In this episode, Salem VanderStel talks about the opportunities outside the progressive investment markets and how you can provide affordable multifamily housing to communities. Stay tuned if you want to learn to operate a vertically integrated business and invest using a model like no other!

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The great thing about investing outside rapidly growing markets
Why it’s crucial to focus on the demand for affordable housing
Hybrid fund model vs. multifamily syndication
Helpful advice about multifamily investing during inflationary period
Perks of creating a real estate investing experience now


A Random Walk Down Wall Street by Burton G. Malkiel | Paperback and Hardcover


Salem is a career real estate investor. After studying Chemistry and Corporate Strategy at Vanderbilt University, he directed his passion for analytics toward financial instruments — building ultra-high net worth asset management products at one of the world’s largest investment banks. He also continued to advise large-scale global financial institutions on financial strategies and structures. While underwriting and building various financial instruments in 2012, Salem discovered the exceptional risk-adjusted returns associated with specific real estate investments. To date, he has directly managed and/or invested in over 2000+ residential multifamily and manufactured housing units.



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Full Transcript
Salem VanderStel  00:00
Right now is the best time ever for all cash deals. As long as it’s some type of cash flow go, you can buy this thing all cash, park your money in it, let the macro thing takeover operated directly and look to refinance in a year or two. And if you’re wrong, then you’re stable. It’s the best play ever for that. Welcome
Greg Lyons  00:17
to the passive income brothers podcast.
Tim Lyons  00:19
Here we take the fear out of real estate investing using real life stories of everyday successful investors. Let’s go Welcome to another episode of the passive income brothers podcast. My name is Tim Lyons and today I am joined by none other than my brother Greg, how you doing today, buddy?
Greg Lyons  00:34
Tim? I’m doing great other than being a little under the weather. You know, we are in December. I have two kids, the boy and the girl, they bring home all sorts of stuff. So I may not be at my peak podcasting boys today. So I am sorry about that. And I apologize in advance. And for
Tim Lyons  00:51
all the listeners out there, I took my family down to Virginia for Thanksgiving. And my three year olds was a little bit under the weather. We, you propped her up and she was a trooper and literally took the whole family down. As soon
Greg Lyons  01:03
as as soon as you left me, she literally decimated all of us. So it was great to see you all. You’re not invited for Christmas. Anyway,
Tim Lyons  01:11
I love you, buddy. I so today we have another all star on our podcast. And what’s really special about today is that we have the opportunity at cityside capital to join forces with this guest and his company to provide opportunities to our investors. So we are super psyched to have somebody with that caliber of knowledge and experience to come on the show and really dive into you know, passive income, you know, syndications multifamily, and all that great stuff. So without further ado, I’d love to introduce you guys to Salem VanderStel. From naked capital. How you doin? Salem? Doing great.
Salem VanderStel  01:46
coming on.
Tim Lyons  01:48
Yes, thank you for making the time for us. So Salem, like so many people, you know that we’ve found listening to podcasts, and then being podcast hosts, we all kind of start somewhere in our real estate journey. So I’d love for you to kind of take us through. Where did you start? You know, what kind of journey have you been on? And then kind of what are you up to now?
