Keith Wasserman (03:56):

I do think there could be some more innovation in the multifamily space in terms of the technology used and maybe the way we think of housing as we know it. Look, he didn’t create the coworking concept. That was being done by multiple other firms. But he made it sexy and cool and he established a brand and it became just at the tip of the tongue, you want to come to the WeWork. One of our startups I was involved with, we were in a WeWork until we outgrew it. But I definitely liked the concept. Maybe he’s going to do something similar in the multifamily industry to create a brand. I was reading about maybe some kind of way for apartment renters to gain ownership in their property, which would be unique. Rent-to-own is not totally new, but maybe he has a different mechanism for it involving crypto. Who knows? There’s a lot of speculation. But I’m interested to see what he has to do in the space for sure.

Robert Leonard (04:46):

He did get a lot wrong with WeWork, but he did get a lot right too. I mean he did kind of make WeWork the name as synonymous with coworking space, kind of like Airbnb or Velcro. People don’t know that Velcro, those little strips that connect together, that’s not actually called Velcro, that’s the brand that’s behind that. The actual technology is called hook and loop. And so he did kind of the same idea with WeWork. But I’m curious from your perspective as somebody who raises capital for your real estate deals and just knowing how important it is to vet the sponsor and for the investor’s to be confident in the person that they’re investing in, what do you think about somebody still backing Adam after everything that happened with WeWork?

Keith Wasserman (05:26):

Look, it’s obviously Marc Andressen being contrarian. It’s a big bet. In the VC world. They like backing repeat founders. Look, WeWork does have a current market cap of around $4 billion and at one time 30 or 40 billion. I think it was just bad governance. I think they just grew way too fast. I know people in the coworking space that have done very well just with a smaller platform. They don’t have as many offices, but it’s very profitable business for them. They started it… Actually, they acquired a bankrupt company during I think the last downturn that was doing this kind of co-working spaces and executive office suites, et cetera.

Keith Wasserman (06:00):

I think backing someone if he has a chip on his shoulder, and sure a lot of people are like, “Oh, you need to back people that are from scratch, that don’t come from this backgrounds” but look, he’s got away with charming people and creating a business and he willed into a worldwide company, this WeWork, right? And even though a lot of early employees got hose and a lot of investor’s that came on later got hosed, it’s still a publicly traded company. Yeah, he made out a bandit for himself, but I think TBT, I think it’s $350 million bet. You don’t know how it’s structured, like I said, how much is going towards any real estate, how much is going towards the new venture, what kind of controls the investor has. It’s out of a multi-billion dollar fund probably. So even if it does go to a zero, it’s still a big swing and it’s not going to affect it.

Keith Wasserman (06:45):

When we’re investing in real estate, we can’t have any zeros. We’re all about preserving wealth and growing it safely over time. If it’s done out of a large fund, if it’s a small percentage, then they could take those kind of swings. But generally when a company gets so much so early that I haven’t seen any real big successes, it reminds me of Quibi. They raised a billion dollars right off the shoot and they had big names behind it. Sure, the concept might have been good, but there’s just things just generally do better organically starting smaller and growing momentum and compounding over time versus just out of the shoot going big like that.

Robert Leonard (07:13):

There’s a book, I don’t know if you’ve ever heard of it, and you’ve definitely heard of the author, but Daymond John, the shark from Shark Tank, he has a book called The Power of Broke. He talks about in that book how people who are broke. He extrapolates it to companies too and how companies with a little bit of money, if they figure out a way and they get hungry and they find creative ways and that helps them versus people that are just starting with a ton of money or companies that raise a ton of money, they actually are often at a disadvantage because they just don’t have that kind of chip on their shoulder.

Keith Wasserman (07:39):

Yeah. And they’re not as resourceful and stuff. They just throw money at it to solve issues when maybe there’s no real product market fit or maybe they got to figure out a way before they start pouring the money on the fire cut to make it bigger. So for sure.

