On this episode of the BigMikeFund Podcast, Big Mike sits down with Jack Martin, co-founder of 52TEN Partners, to break down why mobile home parks remain one of the most resilient asset classes in real estate.

Jack explains how shrinking supply, strong demand, and affordability drive consistent performance across market cycles. The conversation covers rent growth versus apartments, value creation through operations and infill, and a real-world mobile home park acquisition—including cap rates, leverage, and agency debt. They also discuss near-perfect rent collections during COVID, bonus depreciation, and why mobile home parks continue to attract investors focused on capital preservation and steady cash flow.

About the Guest:

Jack Martin is the co-founder of 52Ten Partners, a Scottsdale-based investment firm focused exclusively on mobile home parks. The firm manages approximately 1,600 lots across four states and $55+ million of private investor capital. Jack has participated in over $450 million of residential and commercial acquisitions and dispositions and is known for a disciplined, recession-resistant approach with an unblemished track record of on-time reporting and distributions for more than 200 investors.

HIGHLIGHTS OF THE EPISODE0:00 - Welcome to the BigMikeFund Podcast

0:30 – Guest Intro: Jack Martin

1:17 – Severe supply constraints in mobile home parks

2:29 – Shrinking supply from redevelopment and institutional consolidation

4:28 – Rent growth stability vs apartment volatility

6:37 – Difference between mobile home parks and RV parks

7:44 – Stabilized cap rates across markets

10:41 – Cost advantage of mobile home living vs apartments

12:30 – Homeownership, low turnover, and tenant stickiness

14:23 – Real deal example: Omaha acquisition and value-add strategy

16:01 – Expense reduction and auxiliary income as core value drivers

19:26 – Why mobile home parks require in-house management

22:27 – Capital preservation as the primary LP attraction

23:27 – Performance during GFC and COVID

27:01 – Extremely low tenant turnover rates

29:17 – Bonus depreciation advantages in mobile home parks29:54 – Agency debt, leverage, and DSCR constraints

32:14 – How to connect with Jack Martin

32:30 – Book recommendation: The Secret Life of Real Estate and Banking

33:07 – Market cycles, Fed policy, and closing thoughts

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: 52ten.com

Full Transcript:

Mike Zlotnik (02:04.075)

Welcome to the BigMikeFundPodcast. I'm the Big Mike, Mike Zlotnik and today it is my pleasure and a privilege to welcome Jack Martin. Hey Jack, thanks for coming on the show, let me give you a formal quick intro. So, you are a co-founder of 52Ten Partners with qualified investors to acquire and reposition mobile parks.

Jack Martin (02:12.456)

Thank you, Mike. Appreciate being on your show.

Mike Zlotnik (02:28.878)

So you're all about mobile park recession resistance strategy mitigates risks of loss and provides stable cashflow through any market cycle. And let's see, you've been through a lot and you've done with $450 million of real estate and 55 million across multiple funds, direct investment. So welcome to the show.

Jack Martin (02:53.8)

Well, I'm glad to be here, Mike. Let's talk all things mobile home parks.

Mike Zlotnik (02:58.86)

Yeah, so we're recording this in December, 2025. What's the scoop right now with mobile parks? What is happening? One thing that I've known about mobile parks, I've heard this is again, I'm not an expert, no supply. In other words, they're not building anymore. It's very limited product. Cities don't like them. They don't want to permit land to be turned into mobile parks. So essentially, you know,

The supply is what it is. You can improve them all. You can invest money, can do some value at work, but you can't get a new product. You can't get new ground up construction. There's no ground up construction. There's no land allowed for it. Let's just talk about the basics.

Jack Martin (03:41.524)

Yeah, so there's limited new parks that are developed in the United States of America. Generally, there's about 10 new sizable mobile home parks that come online each year across the United States of America. That's it. And most of those are in Texas. When I say sizable, there may be some small private mobile home parks that are built.

Mike Zlotnik (03:47.79)

Generally there's about 10 new sizeable...

Mike Zlotnik (03:54.095)

Ten. That's the whole gamut, right?

Jack Martin (04:05.822)

that are not tracked, but when I say sizable, I mean of institutional quality. So it's going to be over a hundred lots. You know, it's something that's would be considered class a in the apartment space. That's, that's a large enough for an institution to have some interest. There's only about 10 of those built per year. comparatively there are like I live in next and there's 10 to 15 parks per year that are not over for redevelopment into another asset class.

Mike Zlotnik (04:06.958)

So when I say size, well, mean of institutional quality, so it's going to be over 100 lots. And it's something that's what we consider class A in the apartment space that's large enough for an institution to have some interest. There's only about 10 of those built per year. Comparatively, are like other than next, and there's 10 to 15 parks per year that are not built with the redevelopment.

So they're taking supply down, they're taking mobile home parts and turning them into something else. That's correct. So actually supply shrinkage, not growth. Correct. Yes, so supply of mobile home parts was shrinking. And then if you look at available products, you acquire the consolidation of this asset class from the original owners, which the mom and pops, or families that came to them down through generations.

Jack Martin (04:39.932)

That's correct. Yeah. And on top of that.

Correct. Yes. the supply of mobile home parks is shrinking. And then if you look at available product to acquire the consolidation of this asset class from the original owners, which were mom and pops, or families that handed them down through generations, groups like ours, we call ourselves a professional park owner. We'll go buy those from those mom and pops and we'll solve whatever inefficiencies exist there.

Mike Zlotnik (05:05.55)

Groups like ours, we call ourselves a professional park owner, we'll go buy those from those mom and pops and we'll solve whatever deficiencies exist there, there's value added to it. And then typically, groups like ours are, when they're finished repositioning those, they sell those to the institutional owner.

Jack Martin (05:14.248)

there's the value at play. And then typically groups like ours are when they're finished repositioning those, they sell those to the institutional owners. So once the institutions own them.

Mike Zlotnik (05:25.55)

Once the institution's owned them... Yeah, or a portfolio. I've seen institutions buy parts as small as 50 lots if it was part of a portfolio. So if they can get a large footprint in one market, they might buy seven properties. Two of them are large and then the other five are...

Jack Martin (05:36.754)

Yeah, or a portfolio. Like I've seen institutions buy parks as small as 50 lots if it was part of a portfolio. So if they can get a large footprint in one market, they might buy seven properties. Two of them are large and then the other five are a little bit smaller, but it's still, that's right.

Mike Zlotnik (05:53.999)

But in the same market, at least they have management, know, management is not too difficult if it's too far away from each other.

Jack Martin (06:01.202)

Yeah, that's right. So I think the message there to kind of circle back on your initial statement is that the supply is shrinking both from redevelopment and from acquisition by institutional owners. Once those guys buy them, they never come back to the market. And then of course, there's not very much being built. So the replacement is much slower than the shrinking asset class.

Mike Zlotnik (06:14.348)

guys by them.

So you're seeing as a result healthy rent growth in most markets is that what's happening and what kind of rent growth are you seeing? Organically without value at just like what's the inflation?

Jack Martin (06:37.908)

Yes, so typically in the mobile home park world, let's say your rents were at market, they're going to increase at about 5 % per year. That's pretty standard historically. That's still current today. So unlike the volatility that you see in apartments, for example, there's so much new supply, we're actually seeing in the Phoenix market, we're seeing apartment rents come down.

Mike Zlotnik (07:02.349)

Yeah, negative run growth for sure Phoenix has been in a negative territory for a bit for a while actually

Jack Martin (07:06.74)

That's right. Yeah. So, so that's not the case in the mobile home park business. You know, we're a little bit more conservative than others. So our objective is not to raise rent to market in the first 12 months that we own it. We'd like to kind of slowly take smaller bites out of that and give the residents a less steep path to catching up to the market. But I've seen operators buy parks and raise rent 50%.

Mike Zlotnik (07:16.632)

So

Jack Martin (07:37.854)

just to get it back to where the market is. So there's operators that do it.

Mike Zlotnik (07:44.623)

That requires I guess some investment. I mean unless it's a really mom-and-pop park where the rents are so low that you acquire it at a ridiculous You know ridiculous discount to the rants and of course discount price because the rents are so low and And then the market I assume it's just supply. It's a supply driven What about demand side is demand? increasing people continue to

Uh, and when we talk about mobile home parks, we are not talking about RV parks. We're talking about homes that are sitting on a property for a long time. They still consider it to be mobile home parks, but it's not a, know, a motor, uh, couch, a coach that you brought in. You parked there for, you know, for some amount of time and then you move on. So just, just differentiate the two. Yeah. So for your audience, uh, an RV park is considered a rolling.

Jack Martin (08:35.028)

Correct. Yeah. So for your audience, an RV park is considered rolling stocks of the stock of housing that exists in that property can roll in and roll out on a daily basis, weekly basis. know, there's that's an RV park. Yeah. So a mobile home park, even though mobile homes are in the name, mobile is used, they come in on wheels, but once they're set, they're permanent. They rarely ever move.

Mike Zlotnik (08:50.291)

That's an RV those are just just the homes or wheels

Mike Zlotnik (08:59.695)

come in on wheels, but once they're set, they're permanent, they rarely ever move. We've been in this business for over decade and across almost

Jack Martin (09:04.372)

We've been in this business for over a decade and across almost 2000 lots, you we may have one or two mobile homes that move each year. So it just doesn't make any economic sense to move them. It's a single wide will cost, you know, seven to $10,000 to move and a double wide could cost as much as $20,000 to move it. So once they're set and they're in place, it's considered permanent housing.

Mike Zlotnik (09:14.543)

So it just doesn't make any economic sense to move them. It's a single-wild will cost, you know, seven to $10,000 to move. They're double-wild, costs as much as $20,000 to move it. So once they're set and they're in place, considered permanent housing, the only difference is the homeowner doesn't own the land. Yeah, yeah, yeah. It's bolt-it-on. They're connected to all the plumbing, all the electric, and they just bolt it on. And it's a land lease for them for that lot.

Jack Martin (09:29.682)

The only difference is the homeowner doesn't own the land. So they own the home. That's right. That's right.

Mike Zlotnik (09:44.495)

to be able to have their home. Just curious what cap rate are you typically, you know, buy these at? Just, you know, on the as-is basis, if you look for a target, is there a good cap rate that is healthy or it's a difficult story? Because you, you know, if you have a lot of value at, then the current cap rate may not be as relevant as your potential.