Salem VanderStel  02:06
Yeah, for sure. I got through kind of quickly, I’ll just preface it that I don’t. I told you this. I don’t typically do podcasts. But I’ve always really appreciate you guys. I feel like specifically, we’ve had a lot of honest conversations about the mechanics about things. And I really respect you guys to be upfront. And so I’m glad to get on here and do this, this would be a lot of fun. But I also don’t have like a perfect radio voice and like perfect canned answers or anything like this. So I’m just going to kind of speak off the top of my head, we’ll see what happens. Okay, my background, I came from a really underserved community in Grand Rapids, Michigan. And it was super tough. You had a lot of responsibilities at a young age, I went to community college there, you know, working full time going to college full time, work really hard scholarship to Vanderbilt went on there. And then from there, I was off to New York, JPMorgan ultra high net worth asset management. And that’s kind of where things started getting going for me in the finance realm. While I was there, I really feel fortunate that I got to work in the mechanics of how I’ll try networth asset management products are built. So this is like someone comes in says I have $45 million liquid build me a financial product of equities and bonds or whatever. So I can make a great investment, ideally, at passive income. What was really astonishing to me is how low the returns were, how high the volatility was, I’d read a lot and I thought, Man, you could just go in the s&p and you could do better than this, or down the road of, hey, I can go buy a four unit asset, I can crush these returns. And this is one of the most prestigious financial institutions on earth. Why is that the case? Well, that was you know, 2013 2014 and its size, and they’re so big, these institutions have gotten so massive that if you can play in a smaller sandbox, you can provide outsized return. So that bolstered a lot of confidence. For me, my first asset purchase was 2016, I bought a four unit multiplex in Grand Rapids, Michigan. 95k do a little math and guess what the cashflow is there, definitely brother JP was good. And then start buying more started buying another four unit operating everything directly. And my thesis always was like, Look, I know these returns are better than institutions. I know, this is a, you know, asset backed cash flowing vehicle. This makes a lot of sense. Or things I think start to get interesting is, you know, around 2018 2019 Real Estate start to get really popular. And you know, for comparison, you know, I started studying this stuff and 2012 people looked at real estate people like clowns, I mean, coming out of 2008 it was like your real estate, your job what no one took anyone in real estate seriously. And it wasn’t to that till 2018 where things started to change, whereas Oh, this is legitimate. Everyone’s getting in it now. And so now you kind of have the inverse problem where it’s like, okay, everyone wants real estate. Everyone’s in it, but the returns get harder and harder, harder, harder, and you have to be I’m increasingly sophisticated to make you know what I started out and like, Okay, how do I make ultimately a great financial investment for me and somebody else. So I’ve had increased sophistication along the way. So to kind of just finish up and just wrap up where we are now is, you know, I continue investing around the country, self storage, mobile, home parks, just a lot of different asset classes live for different strategies. All my always kept the Michigan thing simmering. And then in round 2018, I partnered up with a property management company there, I think they had 100 units at a time. And then I said, Well, look, let’s work from value backwards. Rather than betting on this asset class, let’s think about how we can create value at the asset level. So separate from, you know, the ups and downs, the assets itself, we’re putting this mass of hedge between us and everybody else. And that comes in the form of property management and a renovation company, we also hope to, and today, I think we’re at 220 300 units, something like that. So we’ve scaled up a lot. We’ve got about 80 employees, our construction management side is, you know, bread and butter, going in and sharing these units, property management side, caring for the tenants, there’s a lot of different things we do there. But yeah, that’s how we got to where we are today. And it’s a model that I think creating value allows us to go through upcycling and down cycles, where I don’t want to be a one cycle company. I think for the next 1015 years, we can buy assets, operate them and always keep that big hedge above what a traditional real estate investment like do. I pause there, that was a lot.
Greg Lyons  06:38
That’s wonderful. And, you know, it was really funny that when you started, you said, Hey, really happy to be on this podcast. I respect you guys, which was very nice to view. I was excited that you were coming on because of your background, and how you came up through a tough or tougher upbringing, but majorly to Vanderbilt and to JP Morgan. And Tim and I always say we never want to be the smartest person in the room, which is usually pretty easy for yours truly here. But having you won and having worked with you prior, we were really excited to kind of pick your brain about the things that you do on a daily basis to create passive income. And through naked capital, you have done a wonderful job of getting into the real estate world, the multifamily world. And, you know, real estate as a joke, probably, you know, 810 years ago is almost laughable now, right? You know, like, I would never equate a real estate person to a used car salesman, right. But right now you’re right, everyone wants to be in it. Because it is, we think is a greatest investment you can make. As you start naked capital, you become vertically integrated with the property management team, the construction team, why did you want to stay in the Michigan market? What drew you to other than being your hometown, kind of what drew you to the Michigan market to make multifamily a great investment there?