Robert Leonard (07:51):

Yeah, exactly. The listeners of the show who have been around for a while know that my background before getting into real estate investing was studying the stock market and that I’m a huge Warren Buffet fan. If anybody’s watching the video, a lot of the books on my shelf behind me are Warren Buffett books. This seems to be a bit of an uncommon position, at least from my experience in the real estate world, but I do see you tweeting about Charlie Munger and his principles pretty frequently, especially recently. How have Warren and Charlie’s philosophies impacted how you do business and how do you apply their business and investing principles to real estate?

Keith Wasserman (08:26):

A lot of people in our space, these syndicated groups are looking for the short term one to three year kind of fixed flip return capital. It’s totally like the anti finding a great company and buying it a good price and holding it long term kind of thing. So I try to apply those principles now to real estate where we’re buying A plus real estate and at very fair kind of prices and just holding long term and you get all the tax benefits. Charlie and Warren are angry about how people are just flipping properties. It’s like day trading, right? It’s like why sell the golden goose laying the golden eggs especially if a market has high barriers to entry and just keeps improving with population growth and job growth and the replacement cost just keeps getting more expensive to build? Why sell something? Instead, just keep holding it, holding it and then refinancing and pulling up money. Tax deferred. It’s more tax efficient. You don’t have the long term capital gain plus all the recapture.

Keith Wasserman (09:20):

So yeah, I try to apply those kind of principles from my, just the buy and hold mentality, which I didn’t really understand until later on in life about the power of compounding and how just holding long term. Everyone wants instant gratification. It’s really all about just staying at something for a long period of time, doing it over and over. In one year, 20% doesn’t sound, “Wow.” 20% doesn’t sound like life-changing. But if you do 20% for year over year over year compounding, then you’ll be as rich as Buffet because that’s literally what he’s been doing. Like a 20% CAGR for 60 plus years, right? Which is really interesting to me, the power of compounding and long term thinking.

Robert Leonard (09:54):

Let’s dive into that a little bit more. A common thread throughout your online presence, whether it’s your Twitter bio, company website or even what you tweet and retweet, it’s that you compound like you said and that you think long term. A lot of the listeners of this show are newer investor’s and I think they’re often struck by shiny object syndrome and they bounce from strategy to strategy in hopes of getting rich quick. How did you shift your mindset from getting rich quick to building wealth slowly? And how would you help someone who’s currently struggling with this dynamic in their own life?

Keith Wasserman (10:25):

I mean, I’ve made all those mistakes, right? I didn’t understand it early on and I bought companies, public companies, that I wasn’t planning to hold my life. If you’re not willing to hold it for a long period of time, a decade, two decades, multiple decades, then why buy it at all, right? I’ve made that mistake and with real estate. We bought stuff just because it was cheap, doesn’t make it a good deal and stuff. I’ve done that mistake too. I think I’ve just learned from mistakes. I’m lucky that I started investing in my real estate business very early in life. So now I still have a good amount of runway left to fix these mistakes. And hopefully my children are about… It’s all about shiny object syndrome and for sure I’ve done it. I’ve made a lot of those mistakes myself.

Robert Leonard (11:03):

You mentioned that you’re a big fan of compounding, but it seems like to me that this term or the idea of compounding is thrown around pretty frequently. You see it on Twitter a lot. But it’s really a rarely explained for newer investors. For those listening who might not know exactly what you mean when you say that you’re always trying to compound, explain what it is and why it’s so powerful.

Keith Wasserman (11:25):

Literally, someone asked me the other day the definition of compounding. I couldn’t even really explain it in words, but I showed them a chart of something that goes like this at a [inaudible 00:11:34] emotion to something that sort of hockey sticks with time. So compounding… The easiest way’s monetarily with money. If you did showed 10% per year non compounded, it’s the same dollar amount you’re adding every year. But if you do 10% compounded on the previous year, it just starts really over time skyrocketing. And it’s hard to even imagine compounding. I literally had to sit with a calculator. I didn’t even believe it. I’m like, I think I said, “What if someone starts with a million bucks, Which is a lot of money, but if someone starts with a million bucks and doesn’t put any more money into it, if they’re able to hit that 20% per year, which is extremely hard to do over a long period of time, I think it was like 35 years they become a billionaire without adding any money to it,” which was just mind blowing to me.

