Best Real Estate Investments - Episode 2
Brant Greathouse:
Hey, I'm Brant Greathouse, True Star Capital. And we are here for another episode. We’ve got some good content for you.
Carl Moore:
Yeah. Carl Moore. About 13 or 14 years ago, you and I met and somebody from church told us that we needed to hang out and you and Megan brought little baby Cade over to our apartment. And he took a nap in the back while we played some cards in the living room. In that moment, I never knew that this would be our future because we were just friends.
As we progressed along the way, as we had interacted in each other's lives across the years, you had pulled into real estate and not just a single type of real estate, you had meshed with single-family housing, but doing single families as corporate rentals, as individual tools, as all different pieces. When I was freed by my previous employer, it was just very natural that... I told Ashley, I said, "I think I want to start doing stuff in houses because I'm good with my hands. I'm better with a hammer than a pencil, so that's the direction I should go."
I remember coming and saying, "Hey, let's grab a coffee", which I found out you didn't drink coffee and we barely made it through that, but on the flip side, you had already started doing research into, in a many different types of real estate assets. I feel the question for the episode today is, what type of real estate should you invest in?
Brant Greathouse:
If you guys are in interested at all in investing, there's tons of investments out there, especially in the sector of real estate. You can go just a hundred different directions.
Carl Moore:
Can you name some of those?
Brant Greathouse:
... the beauty of it, you can make a lot of money.
Yes. You’ve got single-family, you’ve got multifamily, you've got commercial property in the sense of retail and industrial and warehouse and...
Carl Moore:
Storage units.
Brant Greathouse:
... storage units, marinas, mobile home parks-
Carl Moore:
High-rise buildings.
Brant Greathouse:
... high-rise buildings, office spaces, there's-
Carl Moore:
Condos.
Brant Greathouse:
... an unbelievable amount of wide variety and the list continues to go on, but those are types of real estate, but then there's strategies and niches and ways of making money within those asset classes. When I was starting out, I was looking at all these different types of things and I was saying, and this is the question that you, as a listener, should be asking yourself, "What is going to help me get to my ultimate goal?" Because hopefully your ultimate goal is not just simply make money, making money as a byproduct of an investing and being wise with your wealth. That's not the end-goal. It's actually a goal that's impossible to meet because once you reach that certain level, you always want more. Let's get a specific goal and let's not make it all about just making more money.
If you're asking yourself, "What type of real estate do I want to invest in that's going to help me achieve my major purpose in life? That's going to help me have the type of lifestyle that I want for myself, for family, for being able to give back in the community?" And whatever your goals are.
Carl Moore:
I think there's a lot of books and other podcasts that have hit on that, making sure that your why is big enough. Because if your why is just invest enough that you can take a Disney vacation every year, well, that's great and that is a big enough why for many people, but if your why is you want to leave a legacy that lasts a few thousand years, you want to do something and build something so that you can, like the proverb says, "Give an inheritance to your children's children." That you would build something that big. Then it's really good to create at a vision board and to start looking at, "What am I going to do and how am I going to do that?" So I want to ask you a question, tell me more about the investment side to get your why big enough.
Brant Greathouse:
If you want to detail out what your goals are, it's helpful to reverse engineer sometimes and look out, project out and say, "If that's where I want to go, and here's where I'm at, now we can start beginning to create a roadway that's going to allow us to get there." What I started out with was I said, "I want to be able to have freedom of time and I want to be able to have the freedom of mobility."
People talk about financial freedom, that's a good one. People talk about all sorts of things, but I wanted these two particular freedoms because a freedom of time doesn't necessarily require me to have multiple millions, so it's achievable no matter if you are not in the millionaire range, yet, or if you are already there, it's actually quite achievable. It's measurable because if I have freedom of time, I can line out what that looks like for me. Then also the freedom of mobility, my ability to do what I want when I want with whom I want to do it and go there when I'm ready to. Those were two important freedoms and it all tied back to the mission of being able to make an impact on the world in a bigger way.
I started looking at different types of real estate and a lot of people love to flip stuff. You can flip commercial property, you can flip single-family residential property, but they love to flip stuff. Well, I don't really like the flipping from the standpoint that once you flip it, you make a big paycheck and then you have to go do it again.
That means that you are constantly and repetitively having to go out and continue to make that happen-
Carl Moore:
That's a really good way to get started.
Brant Greathouse:
Beautiful way to get started. It'll put cash in your pocket. It will allow you to ramp things up. In real estate they say cash is king. And if you don't have cash like I didn't when I began, you’ve got to get some cash.
So ultimately I was looking for something that was going to create a passive residual income, and that means rentals. So I started and I was in single family rentals. I was in corporate rentals out here in the oil patch, there's a lot of people that need corporate housing, short-term housing that's fully furnished. And those were great things. Those were going to be able to produce that mailbox, money that everybody wants. It comes in every month. But to scale that, you've really got to go after multifamily of some sort, so we've looked at apartments, we've looked at storage units and even though that's not multifamily, it's, multi-unit, you're spread out over multiple units.
