In this week’s episode, Mark is joined by Jeremy Roll, a full-time passive cash flow investor with decades of experience. Jeremy and Mark discuss the possible impact of the coronavirus and the likelihood of the next recession.

What’s the best asset class to be in right now, and how important is timing when it comes to exiting profitably? Listen in and find out!

What You’ll Learn In Today’s Episode:

  • The important thing in real estate is timing.

  • When it comes to stabilized properties, price is absolutely key.

  • Strategies for learning new asset classes.

  • How to build familiarity with investments and begin to spot opportunities.

  • The role of trust when choosing a deal sponsor.

  • Jeremy’s favorite episode of Family Guy.

Ideas Worth Sharing:

“I’m all about being hyper-diversified across cash flow.” – Jeremy Roll

“Start with an asset class you can relate to, that you can understand best.” – Jeremy Roll

“Timing is absolutely critical in real estate.” – Jeremy Roll

Resources In Today’s Episode:

About Jeremy Roll

Jeremy Roll started investing in real estate and businesses in 2002 and left the corporate world in 2007 to become a full-time passive cash flow investor. He is currently an investor in more than 70 opportunities across more than $1 Billion worth of real estate and business assets. As Founder and President of Roll Investment Group, Jeremy manages a group of over 1,000 investors who seek passive/managed cash flowing investments in real estate and businesses. Jeremy is also the co-Founder of For Investors By Investors (FIBI), a non-profit organization that was launched in 2007 with the goal of facilitating networking and learning among real estate investors in a strict no sales pitch environment. FIBI is now the largest group of public real estate investor meetings in California with over 27,000 members. Jeremy has an MBA from The Wharton School, is a licensed California Real Estate Broker (for investing purposes only), and is an Advisor for Realty Mogul, the largest real estate crowdfunding website in the US. Jeremy welcomes e-mails (jroll@rollinvestments.com) to network with or help other investors and to discuss real estate or business investments of any size.

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Transcript

Mark:               So today’s guest left the corporate world in 2007 to become a full time passive investor. He’s founder and president of the Roll Investment Group where he manages over a thousand investors and invested in $500 million worth of deals. He’s also co-founder of for investors by investors, a non-profit organization with the goal of facilitating networking and learning among real estate investors in a strict no sales pitch environment. He’s got an MBA from Wharton, is an advisor to Realty Mogul, the largest real estate crowd funding website. I’d like to welcome Jeremy Roll.

Jeremy:           Hey Mark. Thanks for having me. Really appreciate it.

Mark:               Yeah. Thank you for joining me, Jeremy. We’ve got some interesting times, so maybe we could talk a little bit about that. But mainly I’m interested to hear your story. It’s a privilege to have you on too often. It seems like the real estate podcast space is flooded with pitchmen and self-promoters who don’t have a whole ton of experience or expertise, and you are the opposite of that. There’s someone who’s put in the work, knows his stuff, has been doing this for over a decade and is simply here to provide value and insight. So I really appreciate that.

Jeremy:           Absolutely, and thanks again for having me on. I’m happy to help. My mission, especially over the last few years I’ve gotten, you know, I’ve been investing since 2002. My mission has clearly been to just try to help as much as I can, as many people as I can. So I’m happy to help any way I can. And thanks for having me on. And by the way, for those of you who are listening to this who don’t know Mark well, I don’t want to embarrass Mark, but he’s a writer and has been a very long time writer on what probably could be my most favourite show on TV, which is Family Guy, of all things. So if you have never watched Family Guy and you’re up for some silly comedy, hopefully that’s okay Mark that I say I like that, it is the jokes, the writing is just impeccable, and I’m not just saying that because we’re on with Mark here. So I highly recommend it. My wife and I watch it every weekend. It’s just hilarious. So Mark, thank you for doing that.

Mark:               Oh of course. Thank you for keeping me employed, giving me a career. It’s fun. It’s fun to go to work and be goofy for eight hours a day. But I wanted to get into your story and you’ve done what most people fantasize about doing that. And that is leaving your job, leaving the corporate world to become a full time investor. You know, that’s way easier said than done, and even amongst the people who have pulled it off, you’re a bit of a unicorn because you happen to do it living in possibly the second most expensive city in the United States. And I saw that it is in the top 10 most expensive cities in the world, Los Angeles. And also you started at one of the worst time to try to pull that off back in 2007, so I’m interested to get your story and how you pulled that off.