Keith Wasserman (12:19):

But it starts slow. 1 million to 1.2 to, I don’t know, I can’t do it in my head, but it starts sort of like this and then goes… And that’s what my career has been like. My first five years, I still lived at home. I had very minimal expenses. It was sort of by design but also by necessity. I’m glad that I didn’t spend much of my early monies. And that’s the benefit of starting a business early. You want to keep your personal burn rate really low and sort of run your family and your expenses to be perfect for compounding, keep it really low and earn more than you spend kind of thing. People, they start making money and you have lifestyle creep and all these things happen. But I think the trick is just keep making more money than you spend and investing it at the highest rate of return, risk adjusted. And for a long period of time, the early you start, the better.

Keith Wasserman (13:05):

If you just got to just play around the calculator and look at compounding graphs and you’ll see the difference. It’s remarkable. It could go the other way too. Compounding the wrong way, like reputation compounds, right? I never understood that. My dad’s always like, “You are your reputation. Reputation’s so important. It takes one minute to knock it off, a lifetime to build.” And now I understand every little thing I’ve done, every person I interact with along the way, it just builds your reputation because that person then interacts with 50 or 100 other people and that person… You could pretty quickly build it pretty good or pretty bad reputation based on how you act with people in this world.

Robert Leonard (13:38):

How do you apply that in real estate with your real estate investing approaches?

Keith Wasserman (13:42):

It’s totally dealing with the brokers. There’s a very limited amount of brokers that work with us. We’re buying buildings that are generally 200 units and up in maybe four core markets. So there’s maybe a few dozen brokers that are actively marketing our deals. So just having a great reputation as a closer and a performer and someone that doesn’t come in and retrains. We want to be at the top of the list when these brokers are marketing deals. Or not marketing. Maybe the seller allows them to bring them to a few groups off market. We want to be at the top of that list for the brokers. And the same thing goes to the sellers. There’s maybe a thousand groups in the country that are constantly buying and selling these larger apartment communities. Just building that reputation, I mean, for sure haven’t met all a thousand, but I’ve met probably at least 100 of them, but they talk to their peers and we want to just be known as the pre-imminent buyer of these kind of properties.

Keith Wasserman (14:29):

I didn’t understand it completely. I started buying mobile home parks and doing some other VC stuff and it’s like if we would’ve just focused and not done these other things, sure, we made money on them, but it didn’t go towards compounding our reputation in the industry and knowledge in the industry. And just focus, I’ve learned over the years, is so important. And now I understand why, Buffet and Munger, they’ll look at hundreds of pitches and only swing when the real fat ones come and go big and concentrate on those. It’s the same concept of just concentration and focus and not being distracted for the compounding.

Robert Leonard (14:59):

You recently tweeted that time and inflation are a real estate’s best friend, which you then followed up by retweeting a tweet from Jonathan Barr that said, and I’m going to read it real quick, “I made more off three properties that I held over 10 years than my share of the profits of 400 flips during the same period with a fraction of the effort. Holding long term is powerful.”

Robert Leonard (15:21):

I’ve had some operators on the show who hold or own assets similar to yours, hundreds of units, but they only hold them for two to five years and then they sell. And I always ask them why and they say it’s because they’ve achieved their target return. They can return the capital to their investor’s and they’re happy and so they sell them. I can see the thought process behind that, but it always struck me as odd, kind of like you said, is that they would sell a great asset. They have to redeploy that capital into something that’s relatively unknown and you already have an asset that’s performing really well. You know it well. There’s a little bit of disconnect there for me. How do you think about this and how do you typically manage your whole periods with your real estate portfolio?

Keith Wasserman (16:01):

That Jonathan Barr quote was really eyeopening to me because I know him personally, a great guy and so, but yeah, I’ve done some of that too where you flip… 400 flips, he would’ve made the same amount of money as just holding three deals or whatever. Like you said, it’s pretty just eye opening. Just that time and inflation are real estate’s best friends.