Then I talked with a close friend of mine, Ryan Smith. In 2009, the guy was already just killing it in the mobile home park space. And he introduced me to mobile home parks and some of the qualities that they have, it's really unique. They have a stigma and he taught me all about how not many people... It's not a really glamorous-looking type of an asset or real estate.
Carl Moore:
It's not like putting your name on a building downtown, like the Greathouse Tower.
Brant Greathouse:
Exactly. It's a mobile home park, but the qualities of it are unique for a lot of different reasons. In a future episode, we're going to talk about how resilient they are in any economy. But mobile home parks, it really boils down to the affordable housing sector. And in affordable housing, our goal is to provide safe, clean, and affordable housing, something that's quality, something people can be proud of. There's not enough affordable housing. And every politician is always talking about how we need more, we need more, we need, and yet they don't tap into fully the mobile home park space.
Carl Moore:
Let's talk a little bit more, you mentioned that you started in the single-family, is that more risky than the multifamily? If you can buy a one or two single family homes and that's all you can get into versus buying an apartment complex, what are the pros and cons there?
Brant Greathouse:
Don't get me wrong, you can make passive income with single-family rentals. I did for many, many years. The problem is you've got to build up a number of units before the risk is diminished. Because if you got one house, think about it, if it goes vacant or something happens to it, your income is now gone and you're still paying a mortgage, most likely.
If you got two, if one of them goes empty, you still have another one. That's good. But you start getting into the 10, 12, 15 and single-family houses. And the problem with that is that they're so spread out. By buying a property like a mobile home park, one of the beauties of it is you've got at 50, 100, 200 spaces all in one location able to be managed by a relatively small management team.
Carl Moore:
Some of the people that I do life with, what they've decided to do is they want to get into the single-family home, but they also wanted to diminish their risk. What they did is as two separate couples, they got together, they started an LLC and they've bought their first rental property and fixed it up, made it look super nice, but they don't have a big mortgage because they did all the sweat equity and now they're looking for their second one. I would say I don't think anybody could have a better partner than what I've got, but be very careful in a partnership because you don't want to ruin a friendship, but it is a great way to diminish risk, to have somebody that can help you walk through life. We just have down days sometimes and it seems like, across the years, I would say, on the days that you're down, those are the days that I'm up and on the days that I'm down, it's just opposite. It's the days that you're up and so you can continually help pull one another up.
Another thing in getting into real estate and just talking about partners, you don't necessarily have to have a partner, but it's a really good idea to find other investors and meet with them on some regular basis because it's going to help you expand your mind, expand your capacity, think about bigger, long-term investments. That's one of the things that you and I did was we regularly met with investors, especially in the single-family home arena because they helped us think bigger. That's a lot of the issues that I have found with a lot of people wanting to get into investing. I met with a guy two or three time over coffee, and he wanted some coaching into getting into real estate and he always wanted to talk about it, but he would never pull the trigger. I think what ended up happening was he ended up meeting up with two or three other people and they all went out and made investments at the same time and then they would get together and talk about it.
The single-family place is a great arena to start in especially if your day job is creating enough income that you can pay that mortgage if your renter moves out or whatever bills might be incurred. But again, it's like you said, there's greater risk whereas if you could buy a quadplex or some small 8, 10, 12, 14-unit apartment complex, you can get in at a much lower level of risk.
I drove by this one apartment complex, it's down the street from my house and as I drove by it, I began to realize, "I think I've been driving for three minutes." I mean, it must have had 7 or 800 hundred units. I think that's what we think of when we think of getting into bigger real estate investments, but that would literally take probably a hundred million just to buy an apartment complex like that, especially out here where the prices are so high, thinking on that arena. Just to say that because you buy something big that has a lot of rental spaces that you've removed all of the risk, well, that's not true either.
Brant Greathouse:
You're making some good points when it comes to partnerships and investments. There's great wisdom in finding people who can push you to another level. That's something I did early on when I was doing mostly single-family residential. When we switched over into mobile home parks, both of us were surrounding ourselves with people who were stretching our thinking who had already achieved a certain level of financial success. I remember meeting with a couple of folks that we called them multi-gajillionaires, because we didn't know how big of a-
Carl Moore:
I remember.
Brant Greathouse:
... nut that they had. We found out later that it was much bigger than we originally thought. Those kind of people, the way they think, the way they process, the way they talk about investing, it's on a higher level of sophistication, which just naturally helps you raise your level of sophistication, pushes you to be able to make larger investments with less risk because you understand something on a different level now.
If you're looking at investing, your goal needs to be, you need to learn how to understand what you're investing in. I think even Warren Buffet always says, "Don't invest in something you don't understand." We understand the mobile home industry. It's a phenomenal asset class. It allows to have the multifamily benefit that reduces our risk, spreads us over multiple units, but it's in the affordable housing sector, which means high demand and low supply, which, if you're investing or doing any kind of a business, with supply and demand, that's the perfect storm. There's so many more benefits that we're going to be hashing out in episodes yet to come.