Jeremy:           Yeah, and Mark, happy to share that. As you mentioned all this, I’m literally shaking my head because you know, my wife’s family lives in Los Angeles. I’m kind of stuck here, so to speak, and it’s not a bad place to be stuck, I’ll give you that. But the key to becoming a full time passive cash flow investor is low overhead and I am doing the exact opposite of low overhead, which is making my life much more challenging and continues to make it more challenging. So anyway, we can get into that another time. But yeah, you make a good point. It’s very difficult to be a full-time passive cash flow investor in a very expensive city and I don’t recommend people try it. It’s not always fun.

                        So my story goes back to 2002 when I was in the corporate world, and at the time I was actually working at Disney headquarters in Burbank here in Los Angeles and the stock market, the dot com crash had just happened, and the previous year I believe, and I was just sick and tired of the stock market for two reasons. One is a little more obvious than the other. So one is the volatility. I’m just kind of a low risk slow and steady guy and to watch the market go up and down 30% a year was just not for me. But I think even more importantly what really bothered me the most was the lack of predictability. So not knowing where my retirement account would be in 10, 20, 30 years, now that just doesn’t seem like a good strategy to me. The lack of predictability and not knowing how I was going to get to that endpoint with some predictability was really, really bothersome. So I started looking at different ways to invest, came across the concept of cash flow and more predictable cash flow and then eventually landed on investing as a passive investor in what are called syndications or basically group opportunities.

                        And so I started to dabble in syndications back at the beginning of 2002 but eventually rotated all my money from stocks and bonds into cash flow. And it wasn’t just syndications. There were other things I was doing as well, but cash flow based. And then by mid-2007 in fact, my goal was not, I didn’t have this master plan to actually get out of the corporate world from the cash flow. I actually wanted the pay check and the cash flow because I just wanted more predictability. I’m building my nest egg on that side of things. But at a last straw moment with a manager of mine at this time who – I was working at Toyota headquarters in Los Angeles in Torrance – and decided to take a risk and leave the corporate world because I did have enough cash flow built up to live off of at that time. And to Mark’s point, I left at a very challenging time.

                        It was mid-2007 and what’s even crazier, Mark, is that my wife, we were pregnant with our first kid. My wife actually is a teacher and she did not go back to work after having our first child in October of that year. But even then I really wasn’t that worried about it because we ended up, I kind of anticipated an economic downturn in about ’08, ’09 at that point and we had enough cash flow built up to live off of. We had a couple of years of run way without any issue. This is all kind of pre-planned. But the bottom line is that I didn’t see it as risky as it sounds at the moment, but that was because of the level of cash flow coverage we have compared to our cost of living. And back then, I wasn’t paying for private school. I lived not in a house, but we were renting a townhouse at the time in Los Angeles and so my overhead was much, much lower back then.

                        So long story short is left the corporate world in mid ’07 and my goal at the time was never to have to go back and still is that today where 13 years later, practically, I’m still out of the corporate world, living off the cash flow. And so my number one goal at this point is to kind of continue to build up my cash flow snowball, I call it so I never have to go back to the corporate world. And that’s my number one focus. And so I’ve been a passive cash flow investor since 2002, full time since 2007, and we’re recording this right now in March of 2020 in very interesting times, deep in the middle of the very unfortunate CoVid-19 Coronavirus.,

Mark:               Yeah. What’s your take on everything that’s happening? Whenever this is published, I’m sure the circumstances will have changed, but we’re coming off of what? A couple of days of bounce upward of the stock market due to the passing of the multi trillion-dollar bailout.

Jeremy:           Yes. The timing is quite interesting that we’re having this podcast right now because every day, the number’s changing. They’re hopefully going to pass that very large, I think $2 trillion bailout either today or tomorrow. The numbers unfortunately are climbing in terms of the known cases in the US for the virus and I’ve been on a lockdown here in Los Angeles as you have Mark for a week or two now. My kids have been out of school for over two weeks and I don’t anticipate that changing for quite a number of weeks or months even. So you know what I’m seeing is that a lot of people right now on the real estate side, so let’s talk about stock market side first cause that’s a little easier. Stock market is down, I think about 20 to 25%. It was down over 30% a couple of days ago. It’s taken a pretty big bounce as the stimulus is coming close to passing here.