Keith Wasserman (16:20):

One of my mentors who became very, very wealthy just buy and hold and he never sold and he did this for probably 70 years, from 20s to 90 years old until he passed, he became a multi-billionaire and he started with nothing, literally cleaning… He was a worker that cleaned construction sites and then started his own cleanup crew kind of company to clean up construction sites, and then started Investing in little tiny projects and then building a little bigger, built buildings, and a little bit bigger and buying a little bigger and just kept pushing the envelope. I think he kept telling me time and inflation are real estate’s best friends. Now I totally understand why.

Keith Wasserman (16:52):

Yeah, it’s tempting to think like, “Oh, in a few years I totally renovate the building and I achieve my business plan. I hit a great IRR and whatnot.” The IRS could be great, but in terms of multiples on the money, it’s like if you just hold long term, if it’s a great property and you’re taking good care of it and you know it, it’s better just to hold it longer and just keep pulling tax deferred monies out. Because yeah, when you sell, you’re starting so much lower, so now you’re investing those monies over a long period of time, versus the monies without taxes taking out of it, you have to literally hit away higher return to get back to where you were. It’s like selling a stock, selling a stock that’s appreciated, right? Instead, just borrow against it. You can right off the interest. And if you do it prudently, you don’t want to lever up crazy.

Keith Wasserman (17:38):

But I mean my dad’s own stock in Nike for 20 years, he put, I don’t know, 10 grand in it and it’s worth 200 grand now or something. It’s the same thing. Compounding, buying good/great companies for long period of time. Yeah, the trick is how to identify those great companies.

Keith Wasserman (17:50):

I just met a great young man named Jake Davidson that pushing off my… I have stocks in my SEP IRA and 401(k) and I’m going to open up a small stock account. Being a real estate guy, you’re never that liquid because you’re always putting money into real estate which then locks it up. But every additional dollar I want to earmark to the market, I’m just going to give him because all day he just reads like Buffet. He’s reading about companies, whatever you call them, 8-Ks, 10-Qs. He’s going to the onsite visits with the management or going to the stores himself, constantly reading. He picks 16 companies to invest in and every year he maybe peels off one or buys one. I think that’s the only way to beat the market, otherwise most people are better off just buying the index for the stock market. And that’s great if you could compound at that 8% per year. But the problem is most people get emotional. They sell at the wrong time and buy at the wrong time. And that’s why they don’t even hit the market returns, which I’ve learned.

Robert Leonard (18:39):

You founded your real estate firm in 2008. I found this really interesting. You found it in 2008 during the height of the recession and the financial meltdown. Why get into real estate at exactly the point where it was one of the most hated asset classes? And going back to what we’ve talked about throughout the whole episode so far, is this related to Buffet and Munger and how they always talk about being greedy when others are fearful? I know you didn’t necessarily know their concepts yet, but now looking back, are you thinking maybe what was happening there?

Keith Wasserman (19:06):

Yeah, 100%. I mean, the margin of safety is so great. When something’s so depressed, there’s nowhere to go but up, literally. I mean, it could have faltered a little more, gone down a little more. Sure, you can never touch the bottom, but things were so depressed and blood was in the street, and yeah, that’s the best time to start a business, to buy something, to get involved in something. When expectations are just so low, there’s nowhere to go but up, right? When you hit rock bottom or something, there’s nowhere to go, but up.

Keith Wasserman (19:32):

Same thing. Yeah, the real estate presented an opportunity to me and my cousin. We sort of pounced on it and not knowing in my lifetime that was a really good entry point. I think it’s cyclical. It’s already happening. Prices are down. Right now, 10 to 25% depending on what the property is and where in the multifamily space. Right now we’re taking advantage of that and starting to make some acquisitions. We pause for a little while to see what’s going on like everyone else kind of, with interest rates rising so fast. But for long term holders, yeah, this provided a nice little entry point. We’re buying a deal right now in core of Southern California. The buyer pool is very thin, but yeah.