Salem VanderStel  08:03
This would be a two pronged answer. The first is really value, you know, where can I go create value? Where can I go buy an asset where I can do something that someone else can do it. So in this asset, these markets that we’re in, you know, call it like 15, small to medium to small side have large markets, and we really haven’t covered where we’re gonna get the asset. You know, we’re the best property management in town in these areas, best renovation company. And again, we could do something that someone else can. But let’s look at the inverse of this. You could also say Salem, why not go to growth market? Why not go to an Austin? Why not go to San Francisco? This is where I think I really diverge from a typical real estate investor is I think of it like Apple, right? Look at Apple stock. Is Apple growing. Sure, Apple’s growing as a company, and they will continue to grow. They add users, they’re adding more users than their loot, you lose the users virtually every single day for the last forever. And that will continue for a long time, give or take. Is Apple stock continuously going up? Well, no, it goes up and down. Why does it go up and down? Well, it’s not about growth, right? Yes, growth is important. But the value of the stock is how fast it’s growing relative to the expectation. So for example, you can buy something in Austin, and Austin is growing really, really rapidly. But if you bought it multifamily asset that has negative cash flow on it for a long time, and that market grows, but doesn’t grow as much as people thought it would, and you basically overpaid for that growth, then you’re still not going to get a good return. So the way that I look at it is, and I know this isn’t perfect, but it’s a good mental framework is I imagine that growth is priced in, it’s priced in in the big markets and it’s priced in the small markets. If it’s a nicer area, I’m gonna pay more per door if it’s not a good area, I’m gonna pay less per door. Yeah, there’s some opportunities in between those things. So I just kind of think okay, given that it’s already priced in It’s not a major metric for me, I’m going to consider it within the realm, the micro neighborhoods that I consider. But I’m just gonna go to Michigan where I have value where I have the pm company where I have everything else. Does that make sense? It’s kind of a nebulous point I struggled to describe.
Tim Lyons  10:16
No, it makes a ton of sense, because I mean, where Greg and I sit, you know, now that we have our securities licenses, and we work with a broker dealer that’s solely focused on private placement opportunities in multifamily and self storage. You know, I think the expectation from a lot of investors are to hear Phoenix to hear Austin to hear Florida to hear Nashville to Chattanooga, hear all these quote unquote, sexy markets. And when they do hear something like Michigan, they’re like, wait a minute, Michigan, Ohio, like people actually invest there? Like, and it’s yes, the answer is a resounding yes. Because at the end of the day, if your investing thesis supports investing for value, people need a place to live it, you know, people food, clothing, and apartments is what our mentor, you know, taught us, right. And so they need to live in Michigan, and they need to live in Austin, right. And there’s value and I think what your value is by, you know, my insight with working with you guys, is that there’s nothing that can be substituted for local knowledge, right, boots on the ground market, you know, dynamics, knowing the players, having the relationships with their community banks, or lenders and brokers. And, you know, I think that’s really where you know, value is created. So can you speak a little bit more to having that boots on the ground presence and having that market knowledge and then using that to create value?
Salem VanderStel  11:34
Yeah, totally. So let’s use an example of a property. Let’s use three pack, we just sold it back. So we bought this asset for around 10 million, I can get the exact number. For sure. It’s pretty much right on 10 million. When we bought this asset, the seller had to sell he had to get rid of it mismanage I think it was two brothers that were fighting. They weren’t as you know, mutually inclusive. As you two right? You guys do a great job. Maybe I should introduce you just take over there abysmal. But anyways, they had to sell the asset. And it was like 70% occupied, it’s in pretty bad shape. It was in a tough neighborhood was a tough looking asset. Honestly, this was one of our heavier lifts. When we took this on, we knew that we were the only player that was really going to get financing 10 million purchase price means look, call it like $3 million of equity, really, to get where institutions play, you got to be 10 million plus in equity. So we’re still way below institutions. That means no one’s coming in with like, Okay, I have debt in hand from Arcadia from JLL. I use third party markets, right? The debt is local banks primarily. So these local banks are like, who are we going to lend to to buy this asset? We were one of the only people that could even get financing on this because we were vertically integrated because we own everything. So knowing this, we could kind of just name our price. We said, I think the guy wanted, I don’t know, 1213 Originally, and we’re like, look, we’ll give you 10 We’re right here, whenever you’re ready, and he had to sell so he had to sell to us, we get this asset, you own it for less than two years, I think I was like 18 months all in. And we sent in a renovation team and work unit by unit, a lot of them were really messed up carpet, walls, countertops, lighting, serious, huge. That’s the renovation piece and the property management piece, its culture, people are paying rent, they’re not going to be able to stay there anymore. We need a better tenant base. And we’re