Jack Martin (10:10.438)

Yeah, that's not, it's probably not the metric that you would evaluate an investment by, but, cap rate will be relative and let's call it a stabilized cap rate. You assume that we're, we purchased a property, we did all the capital improvements. We filled all the vacant spaces. We raised the rent to market. We've stabilized expenses and now we're ready to sell it. Cap rates will range anywhere from high threes, low fours in a really attractive.

Mike Zlotnik (10:15.63)

Bye.

Cap rate will be relative, let's call it a stabilized cap rate. We assume that we're, we purchase the property, get all the capital improvements, we filled all the vacant spaces, we raised the rent, mark it, we tablized expenses, and now we're ready to sell it. Cap rates will range anywhere from high threes, low fours, in a really attractive, market to somewhere in the eight to nine percent range, in more rural,

Jack Martin (10:39.662)

attractive expensive market to somewhere in the eight to nine percent range in more rural tertiary locations. So that's a stabilized asset. But yes, Mike, speak to if there's a heavy value add, let's say that there's a lot of vacant lots that can still be you can perform infill and gain more income. You might buy a attractive investment in the low threes.

Mike Zlotnik (10:47.215)

Sure sharing locations so that's a stabilized asset. Yes, my What's else less relevant because you have a lot of vacancy right you have a lot of vacancy so I Do like to stabilize of course, that's your target

cap rate in a given market and then how much of a discount are you getting and how much work premium will you get for improving the property, leasing up empty spaces. So on the demand side, are you seeing growth in demand? Again, I'm just trying to understand from the point of view that you have a lot of supply of multifamily housing and as markets got oversupply of multifamily,

Jack Martin (11:23.71)

That's right.

Mike Zlotnik (11:45.967)

Substitution effect, you know people may may choose to live in a mobile home park or they can go around traditional apartments they're not directly competing but just like you mentioned a lot of new supply in multifamily and and you know choosing to stay at the mobile home park is a better of you know, you either used to a property like this or

You you can't afford apartments and you go to mobile home parks that give those are less expensive in general. That's my perception, unless I'm wrong. Yeah, so I mean, first of all, to answer your question, we own particle across the United States, so not just in Arizona for community market. And demand, there's something we want to do to demand in every market, even within an individual state. Like we have more demand in central Arizona than we do in southern Arizona, for example. But that would be the same.

Jack Martin (12:19.828)

Yeah. Yeah. So I mean, first of all, to answer your question, we own parks all across the United States, so not just in the Arizona or Phoenix market and demand. There's some nuance to the demand in every market, even within an individual state. Like we have more demand in central Arizona than we do than we see in southern Arizona, for example. But that would be the same for any asset class. you're renting

Mike Zlotnik (12:43.343)

for any asset class, yourself, renting BRBOs or permanent units, that demand you want to be present there. But generally, the cost on monthly basis to live in a mobile home park is about 50 % of that of a equally appointed apartment in the city.

Jack Martin (12:47.624)

BRBOs or apartment units like that demand nuance is still going to be present there. But generally, cost on a monthly basis to live in a mobile home park is about 50 % of that of an equally appointed apartment in the same neighborhood.

Mike Zlotnik (13:08.377)

For the same, I don't know what the square footage of a mobile home park or mobile home would be versus an apartment. Is it similar to or a little bit smaller? It depends. I mean, we have homes as large.

Jack Martin (13:18.42)

It depends. mean, we have homes as large and we have five bedroom, three bath homes in some of our parks. So those are double wide, 1800 to 2400 square foot homes. But the average mobile home is probably going to be more like, you know, 11 to 1200 square foot for a three bedroom. And then it goes up from there.

Mike Zlotnik (13:41.775)

But the cost is so much lower because lower what insurance lower taxes I mean, there's still utilities like energy is energy. Maybe it's less expensive and then

Jack Martin (13:52.148)

Yeah, I'm just speaking to the lot rent. So this assumes that you own your home. The lot rent in most markets is going to be at less than half of what the apartment rent is for a two bedroom apartment. So like in Phoenix, for example, in a working class neighborhood where two bedroom apartment rents are somewhere in the 1800 range, you would see mobile home park lot rent be somewhere in the 900 or less range.

Mike Zlotnik (13:55.439)

So this assumes that you own your home. The lot rent in most markets is going to be less than half of what the apartment rent is for a two-bedroom apartment. So like the Invenit for example, a working-class neighborhood where two-bedroom apartment rents are somewhere in the 1800 range, you would see mobile home park lot rent be somewhere in the 900 or less range. But then there's a cost of the mobile home.

Jack Martin (14:23.508)

Correct. Yeah, correct. So then this separates the difference between a renter and a homeowner. So some people want the flexibility of renting because if something changes in their life, they can pick up really easily and move on. That's the other side of that coin is for the landlord. That's disruptive because now they have turnover. Right. In the mobile home park business, the resident that you attract wants to be a homeowner.

Mike Zlotnik (14:25.263)

So then this separates the difference between a renter and a homeowner. So some people want the flexibility of renting because if something changes in their life, they can pick up really easily and move on. The other side of that coin is for the landlord, that's disruptive because now they have turnover. In the mobile home park business, the resident that you attract wants to be a homeowner.

Jack Martin (14:53.268)

They want certainty with respect to where they live. Kids go to the same schools, all those kinds of things. And they want to gain equity. So even though it's a normal home, it still has value. If they decide to exit, they sell it. The value of the home has some correlative relationship with the value of the housing market in the neighborhood.

Mike Zlotnik (14:53.561)

They want certainty with respect to where they live. Kids go to the same school all the time. And they want to be, actually. But even though it's a whole home, it still has value. If they decide to exit, to sell it, the value of the home has to have correlative relationship with the value of the housing market.

Mortgageable in the words, if you're trying to buy one, can you get a mortgage on a mobile home? Yeah, typically the the amortization schedule is shorter the where you buy a single family home you get a three-year amortized loan and the mobile home park business is usually 15 to 20 years Because they think of it as a not exactly a home. They think of it as I guess sort of like a car

Jack Martin (15:21.46)

Correct, Yeah, typically the amortization schedule is shorter. So where you buy a single family home, you get a 30 year amortized loan. In the mobile home park business, it's usually 15 to 20 years.

Jack Martin (15:44.148)

It is. Yeah, the financing is very similar to getting an auto loan. So the lenders view that as the useful life is going to be shorter than a site built home. So the willingness to lend is a shorter period of time. But with that said, we have homes in some of our parks that were built in the 50s and 60s and there are still people living there.

Mike Zlotnik (16:04.791)

They're still hanging in there Fascinating so let's go into the investment part of this whole business As you buy these investments and and again, I I don't know what's a classic

investment looks like. Give me an example of a deal recently did, you know, acquired something at what cap rate, what's the value at plan, what purchase price, and then what kind of cash flows, what kind of, you know, we project, what kind of, you know, growth, just walking through a typical deal that you sort of did recently and anything that comes to mind.

Jack Martin (16:45.864)

or yes, we'll yeah, we'll just grab the last park that we acquired, which was in Omaha, Nebraska. 138 lots is right central downtown, close to the freeway or close enough to the freeway where we have income that comes from a billboard on the property that you could see from the freeway. Only one tenant or excuse me, one park owned home. So that's the manager unit. Everything else was owned by the tenants.

Mike Zlotnik (16:50.626)

acquired.

When? 138 units all tenant owned. So you bought the land and all the leases, you know, the land.

Jack Martin (17:16.916)

Correct, Yeah, so That one was that's the rare occasion that is fully occupied but that's just how that one showed up usually there's a Handful of vacant lots and there's some component of park owned homes whether they're rentals or they're Typically, we'll assume some of those but this particular one did not have that

Mike Zlotnik (17:21.901)

Yes, so is it fully occupied or this got vacancy? one was but that's a rare occasion that's fully occupied but that's just how that one showed up. Usually there's a handful of vacant lots and there's some component of park owned homes whether they're rental or they're Typically we'll assume some of those. This particular one cannot have that. This one on a seven year hold period conservatively probably a mid-14 IRR.

Jack Martin (17:43.017)

This one on a seven-year hold period, conservatively probably a mid-14 IRR. A little more than half of that will come from the workflow.

Mike Zlotnik (17:50.703)

That's IRR D level or LP level? So your D level IRR you're projecting to be what range?

Jack Martin (17:55.034)

LP level. Yeah, LP level. So.

Jack Martin (18:01.832)

You know, I don't recall what that one was, but it's in the 20s, mid 20s, probably somewhere in there. So the splits for us is typically going to be 75-25 on average in favor of the LP. But that one had a coupon to the LPs out of the gate year one was somewhere in the mid to upper threes. And then at the end of the seven year hold period, it was closer to 10, the cash on cash.

Mike Zlotnik (18:06.927)

So the splits for us is typically going to be 75.25 on average in favor of the LP. So that one had a coupon to the LP out of the gate year one was somewhere in the mid upper freeze. And then at the end of the seven year whole period, was closer to 10. The cash on cash. Because of a lot of what kind of value can you do to push the yield up that much that fast?

It's year three you said right? Year three you would be. So the combination in all of our parts is going to lowering expenses so they're higher than they should be. A lot of times that's because non-in-profit running them. Or there's an absentee owner that's running it and he has way more staff on site than he Or they're not maximizing the use of their maintenance staff so they're using outside vendors.

Jack Martin (18:34.929)

Well, yes. So the combination in all of our parks is going to include lowering expenses so they're higher than they should be. A lot of times that's because mom and pop are running them. They have

Or there's an absentee owner that's running it and then he has way more staff on site than they need. Or they're not maximizing the use of their maintenance staff. So they're using outside vendors and those get, those can get really expensive. And on the income side, rents are lower than the market. This one, I think wasn't that bad. It was probably somewhere in the range of mid twenties. Um, you know, 20 % below the market. wasn't, it wasn't dramatically below the market.

Mike Zlotnik (19:01.295)

And those can be really expensive. And on the income side, rents are lower than the market. This one, think, wasn't that bad. was probably somewhere in the range of mid-20s, 20 % below the market. It wasn't dramatically below the market. But then there was the vacant office building that we could get a lot of income in. We'll take those office buildings on a fully occupied property. It doesn't need a manager's office anymore.

Jack Martin (19:18.056)

But then there was the vacant office building that, you know, we can get a lot of income. We'll take those office buildings on a fully occupied property. Doesn't need a manager's office anymore. And we'll put that up into some executive suites and we'll lease those out to the market. And then there was billboard there, an older billboard on an older contract where there's substantially more income potential there than what they were getting.