                        And on the real estate side, real estate moves much more slowly than stock market, both residential and commercial, and me being mostly on the commercial side, which includes multifamily to me, we’re waiting or I’m waiting as an investor to see what happens in the various properties I’m invested in and everyone seems to be waiting for April 1st, which is when rent is due regardless of whether you’re in multifamily or a self-storage property or mobile home parks or other stuff. And so everyone’s waiting, bracing, waiting to see what the government’s providing as far as stimulus to people and tenants going and small businesses going, waiting to see what programs are in place on the loan side, to see what loans may be able to be payment-deferred or maybe some are current interest only and it’s a constantly changing situation.

                        Here’s a few things I can tell you as an investor that are kind of not going to change I think. Number one is when people ask me what I’m doing today as an investor because I’ve been mostly in the side lines since late 2016 in anticipation of the downturn, and so I’ve been waiting for the downturn to happen. I didn’t want it to be in conjunction with people’s health, but it’s now happening. And so from my perspective, I’m waiting for three things. I’m waiting for what I call price discovery in terms of asset pricing, which I don’t think it’s going to take place until at least 2021. Real estate moves very slowly. We’ll probably take about two years to bottom. And so I’m waiting on some price discovery to see what the price adjustments are going to be likely downward as far as asset prices.

                        I’m waiting on vacancy discovery just to determine per asset class, how are they all going to be impacted, what the vacancy rate is going to look like. And then of course I’m also waiting on rent price discovery, which is if there is an impact on the vacancy side, there probably will be an impact on the rent side. What’s that going to look like? And to me, because I’m not in a rush, it seems safer to wait until after the election, regardless of everything else, just to see the economic potential effects of who gets elected and everything. So there’s so much going on right now that I’m probably going to be on the side lines with the exception of very odd, unique pricing. Like let’s say if somebody is offering 2021 or 2022 pricing, I’m calling it, then I’ll seriously look at it, which would be a major cap rate adjustment from my perspective. Otherwise I got to wait for all the dominoes to fall and everything to unfold and become much more clear.

Mark:               Right. So when you say price discovery, rent discovery and vacancy discovery, that basically means when the dust settles, where these metrics will all be. Is that accurate?

Jeremy:           That’s exactly right, yeah. We won’t discover any of that for some time. Some things will be separate quicker than others, so they vacancy will probably go up fairly quickly, but it’ll take a few months to really find out where it’s gonna land, and rent price discovery will probably take more than a few months to see where that lands. And then asset prices govern. I mean theoretically that’s probably not going to take place till after the elections as far as enough transactions happening and even understanding where the market’s starting from in this downturn and it really takes a couple of years for the market to bottom. So even in 2021 I intend to be very careful and probably only go into deals that I think are kind of better than market pricing at the time, knowing that it’s kind of a slow transition to take place.

Mark:               Right. Yeah, that sounds like a good thing. Yeah, it does take a while for those two to ultimately play out and even the rent discovery, it seems like the rents could go down in reaction to Corona virus, but if that triggers a recession, the recession may add another wave of impact that could affect rents and prices. It seems like there’s a lot of different things at play.

Jeremy:           I couldn’t agree more and I’m kind of taking for granted that we probably started recession last month or this month, this month being March of 2020. We won’t know that until it’s done and we can actually measure it in retrospect. That’s how the recessions work and are measured, but personally I’m just one person’s opinion. I am under the assumption that this whole thing has probably caused a domino effect, due to the unemployment that’s skyrocketing right now. We’re probably in a recession at the moment, but no one could say that for sure.

Mark:               Yeah, I agree. When things seem to be settled, what are you specifically looking for? Are you just looking for stabilization in terms of pricing rents? If they’re moving upward or downward but most likely downward, you’re going to wait to see where they start to plateau?

Jeremy:           That’s right. And you know, I don’t think it’s realistic for anyone to be able to know exactly when the bottom comes in, just in terms of picking the exact bottom. But I have some targets as far as cap rate adjustments, in terms of basis points that I’m targeting myself just to create some safety as far as pricing. I’m a stabilized investor, meaning that I only invest in stuff that’s either stabilized or minor value add, and with that strategy the price is absolutely key because we’re not creating a lot of cushion in the execution of the business plan. So I have to be very, very careful on pricing and I intend to be very, very careful on pricing and that’s going to be my number one focus if I might consider anything, whether it’s this year, next year, even the year after. And so I’m not anticipating we’re going to bottom for probably two years just based on historical cycles, so that means that I’ve gotta be really careful in the next 12 to 24 months and not end up going into an asset that’s still too expensive cause it just takes a while for that to adjust.