evicting people that are paying and you know, that can be hard and sad sometimes, like, look, we have to evict some people. But the reality is there’s a lot of people that are paying rent on time that are there, they want to keep that relatively low rate and they want to save for spa. So we can go through cleanup the whole community make the thing safer, right and at the end assets a lot better. So we ended up selling that I think our final price was 14.5. And we more than doubled our equity on that in what’s a year and a half. So like the project level, I err on that like a 70% plus. I mean, I think that’s a good example of like, okay, this wasn’t in Chicago, this wasn’t in one of these growth markets. But from the work that we did on it. Interesting to know, in that time period that people ask me all the time say, Well, what happens about debt, right? Debt rate goes up, I’m like, Well, look, we’re not trading commodity, there’s a lot of value creation here, we got higher price, the debt on us relative, the new buyer, the new buyer had almost double the debt rate that we did, right double, which is crazy to think about. So that’s a good example, right? That’s a heavier lift example. We buy more stable stuff where it’s like touch, we buy a lot of small stuff where we package it in, but I think that’s a good example of like, you know, there’s not somebody like scouring LoopNet in Charlotte, looking at that asset thinking they’re gonna be able to do that. Just
Tim Lyons  14:46
jump in real quick for sale just to want you to drive home one more point right there is when you’re buying a property, you’re buying a stream of cash flow, right? Then you’re basically buying a business and if you can turn that business around and put a Great product in and serve people and make the community better. I mean, like, there’s a win win win all around. And I also think, you know, the passive investors when they think about sexy markets, and then they think about, you know, other markets around the country that maybe don’t appear as sexy. They also look for, like, you know, the 150 250 unit complex with the pool and the palm trees, right? And, you know, what you’re talking about is people need a clean, safe, affordable place to live, right? And you’re serving a community, you’re serving a purpose. Yes, you’re making money at it. But can you talk about what the value is on a 12 unit that you might pick up? Or even a 42? Unit? Like, why are those so powerful in your portfolio?
Salem VanderStel  15:41
Yeah, so this is another, I haven’t really described this to anyone else for years. But one of the things I learned at JP Morgan, and at Vanderbilt, and a lot of these, like investment banking things is everyone talks about the A Class assets. And they talked about the hot growth markets as if that’s really that all that exists, it’s really easy to kind of live in a bubble and not really recognize, you know, the situation that the three of us and a lot of our investors are in already 90% of people with jobs above the age of 15, United States make less than 100k a year, right. So these like hot markets that we’re thinking of does not represent the majority of the economy, it’s a tiny portion of the economy. And the portion of affordable demand for affordable is growing more and more and more and more. So I bring all this up to say that, like, look, I’m from these communities, I’m from these areas, I know they’re there. I know, they’re huge. And I know they’re growing as homes get more expensive, as wages get tighter as private equity buys the grocery store and wages for the clerk go from $20 an hour to $12 an hour, like it’s just happening. And with build costs at 300k plus the door, there’s no supply coming anytime soon. So for all of these hospital workers, for all these educators, for all these government officials, people that work on the roads, people that clean the lawns, people that clean the if you’re in a building right now look around on the ground, whoever cleans that building, like they need somewhere to live, and they can’t afford the palm trees and they can’t afford the pool, and they don’t want to live in affordable housing complex that is dangerous, or whatever. So it’s that middle market that we’re really trying to feed and fill and the demand is insatiable. I mean, we get these units done, we have just incredible waitlist on every single time, because there’s just not enough product there. So yeah, that was a bit of a tangent. But to answer your question,
Greg Lyons  17:32
you absolutely did, absolutely did. And, you know, one of the things that has kind of attracted me and a lot of our investors is you will do a wonderful job with workforce housing. Again, like you said, cleaning up these complexes, safe places to live without jacking up rents, you know, $800 a unit, so people can’t afford them. So I think there’s a really healthy balance that you will strike with making it safe and affordable, yet having a really good business model. So that’s makes me and a lot of our investors feel really good about what you’re doing in these communities. But with your model, you instead of investing in a single asset, a single apartment complex, which we do a lot of cityside capital, you employ a fundamental meaning that’s multiple properties. And that’s a little bit different than what a lot of investors are used to with the single asset syndication. Can you talk a little bit about the fund model? And maybe a little bit, kind of the differences between a single asset syndication and a fund? Yeah,
Salem VanderStel  18:37