Mike Zlotnik (19:31.117)

And we'll put that up in the executive suites and release those out to the market. And then there was billboard there, an older billboard on an older contract where there's substantially more income potential there than what they were getting. And then there was some vacant land that had not yet been developed that we could develop a new additional lot. So there will be some in-fill that we'll add there.

Jack Martin (19:46.33)

And then there was some vacant land that had not yet been developed that we could develop into additional lots. So there will be some infill that we'll add there as well.

Mike Zlotnik (19:56.527)

So it's a multi-pronged strategy to add value to get to these IRR targets through interestingly enough, cost-cutting, auxiliary revenue, right? And I guess you look for every area of opportunity, new lots, empty buildings and rent growth. It's actually, know, just listening. It's an operating business really. It's not a pure real estate because

A lot of the things you mentioned is you're improving, I mean, some real estate improvement, there's a lot of like, you renegotiate billboard contract. It's semi-operating, right? And cost cutting is definitely an operating thing, big time. Buildboard, could say it's on one time value add activity, but with the cost cutting, you're running the business way more efficiently with less staff and less expenses, which is.

I hear this a lot of times, it's true. know, it's, it's, it's, I'm not questioning what you're saying. I'm just saying quite often, I've heard this rodeo many times. Everybody's planning to make some improvements, introduce new technology. Um, I was at a business dinner last night and one of the folks there saying that they, you know, they use technology so much that they reduce staffing, you know, more than 50%.

different asset class. And when I hear this, like, that's wonderful if you can do that. Maybe that's the truth. Maybe AI and tech comes in and you don't need the staff member property at all, or, you know, maybe one person on a sizeable property instead of having two or three people. So is that what you're seeing? Is that how you're thinking through advanced technology? Both for leasing, for maintenance requests, for, you know, payments, everything else.

Jack Martin (21:52.422)

Yeah, so we'll use technology to the degree that it can. And I think that every year it gets better. But I don't see 50 % reduction in staff requirements. I don't see that in this asset class. there's mobile home park management is a little bit more heavy hands on than other asset classes. For example, if you go to the top.

Mike Zlotnik (21:52.739)

Yes, it will use technology to the degree that it can.

but I don't see 50 % reduction in staff requirements. don't see that in this asset class. there's mobile home park management is a little bit more heavy hands-on than other asset classes. For example, if you go to the top, park owners in the United States, they all have vertically integrated internal property management in-house. None of them use an out-stores after a party.

Jack Martin (22:16.456)

The owners in the United States, they all have vertically integrated internal property management and house. None of them use and outsource a third party or very rarely is that.

Mike Zlotnik (22:27.247)

For mobile home parts, there's no it's not like property not like apartments. We have a lot of property managers That's right. So in any major market, you get 100 choices of property managers for apartments where in the mobile home park business, you might have three or four, and if you have a major market. And the challenge is that assuming moving parts, get home sale, you're moving homes in and out, the amount of heavy lifting that's required to take an under...

Jack Martin (22:33.396)

That's right. So in any major market, you get a hundred choices of property managers for apartments where in the mobile home park business, you might have three or four in a major market. And the challenge is that there's too many moving parts. You have home sales, you're moving homes in and out. The amount of heavy lifting that's required to take an underperforming property to a stabilized status, there's a lot of work.

Mike Zlotnik (22:57.007)

property to a stabilized status. There's a lot of work. And if you're manufactured housing community third party property manager, you're only collecting on a percentage of the lottery. Which is five to six hundred bucks on average across the United States. So there's just not a lot of revenue there. So what we found, and we did try third party initially ten years ago, and what we found is they can

Jack Martin (23:01.138)

And if you're a manufactured housing community, third party property manager, you're only collecting on a percentage of the lot rent, which is five to 600 bucks on average across the United States. So there's just not a lot of revenue there. So what we've found, and we did try third party initially 10 years ago, what we found is they can collect the rent.

They can hire and fire staff, they can pay your bills and provide you reporting. That's about it. That's all they can afford to provide. So if you have, if you want to take advantage of the real upside in the manufactured housing community space or mobile home parks, you need to be able to do all this stuff in house.

Mike Zlotnik (23:46.303)

Yeah, understood man, that's why you need to get sizable properties or multiple properties in the same area Otherwise, you know you how do you get people to be in that area?

They had to live somewhere and they have to, you know, they have to, have families too. So your staff needs to be, I mean, I see this with apartments too, where there's some shared resources between apartments owned by the same parent or the same, you know, property management company in the apartments, but they share resources between properties that are not far from each other. I guess it's the same approach here. You have staff.

Jack Martin (24:16.212)

Mm-hmm.

Jack Martin (24:21.01)

Yeah, for sure. You either have to have a large footprint initially with a single property or once you have that one you can bolt on other properties around it and it gives you economy at a scale.

Mike Zlotnik (24:34.925)

Yeah, understood. And using this deal for the return perspective, just trying to assess. So, mid-teens IRR, cash flow starts kind of light, but then it picks up. Is this typical and common? And you run, I guess you said 75-25 split, you run a PREF, you run asset management fees.

Jack Martin (24:56.02)

Yes, so those those splits depending on the check size they can get more favorable or less favorable for the LPs at least with 5210. Typically this preferral is going to be somewhere around seven and there's going to be an acquisition fee, a 1 % asset management fee, and then a disposition fee or a refinance fee. So we keep the fees pretty light. I think that the thing that deserves to be talked about here, I mean through the lens of an LP.

Mike Zlotnik (25:08.571)

I There's going to be an acquisition fee, a 1 % asset management fee, and then a disposition fee or a refinance fee. So keep the fees pretty light. I think that the thing that deserves to be talked about here, I mean, through the lens of an LP, that what's the most attractive things about a mobile home park investment, assuming that you have a good sponsor that's.

Jack Martin (25:26.002)

that what's the most attractive things about a mobile home park investment, assuming that you have a good sponsor that's behind the investment and doing all the work.

Mike Zlotnik (25:33.167)

Let me guess let me guess what's the most attractive thing on that I'm gonna guess and I'm from wrong I'm wrong, but I know a little bit about this so it's not that I'm inventing the wheel on the fly It's the bonus depreciation. I think it's gonna have massive because this these things depreciate better than apartments

Jack Martin (25:38.546)

Okay, perfect.

Jack Martin (25:53.724)

Yeah, that's probably the second. If I was interviewing a typical million dollar check writer, that would be his second most favorite thing.

Mike Zlotnik (26:02.959)

What's the number one?

Jack Martin (26:05.742)

the stability, the likelihood of preservation of capital is number one.

Mike Zlotnik (26:14.191)

Why do you say that? Well, I mean, when you're evaluating investment, think the most, well, this is what I hear from our LPs. The first thing that attracted them to mobile home parks was the stability. If you look at economic events like the GFC, you go try to find a mobile home park that went 400 in 2008 to 2012. It's a size, you won't find one. They just don't put a...

Jack Martin (26:17.116)

Well, I mean, when you're evaluating an investment, I think the most, well, this is what I hear from our LPs. The first thing that attracted them to mobile home parks was the stability. So if you look at economic events like the GFC, you go try to find a mobile home park that went to foreclosure in 2008 through 2012 of size, you won't find one. They just don't go to foreclosure.

They're super stable. Go try to find evidence of a mobile home park that didn't collect their lot rent through the COVID pandemic. Those are the, in extreme conditions where mobile home parks really shine, they're extremely stable.

Mike Zlotnik (26:43.471)

super stable. Go try to evidence of a mobile home park that didn't collect a lot of rent through the COVID pandemic. Those are the, in extreme conditions where mobile home parks really shine, they're extremely stable. So during COVID, if I understand you correctly,

Tenants paid rent not the same way the apartment complex tenants paid rent where they they you know Especially class C properties of a lot of collection issues. I'm just curious if the mobile home parks didn't didn't hit a collection issue during quoted Yes, so what you people recognize and this is the reason behind why we collect 100 % of our allow rent. In the apartment world, if you're exercising your right to strategically default.

Jack Martin (27:20.55)

Yes, so what few people recognize and this is the reason behind why we collected 100 % of our lot rent. In the apartment world, you're exercising your right to strategically default on your rent because of the moratorium on evictions during the pandemic, the recourse that the property owner had was at the end, when the moratorium is lifted, they can evict you and take your deposit.

Mike Zlotnik (27:39.963)

the property owner had was at the end when the moratorium was lifted they could evict you and take your deposit. That was all the reports they had. In the mobile home park business, if you don't

Jack Martin (27:48.638)

That was all the recourse they had. In the mobile home park business, if you don't come current on your rent, not only do I evict you, you have to forfeit your home.

Mike Zlotnik (27:55.615)

Not only do I evict you, you have to forfeit your home. as part of the contract, they're actually putting the home at risk if they own the home? Yes, so this is the law in mobile home parks that if you don't pay, you can't come current on your rent and you have to leave your home there and it becomes the park owner's property. So it's really, you're acting like a tax authority essentially for non-payment.

Jack Martin (28:04.308)

That's right. Yeah, so this is the law in mobile home parks that if you don't pay, you can't come current on your rent and you get evicted, you have to leave your home there and it becomes the park owner's property.

Mike Zlotnik (28:24.175)

I don't know you're leaning the asset or not, but it's just you know, you're not letting them off the property You're holding to there. It's interesting. It's just it's The way that the regulatory or the regulations is written is kind of like if abandon your... you park your car to parking lot, it accrues parking expenses, and then at some point it becomes an abandoned car, and it becomes the owner of

Jack Martin (28:32.529)

Yeah, so it doesn't, the mechanics aren't necessarily that way. The way that the regulatory or the regulations is written is, is, it's kind of like if you abandon your, you parked your car in a parking lot, it accrued parking expenses. And then at some point it becomes an abandoned car and it becomes the owner of the parking lot or the owner, there comes the property of the parking lot. It works a little bit more like that. But tenants that.

Mike Zlotnik (28:58.415)

Interesting yeah on some of them.

Jack Martin (29:01.672)

that live in mobile home parks and understand that. So yeah, there was people that were seeking strategic default. They came into our offices and said, I heard we don't have to the rent. And then the manager said, well, that's true. You don't have to, but when the moratorium is lifted, you have to come current or you'll get evicted and you lose your home. So they paid the rent.

Mike Zlotnik (29:23.427)

Yeah, I understand that angle. That's actually a good point that you have better collections as a result. You know, it's similar. We do triple and industrial, right? mean, tenants pay. It's different experience for businesses, you know, who were there for long time. They're not going to default their business here. You have a significant collateral in the form of the mobile home that's sitting there.