Mark:               Yeah. I found that to be a difficult thing to navigate or at least to try to time in the 2008 because I was fortunate to have a good job in income. So I had liquidity and I wanted to get in at opportune at great pricing. You know, it’s the one of the few benefits of going through a recession, but I think I jumped in a little early on a couple things and then I was buying like one thing a year, but I feel like I ultimately started one year too early.

Jeremy:           Yeah, you’re right. It is tricky. And so you know, the way I try to stay out of trouble with that is I have specific cap rate adjusted target, meaning that… and I’m going to give you some examples. I just had a call with somebody earlier today about this. Let’s say that you’re looking at a class C multifamily property in Dallas, and let’s say that that property a year ago was trading at about a five and a half cap and it was stabilized. Okay. What I’m going to be looking for is preferably like a minimum of 150 basis point adjustment in the actual cap rate and preferably 200 or better. I don’t know if 200 or better is going to be realistic, but I’m probably only going to really feel comfortable at 150 basis points or more and I may adjust that. We’ll see what happens in real pricing, but right now that’s what’s going through my head based on previous cycle adjustment.

                        So if something was at a five and a half cap last year or was two months ago, I like to see it be at a seven cap or better and then I’m probably going to be comfortable moving forward. If it drops to six or six and a half cap, that’s going to get me a little bit nervous unless there’s some other reason or a portion of the deal a little bit unique that makes up for it. And again, I’m only discussing stabilized property here and that’s what I invest in. That could be completely different strategy for a major value add or a complete rehab, a tear down and redevelopment. That’s just for the profile that I focus on.

Mark:               Sure. Because you invest in a lot of different asset classes, are you going to shift what assets you target given the different stage of the cycle that we’re approaching?

Jeremy:           Yeah, great question. So the way I work through a cycle is that I don’t necessarily shift the asset classes I’m targeting, but I do monitor the pricing of each asset class. So I’m going to give you just a quick walk through of what I did in this past cycle, assuming it’s now over. So for me, and everyone’s different, but for me, between 2009 and 2013, I invested in anything that made sense within my target asset classes. And then as 2013 I started getting a little skittish on purely stabilized apartment buildings and their pricing because there was a lot of investors piling into apartments because of all the home foreclosures. People need a place to live so it was very popular. So I kind of stopped doing market rate pricing of apartments at the end of 2013, just on my own investing.

I still actually made probably 7 to 12 or 13 apartment investments since then, but they have all been unique. They’ve all been unique situations and pricing. And then same thing happened for me in self-storage. 2015 was the last year I felt comfortable with self-storage cap rates, and I kind of went on the side lines on that asset class. And then 2016 was the last year I felt comfortable on mobile home park cap rates, and then I went on the side lines there, and that was the last bastion of people chasing yields so that was the last one to fall. Since then I’ve only done stuff with unique pricing on any asset class, but so what I do is I have a bunch of asset classes I’m targeting in a cycle and then I kind of drop off each one and continue on the others when they get too expensive with the exception of unique pricing.

                        So for this cycle coming up, keeping in mind that I target predictability in what I’m investing in, and I’m also going into stabilized opportunities, kind of what I call my Tier A target asset classes will likely be apartment, mobile home parks, self-storage and senior living. I think that those four are the ones that I’ve identified just for myself personally that I think are the most predictability amongst all the asset classes, the major asset classes for the next 10 years in terms of predictable cash flow and also where they’ll be predictable demand 5, 10 years from now, or maybe even increasing demand with some of those in 5 or 10 years from now such as senior living.

                        So those are my Tier A. I’m still going to look at Tier B and all kinds of other stuff, but that would be my favourite target for the next cycle. And I’ll go through the cycle the same way. I’ll have a certain target cap rates for each asset class, have a minimum threshold of cap rate that I’m targeting, and when an asset class breaches my minimum on a market rate deal on average in the types of areas I’m looking at, then I’ll go to the side lines with the exception of unique pricing and wait for that cycle to finish.