definitely. So typically, someone at our side is vertically integrated, you know, they’re gonna go out and they’re gonna do a blind fund, and they’re gonna say, Look, we’re gonna raise $50 million, we’re gonna buy a bunch of 150 unit assets. Isn’t that great? And investors like, well, I don’t know what I’m gonna get. What is the benefit here really, for me? Right. And I agree with them, I don’t really think it makes sense in that case. So we kind of do this hybrid approach that I think it’s a win for everybody, especially people that have like windfalls and are doing a lot, we will buy an acre asset, we’ll buy, you know, a 234 100 unit asset, typically some of that super stable, we plug in our property management company. So day one, we’re getting a lot of cash flow, and then we’ll go out and we’ll buy a bunch of anywhere from 10 to 50. Unit, apartment complexes nearby, and then we consolidate the operations on them. You don’t see many teams doing this for a lot of reasons. But one is they don’t own the property management company. So if they go to a property management company, the property management company we like, we’re not going to on those small assets, and we do we’re gonna gouge you, whereas for us the exact opposite, we’re like, look, we already own it. We already have the infrastructure right here, we have our snow plow guy across the street or lawn mooring or whatever, just send them over. So our operating costs are like nothing on those 15 assets and they’re just like pure cash flow. The problem I think a lot of teams have and another reason that they don’t do it is that it’s a lot of work and especially going and raising capital, so I’m not gonna go out and raise capital and build a syndicate Should I build a deck and walk everyone through every time I buy a 20 unit an asset, right? Instead, I will just do this fun model where I say, Look, you have half to two thirds of what you’re typically what we’re going to do in the entire fund. And it gives us room to be flexible and go after these things to get higher returns. And our returns support it, you know, you can go look at our average returns, and they’re, you know, substantially higher than, you know, comparable model doing a single asset, typically, unless it’s like a highly leveraged something somewhere else. So that’s the benefit of the fund model. The other good thing about it is back to that example, I gave you of like, yeah, the 100 IRR, like, yeah, we do do those, and that happens. So the renovation, but for us, it’s better to just include those in a fun, so we kind of get this blend of everything. So for a lot of investors, they come in, and it’s like, Look, we’re not going to hit a galactic homerun for you, we’re not aiming for galactic homerun for you, we’re aiming for a balance, you got the stable cash flow, if the market goes absolutely terrible, and all multifamily assets are underwater, you’re diversified across a bunch of different assets where we have cash flow coming in. And we’re creating value where in my opinion, like 6070 80% of teams are going to be wiped out way before we’re going to touch our principal, you know, maybe our distribution goes way down. So in that way investors are getting that diversification, yet, they’re getting exposure to some of these nimble opportunities that they typically wouldn’t get unless they’re funding themselves. When it’s a really stable option, like, look, you’re gonna cash flow and you got value creation coming. So the fund model works for us, it works a lot with this nimble model. I do agree with investors, when they say, Look, if I’m not getting an extra value of going this fun model, why am I doing it? And I totally understand that. So it’s got to be worth it. And it’s got to make sense for Steve strategically for them. And for us,
Tim Lyons  21:45
dude, I love that answer, right? Because doing what we’ve been doing for a couple of years now, you know, it’s funny, when you see the glossy investor decks with all the sexy pictures and all these like, you know, great looking apartments, you’re like, Man, I could live there, like, I’m gonna invest in this place, right? And that’s just like a tears at our emotions, right? As an investor, that sounds very emotional, it really is, right. And that’s why I think when you understand how commercial real estate works, and, you know, every dollar that you invest can become a multiple, you know, and it’s by the jockey that’s riding the horse, that horse is the asset, and the jockey is the property and construction management, the asset management team. And, you know, each dollar invested can be a multiple, because of, you know, the pure operations. And I think that’s where, you know, a lot of folks get mixed up in investing, you know, it doesn’t have to be the shiny thing. You know, there’s plenty of companies out there besides Apple, right. So what, you know, if you’re going to be an egg, you know, my point is in equities investor, you know, there’s plenty of companies out there that are just, you know, grinding through the process, right. And that’s really kind of what I love about real estate is that, you know, there’s a process, right, you and I and Greg, we didn’t invent syndication, we didn’t invent real estate, commercial underwriting, we didn’t do any of that. But it’s a process that you know, when played correctly, it could be a very good spot to be in. So, Salem, I want to kind of talk about the current kind of Outlook, you know, right now, we’re recording this in mid December of 22. The stock market is going crazy today with the new CPI print of 7.1%. Right? You know, the 10 year just took a dive today, like there’s a lot going on, right? And Greg and I have become macro nerds over the last couple of years. But not everybody is not everybody has the time or the knowledge or the know how right so we don’t listen, I wish we had a crystal ball. But none of us do. But with that being said, you know, what’s your outlook for kind of the next quarter to maybe a little bit longer with multifamily with commercial real estate with cap rates with interest rates? You know, and how does that feed into like how you supply the debt for these properties and some of the decisions that you have to make as an operator?
