They don't have to present offers, if they don't like the offer. And so we found that the off market strategy was a better way to go. A friend of mine who I invest heavily with, we just invested about 26 million with him. He has a team of five people working in his office. And those five people call 100 plus self storage and mobile home park owners every day. And so the five of them together call about 700 or so per day, five days a week all year round. And so they're calling 10s of 1000s of mom and pop operators, every few months cycling through the whole list and then starting again and that consistent follow up that they do year in and year out. means they're getting deals that virtually no one has access to a guy was a At eight years old, they called him for the first time he had a huge mobile home park in Michigan. He said no, but I'll keep it in mind. And they called him every quarter for seven years. And when he was 95, his niece called and said, we talked him into selling Finally, he's ready to take the offer you made back in 2018. And my friend said, Are you sure that's enough? She said, that's more millions of dollars as more than he ever dreamed. Sure. It's enough. Well, my friend flew out there the next day, and he got a great deal. And he gets lots of deals like that 93% of them are off market. Okay, awesome.

Brian Briscoe 30:39

So that's nice. I mean, you're, he's, he's removing the broker from situation completely by going direct to seller.

Paul Moore 30:45

Yeah, he's got far more deals than he could ever close on as a result. Interesting.

Brian Briscoe 30:52

And I think that translates well, to multifamily to you know, I mean, just, there's no magic about the asset class about the, you know, being a self storage about being a mobile home park, you can do the same thing with with multifamily.

Johnny Lynum 31:05

Yeah. My next question, you know, it's kind of centred on on your podcast and your experience, you know, with with losing money. And I guess, with the due diligence piece, too, you know, as you kind of evaluate talking to a lot of different people, what did you kind of see, as like some of the top mistakes that, you know, new people are just inexperienced people kind of make as they're trying to go through and, you know, syndicate.

Paul Moore 31:29

One thing I think it's really important is the role, the intangible role of our heart and our gut in our decision making, you know, it's, we've got the brain, the logic, and for us, guys, a lot of us make decisions based on what our brain tells us. The guy said, this was the best deal, and the guy said, we could raise rents, and, and then what happens is our heart follows along. And our heart The truth is our hearts dragging us along, we think it's our brain, but are really we're doing what we want to do. And then our brain follows it and makes these logical conclusions. And then our gut, typically in those situations is ignored. The problem is if you ignore your gut, if you ignore that funny feeling that something's wrong here, and that little lie or two, or inconsistency, you heard them, say, but your brain is trying to tell you to ignore it, you're probably going to get in trouble. And so what I would want to say in due diligence is, it's really important that your brain, your heart, and your gut all line up. And if you ignore your gut, you're ignoring some flies that are buzzing around. And there's probably something down there. If flies are buzzing around as my oil man friend said, in Texas, there's probably some bs down below. You've got to uncover that. And he's gotten to the place. He said, If he sees one fly buzzing around just one, he'll show the guy to the door of his office, and he'll never look at the deal again. And as a result, he misses out on some good deals. But he said I'd rather say no and be wrong than say yes and be wrong.

Brian Briscoe 33:11

You might, you might miss out on good deals, but you'll never get a bad deal going through that philosophy.

Paul Moore 33:17

Yeah, I think that's that's what's happened with us, we have come to a place where our default is to say no. Warren Buffett said Great Investors say no, a lot. the very, very best investors say no, almost all the time. Yeah,

Brian Briscoe 33:34

I think that's a good way to do it. And I think a lot of people that I talked to right now are saying that they're looking at almost 100 properties for every one they get under contract. You know, so that that's 99, Noes for one yes. So I think to take that one step further, you know, be careful if you're looking at saying yes, on the third or fourth property that comes across your desk.

Johnny Lynum 33:56

So it's true, most definitely. Yeah, I literally just read that in Napoleon hills. How about I think he's had to have a sale your way to live. And just talk about the emotion, the emotion driving the seizures, and not necessarily the brain, that how we make decisions a lot of times with emotion, right.