Mark:               I have a random question for you. You are a cash flow investor. This is another irony about you is you are a cash flow investor and you live on the West side of Los Angeles where there’s no cash flow. Cash flow doesn’t exist, but you live in one of those valuable real estate areas possibly in the country. Is there any part of the cycle, because this is what my attitude is I’m a total value-add B and C class apartment investor, and I always look at those nice properties in these A++ locations on the West side. But I always say to myself, the only time I would ever buy those is at the rock bottom of a recession when you can pick those up cheaply, but still that’s an appreciation play ultimately. Would you ever consider anything like that?

Jeremy:           Yeah, that’s a good question because I agree with the thesis that because of the volatility in this market, which I don’t invest in California in general because of that, and especially not West side LA, but I think if someone is a value add investor, I think there’s a very good argument to be had to do that, as long as you believe that the appreciation is going to come because you’re making a bet on the appreciation. So if you have a good reason to believe in that area that appreciation is going to come, it’s the old like buy low, sell high. If that’s your strategy, then buying low is probably coming up. It’s probably coming up in the next year or two, just based on the way cycles work. So now I personally probably wouldn’t be doing that for myself because I am much more interested in cash flow.

                        I try to stay really adamant in terms of focus on what I’m focused on, which is the cash flow. And you’ve got to keep in mind that I actually live off the cash flow, so every dollar that I don’t put into an asset that’s generating cash flow is kind of a liability for me in that I only have a finite amount of money I can invest and I’m kind of shooting myself in the foot every time I invest in something that doesn’t produce cash flow because in case some of my other cash flow sources dry up, then I don’t have access to that money because it’s typically illiquid that I invest in to really generate more cash flow. So for me it’s all about just getting the cash flow snowball as big as possible, which also means staying out of California in general.

Mark:               I see. So you basically, you’re looking for cash flow and it seems like you have favourite investments or ones that you believe are going to perform the best. Do you kind of step back and design like an allocation? Basically you take your whole investment picture. Do you divide it up between say some will be real estate, some will be… break that down and do multifamily and self-storage and others and then it seems like you invest in a number of alternative investments and if I’m not mistaken, probably you also have stocks and bonds in addition to that. Do you design like what you want your entire investment picture to look like?

Jeremy:           Yeah, good question. So I’m an anomaly in two ways. So I actually have not owned stocks and bonds since 2007. Now I actually just transferred some money back into this Fidelity account that I had that was dormant literally since 2007. I’m surprised it was still there. I may buy a little bit of stock if we go more than 40% down on the market. That’s kind of my minimum that I’ll feel comfortable with. Then I’ll probably buy in, and actually the only purpose of that, Mark honestly is that I personally feel like as I’m waiting to be able to invest in the next year or two, I think it’s a much better bet to have that money sitting in let’s say an ETF, like a S& P 500 ETF to gain what’s likely going to be a bit of a recovery. The stock market tends to recover much more quickly than the real estate for example, and have it sit in that type of account while I’m waiting to deploy it in the next year or two, and benefit from probably a better gain than sitting in a high yield savings account for example. And that would be actually my purpose of using the stock market, but that’s just very short term and not probably what you have in mind.

                        The other anomaly is that I am very heavily weighted into illiquid assets, the majority of which is actually real estate, but not all of it. So I don’t necessarily look to allocate myself amongst like we’ve got a pie and it’s not like 30% stocks, 70% real estate, etcetera. I’m just more about…I’m practically 100% in on cash flow and then I’m trying to divide up my cash flow pie. And if 90% of that happens to be in real estate, as long as I’m heavily diversified amongst the entire pie, I’m comfortable with that. Not everybody will be, and it may not be the smartest thing, I don’t know, but that’s just the way that I am now because my entire life has changed from cash flow, in many really good ways. And so I’m all in on cash flow. And the best way to gain cash flow from me in terms of the easiest way to find opportunities and a little bit more on the lower side has been real estate, because I prefer to be in a harvest than investment than in a business investment on average, just from a risk profile perspective.

                        And I do have a business backed by ATM investments I know Mark is familiar with, and some other stuff for cash flow, but generally I am all about being hyper diversified across cash flow. And I will say I’m in over 70 LLCs right now. In fact, I’ve easily been over a hundred of the past 18 years because I have been in over 30 sales in the last three years. So I take a very hyper-diversified approach to help reduce the risk of the fact that I’m concentrated in one asset much more than most people.