Robert Leonard (20:11):

I want to talk a bit about that process of buying from a publicly traded REIT, but before we get to that, I’m curious, what was your experience with real estate prior to founding your real estate firm? Had you owned any rental properties or done any flips personally before you got started?

Keith Wasserman (20:24):

I was always been an entrepreneur. I’ve never had a job. Literally my dad set me up with this big developer in town, the guy that said time and inflation are real estate’s best friends. I didn’t make it. Literally I call my dad and I’m like, “I can’t do this.” I don’t mind pushing papers and filing for myself for my own business, but I’m not going to do it for someone else. But I started literally had no knowledge. I mean, my cousin and I started with a fourplex. We got an FHA loan, which was only 2.5%t down. We got a cash advance on his credit card to do the rehab, and that’s what put us in business. My dad’s an attorney by trade, but him and my mom built this little strip center here. They invested with a few of my dad’s clients that were in real estate.

Keith Wasserman (21:01):

So tangentially I understood about real estate. My dad, he was smart enough to know that he’s made more money in real estate than his law practice even though he had 80 attorneys. He literally, from a few little pieces of property, made more money over the years. I think literally I just learned by doing. Damian, my cousin and business partner, his dad was out there in Bakersfield buying and renovating like 5, 6, 10 unit kind of small apartment buildings and just very hands on himself, like literally walk the building with the contractors. I mean, that’s how we learned. Damian, we were driving out there every week, two hours each way and paying all the people that we’re working, inspecting the work and literally just being very hands on and learning the business by doing. That’s the best education. People always ask, “Is it better to do that? Is it better to get a job?” It just depends. A job is great as you get paid for learning, sort of, right? But I’m unemployable. I just can’t be an employee to… I can’t do it. It’s not in my genes.

Robert Leonard (21:53):

Let’s go back to the publicly traded REITs. I’m curious to learn a little bit more about that. I don’t even know anything really about the process. I guess I don’t even know truthfully what questions to ask, but I guess just tell us a little bit about how that comes about. Do publicly traded REITs list their properties with brokers only? Do they go to market? Just walk us through that whole process.

Keith Wasserman (22:14):

I just learned this myself. We haven’t bought from that many REITs. They sell generally when their stock price is down because they use those proceeds to buy back shares. You see that with a lot of companies that are well run. When their stock are down and they think it’s a value, they’ll reinvest in buying back shares versus spending the money and giving dividends to the shareholders. Right now the market’s down and they’re peeling off a lot of assets in different markets. This one happened to be in one of our target markets here in SoCal. It’s a 2009 built asset. It was institutionally built, institutionally owned, it’s in great shape. Yeah, I mean generally we’re a big player and stuff, but these kind of buildings generally go to other kind of REITs and stuff, but they’re sort of out of the market now and it leaves opportunity for entrepreneurial guys and gals like ourselves.

Keith Wasserman (23:00):

I remember when we started in Phoenix, they were selling everything in Phoenix. Equity Residential was offloading all their portfolio in Phoenix. Generally, I mean that was just a really bad time. People like ourselves, we bought few from different REITs, but everything that was bought during those times have gone up so much. They weren’t the best at timing it, but maybe they bought back their stock, like I said. Maybe they used those monies and bought back the stock. Maybe the stocks performed… I mean, I haven’t really tracked it since 2010 to see how it’s done. But yeah, they market it just like anyone else, the property. They brought it to market. We have great broker relationships. We’re very lucky to have been selected as the buyer. We came in with very aggressive terms and a market price, a fair price.

Keith Wasserman (23:42):

At these big price points, it’s hard to steal a building from… A mom and pop once in a while you could buy something that’s… But with the internet and all the information, it’s all out there. You got to either be long term thinking or see something that other people don’t see really to create that alpha. Same in the stock market, it’s like there’s no asymmetric information unless you’re insider trading or whatever, right? But all the information’s pretty much readily available, but you got to just have a long term mindset or see other things that other people aren’t seeing.