Brian Briscoe 34:13

I think it's true of a lot of things. You know, I think we we have a feeling or we have something that we believe in. And we create a logical argument to match how we feel more often than not, you know, and so it doesn't matter. You can't make a logical approach to most people, because they've already had they had that gut that not the gut feeling but the feeling down their heart, like Paul said, and the minds following it. And that happens more often than not, that's just real estate, not business decisions. I think it's all aspects of life. Yeah, that's very true. All right,

Johnny Lynum 34:46

Johnny, what else you got? Yeah, so I know you had mentioned started with commercial real estate, but kind of how have you seen benefits compared to apartment syndication? They kind of work better for you guys. We're going to fund route versus syndication.

Paul Moore 35:01

Yeah, you know, they all work the same way. The reason I love commercial, which I would consider large multifamily Self Storage, mobile, home parks and then other asset types. The reason I love those over residential and we've probably all done residential too is if I fix up my residential house, and let's say I bought a house for 250,000 in a $400,000 neighbourhood. And let's say I just want to really make it perfect. I you know, I finished the basement, I finished the attic, I put on an addition, I put in this beautiful fence and security and every single possible Bell and whistle and I spent 400,000 on it. Now I got 650 in an in a house that's in a $400,000 neighbourhood, I'm probably not going to make a profit on that because residential real estate is based on comps comparable properties as we know. But commercial real estate including large multifamily is based on a value formula. And that value formula is the net operating income divided by the cap rate or the rate of return is the value. And so you can force appreciation by just increasing that numerator, and sometimes shrinking the denominator. And if you can do that in a predictable way, then you actually have a safer asset because you're creating a large margin of safety. We recently bought a mobile home park for 7.1 million, we were part of the investment. And it was three and a half million cash three and a half million debt six days after buying it for 7.1 million, my operating partner was offered nine and a half million. Wow, he turned it down cold because he knew that once he made two or three significant changes that were very predictable. He it would be worth much more than that. He made those changes. One was passing the utilities water and sewer back to the tenants adding $100,000 to the net operating income. And after 10 months of owning it sold it to an unsolicited buyer for $15 million. So the three and a half million in equity going in turned out to about 11 and a half million dollars coming out 10 months later. And so that kind of thing. that opportunity to use that math, way Trumps residential real estate, where you're basing it on comps, where somebody might say, well, a mobile home park in this area goes for this much, you know.

Brian Briscoe 37:33

Yeah, I love that example. And that that must be that 360% return on a 10 month example that sounds like an absolute home run. Well, we are about out of time here. So I'm going to ask each one of you guys one more question each and Paul, you go first, how can listeners find out more about you?

Paul Moore 37:52

They can find me on bigger pockets where I do a live show. And also at our website wellings Capital calm that's w e l l i n g s wellings Capital calm. And if people would like to get a free e course or an audio course on commercial real estate investing, which again includes large apartments, self storage, mobile home parks, they can get that by going to wellings slash resources. I also have some other stuff there including special reports on mobile home park, self storage, etc.

Brian Briscoe 38:29

All right, and we will have a link to your BiggerPockets profile and website in the show notes. So Johnny, same question for you. how can listeners learn more about you? Yep. So

Johnny Lynum 38:38

I just recently started a YouTube channel so real estate investing with Johnny meinem on YouTube, on my website as well. Operation invest www dot ServiceNow comm as well as Instagram, this operation is still so

Brian Briscoe 38:56

Alright, sounds great. So once again, listeners if if you want to contact either one of these guys or find out more, head to the show notes, all that information is going to be right in there. So you can just tap and whiskey way to websites or, or a profile. So Paul, Johnny, thank you so so much for coming on the show today. This was a great episode. I learned a lot about quite a few new things, actually. But appreciate your guys's time today.

Paul Moore 39:19

All right, thank you. It was an honour to be here. And thank you both for serving our country.

Brian Briscoe 39:24

Thank you, Brian. Appreciate it. All right, and that's a wrap.

Thank you for listening to the diamond apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest on our show, visit our website at four oaks capital comm slash podcast or email us directly. If you're still listening, you obviously like the show. So pull out your phone app, subscribe, and leave us a five star rating on your favourite podcast app. And we'll see you again next week.

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