But we've got an opportunity. It's a window of opportunity where there are less professionally-managed, owned and operated mobile home parks right now. For people like us who can come in and do value-add improvements to a mobile home community, raising these people's standard of life, allowing them to be proud of where they live and raising the value of the asset itself. Now we've got something that we can talk about, because now we're able to produce wealth. Now we're able to meet the goal, right? You can drop 100-grand investment or 50-grand investment or anything varying into this space with us. Now you're creating that passive income. Now you're creating your long-term equity growth and it's stable, it's a stable type of asset.
Carl Moore:
Well, and especially the way that we have it set-up because we invest in fund structure, so you invest into a fund that buys assets in different communities. Even if there's some sort of natural disaster or some sort of economic crisis, something happens in one of those communities, you have the other supporting legs to continue to hold those up, which is the most attractive part for me.
Brant Greathouse:
100 percent. Well, you talk about diversifying your investments. A lot of people say, "Well, I don't want to put all my eggs in one basket." Well, there's a lot of ways to take that and to people who don't really understand spreading out risk, they would say, "Well, I don't want to put everything in mobile home parks." But what I would say is, "Spreading out your risk is spreading it out over multiple rental units in multiple geographic area, in multiple funds."
Carl Moore:
Absolutely.
Brant Greathouse:
That's truly the definition of spreading out your investment and not keeping it all in one basket because one thing can go wrong over here, but it's not going to happen to all of them at once.
Carl Moore:
And you mentioned something about at least our structure, which is buying communities and upgrading people's way of life, upgrading the community and building wealth in all of those facets, and that's something we're going to talk about very specifically in another episode, how do we take a C or D community or asset class and bring it up to an A or B class so that we've built the wealth? I think term's sweat equity, use that, so that we can turn those profits back to our investors.
Brant Greathouse:
If you can invest in something that has a natural benefit to it, like the affordable housing sector being in such high demand, and you can double your money in five years or less, and you can spread it out over multiple units, over multiple geographic locations and over multiple funds, well, now you've got something that's significantly diminished risk and significantly higher demand than your average type of housing. I think the number is 20% of Americans. One fifth, one out of every five Americans cannot afford more than the price of a mobile home for their housing payment. There's simply not enough. You’ve got low income apartments, you’ve got low income mobile home parks. That's pretty much the only two things that serve the housing needs and the low-income brackets. And honestly, a lot of operators and owners do a poor job of providing something that's safe, and affordable.
Carl Moore:
One of the things that we were able to do, and I really think COVID expanded our capacity to take care of people because when the whole lockdown happened, most of the people that lived in our communities were on those frontline retail places that they couldn't go to work any longer. Us being able to take and shift our focus towards those newsletters that we would pass out to let people know, "This is a place you can find dinner. This is a place you can find lunch. Here's a place that's actually selling toilet paper." And then we in-housed a lot of that toilet paper so people could have some, which I didn't know toilet paper was a crisis, but apparently it is.
Then also using our resources to really help out those people that are living in our communities, most of them work two jobs, they don't have time to go find the government programs. We were able to find those programs and offer them to our residents. Well, if you're a month or two months behind and you're afraid your manager is going to kick you out, and instead they show up with some ability to give you help if you're willing to fill out the paper and help yourself, we've already done the research, here it is. As people invest with us and our community and with our True Star Capital brand, they're not just investing in wealth, they're also investing in the lives of people and that's what drove us to this point, ultimately.
Brant Greathouse:
Well, you just made me think of something that I think is important for people to hear, because we're speaking to a lot of people here. The government puts out a lot of great programs and we've found those and this has been hugely beneficial, but you know what I've been really proud of over the last 18 months or so as we've gone through the pandemic? The churches have really stepped up.
Carl Moore:
Absolutely.
Brant Greathouse:
And if you are a part of a church and you want to look for a way that you can really make an impact in people's lives, it's finding them and some of them may be in their lowest times in life, and being able to give them a boost in a healthy way. We're not enabling people, we're empowering them for the long haul, not giving them fish, but teaching them to fish. That's, I think, a very big deal. If you have something within your influence like that that you can do within your communities, within your churches or whatever, I would encourage you to do it. Carl, just to wind this down, back to our original question, what is the best type of asset class to invest in?
Carl Moore:
As far as real estate goes, I would say all of them. I mean, all real estate continually appreciates and continually grows. I think it's important for you to take on and look at what is your risk level. And if that's buying a single mobile home community for 10 or 15,000 and make them one or 200 bucks a month, and that's your risk level until you can grow, then that's the place you should start. If it's a single-family home with a friend or a partner or a parent, or by yourself, and that's all you can take on, that's the place you should start because real estate is continually growing and holding real estate assets is where you're going to make more wealth than any other class, I believe.
Brant Greathouse:
Nice.
Carl Moore:
So I'd say, "All of them."
Brant Greathouse:
All of them.