Robert Leonard (24:09):

I think what we’re seeing today is pretty far from the financial meltdown of 2008, or at least it has been so far. But having been through that time, how did the beginning stages of what we’re experiencing today compared to what you saw back then?

Keith Wasserman (24:22):

I remember back then, the stock market was fallen every day it’s 500, 1,000 point. It was just in such turmoil. I guess we are down now pretty heavily on the Nasdaq, but you could have said it was maybe overinflated. Back then I remember reading the Wall Street Journal. Every day I opened it you see 10,000 job losses, 20,000 job losses. I see some companies that are sort of aren’t profitable and stuff, they’re the tech guys, they’re laying off a few people here and there, a few hundred. It’s nothing like I saw back then. Unemployment right now is historical low again, I think, right? Then it go back to during COVID shut off because people couldn’t go into the office and work and things were shut down. But I’m surprised how quickly it bounced back. I think the economy’s just too strong and too hot and that’s why they’re trying to curb the inflation and really rise rates and slow it down a little.

Keith Wasserman (25:05):

I think it’s just a totally different thing than what I was seeing in ’09. I’m 37, so I didn’t really see the… I was six or seven when the early ’90s thing hit so I don’t know what happened exactly back then. I’m like, I could read about it, but I wasn’t there to see that distress and that crisis. But yeah, every 10 years there’s some kind of fallback. But if you have the dry powder to be able to withstand those downturns, the next high will be much higher and those downturns will be great buying opportunities.

Robert Leonard (25:33):

Some of the markets that you’re invested in are a bit unique to me, at least based on the previous guests that I’ve had on the show and kind of where I invest myself. Many of the guests, even though who are similar to you and based in California, they invest in many of the same markets in the same states, which include Texas, Florida, the Carolinas, et cetera. A few of the markets that you’re investing in that interest me are New Mexico, Washington and Utah. California interests me a little bit too, but mostly those three. What made you pick those markets and what are you seeing in those markets that make for a good investment opportunity?

Keith Wasserman (26:09):

We’re so opportunistic. We’re market-driven. Once we pick a market, we then go heavy and try to buy at least 1,000 units in that market because all our time and energy and compounding we want to just focus. We started in Bakersfield in December of ’08 or ’09 because we saw the opportunity to buy stuff very depressed. The industry was based on oil and agriculture, which we thought would come through really nicely through the recession. Oil was still like $130 a barrel. They did start adding tons of jobs. Looking back, that was actually a good market in the beginning.

Keith Wasserman (26:36):

And then Phoenix, we came in 2010 to 2015, we were buying heavily when blood was in the street. Our thought there was like Phoenix is the fifth largest city in the United States, it’s not going anywhere. I didn’t realize it was going to diversify so much in terms of employment and stuff and come back so quickly, but it really did. I mean it took years, but that’s pretty quickly compared to where it was. I mean, rents were down 20% and some apartment buildings were half empty and housing prices got killed there because they were just the poster child from the housing boom and bust.

Keith Wasserman (27:03):

Then in 2016, we went into Denver. We saw all the migration patterns of millennials and just so many people, young people, moving there and job growth and just the Four Seasons and the cities just was already booming for a few years where I’m like, “Wow, this is going to keep continuing” and it really has. Salt Lake City, we were so early there compared to our peers. It was not considered a primary market or even a secondary market. It was sort of like a tertiary market. It’s pretty small, but such a dynamic little town. Very business friendly. Youngest state in the nation in terms of population. We used to joke, they’re like babies having babies. You see young people carrying babies and it’s just so much driving that. And very educated population because of all the missions that they go on. They speak multiple languages. You got Goldman Sachs’ second largest office outside of Manhattan. We learned early on that was in Salt Lake and fell in love with that market, bought around thousand units there.