Mark:               Yeah, that’s great. And when you are looking to get into a new asset or a new investment and say you’ve done your research on mobile home parks for example, how do you take your next steps? Is that even how you work it? Do you start by saying I like this, the performance prospects of this one asset class? Now I want to find one specific deal that I want to get into? How does that play out?

Jeremy:           Yeah, good question. So it’s honestly been a long time since I had to dig into new asset class cause at this point I’ve kind of covered most of them. Senior living was the most recent one a few years ago that I had to dig into from scratch, and what I did with that one is actually went to a couple of senior living conferences to learn. I actually went to the extent of… true story. I saw someone on a panel that was going to be speaking at a conference in Florida that I couldn’t go to, and I love this backer. He is a Harvard grad. He’d been in the senior living space for 10 to 20 years. I just reached out to him randomly, was able to schedule a call with him and long story short is I’ve just learned a ton from him. I’ve actually gotten presentations from him that he’s done and learned a ton over the years about the asset class with his couple of decades of experience, and I continue to learn. I continue to look at deals, but for the average person, what I recommend is that, let’s say that someone’s listening to this and are just starting and they don’t know we’ve asked the class to start with. So the first thing I would recommend is start with an asset class that you can relate to, that you can understand better, most easily right off the bat. So for a lot of people that’s apartments and the reason why it’s apartments is because they’ve lived in an apartment or more over time, so they can understand how it works. It’s fairly easy to understand and they can relate to it.

So from there what I recommend they do is, which is what I had done over the years, it’s not just education. So you can actually go online and look up some courses on how apartment investing works, but you can also go through a lot of local meetings, especially in larger cities. Listen to speakers and/ or panellists discuss that asset class. I went to a ton of meetings when I was younger, I mean two to three a week when I was not married and way back when when I was much younger, and you just absorb a lot. But one of the best ways to learn that’s very efficient is to actually do what I call opportunity exposure. So with the advent of crowdfunding now, if you’re an accredited investor, which is basically just a certain net worth or income level that you qualify for, you can actually go onto some of the large crowd funding sites in the US and let’s say you want to learn about multifamily opportunities, in your pyjamas in an hour you can download 10, 20 deals. I’m not even exaggerating. It’s that simple.

                        When I first started, without trying to sound like an old person, I had to go and actually find a field that wasn’t allowed to be publicly marketed and go network to find it. It was very difficult to get the opportunities, to get exposure. Now the opportunity exposure is really easy and very efficient and you can download all 10 of those business plans or 20 and you put them all side by side. You read them all and you start to learn these similarities and differences, how the asset class works, what people tend to focus on, how each operator will look at a market analysis, a rent comp analysis, a sales comp analysis, and even how their business plans differ and once you start reading these opportunities to get opportunity exposure, you learn a ton. And by the way, you learn even much more than I just mentioned, but those are just some examples. So my number one recommendation is to start with an asset class that you can relate to easiest if you have the easiest starting point and then get a lot of opportunity exposure combined with some education and don’t move forward to anything until you’re 100% comfortable, and that could take a long time, but it’s worth the time.

Mark:               Yeah, I love that. That self-education of just getting as many examples of investments as you can and line them up side by side and just compare, and then you start to see trends and you can pick out the anomalies. The ones that are exceptional and do that with LoopNet. Just basically, in LA County at any given time you could go on LoopNet and pull up 10,000 multifamily buildings for sale and just compare them all and see where the exceptional pricing is.

Jeremy:           Exactly.

Mark:               A couple of quick questions because I know you don’t have a ton of time. Just out of curiosity. So what was your first investment? I think you said it might’ve been an apartment building, your first passive investment.

Jeremy:           No. So for me I got lucky cause I had lifelong friends of my family who had been syndicating for already 10, 20 years at that point and had a ton of experience, and so my first investment, I actually don’t remember exactly what it was. It was such a long time ago. It was almost 20 years ago, but it was either an office building or a retail strip centre because that was their focus time. So it was one of the two.

Mark:               And it was somebody that you knew?

Jeremy:           It was actually lifelong friends of my family. So literally a family I knew, with the sons I knew since I was like four or five years old. And so I got very lucky because a, I knew I could trust them in terms of investing with them. B, I knew I can learn a lot by investing with them because they probably spend a lot more time with me helping me to educate myself on that, and so it was just a unique situation and kind of gave me a bit of an advantage starting off.