Salem VanderStel  23:59
Yeah, so it’s an interesting time. I guess a few things first, like, I know, everyone says this, but I’ll just preface it again, like, I’m not a macro expert. I have no idea. I buy real estate apartments and run them out. So that’s what I do. Like, I can just put out my opinion on things you don’t debate. I will say there’s been a lot of real estate syndicators and real estate buyers and whatnot, that if they weren’t creating value over the last couple of years, they’re in a tight spot right now. They are not getting the cap rate compression we all knew was going to happen. I don’t think it’s going to be dramatic. I don’t think you’re going to see massive losses or anything like this, I think you’re gonna see just a lot of projects that like never really made any money. You know, I think that is going to be a real thing for a lot of teams. And our returns have the potential to be a little bit lower, too. You know, cap rates aren’t going to be compressing interest rates gonna go up. So that’s like a macro picture. I think margins are getting squeezed. But I do think it’s a good thing. I do think it’s a good thing for the long run for us as it relates to our strategy. See, where it really makes the difference is on a bigger asset, let’s say yeah, okay, maybe my cash flow is, you know, 7% here one and seven, eight or something like this and, you know, maybe my my love leverage is a little bit lower, it really doesn’t make that big of a difference on a mathematical basis. I’ll tell you where it makes a huge difference, though, is on a smaller assets. So, before, you know if a property is let’s say it’s operating at zero, there’s not $1 coming off this thing, right? What’s the cap rate, what’s the debt, it doesn’t matter. The fact is, like, this thing makes no money whatsoever, I know if I can buy that asset for under 50k door. And as long as the bones are good, and I can come renovate that, I know I can get a 10% plus cash on cash or, you know, typically a much higher IRR if I refinance it, right, but I need them to sell me that asset, I need them to say, Okay, I’m done with this, well, before they could just refinance their way out of anything. Now a lot of money floating has come up, runaway rent prices have slowed down a little bit, a lot of people have come in and overpaid. So there’s a lot of new reasons that are forcing people to sell, which are great, because for us, so maybe I’m a little bit compressed on that big asset, but I’m getting better access to more smaller assets where like, you know, our higher average IRR is like LM in the 50s and plus or whatever. So I’m getting better there and getting more access. So it’s a good thing. And I would also say, you know, to give a tip to other investors right now is maybe the best time ever, for all cash deals like a 12 to 48 unit asset. Who cares? I mean, as long as the thing gets some type of cash flow, go, you can buy this thing, all cash, park your money in it, let the macro thing takeover, operate it directly and look to refinance in a year or two. And if you’re wrong, then you’re stable. It’s like, okay, well, you didn’t lose any money in the market. I think it’s the best play ever for that, because you can really pick off a lot of people that were over levered for the last few years. I’m all about it, keep raising those rates, as far as I’m concerned.
Greg Lyons  27:02
Well, careful what you wish for sometimes, right? But no, that was, you know, kind of a great kind of overview of we’re not none of us are macro economic experts, you know, but when you hear an opinion from someone that’s in it every day and someone that is obviously smart, and does their homework is really great to hear. Speaking of which, as you were getting into real estate, what kind of resources did you use to kind to kind of learn about it was there a coaching masterminds, other podcasts outside of the passive income brothers? Was there anything that really kind of really got you into real estate and kind of, you know, you were able to sink your teeth into
Salem VanderStel  27:40
A Random Walk Down Wall Street is a really good starter book that gave me an understanding of, okay, the s&p On average, if you can hold the position for 15 years, is going to get you 10 to 12%. Depending how you look at the data, right now, that’s a taxable return. But that was really good baseline for me and saying, like, okay, if I’m gonna come out there, I need to handedly be 10 to 12% per year. Otherwise, if investor has a long time period, they should just stick their money in the market. Now granted, real estate’s a little more stable, so it gets a little bit loose there. So that’s a really good book, random walked on Wall Street, I just read a bunch of real estate textbooks, I met a lot with a lot of people. The best thing though, like anything is experience. I think a lot of the investors I have own real estate outright already, they own a bunch of stuff on their own, and then they invest with us. And they start with a small amount. And over time, they realize like, look, I’m getting the same returns to you guys, as I’m owning it on my own. And maybe they’re with other teams that have a better strategy than us and you know, are more sophisticated or a better spot. So I think casting a wide net and being an LP and stuff, I think being a GP buy something outright, buy something small, own it all, the more you can just get in and get experience and understand it, it’s gonna kill you. Because at some point in many people’s career, they’re going to switch jobs or get a big bonus, or get a windfall, or from one thing or another. And it’s all about just building the experience to get there more than is about just optimizing the exact strategy. You know, real estate is it’s tough, it’s nuanced. It’s complex, and there’s a lot of different things. So I think just getting as much exposure as you can in different ways of