Keith Wasserman (27:53):

And then yeah, we moved next to Reno. We were pretest law in Reno. That might have been a little earlier. We got lucky on that one. We invested with a partner, a mentor and friend of mine. We did very well there. The ones we didn’t do well on were Texas, which we had two in San Antonio, about 600 units we bought. They were older buildings, they had a lot of just deferred maintenance and issues. And during COVID we got killed with collections. So we sold that when the market was hot. We got out for an 8 to 10 IRR, which was lower than our 12 to 14 or whatever we projected. But we were very happy to then redeploy that capital via 1031 into a much better asset.

Keith Wasserman (28:29):

We were in Seattle for a hot minute for a few years with around 500 units. We sold those during COVID because of also collection issues. It was very anti being able to collect rent there and you don’t have to pay your rent kind of thing. So we sold those. Same thing, 8 to 10 IRR, walked away with a single and we’re very happy. And then, okay, Albuquerque, New Mexico came about five years ago. We saw there was no new development in the pipeline. We spent a lot of time out there and we’re like, “This is a good market.” Slow and steady. During the last recession very few buildings, if any. I don’t think any that were like of size went back to the lenders and stuff. They didn’t see such great rent growth, but they didn’t see the rents decline. And I’m like, “Okay, we’re already 5, 6, 7 years into the cycle. Let’s park some money here.”

Keith Wasserman (29:16):

Looking back, it was amazing. We started seeing some huge rent growth over the last couple years. And even more importantly became more of a, I don’t know if you call it primary market, but bigger investors started going there. The Kennedy Wilsons of the worlds and larger investors that before would redline that market and they’re like, “No, Albuquerque,” they started Investing there and drove cap rates down, which means the multiples up. And were like, “Here, you could take this building. It’s a great building. I’m probably going to regret it 20 years from now, but at this time we bought it a six plus cap. We’re selling it around a three plus cap. Let’s redeploy into a higher barrier to entry market. Southern California versus breaking bad territory.”

Keith Wasserman (29:53):

I mean, Albuquerque was good to us, but that’s like a… We felt like a real good timing kind of market. We since sold in Phoenix unfortunately everything in 2017 or 2018. We lost out on a lot of growth there, but that market right now is getting smacked. I think values are down around 20% give or take. There could be some blood in that market, especially with a lot of borrowers borrowing it, very high leverage, floating rate, term debt. Especially for rents, they’re already coming down. They’re growing, but not at that crazy rate they were. If they flatline or decline, then there could be another big buying opportunity in that market.

Robert Leonard (30:26):

How do you think about the laws and regulations that are in California? I know you have over 2,000 units there. Sounds like you’re buying another deal there right now. You’ve done a lot of deals there in the past. Clearly you’re okay with it, but I’m curious about how you think about the regulatory environment and being a really tenant friendly state and how you think about that when you’re investing.

Keith Wasserman (30:44):

Yeah, I think it’s priced in. If it wasn’t priced in, it’s all about risk adjusted returns. So I think it’s all priced in. I’d rather take that risk at these great prices than park my money at nose bleed valuations like they were in a few months ago in the Phoenixes and the Vegases and the more boom and bus markets that are very transitory in terms of population. There’s such high barriers to entry here in Southern California where we’re buying a building now in Studio City in the valley, the best part of the valley in my opinion. There’s only been three buildings built over 100 units in the last 25 years.

Keith Wasserman (31:17):

It’s so hard to add new properties and add to build. Entry level housing is 2.5 Million starting in Studio City. It’s going to create people that just need a rent and the rents are going to have upward pressure. This particular building is not subject to LA rent control because if it’s age, it’s a newer building. So yeah, it’s a harder slog raising money because people read the headlines of California, “I don’t want to invest in California. I don’t want to be part of the politics there, et cetera.” But I’ve seen this story before and it’s like long term, I think 10 years from now, 20 years from now, I mean, we’re going to be so happy we own these kind of buildings, versus chasing yields and other markets that are more boom and bust than cyclical. That’s why we sort of try to zig when others zag especially if we are very bullish in an area like Southern California.

Robert Leonard (31:59):

I’ve been pretty interested in starting my own nonprofit. Now I actually already received legal 501(c)(3) designation from the IRS. So I’m curious to learn a bit more about your nonprofit, the Resident Relief Foundation, and what you’re doing with it. Tell me a little bit more about how it works.