So they're not defaulting on something they don't own and they can just go, you know, pick up their stuff and don't pay the rent for however long and move. Yeah. So it may, makes sense. It's actually in my head, it's, it's comparing the similarity and I feel, yeah, I mean, I can understand that it, it, it, there's more protection mechanisms here versus apartments. Yeah. And if you kind of add on top of that, there is still tenants turnover, tenants move across the country or, or whatever.

Jack Martin (30:11.496)

Yeah, and then if you kind of add on top of that, I there is still tenant turnover because tenants move across the country or whatever. But when they decide it's time.

Mike Zlotnik (30:20.636)

How much turnover do you actually see per year like you have you know 138 lots how many of these things turn

Jack Martin (30:26.628)

It's going to be less than 5%. On average, it's probably between 1 and 3%. So these are homeowners. Very sticky. But when they do decide to...

Mike Zlotnik (30:32.271)

It's very sticky, it's very sticky. When an average apartment complex, just multifamily, you could have 30-40 % turnover, which is normal, and here you are only doing 5%, which is great. It's really sticky. And then when they leave, they sell their home. It's the mechanism through which they move. So it's too expensive to move their home. Even if it's within the same city, it would cost more money to move it than it would be to

Jack Martin (30:44.552)

Yeah.

Yeah, it's really sticky. And then when they leave, they sell their home. It's the mechanism through which they move. So it's too expensive to move their home. Even if it's within the same city, it would cost more money to move it than it would be just to sell it and go buy another one in a different property. So.

Mike Zlotnik (31:01.935)

Bye.

You don't even have turnover. You have just a different person living in the thing.

So I thought physically 5 % pick up their trailer or whatever, the mobile home and they move, but it's not, like you said, it's too expensive.

Jack Martin (31:19.09)

Yeah, the transfer of ownership, like your resident base may turn over between, you one and 5%. But the homes still, still the same homes. So.

Mike Zlotnik (31:29.707)

Yeah, that's fascinating. Now I begin to understand why this is stickier and this is more, if you got a good, well-occupied property that you're running well, these homes are not going to move. Maybe some few people will move, but the homes are not going to move. And the result, you got a steady type of a setup.

Jack Martin (31:52.456)

That's the underlying thesis of mobile home parks is the stability. So back to that conversation about LPs, their first answer is, I love this because of the stability. The likelihood of A, me losing the coupon that I signed up for, but certainly B, losing any portion of my principal is extremely low. So that's what attracts them initially.

Mike Zlotnik (31:52.771)

That's the underlying thesis of mobile home parks is disability. So back to that conversation about LPs, their first answer is I love this because of the stability. The likelihood of A, me losing the coupon that I signed up for, but certainly B, losing any portion of my principal is extremely low. That's what it's actually saying.

Yeah, it's a very defensive investment. I appreciate you clarifying. I'm just comparing in my head to industrial because I mean, we do triple an industrial and the similarities, stability, predictability. mean, that's the key. You're not shooting for super high IRRs, but you're not. Yeah. I mean, it's a safety of principle first and then some kind of adequate rate of return in general. Yeah. And then back to your comments about bonus appreciation. That's the thing that gets them the most.

Jack Martin (32:44.66)

Yeah, and then back to your comment about bonus appreciation. That's the thing that gets them the most excited. And bonus appreciation would be anywhere from 100 % coverage. I you could get as much as 200 % coverage, but, know, conservatively, it's probably more like 150 % coverage for every dollar that you invest. So you get a lot of losses on your K1.

Mike Zlotnik (33:03.787)

Yeah, yeah, I'm aware I mean we've seen in like you said hundred fifty percent coverage in it all depends on the leverage Well, what kind of leverage do you get by the way in a mobile home park one of that like you're buying mobile home park?

financing with bank debt what what is a typical leverage? Yes, and typically will all by parks that qualify for agency debt so either Freddie or Fannie Today you probably get 70 % leverage as long as you need a 125 PCR So like a lot of times the loan sizing will be smaller than 70 % because the cash flow on the property is not yet meeting that

Jack Martin (33:24.82)

Yeah, so typically we'll buy parks that qualify for agency debt. either Freddie or Fannie. Today, you probably get 70 % leverage as long as you meet the 125 DCR. So like a lot of times the loan sizing will be smaller than 70 % because the cash flow on the property is not yet meeting that 125 DCR.

Mike Zlotnik (33:48.833)

Yeah, I was going to say exactly that because you're buying initial cap rates too damn low to meet the DSCR even though you can meet the LTV, but you can't quite. It's kind of interesting. We've looked over the years into mobile home parts. We've not found any interesting investments. At least cash flow initially is too light. And it's exactly the reason because you traded low cap rates. Unless you're really in the boonies.

Jack Martin (33:55.252)

That's right.

Mike Zlotnik (34:17.865)

that's a different conversation. it's an interesting asset class. But on the 70 % leverage you could run easily over the purchase price. First year bonus depreciation is typically how much? Essentially you buy something for 10 million dollars as an example. What's your first year bonus?

Jack Martin (34:40.532)

Mm-hmm.

So in that case, there probably is 7 million.

Mike Zlotnik (34:49.583)

So it's, Yeah, I can see this. Multi-family is at 30%. You are at 60, 70. So you're doing double multi-family because.

Jack Martin (34:51.444)

So if you get 70 % leverage and you put three and a half million dollars down, let's call it, you know, half million dollars for some capex or something. You're going to get 180 % coverage or somewhere in that range.

Mike Zlotnik (35:15.119)

I guess you're depreciating. mean, the entire thing is there's no allocation for any long schedule. I'm almost the entire everything is just is really maybe not 100%. You still have some land, but everything else you're bonus depreciating close to everything else. typically will get about 70 % of the property's value as land improvements. That's where you take about 15 years. So that's where the bonus appreciation is really powerful. most of these properties are going to have, you know,

Jack Martin (35:29.236)

Yes, typically we'll get about 70 % of the property's value as land improvements. And that's where you take the bonus 15 years. So that's where you have the bonus depreciation. It's really powerful. Then your most of these properties are going to have, you know, 10 to 20 % is the land value. And then if there's some kind of office building or something like that, that would be the remainder.

Mike Zlotnik (35:51.022)

Understood I mean, this is great. Appreciate you your wisdom What's the best way for folks to reach out to you is their website any other way? Great any final comments thoughts any book suggestions something just

Jack Martin (36:00.584)

Yep, go to our website 5210.com. That's the number 52 T E N dot com and just go to the contact page.

Jack Martin (36:16.114)

Mike, this has nothing to do with mobile home parks, but I think the best book that has ever been written on the real estate cycles in America is called The Secret Life of Real Estate and Banking. And it's written by a gentleman named Philip J. Anderson. And it's a 200 year history of the cycles, the cyclical nature of real estate. And it kind of weaves in the corruption.

Mike Zlotnik (36:23.154)

but of your heart. is called The Secret Life of Real Estate and Banking. It is written by a gentleman named Philip J. Anderson. It's a 200 year history of the cycle, the cyclical nature of real estate.

It kind of leaves in the corruption from banks and government entities and lobbyists and all that kind of stuff. And then the natural greed is moving. Yeah, there's so much to say on that. The pendulum swings both ways and sometimes swings too much. And we've seen a cycle recently, and we're probably going to see many more in the future. But it creates opportunities. So every time you go through a cycle, it creates buying opportunities.

Jack Martin (36:46.398)

from banks and government entities and lobbyists and all that kind of stuff. And then the natural greed of humans. So fascinating.

Jack Martin (37:08.51)

Mm-hmm.

Mike Zlotnik (37:13.593)

And those people who don't miss the cycle, you know, they take it on the chin. That's life. And the government, unfortunately, I'll just add one comment. I've talked about this so many times. They've given us cocaine for many years called ZERP, right? Zero Interest Rate Policy. They got a lot of people addicted to it and then they withdrew the cocaine very fast and then you had a withdrawal syndrome and caused massive grief. And whether you like it or not, the Fed

Jack Martin (37:18.164)

space.

Mike Zlotnik (37:43.947)

often wrong, often late. you know, that's been the case. Even now, I'll just add one quick comment. I'm reading the book 1929, Andrew Ross Sorkin, just kind of come into light of these, you know, booms and busts is a little bit of a concern of AI boom and maybe overreliations and how you go in 1929. Example of the government being sound asleep, the Fed.

not really paying attention. Now of course tolerance of pain is much lower than they just let problems happen. They didn't think of this the same way they think now. Now they cut rates, they flood liquidity, it's how they solve problems. But the same behavior, it's kind of like these patterns repeat again and again and again. So I appreciate your sharing. was one more time. What was the book?

Jack Martin (38:37.5)

It's called The Secret Life of Real Estate and Banking by Philip J. Anderson. He's actually an Australian guy, but he studies real estate market cycles worldwide and that book specifically written about America.

Mike Zlotnik (38:50.215)

That's wonderful, thank you for sharing. you for coming on our podcast

Jack Martin (38:53.68)

Thank you for inviting me, Mike.