Tim Lyons  29:22
that answer. And I’m going to stack on top of that real quick. If you think real estate’s for you, and you go by because everybody wants to do it by themselves, right. So they want to go buy the asset, they want to touch it, they want to drive past it, they want to be the landlord, they want to make that passive income. And then like me, I bought a three family. That’s how I got started. And I was a firefighter in New York City. I was an ER nurse at a level one trauma center. I had three little girls at home and I bought myself a third job, right? People called me all day long. The windows are rattling My apartment is cold. There’s a bat in the rear staircase, you know, and it goes on and on and on. And I was like, oh my god, this is not what I thought it was. Want to be? But I didn’t know about syndication I didn’t know about multifamily. It seems scary. It seemed hard cap rates, spreadsheets, net operating income expenses, p&l, I mean, that’s like a Wall Street thing to me, right, as a blue collar type of guy. But when I realized what was out there, and what’s available to you, that’s why this podcast exists, right? Because there’s such a different outlook. And there’s different ways many ways to skin a cat in real estate. This is just one of them. And before our broker, dealer compliance guy kills us, I just want to tell the listeners that you know, a lot of these facts and figures that were thrown out today percentages IRR is you know, 10 million this, you know, these are all kind of like overviews, right. So if you really want to dive into the numbers, you know, reach out to Gregory or to Salem. And we’ll be happy to share with you our investor decks and have a phone call and all that stuff. So you welcome Bill first shot that went out. So the left part of our podcast is the three questions. So just really what comes to the top of your head, you know, when you hear these? So the first question, I love to ask people, and it’s from a de facto mentor of ours, Robert Kiyosaki. And to the uninitiated, this can sound kind of terse, and he says, savers are losers. And debtors are winners. What does that mean to you, especially given this current climate that we find ourselves in? Savers
Salem VanderStel  31:15
are losers and debtors are winners? Oh, man, jeez, I don’t know how to respond to that one.
Greg Lyons  31:21
I gotta be honest with you,
Salem VanderStel  31:22
I would say it’s a little bit more complex than that. And I think there’s a balance to everything. And I think I would say age is very appropriate here. So that book I referenced random walked on Wall Street, the note there is like, Look, if you have 1520 years, if you have a long horizon of working and hopefully staying healthy, then yes, debt all day, take equity, take investments, it can go up and down. As long as you’re averaging up mathematically, you’re gonna just the compound growth, you’re gonna be so far above everybody else, you know, if you’re 70, and you’re looking to preserve and protect your capital, it’s a little bit different equation. But look at the math, you know, go type in compound annual growth calculator and put in 12% per year for 30 years, versus, you know, 4% and a bad and, you know, look how big that is. So, yeah, I’d say if the time period is long enough, then yeah, debtors are gonna win out every time.
Greg Lyons  32:15
Yeah, that’s, that’s absolutely right. The second question we have is, just like us, you speak to investors all the time? And what do you say to people when they say investing in real estate is too risky?
Salem VanderStel  32:27
You know, I? I don’t know. I think a couple that question is sometimes people say like, Well, I’m not used to syndication, or I can own it myself, or I can do whatever, I’d really try not to be the silver bullet that is really going to fit everyone. And I’m just like, look, this is what we do. Here’s our returns, we like, I think we’re really good at what we do. And you can go compare it around and learn on your own. And hopefully you come back to me someday. So I’m not really trying to convince anybody if someone’s like real estate’s too risky. I’m probably just like, I don’t really want to continue the conversation. I’m like, Well, yeah, sounds like it’s really risky. You know what I mean, but like, I think most people are getting up to that, like mid sophistication where they have a lot of assets. You know, not many people are gonna write a $500,000 check. We were like, you know, I think real estate is just a bad investment. Like, you’re not gonna hit it that often.