Mark:               Yeah, that’s great. That’s amazing. That’s really helpful. Having somebody shepherd you through your first deal. Who’s on your team now, or are you mainly solo? I know you’ve got a wide network and you work with a lot of people. Do you have a team, like a core group?

Jeremy:           No, I don’t have any teams specifically. I definitely leverage a lot of teams. So I think what a lot of people misunderstand is that while I don’t have an assistant or anything myself, even though I do this full time, I am constantly making bets on other people and that’s actually what I do as a passive investor. I make bets on other people and I get to leverage those teams, which can be very large. Plus, I get to leverage people, time, credit, experience, expertise and specific asset class, etcetera. So I am highly diversified across a lot of opportunities and a lot of operators, and for each of those operators I’m able to leverage their team and structure. So it’s a very decentralized model in the way that I work, so to speak.

Mark:               I know that you vet operators very carefully, and maybe I’ve heard you say that you sometimes will bet on the operator more than the deal itself. Do you find yourself doing a lot of repeat business once you find a good operator?

Jeremy:           Yes. My favourite scenario is someone who’s very experienced, who I can end up investing with multiple times for many reasons. And so my preference is to invest with someone multiple times, but it’s certainly optional, no requirement. And frankly, you know, if I invest with someone once to try it out and it doesn’t work out well, of course I’m not going to invest with them multiple times. That being said, like the sponsor I started with, I messed with I think over 20 times, 20 times for sure or more. Another sponsor I have in mind who I’ve invested with probably 10,15 times over the years, and so there’s another one I’m thinking of doing. I think I invested with eight or nine times. It’s definitely a nice scenario and it’s not just about that I already know the people and I know who I’m making a bet on, it’s about I’m looking for someone who’s got the similar philosophy to me and there’s one sponsor in particular, actually a couple of them where if they bring me a deal, literally 9 times out of 10, I’m going to end up moving forward because we’re analysing and we’re looking for almost such a similar thing that we will think the same way, we’ll be targeting the same thing and we’re very conservative, and if it’s someone I really want to make a bet on based on their execution and their expertise and if they’re bringing me… it’s almost like somebody who’s bringing me a chocolate frosted doughnut. That’s my favourite doughnut and 9 times out of 10 I’m going to say, yep, I’m going to have that one. One time I’m going to be like, ah, the chocolate isn’t really what I wanted. But if someone’s bringing me a maple frosted doughnut, it’s like okay, it’s a doughnut, but it’s not the right thing. So if the person who is bringing me is on the same page knowing that I want that chocolate frosted donut each time and they’re looking for the same donuts themselves, like they’re buying a case of six and there’s give me one. That’s the thing. That’s why the philosophies that lines up is so, so great when that happens so I can make a bet on someone multiple times. That’s really how it happened.

Mark:               That’s amazing. It seems like it probably takes time to build that level of trust with different operators, but once you get there, life is good. So I know you have limited time, so I want to let you go, but I was going to ask you a couple quick questions. Do you have any advice that you would give investors right now as everyone seems to be panicked and uncertain of what to do?

Jeremy:           Yes. So, what I would say is if you’re trying to figure out should I invest now, should I wait, etcetera, I’m going to give you my perspective and I’m one person’s opinion, of course. They’re going to want to get a lot of opinions and I’m not a financial advisor and investment advisor. I should’ve said at the beginning, so everything, I’m just here on this podcast, I’m just sharing my perspective as an investor, but as a relatively low risk, passive cash flow investor, investing in stabilized opportunities. If somebody asked me what I’m doing now, my answer is literally nothing. I’m waiting and I’m waiting for that discovery of those items that we talked about. And so for me, in fact, I think I’m doing myself as a disservice if I’m actually going to jump on something right now because I’m not going to discover how much vacancy there’s going to be in something in a few months after this whole crisis unravels. I’m not going to discover what rent pricing is going to be at quite yet, and I’m certainly not going to know what price I should be paying because there probably won’t be very few if any transactions that will occur.