_______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

In this episode of the BigMikeFund Podcast, Big Mike chats with Delta Captain James Reeman from a sunny Hawaii layover. Drawing parallels between high-stakes fighter pilot missions and savvy investing, James shares aviation's "threat brief" for risk mitigation—identifying pitfalls, prepping contingencies, and debriefing lessons to avoid repeats. From commanding F-16s and a Space Force squadron to mentoring pilots on tax-efficient diversification (beyond 401(k)s into alternatives), he stresses fulfillment over achievement: "Wealth is for enjoying life." As a new grandfather in Colorado, James reflects on family traditions, financial education gaps, and giving back via the Wings Over the Rockies Air & Space Museum. Ideal for high earners seeking disciplined, gratitude-fueled strategies amid market cycles—discover how "earning your keep" in turbulence builds lasting security.HIGHLIGHTS OF THE EPISODE0:00 - Welcome to the BigMikeFund Podcast

0:19 - Guest Intro: James Reeman

0:37 - Holiday Recording: Christmas Gratitude & Service Thanks

1:02 - Hawaii Layover: Job Perks of Food, Hikes & Red-Eye Flights

1:20 - Career Journey: F-16s, Space Squadron Command to Delta

2:24 - Flying-Investing Parallel: Earn in Challenges, Prep for Worst

3:11 - No Catastrophe Option: High-Stakes Parallels in Aviation & Business

3:38 - Family Roots: 3 Kids, Aviation Tradition & New Grandparent

4:30 - Wings Over the Rockies: Inspiring Youth in Aerospace

5:43 - Chess Analogy: Prep, Execute & Debrief for Continuous Learning

6:13 - Risk Management: Identify Threats, Mitigate & Debrief Missions

8:49 - Debrief Power: Learn from Wins/Losses to Refine Processes

10:11 - Leadership Evolution: Ego in Fighters vs. Diverse Space Teams

12:59 - Space Force Explained: From Air Force Roots to Satellite Defense

14:20 - Satellites' Role: GPS Timestamps Power Global Commerce

17:48 - Blackouts Impact: Critical Systems Halt Modern Life

18:28 - Pilot Coaching: Taxes as Top Expense, Diversify Beyond 401(k)s

20:18 - Financial Gaps: Schools Skip Money Management Education

23:21 - Pilots' Habits: Index Funds, Cash Balance Plans & Alternatives

26:53 - Reversion to Mean: Bulls/Bears Demand Diversification

29:42 - Evolution to Fulfillment: Service, Gratitude Over Achievement

31:52 - Connect with James

33:22 - Giving Back: Helping Others as Life's Guiding Light

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTInstagram: @f16pilot

James' Favorite Charity: https://wingsmuseum.org/

Website: https://www.jamesreeman.com/

Full Transcript:Mike Zlotnik (00:04.952)

Hi folks, this is Big Mike, Mike Zlotnik. Welcome to the BigMikeFund Podcast. And today my guest is James Reeman. Hi James, how are you, sir?

James Reeman (00:14.47)

Big Mike, doing great. Merry Christmas. What a treat on a Christmas afternoon for you and morning for me that we get to share a little time together.

Mike Zlotnik (00:23.47)

Merry Christmas. Yeah, it's wonderful to record this during the holiday season. Thank you for taking the time to join me. And also thank you for your service. James is a fighter pilot who is now flying Delta, one of the most senior, most tenured captains. So thank you for your service and welcome to the podcast.

James Reeman (00:47.545)

It's a privilege to be here, sir. I'm looking forward to our conversation.

Mike Zlotnik (00:51.502)

And we're doing this, you're in Hawaii. Tell me a little bit about your travels. And this is, I guess, comes with the territory. You flew in a plane, you landed, and you have a little time off.

James Reeman (01:03.257)

Yeah, Mike, it, you know, there's something to be said for loving your job, right? And I've always been very fortunate. My career in aviation started as a fighter pilot flying F-16s and eventually through some adventures there, eventually commanding a space squadron. But in my semi-retirement now, I've been a captain for Delta for a long time. And so when I fly somewhere, one of my favorite things to do is try to experience all that that place has to offer in terms of food and adventure. so.

Yeah, I treated the crew to a little Christmas Eve dinner last night and this morning a couple of us got up and did a little sunrise hike. And this afternoon I'll get a nap and then the payback for me is I to fly the red-eye back to the United States tonight. But we'll be well prepared for that.

Mike Zlotnik (01:48.664)

Well, at least you get to enjoy Hawaii and little bit of a hike. I guess it comes with a territory. It's a job benefit. You fly different places. It's interesting everywhere. I guess isn't Red Eye easier to fly then? Or it doesn't matter if you're just flying a plane. The Red Eye or not, it's still a flight.

James Reeman (02:00.781)

Yeah, it's...

James Reeman (02:08.548)

Yeah, mean every flight has its own inherent challenges and I'm really anxious to dive into some of the parallels with investing today because when everything goes well, it's easy, right? But those aren't the days you make your money. And I'm sure in investing, it's the challenging times where you really kind of earn your keep. And in aviation, we prepare for the worst case scenario, hoping that never happens.

And most of the time it doesn't, so it's pretty routine. But when something goes wrong with the airplane or the weather or the passengers or some combination thereof, that's really when we earn our salary. I joke with my kids that I probably earn most of my income on about one flight per year. And the rest of the time I'm just flying great places and trying to find somewhere to work out and a great place to go to dinner and have an adventure.

Mike Zlotnik (02:58.254)

Yeah, that's the words of the wise. Whenever I think of flying, think of it as like a catastrophe is not an option. It's like you have to, the failure in your business is a catastrophic failure. You can't fail lightly there. If it's a failure, a problem. It's a huge problem. So we'll compare that to investing in a second. Let's go back to your family for a...

James Reeman (03:16.439)

No.

James Reeman (03:21.175)

Yeah.

Mike Zlotnik (03:26.328)

Tell the folks a little bit about your family. I know you live in Denver. You have a wonderful family. And then you're involved with a great charity. Give the charity a little bit of a hug and give it a little love.

James Reeman (03:37.75)

Sure, sure, that sounds great. Yeah, I have three kids and our roots are in Colorado. They've spread their wings a little bit now. My eldest son is a pilot as well. He served in the military with me and he actually has a child. So I'm a new grandfather, which I'm still warming up to the idea. And then my middle son is a banker for JP Morgan in Los Angeles. And, you know, following in that your financial footsteps, if you will, maybe.

And then my daughter is a student at the University of Michigan. And she got her private pilot's license when she was 17 and actually soloed her first aircraft when she was 16. But aviation is a big part of our lives. So one of the organizations I work with, I'm on the board of directors for the Wings Over the Rockies, Air and Space Museum, which is Colorado's official Air and Space Museum. So we dedicate a lot of our time and resources there and try to empower opportunities for young people.

to be inspired by aerospace, aviation, and things like that, and hopefully find a goal and follow their dreams. so Wings Museum is something that we support.

Mike Zlotnik (04:47.926)

Yeah, that's a wonderful cause. the fact that you got kids involved, it's also great. It's kind of funny. People get their kids involved in sports. Christmas day football, was watching Dallas Cowboys are playing and M.F. Smith, it was on and he was talking about how he's involved with his son now playing for a different school. He comes from Florida and his son plays for Bulldogs. It was a very interesting, but it's a family tradition.

James Reeman (05:14.508)

Yeah.

Mike Zlotnik (05:16.93)

Your family tradition is football. Your family tradition is flying.

James Reeman (05:20.639)

It's great and I know your kids are active. You've got an ice skater and you know it's a fun time in their lives when you get to see them following their passions.

Mike Zlotnik (05:29.944)

Well, my girls are skaters, but there is no family tradition there. People ask me, if I skate, I tell them, listen, have you ever been to circus? Well, the old circus. Have you ever seen bears on ice? That's me.

James Reeman (05:33.921)

Hahaha!

James Reeman (05:41.89)

That's funny. That's funny.

Mike Zlotnik (05:44.056)

So let's talk a little bit about flying and investment. How do you think about investing and flying where you cannot afford a catastrophic scenario? How do you, just curious from the eyes of an investor and a pilot.

James Reeman (05:55.778)

Well, I... Sure.

James Reeman (06:01.846)

Yeah, well, I think it's risk management, right? And I know that that was a popular term decades ago and it's still it still is now. One of the things we brief on every every flight, Mike, are the threats. So a basic fighter pilot briefing, I still use that format in the airlines. We identify our objectives. We go through a little bit of the plan of how we're going to execute. We talk about some of the contingencies. And then one of the most important part of the briefing is identifying the threats.

What are the common errors? What are the things that could make this go wrong? And then the most important part of the threat brief is not just identifying those threats, but then how are we going to mitigate them? What are the steps we're going to take if we hit that fork in the road and things start to go a little sideways? How are we going to delegate responsibilities, take care of the passengers, and get that airplane safely on the ground? And only through a proper debrief,

briefing and debriefing. I'll get to the second part later because I think it's the most important. Are we able to kind of trap those errors early and hopefully get on a path to a safe landing for us? And investing, it's mitigating, you know, what is the return you hope to get, but also you've got to identify the worst case scenario because not everything is always going to go as planned, right?

But, I think, and you do this in investing as well, the most important part of any mission that we fly is the debrief. If everything went perfectly well, I still spend a few minutes in that cockpit after the flight before I go out and hand out wings and say goodbye to the, I miss a few first class passengers by doing this, which I hate to do, but I go, hey, what went well today? What could we have done differently? And what did we learn? What mistakes did we make?

that we can learn from so we don't repeat those. And that format has actually been borrowed by the medical industry, surgeons and fighter pilots, and maybe big shot investors. You we have some egos, right? And so we don't always like to debrief. We like to rush to the next project. But I think a thorough analysis of how did things go today, even when they went well, more importantly, when they didn't, helps you get better each time so you're refining your process. And so I think there's some wonderful

James Reeman (08:24.266)

parallels and you can even measure those private versus public markets, you know and and things like that but taking a mistake you make trying to learn from it so it doesn't get repeated I think is a really important part of the process.

Mike Zlotnik (08:29.825)

and take my time.

Mike Zlotnik (08:38.637)

James, it's so wonderful you say this. This is the most profound mental process in continuous learning. And I'm working on my second book. And part of the book, I talk about chess. I'm a chess master. I grew up playing chess. And what? In chess, you do exactly the same thing. You prepare for the game in advance, thinking through who you're playing against. And you're basically building a game plan.

James Reeman (08:54.73)

Okay.

Mike Zlotnik (09:05.771)

And you have a flight plan. You're going to know what's going to happen. At least you're going to prepare for possibilities. And after the game, no matter what you do, just like you do with debrief after the flight, it's critically important to go over what just transpired, go over the game, how it went, what mistakes were made, and what did you learn from this? And if things went well, why did it go well? And the same is true in investing. Mistakes.

or issues or challenges or headwinds are inevitable when they happen. What do you do about it? The only thing you can do about it is learn. And to learn, you have to go through analysis and think through what transpired and how you reacted. I can imagine as a fighter pilot, not only what's happening, but how you reacted to what's happening is just as important.

James Reeman (09:55.026)

You know in an f16 it was a little more deliberate

potentially than at the airline because it literally was life or death. in combat, our briefings were pretty concise. We did a really good job of having standards and a little bit on leadership because I know you work with teams too. I found out that fighter pilots are not the best leaders and I'll tell you why. There's a little caveat on that. But the 30 or so guys I would deploy to combat with, we knew each other really well and we were pretty similar.