Keith Wasserman (32:15):

We were seeing in our buildings that a lot of residents that have been there a long time, they fell on a hardship, unexpected job loss, some kind of medical bill. They weren’t able to make their rent for either a partial month rent or for few months. We had to go through with the whole eviction and process and serve them. Because of Fair Housing laws, we just couldn’t pick and choose who we wanted help and not help. We thought there has to be a win-win scenario. We created Resident Relief Foundation and we help identify residents from across many people’s portfolios that are good residents and they’ve been in the building for X period of time. I think at first they couldn’t have had a late payment. Now I think they can have some kind of late payment. But we give them financial literacy courses. We help them with resume building and we provide relief in the form of rent payment.

Keith Wasserman (33:05):

The landlord sometimes drops the late fee portion of it. We’ve given as little as a few hundred dollars to help make a partial month rent up to thousands of dollars that help people stay in their homes for multiple months. It’s a win for the landlord and for the management company because they don’t have to have the huge expense of eviction and the downtime of a vacant unit. And all the turn costs, all that added up are thousands of thousands, 10,000 plus dollars, tens of thousands potentially. It’s good for society because about two-thirds of these people didn’t have any other places to go and would’ve been homeless. Homelessness is a huge issue and it’s plaguing a lot of our cities. It’s obviously good for the person because it prevents them from being on the streets.

Keith Wasserman (33:46):

Housing stability is so important in people’s lives and psyches. If they have that, then they could get on easier with their life and not have all the emotional issues and problems that not having a house or roof over their head will provide. We’ve helped hundreds of people stay in their homes and we’ve saved [inaudible 00:34:04] taxpayers millions of dollars. It costs so much to build these units and stuff. It’s so hard to get help once you’re on the streets and it costs so much more. We might as well prevent people from being on the streets than allowing them to flounder. So we try to catch them earlier on in the process. Our goal is to get more foundations, very wealthy family foundations and public support and just be able to help thousands and then 10,000 plus. The more, the merrier. There’s a lot of people that are just responsible, just leading that paycheck to paycheck life and not having any resources. So we’re trying to train them but also give them a hand up the process.

Robert Leonard (34:40):

Are you able to use that on your own properties that you own?

Keith Wasserman (34:44):

We’ve done it I think once maybe out of the few hundred. I mean, we got to be careful with self-dealing and stuff.

Robert Leonard (34:49):

Yeah, I was going to say, there’s no conflict of interest there.

Keith Wasserman (34:51):

Yeah, exactly. We originally call it Yelp Foundation, but then I’m like, you’re alienating all the other owners and management companies. Yeah, it’s literally just like we’re trying to do good in our industry. Without renters, we wouldn’t have a business. So how do we help the industry as a whole and create a name for ourselves as being the founders of this awesome nonprofit? So we changed the name of the Resident Relief Foundation and we’ve helped dozens of large management companies and other owner operators and hundreds of families that needed the assistance.

Robert Leonard (35:19):

I think it’s really cool what you guys are doing. Keith, as we wrap up the show, I want to give you a chance to tell the audience where the best place is to go to find you and connect with you.

Keith Wasserman (35:28):

We can jam on Twitter, that’s my favorite medium, my favorite vice of all the social medias. Yeah, just @Keith_Wasserman. You just search for compounding or Gelt or Keith, and you’ll find me probably at the top of the list there. Or you can shoot me an email always. If it’s a well thought out email, you can shoot me an email at keith@geltinc.com. It’s G-E-L-T-I-N-C.com. Yeah, I’m here for anyone that’s interested in doing what we’re doing, investing in real estate or just long term thinking and compounding. Those are things I’m sort of known for nowadays.

Robert Leonard (36:04):

Keith, thanks so much for digging time out of your busy day to meet with me. I really appreciate it.

Keith Wasserman (36:08):

Yeah, thanks for having me on the show, Robert.

Robert Leonard (36:11):

All right, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (36:16):

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