                        So what I’m doing personally and what I would tell other people to do is to wait. Wait until after the elections, see who gets elected, what effects they may have on the economy and on real estate. Wait for the discovery of all those items we mentioned before and then in early 2021 then start setting very seriously. In the meantime, if you get a very unique situation or very unique pricing or some other unique reason that would compel you to move forward in something, I wouldn’t tell someone not to. I’m looking at something right now that’s kind of unique that I might do in a few months and not necessarily wait until the end of the year, but generally I would tell people to be very careful right now, because in many ways if you go in right now, you can both be still be paying peak pricing if it hasn’t adjusted enough, and you can also be paying a multiple of income in the stuff that I invest in and you could be paying a multiple of income where the income isn’t there to the same extent, both because of increased vacancy and reduced rent in just two or three months from now, so you’d be doing yourself a complete disservice. So just be very careful right now. Again, we’re recording this in March of 2020

Mark:               Yeah, I agree 100%. What is the one practice or discipline that you have that you think reaps the most benefit? It seems like you have restraint and conservativism, but yeah, I want your opinion on that.

Jeremy:           I think that one of the things that helps me the most aside from just trying to be really well organized and kind of maximize the efficiency of my day is I’m able to think really high level and see the entire cycle as a picture. And so the way I have painted it for hopefully the listeners earlier was I have the whole cycle long strategy, which could be 5 years, 7 years, 10 years or whatever it is, and I try to execute on it and I’m very numbers focused and I try not to be emotional about it. So I love mobile home parks for many reasons. As an investor, I think they’re going to be great in the long term. Does it mean that I should invest in them in 2017, 18, and 19? No, unless there was a unique situation. Was it frustrating? Highly. Were the last three years ultimately frustrating for me as I sat around, couldn’t find hardly anything to invest in, and were in a bunch of sales to lock in the right pricing and my cash flow was going down every year? Crazy frustrating. But the discipline of sticking to your numbers, not getting off the ball of having a minimum threshold of cap rate for example, or multiple that you’re willing to go into. I think the discipline of being willing to sit around and wait and continue to wait even today, knowing that next year will probably be better, is absolutely key. Because one of the most important things in real estate is timing and I like to give people an example.

                        Here in LA, I could have invested in the best building on the best block of Rodeo Drive, very high end area with the best tenant in 2007 with the best operator to make a bet on, and in 2010 I could’ve been foreclosed on and had nothing. And in 2010 I could have invested in the worst building in the worst location with the worst operator and conceivably made big profits in 2017 when that sold. And so timing is absolutely critical in real estate. And right now I think we’re about to have one of the best times to potentially go in, but we’re not quite there yet. Regardless, I think it’s so critical to understand your own opinion and paint your own picture of what the timing looks like at a particular time and fix your guns with it. I think that’s really, really important if you’re going to try to be very long-term successful.

Mark:               Yeah, I love that. Yeah, I agree. Final questions because I know you’re in a hurry. Do you have a favourite Family Guy episode?

Jeremy:           Oh my God, you and I talk about Family Guy a lot. Favourite one? I’ve seen so many. Even just recently I’ve seen so many. There was one recently that I thought was really good and you and I talked about this and I think you have been involved in this. There was like a throwback to the…I think they went in a time machine and went back into the ’80s or ’90s and the references, the ’80s or ’90s.

Mark:               Yeah, I wrote that.

Jeremy:           There you go. So you wrote it on top of it, all the references, the constant references for someone – I’m in my mid 40s – were just so fantastic and just spot on. And you guys do a lot of flashbacks, which are also hilarious in their own right, but the entire episode was just one big flashback and boy, was that funny. Honestly, for those who’ve never watched these episodes, they’re very extreme comedy. There’s a lot of crude comedy, but any episode is good and I really don’t say that lightly.

Mark:               Well wow, you’re a good promoter for the show. And like I said before, keep me employed. Finally, how can listeners reach out to you?

Jeremy:           Absolutely. So anyone out there who, if there’s any way I can help whether you’re new or experienced, you want to network. If you’re an operator, you have opportunities. If you’re an investor group looking for investors or looking to just trade notes on that, I’m happy to talk to anybody and help any way that I can. So don’t hesitate to reach out. My email is the best way to reach me. So that’s Jroll@rollinvestments.com is definitely the best way to reach me.

Mark:               Well, thank you Jeremy so much for doing this specifically and especially because this is the second time we did this because I forgot to hit the record button.

Jeremy:           Yeah, Mark, thanks for having me on. I really hope this episode is helpful for people out there and be safe and keep healthy right now. That’s the most important thing with the timing we’re talking about here. It should be quite interesting to see what happens in the next few months and hopefully everyone listening will be okay in the coming months.

Mark:               Yes, agreed. Thanks Jeremy.

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