A lot of guys were, as you would imagine, the high school quarterback or the student body president, no shortage of confidence and egos. And so when you went to give a pep talk, it was almost like you were talking to the mirror. It wasn't that challenging. You didn't have to tell these guys to wear their uniform correctly or to get into shape. They were motivated, disciplined warriors. And when we would brief, sometimes we go, hey, today, everything is standard, per our standards.

you know, here's a couple of threats for today, but it's like, we could be really concise. And I know that in investing, sometimes there's time critical situations where you have to act upon an opportunity and you don't have time to maybe cover all the details. We would still debrief thoroughly. Fast forward to a big change. When I started commanding a space squadron, I hired and stood up 150 people organization of every

ethnic background, racial orientation, sexual orientation, and I loved and respected these people so much, but I really had to learn to listen because they didn't think like me. So it wasn't this efficient combat type scenario, but the collaboration was much more, was better. Because when you're with a bunch of people that think like you, and I'm sure Mike, when you go to your biggest fans, they go, hey, everything you're doing is great. That's not the best feedback you get. Sometimes it's somebody who comes at it from a completely different angle, something you didn't think about.

James Reeman (11:52.165)

on that it can be better but there's pluses and minuses of both those organizations in combat give me the guys that think like me because it's more efficient right in peacetime give me that diverse group where we struggle a little bit more come up with better ideas and so i know that's a little bit of a tangent but i know it you can relate to that in in investing as well as you work with different teams and different situations where it's more time critical or less time critical

Mike Zlotnik (12:20.31)

Yeah, this is so impactful. You never want the S man. You want meritocracy of the best ideas. Merit wins. The best ideas win no matter who they come from. And as a leader, recognizing the best ideas and best people that that's that's leadership, right? That that's important to be able to enable the organization to function well in its diverse environment. So and what is Space Corp? Sorry, I'm like dinosaur living in the current age.

James Reeman (12:46.644)

Yeah.

Mike Zlotnik (12:48.238)

versus i guess you you are a fighter pilot and then you go space space corpse you i guess it's part of the military i assume you went to outer space

James Reeman (12:55.997)

Yeah. So for a long time, there were five branches of the military, right? You had the army, the air force, the Navy, the Marines and the Coast Guard. And a few years ago, the Space Force stood up. And of course, everything today gets a little over politicized. So because of who the administration was at the time, it got some press, I think, that distracted from it. But the best way I can explain Space Force is in the late 40s, shortly after World War II.

The Air Force decided that they needed their own branch within the United States. And similar things actually happened in the Soviet Union. They were very much in parallel as they moved from World War II toward the Cold War era. The Air Force was owned by the Army. And so the generals in charge, every time they had an extra nickel, God bless those tank driving, cavalry, rifle fires, they wanted a better tank, not a better airplane.

So they decided that the Air Force needed its own identity, its own leaders, its own uniforms, its own path to progression so that aviators could make aviation decisions. Well, for the past 50 years, space has been a very important part of the military. And everyone wants space to be two things. You know what? My friends want space to be Mike. They want it to be Martians and manned space travel. It's neither of those, unfortunately.

Mike Zlotnik (14:19.182)

Ha

James Reeman (14:20.853)

The people that want it to be that want it to be really bad. And anything is possible, but I'm telling you that Space Force has to do with satellites. And there are satellites in low Earth orbit, medium Earth orbit, and high Earth orbit. Low Earth orbit is like imagery and stuff going on around here. Medium Earth orbit is like GPS and other stuff. And then high Earth orbit is spy satellites, things that like the Soviets that hang out over ours and China's hang out over here.

Mike Zlotnik (14:45.687)

and then go with profits.

James Reeman (14:48.348)

All of that stuff's really important, very complex. However, it was run by the Air Force. So these pilots, every time space needed something, they got secondhand material. They didn't have their own paths of progression, their own uniforms, their own leadership. So a half a dozen years ago, they decided to create their own branch. And of course, any time you do something new, it creates challenges. So when my boss came to me and goes, hey, you can't fly airplanes forever, even if Peter Pan is your role model.

We want you to be a commander for Space Force." And I said, you know, I have a business degree, not an engineering degree. But what they really needed at that point was somebody with people skills. And I have a passion for that because these very cerebral, smart learners didn't have the camaraderie and the connectivity the fighter pilots had. So as soon as they were done with their commitment to the military, they left for Lockheed, Raytheon, all the civilian companies.

Those of us that stayed in the military for long time, we didn't do it for the Jets. We did it for the camaraderie, the friendships, the connective tissue we had with the brothers and sisters that we served with. So my job was to help instill that. And I don't know how I did. I got a bunch of messages today from kids that I used to command that I think appreciated the effort I put forth there. But what we tried to do, and they're doing better all the time, was create a branch of the military where they have their own identity.

They felt important. had their own path to progression, their own budget. Still growing pains with that because it is the largest domain. If you think about land, sea and air, space is the largest. And satellites and everything they do, I'll give you, if I've got time, I'll give you one quick space story that you'll appreciate. So people are like, how important are these satellites? I'm gonna go, well, we did an exercise one time called a day in the life without GPS.

Mike Zlotnik (16:35.503)

Go ahead.

James Reeman (16:43.847)

And people, they go, GPS won't work on your phone, so you can't navigate on your phone, use a map. I go, no. Every one of those GPS satellites has an atomic clock. You probably know a little bit about internet security, Mike. What do they use? What's one of the main things cybersecurity uses to secure everything? Timestamps. Every credit card reader, stock exchange, gas pump in the world, if you didn't have GPS, would stop working.

you basically have the cash in your mattress. So all commerce would stop. And so those satellites are not very well protected by the way. And so one of our peer adversaries could hold that at risk. So there's a lot of important stuff going on up there. It's not as exciting as flying jets at Mach 2 upside down and blowing things up, but it's really, really important stuff and a very evolving part of our military. So there's Space Force 101.

Mike Zlotnik (17:37.55)

Yeah, that's right.

I appreciate you sharing this. There's a lot of wisdom here and I didn't realize that all the credit card readers around the world and number of other technologies wouldn't function. But wasn't a blackout in San Francisco just a few days ago and as a result, a whole bunch of cars stopped, they couldn't navigate. I remember blackout in New York City. We live in the world. When you turn off electricity or you turn off this critical system, everything comes to a screeching halt. It's almost like we go to a Stone Age.

At least it feels this way.

James Reeman (18:11.744)

Yep, it's very true.

Mike Zlotnik (18:15.407)

It's very, very important what you do and what you did. So back to the commercial aviation now and investing. And I know you work with other pilots for Delta and you coach them, you do some mentorship. So again, comparison to investing to the best of your ability, you're an investor. So how do you think about coaching younger pilots on both? How to be a better

James Reeman (18:44.294)

Yeah, well, so my my my official role, I'm a line check airman. And so what that means is I I train the new pilots and then I also give periodic evaluations to the experienced pilots. But some of these flights are six to eight hours long, right? And so you can cover the aviation stuff in the first hour. And inevitably, we end up talking about money, life skills, things like that. And one thing we learned early on, don't take investment advice from a pilot. Right. But

Mike Zlotnik (18:45.071)

and how to be a very

Mike Zlotnik (18:57.987)

replace the 16.

James Reeman (19:13.318)

The very general advice I try to help pilots understand is their number one expense in their lifetime is W-2 wage earners is going to be taxes. And that although the market has been on an incredible run for the past 15 years with a little maybe pause around COVID, it's good to mitigate your risk by exploring alternative investments. And I don't give a lot of specific advice, but just encourage them to be open. There's some good podcasts and

Financial education is something that's not taught very well in our schools. And I'd be interested how in Moldova, I think we take so much for granted in the United States. But when you grow up in a different part of the world, sometimes security and risk mitigation, when you don't take it for granted, you're a little more disciplined, I think, with your approach to things. So I try to teach some of these soft kids, if you will, that you need to pay attention to financial education, taxes very specifically.

and finding different ways where you can not necessarily hedge, but diversify your portfolio so you're prepared for a long game. Because aviation is pretty well compensated right now. It's a cyclical industry, but we're in that doctor lawyer category where you can make money. But if you don't pay attention to where it goes or how much of it goes to taxes, you end up not being well prepared for the long game. So I don't know if I'm touching on some of the spots, but that's kind of how I

give them general advice about investing.

Mike Zlotnik (20:44.943)

Well, you're stimulating thinking, You're stimulating thinking, you're stimulating important areas. Obviously, it's not what you make, it's what you keep. Alternative investments versus kind of the Main Street versus Wall Street and being exposed to things that are not taught in schools. again, I grew up in Moldova, former USSR.

Very different world over there. You were expected to be you know a doctor engineer and never worry about finance and the government essentially owned everything right you come over here even here in school schools You're not unless unless you're studying finance unless you go into business and finance you're studying medicine You're studying to be a pilot you're studying to be an engineer or a computer programmer or Now AI you're not being taught how to manage your money how to invest

James Reeman (21:17.295)

Right.

Mike Zlotnik (21:39.151)

You're being taught how to be a good or a great professional in whatever your profession is, which is important. But at the same time, the rest of the education happens in the hours that you're not flying a plane or hopefully it is. You're learning something while you're flying a plane. But it is something that we all learn through other interactions. And my two cents and...

We'll see just a custom the soul for many many years that it has been very easy And and it's simple and people have invested over the 401ks and all these automatic savings mechanisms are great, but at the same time There are bulls and bears and the markets turn and you We see a group like you saw like you said we had a great bull run and I have a friend who uses this fancy term Which I strongly believe called reversion to the mean

things do revert to the mean. So when you get too ahead of where reasonable return should be, corrections do come in and the markets do have, they are at the whim of the mood. And if the mood changes, you're optimistic to fear, things can suddenly get very different and alternatives are great or good for diversification, for having predictable income.

James Reeman (22:54.775)

you .

Mike Zlotnik (23:02.255)

So just let's go on this topic. So how do pilots think about investing or at least in a new experience? And I guess it's a function of where you are in your career. If you're about to retire, maybe more focused on income versus if you are on an earlier stage, maybe you're trying to grow your nest deck, tax efficiently. Just curious again, we had many folks in a podcast. We've had nobody.

like you as a fighter pilot, not just a fighter pilot, but a commercial jet pilot. And I fly Delta. And when we spoke, when we flew together, I was just so impressed. are one of the most tenured senior captains in the fleet. so just give me your perspective on investing. What do you like and what do other pilots that you've talked with without giving any financial advice?

James Reeman (23:32.336)

Okay.

James Reeman (23:41.493)

Yeah, that's how we met.