Tim Lyons  33:14
No, I love that. I mean, when I first started a little journey, I was on a mission to turn people around, you know, real estate is the way to go, dude, like, you know, and I found myself like, I would spend hours on end with like, one person or two people. And I finally like, one day I woke up, I said, you know, I can’t spend my time converting people, like, if you want to take the education, and then take action on that education, I will talk to you all day long, and we’re gonna go some places together, right. But to convert people that are just not there, it just takes a little bit more education, which leads me to my last question. Jim Rohn, another de facto member of, you know, our little mastermind of Greg and I kind of love to listen to and read about. He says that a formal education will make you a living, and a self education can make you a fortune. Does that mean to you? Like the hardest questions ever? Were killing you today? Huh?
Salem VanderStel  34:08
No, they’re good. They’re good questions. I try to get by answer. Is it tight? Try not to just opine on random things that I don’t know too much about. I agree with that. And I would say probably more so than ever, right? You’re starting to see this, like, huge differentiation in the last, you know, five years. I mean, it’s been an ongoing trend, like, since the post post war era of, you know, capital owners moving their way up. And a business owner is a capital owner in a way. You know, equity is equity. You know, whether it’s working for a job, you know, being a lawyer or a doctor or whatever, it can be tight, and it can be really, really hard. And I think real estate is a great foray into that of creating your fortune creating your wealth, building that momentum, and now you’re seeing it more and more and more like how many people or how many partners like a consulting firm or whatever, like, Hey, I’m building a real estate business on the side now. I can utilize, you know, email and technology and calls and portals and stuff that didn’t even exist 2030 years ago. So I agree with you. And I would say that that trend is probably accelerating, where everybody is going to have some type of, you know, side hustle or whatnot going on. So yeah, I hopefully it makes a fortune. That’d be amazing. But I will definitely say that the commonality of it and the access to it is just, I mean, multiplying exponentially.
Tim Lyons  35:28
I’m our living walking example of that, right? Real Estate became my side hustle, I affectionately say that I retired from being a nurse, right, and I got into real estate. But just because of these technologies, these tools, the education and the conferences, like, the masterminds, that Greg and I are a part of like the it was getting in the right rooms, it was getting the right education. Greg and I both graduated from college somehow, you know, with college degrees, right? Go PC friars and go UVA while he was there, but there’s so much education. And I think it’s really finding that fine tune of where do you want to be? Who do you want to be like, who can you rip off and duplicate from and getting in the right rooms and getting the right circle? So I just love that so much. Well, Sam, I feel like I could talk to you probably all day long about this, but I want to be mindful of your time. So how could you if people want to reach out to you and find out more about naked capital or just, you know, connect with you? How can they do so? Yeah,
Salem VanderStel  36:22
they can email me Salem and naked capital The last thing I do just want to say before we go to is, I think the model that you guys have, and what you offer to your investors, is pretty incredible. And again, back to the example like you just couldn’t do that a long time, you know, 1520 years ago. I mean, look, I love what I do. And I put all majority of my money into what we do. And I think we’re great at it. But having exposure to a wide variety of things. I mean, you guys are so diversified. It makes a tremendous amount of sense for people. And I think over the years, both you guys and your investor, you know, 10 years from now you talk about you know what resources and experience. I mean, you are the resource you are the experience, you guys are gonna have such incredible breadth of what worked and what didn’t and what excelled and what was okay. I think it’s awesome. I think it’s so cool. It’s cool to see you guys. And on that note, how many times have I told you guys like, I’m always looking for feedback. Like I love what we’re doing. But you guys are the ones that have exposure to stuff you guys are learning at the most rapid play pace on a broad level. I just hope you can funnel and feed that back. And that’s where he’s at Dubois really appreciate to communicate with you guys. Click stack.
Tim Lyons  37:34
I love that. Well thank you very much. The feeling is mutual, my brother. So with that being said, we are so happy that we are able to serve you guys this week, and we look forward to serving you again next week. Thank you for listening to another episode of the passive income brothers podcast. We would be grateful for your support of our podcast by giving our show a five star rating and review and subscribing to our show on your favorite podcast platform. Don’t forget to take inspired action after listening to this show, so that you can start building out your passive income streams. Finally, head on over to city to connect with us and find out more information about how to get started passively investing in real estate