James Reeman (23:56.311)

Yeah, well, that's a great question. I think we're doing a better job of educating folks at Delta and most of the legacy carriers. So legacy would be Delta, American, and United, the big three. But even Southwest Frontier and some of those, the 401k is a defined contribution plan now. There's no pension anymore. And so whether you like it or not, 17 to 18 %

per month goes into your 401k. know, opinions vary greatly on that, but most people are in pretty traditional index funds, S &P 500, things of that nature. Some people will treat it a little bit more like Vegas, but that's for the most part the primary investment vehicle for a lot of pilots. And if you do it intelligently, as your income goes up, you hit the 415C limit pretty early.

And then Delta, a couple of years ago, you used to get then just after-tax cash, instituted a market-based cash balance plan, which is managed by somebody else, and it's a modest return, but it allows then any overflow money over the 415C limit to go to that, which I think lawyers and other doctors, other high-income earners have used for years. The challenge is almost all of that, depending on, you don't have a lot of flexibility where that goes.

And that's why, you know, after talking to you and I listened to a passive income pilots podcast where they do self storage, some things like that. I started exploring more alternative investments, you know, private equity type stuff, because I don't want everything exposed in one area, which you kind of end up there, whether you like it or not, when your main vehicle is a 401k. So those are some of the things. The other nice thing about aviation is that when you're at work, you're at work.

Like I'm at work right now, I won't show you the pool in the background there, but when you're home, you're all the way home. So a lot of pilots do pursue other businesses, opportunities, money making, sometimes money losing ventures, real estate and things of that nature. So you end up with a pretty diverse group, some of them that have become pretty well educated on investing and alternative investments.

James Reeman (26:16.206)

I know that's a little broad answer, but it's a unique category, I think, of earners and investors because it's a pretty well-rewarded career profession. yeah, there's good advice and bad advice that comes from other pilots, so I always kind of take that with a grain of salt. But we're in a position to take good care of ourselves and our family if we pay attention.

Mike Zlotnik (26:42.255)

Well, James, so this was so wonderful. You mentioned so many things that I wanted to kind of just touch a little bit. So for one, obviously diversifying outside of the Wall Street, going into alternative. You mentioned traditional vehicles, the defined contributions plan. You also mentioned cash balance plan, which is a phenomenal, phenomenal tool for folks to be aware of because it actually works. We use cash balance plan.

It is a mix of the old school defined benefits plan versus defined contributions plan. So cash balance plans are great for folks, especially if they have a business and they're able to contribute. But what's really fascinating is that you don't have to go just to Wall Street. You can actually have a cash balance plan and have a non-traditional account. And some of the major players like Charles Schwab or Fidelity's can set up these accounts.

and manage them and you can invest in alternatives. So I just wanted to add to what you said, if folks are creating or created or open to having a cash balance plan, they could set up to invest in alternatives. We do that all day long. We invest in real estate and what we understand. So all I could tell you is that it exists. it's a great recommendation or at least you mentioned that concept.

James Reeman (27:42.328)

That's great.

James Reeman (28:03.019)

I'll have to figure out, I currently don't think we have flexibility to do much with our market-based cash balance plan. at one point we retire and then we can do whatever we want with it. But yeah, it is something I think that is managed internally.

Mike Zlotnik (28:09.613)

Because it's delta, right? It's part of delta, is that?

Mike Zlotnik (28:22.215)

My hope is, let me just add this comment. My hope is President Trump mentioned allowing 401ks and maybe cash balance plans. He didn't say cash balance plan, but the 401ks to invest in alternatives like real estate or private real estate, not just publicly traded. That's exactly the case. When you're dealing with a plan that's been around for many, many years and managed by a large company and their appropriate administrators and managers, it's very difficult for them yet

James Reeman (28:37.836)

Yeah.

Mike Zlotnik (28:50.809)

to make any changes and offer alternatives. But I think over time, give it enough time, I am pretty sure you'll have some options or other firms will have options where it's not just the Wall Street products, not the mutual funds and individual stocks. There's gotta be some options on alternative investment.

James Reeman (29:09.557)

Yep, I couldn't agree more because you don't want to your hat just on that one hook because corrections do come and I definitely think that we're a little overdue and it's nice to have your assets spread around a bit.

Mike Zlotnik (29:27.087)

Yeah, this has been amazing. It's kind of, I don't know how to say it, but I'm just so impressed and so fascinated how, I mean, your story, how you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've, you've

for anyone listening. don't have to be a pilot to benefit from these ideas. You could be a business owner, could be a doctor, you could be a computer programmer, you can be anybody. These concepts actually super applicable. So thank you for sharing your wisdom. Any final quick thoughts, any great book, any just kind of whatever comes to your heart.

James Reeman (30:12.133)

You bet, Mike.

James Reeman (30:20.46)

Sure, sure. And I do want to close with one thing, and you helped remind me this the other day, is that I got a text from you saying, it's the holidays. Do you have a charitable organization that you're a fan of? We'd like to make a contribution. And it really helped me think about my evolution. I'm in my mid-50s now, and I try hard to stay in shape. It's part of my routine. also, my focus has changed in recent years. I think what got me through my first half of my life was like,

passion and discipline and goal setting and all that stuff. But I think what you find, and investing's a big part of this, as I've matured trying to find ways to be service oriented, generous, and practice gratitude, I was confusing achievement for fulfillment, always seeking that next dollar, that next leadership position, and finding ways, if you do well investing, and if you do well in other ways, simply to be generous and to give back and service.

the rewards from that are much more lasting. And I think you and the folks at Tempo really set a great example of that. And it makes me feel really good about being associated with you and getting to know you better and being on the podcast and just being able to do this over Christmas is super meaningful. And I appreciate it a lot. If people want to learn more about me and some of the aviation mentoring we do, I have an Instagram and a website.

If it's appropriate to mention it, I will. If not, I'll save it for another time. Yeah.

Mike Zlotnik (31:48.397)

Go ahead, please, Yes, mention the charity, how folks can reach out to the charity, to the wings over the Rockies. And then your website, absolutely, please.

James Reeman (31:55.092)

Yeah.

Yeah, the easiest way to find me is on Instagram. I don't know how I managed to land this back in the day, but my Instagram is F16pilot. So I'm the one and through there that connects to a link tree that has all my service organizations and other things I do. And anything I do in those endeavors, the little bit of money I make, which is not much, I put back into the charitable organizations that I support. So there's stuff in there about travel fitness and

wellness and different things that you can do to be a smart traveler, as well as how to stay fit on the road, and then some stuff on service and contribution as well.

Mike Zlotnik (32:38.096)

Thank you, James. And I do want to mention the website for the Wings Over the Rockies. I'm looking at the website. It's a wonderful website. It's a wonderful mission. It literally wingsmuseum.org. So let folks...

James Reeman (32:44.37)

Okay.

James Reeman (32:50.654)

Yep, wingsmuseum.org, yep. And we do a lot of great work for young people there and trying to find ways where we can connect kids with a goal and so we can ignite their passion and hopefully they end up loving their job as much as you and I love our jobs, right?

Mike Zlotnik (33:08.282)

Find the job that you like enough to work a day in your life. Find a passion, right? And so getting people involved passionately makes... And a final comment, I appreciate your spirit of giving. There's nothing more rewarding in life than helping somebody. I learned it from my mother. She passed away close to two years ago. And all her life she was a giver. She was just trying to help people. And it's not about...

James Reeman (33:13.328)

Amen to that.

Mike Zlotnik (33:36.34)

your accomplishments. It's about helping somebody else, whatever little help you can do. If you can do great help, wonderful. If you can do a little bit of help, that thinking just moves you forward. And that's the best way to go through life. And some people discover it early in life, some people discover it later in life. Every time I hear this, I kind of remember my mom, how she lived her life. And this has always been kind of a guiding light.

If you don't know what to do, help somebody. That's the easiest way to think and being associated with a wonderful charity is a great cause. Thank you for doing that and thank you for your service. It's so awesome to have you on a podcast. This is a wonderful episode. Thank you, James.

James Reeman (34:21.999)

All right, Mike. Hey, Christmas to your family and best of luck in 2026. I look forward to working with you.

Mike Zlotnik (34:28.292)

Merry Christmas and likewise._______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

Join Big Mike for a deep dive into resilient multifamily investing and life's bold pivots with Gino Barbaro, co-founder of Jake & Gino, a real estate education platform. With a self-funded portfolio exceeding 1,800 doors and $350M in assets under management—mostly in Tennessee—Gino transformed from a New York pizza shop owner to Florida-based family man, driven by a vision for his six kids' future amid skyrocketing Northeast costs.

From his 2017 migration south for affordability and freedom (echoing today's exodus trends) to spotting DeSantis' game-changing property tax cut bill, Gino shares why Florida's "last stop" vibe is now a launchpad. Delve into his Knoxville origin story: snagging deals at $35K/door in 2011-12 fear, holding for explosive rent growth (from $300 to $1,100+), and balancing value-add grit with stable new-builds at near-1% rules. He breaks down today's "Jesus moment" for overleveraged owners—flat rents, oversupply, and the $1.5T debt wall—while urging disciplined underwriting, capacity checks, and patience for 2025-26 bargains.

Whether navigating builder distress, Fed delays, or post-QT liquidity waves, Gino's no-BS wisdom on cash flow, operations, and long-term legacy will arm you to surf market cycles like a pro. If you're eyeing contrarian plays or family-first freedom, this is your blueprint—raw, real, and ready to deploy.

HIGHLIGHTS OF THE EPISODE0:00 - Welcome to the BigMikeFund Podcast

0:19 - Welcome and Intro: Gino Barbaro

0:48 - Family Move: NY to Florida for Kids' Affordability

1:50 - Migration Trends: Southward Shift Post-2010s

2:47 - Location: St. Augustine's Small-Town Appeal

4:15 - DeSantis Bill: Eliminate Owner-Occupied Property Taxes

5:43 - Multifamily Focus: Tennessee Portfolio Origins

6:00 - Early NY Struggles: High Taxes, Poor Pencil

6:34 - Meeting Jake: Knoxville Entry in 2011

7:05 - Low Prices: $35-40K/Door in Fear Market

7:41 - First Deals: Hold Long-Term for Rent Growth

8:48 - Market Cycle: Buy in Fear, Patience Pays

10:45 - Supply Surge: 92% Occupancy, Concessions

11:44 - Debt Crunch: Sellers' "Jesus Moment" at 4-5 Caps

13:13 - 12-24 Month Window: Debt Resets Create Deals

13:36 - 1% Rule: $100K Door Needs $1K Rent

15:04 - Newer Assets: 2024 Build at $180K/Unit

17:04 - Portfolio Balance: Value-Add vs. Core Plus

18:16 - 2023 Lesson: Overcommitment Stressed Infrastructure

19:13 - No Deal Better Than Bad: Fit Business Plan

22:15 - Builders' Habits: Overbuild Leads to Distress

25:03 - Risk Tolerance: Buy Stable Over Build Speculative

27:08 - 2026 Outlook: Motivated Sellers Clear Supply

28:44 - Fed Delay: Wanted Failures, Late on Cuts

29:51 - Rate Drops: Spur Activity, Pencil Deals

37:42 - Connect with Gino

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: http://jakeandgino.com/

Full Transcript:Mike Zlotnik (00:01.915)

Welcome to the Big Mike Fund podcast. I'm the Big Mike, Mike Zlatnik, and today it is my pleasure and a privilege to welcome Gino Barbaro. Am I saying it correctly?

Gino (00:12.204)

You are saying it correctly, yes.

Mike Zlotnik (00:14.599)

And he hails from sunny Florida. He's got a sizable multifamily portfolio, over 1800 doors, 350 million aum. And it's mostly his money, not investors, which is very impressive. Welcome to the show.

Gino (00:32.588)

Mike I used to hail from New York and now I hail from Florida. I'm doing good brother how you doing?

Mike Zlotnik (00:37.415)

Doing well. Appreciate you coming on a podcast and we're in Florida and tell us a little bit about your family. You have six kids, so you're busy.

Gino (00:46.478)

Well, that's the reason why I moved to Florida. I had five kids at the time and I'm living in New York. I used to own a pizza shop, a little restaurant up in Potnum County. It's about an hour north of the city and I loved it there. I was in business with my dad for years and I saw back in 2012, 2013, the inability for my kids when they get older to buy a house in New York.

That was the reality. I could live there. I could pay 30 grand in taxes. I could suffer the winters for a little bit more. But I'm like, my kids got no shot up here. And that was the reality to me. That was the gut punch to me that I had lived there my entire life, and that my kids would struggle living there. So I decided, where do I go? Where can they afford to actually buy something? Where is it? Where's there more freedom? Where's there more flexibility? And where's their warm weather? And that's how I ended up in Florida back in 2017. And

I think there's gonna be more of a flight to Florida if you see what's happening in New York. And it's just very interesting what's been going on over the last few years with migration patterns and all. Whereas 30, 40 years ago, if you said you're moving down south, people thought you were absolutely nuts. There was no education down here. The talent pool of people working was not what it was. The infrastructure wasn't great. And it's just incredible to see what's happened in the last 10 to 15 years down south, Mike.

Mike Zlotnik (02:01.338)

Yeah, that's the truth. People used to go to Florida just to retire. Now they go to Florida for quality of life.

Gino (02:03.734)

Mm-hmm.

Mike, my dad, my dad used to say it's the last stop. That's what he used to say. And he actually sort of half retired six months, New York, six months, Florida. And that was back in oh five. And I remember him saying that. And I'm like, wow, I guess this is the last stop for me as well. But I mean, it's it's it's been a good transition. I'm praying. I'm praying it's a long stop. Yes.

Mike Zlotnik (02:23.59)

That's all, it could be a long stop, right? It could be a long stop.

Mike Zlotnik (02:29.85)

So which part of Florida just the.

Gino (02:33.016)

So it's interesting, Florida, 80 % of the population is below Melbourne. If you go to Melbourne, Florida and go south, that's where 80 % of the population is. That's where most people think, especially New Yorkers. New Yorkers go to Boca, they go to Delray Beach. I decided to go to North Florida. I wanted it a little bit slower. I wanted seasons like today, 75 degrees outside. It's beautiful outside. I'm in St. Augustine. So I'm about maybe two hours south of the border and I love it here. It's great to raise a family.

The cost of living is great. The quality of living is great. Down in South Florida, it's amazing. The opportunities are incredible. It's just really crowded down

Mike Zlotnik (03:11.62)

Yeah, it's the oldest official town in United States. think it was what founded somewhere in the

Gino (03:15.502)

Yes. 1565. Yes. Uh huh. Incredible.

Mike Zlotnik (03:20.784)

I've been there. It's a wonderful, it's different. It's definitely different. It's not a destination like Miami or Tampa. It's just a small town America and it's a very, very different experience.

Gino (03:34.592)

Yeah. If I would say to the listeners, if anybody's ever been to Charleston or Savannah, it's a small Charleston. It's a small Savannah. That's the feel that I get. And that's why I chose it. It was really affordable at the time by household. Things have escalated a lot. no state income tax, property taxes are a lot less down here. So for us, it was just, it was just a great fit.

Mike Zlotnik (03:55.685)

Yeah, and I hear I another guest on a podcast previous recording last week as the sentence is floating a bill to eliminate property taxes for owner occupied. That's

Gino (04:07.502)

It's incredible because he's got to get that on the he's got to get that on the balance. He's got to propose it. So he's got to get 60 % of the people to vote for that. I don't know who would vote against it. It's incredible. Like he got Doge out there and Doge has found over a billion dollars of wasteful spending and only three counties. If he lets that thing go wild, he's going to find out so much waste and people are saying, well, where are you going to find the money? You find the money by becoming more efficient and by actually getting in there and cut

Mike Zlotnik (04:14.697)

I'm sure people will vote for it.

Gino (04:34.51)

wasteful spending and start using AI to start replacing a lot of the a lot of the inefficiencies in government. And I think if he allows if he does that, you know, many people would move here just because of that, just because they have like they actually have their ownership, they own their own home, but not having to pay taxes for the next 10, 15, 20, 30 years, that would be incredible, revolutionary. And I hope other governors start to look at that and start adopting that type of mindset.

Mike Zlotnik (05:02.138)

Yeah, it's a very pro business. You cut the taxes, more people move, the GDP of Florida grows and he'll make up on the consumption tax and other ways to, and obviously, dodge, he'll find inefficiencies and waste. So, interesting. That's very fascinating. But let's move forward and talk a little bit about multifamily. So this is the business you're in and most of your properties in Tennessee. How did you wind up?

Gino (05:12.962)

Yes.

Gino (05:17.953)

Mm-hmm.

Mike Zlotnik (05:30.778)

Building a portfolio of multifamily properties in Tennessee. Why Tennessee? And yes, let's start there.

Gino (05:36.961)

It's a great question. When I started, I was in New York. I tried to buy stuff in my backyard. It just didn't pencil. mean, up in New York, the taxes were too high, the insurance was too high, and I was starting smaller. So then I decided, hey, let me go up into the upper part of the state. So I decided to go into Rochester, New York. And I didn't know. I wasn't an inexperienced investor. I was just looking for deals. And that was the reality. And I was looking at high cap rates, high cash flow. But with that,

You got old buildings, got a lot of capex, you have tenants that are really not the greatest tenants in the world, a lot of Section 8. So I started getting burned out with that model. I said, I want to go somewhere where I can find value, I can have some cash flow, and I can have some capital appreciation. I wanted a little bit of both. And when I met Jake, he was the pharmaceutical rep that used to come to the restaurant, would take out orders from the restaurant, catering orders, and go to doctor's offices.

And he got burned out doing that back in 08, 09, you know, Obama came in with the Sunshine Act and health start, healthcare started to change. So he's like, Gino, I want to get into real estate. said, Jake, I know you're moving to Knoxville, Tennessee, and this is when he moved back in 2011. When you get down there, let's start looking at deals and deals back there. Mike, we're 35, 40 a door. They were so inexpensive back then. But you have to remember back then nobody knew where Knoxville was. There was no institutional money back then. Rents were really suppressed.

You couldn't raise capital back in 2010, 2011. GDP sucked. Everyone was afraid. So when you go back to that, you go, oh, wow. Okay, that's when you should have bought. Everyone was exiting. Everyone was leaving the economy instead of like going into it. And it's sort of what's going on right now. People are afraid. If you could buy deals below replacement right now at the debt that you're getting it at, and you can hold those deals, the next couple of years to me are going to look really good. And that's what happened to Jake and myself. We finally

jumped in, found the deal after 18 months. Three months later, we found another deal. And then six months after that, we found another deal. And we were just fortunate to be in the right market at the right time. And we were able to buy these things at price points. But more importantly, I think I need to add this as well. We didn't just flip out of those deals. We still hold and we still own the very first deals that we bought. They were incredible. We've been able to refinance them and repurpose the money. But I think the key to this business is buying a good asset in a good market.

Gino (07:55.353)

that if you can hold for the longer term and get that rent growth and get those tax benefits and get that and be able to hold it and be able to build a business from those assets, that's when you start making money in this business. Because when we took over, like I said, rents were 300 bucks for that little crappy 25 unit property we bought. But fast forward to today, we still own it. And rents in that place were $1,100 plus rubs. So you can see how much they've exploded in the last 10 or 12 years, but you just need to have patience.

And you need to be able to operate these assets as well.

Mike Zlotnik (08:28.378)

Yeah, that's a lot of great nuggets. So just to recap, it's the market cycle nugget, right? We bought it right after the market reset and the fear was high. There were very few people who are doing this. These properties were trading at the insane discount and yeah, these were not popular markets. We were moving against the current. You were not doing what masses were doing. You were doing exactly the opposite. And that's how you found the best value.

Gino (08:52.121)

Yes.

Mike Zlotnik (08:58.278)

And then the other nugget is Yeah, patient and it is an operating business Multifamily is one asset class that is it is not a It's not a car wash. You're not running an active where you're not a senior living facility But it's still a pretty significant operating business where you have tenants and toilets and you have to be able to service these properties deal with customer service and issues, so

It's kind of, but the pendulum swings to the extremes. We've seen extreme greed now, there's extreme fear and exactly the right time to consider going back into the strategy. If you can get the right deals. So today it feels like, I think right after 2008, nine interest rates were also very low and the market reset, the Fed cut rates to stimulate the economy with the economy went through a severe recession and you had.

Gino (09:41.634)

Mm-hmm.

Gino (09:49.529)

Mm-hmm.

Mike Zlotnik (09:55.911)

not only very low prices, but very cheap money. So the timing was almost perfect. Are you seeing the same opportunity now? Are we kind of at the bottom of the cycle? We still need some more time to basically inventories are building up, distress is building up in the system because a lot of people bought lots of multifamily in 21, 22, and that was the peak. Now we're sort of at a very low point.

Gino (09:58.723)

Yes. Yes.

Mike Zlotnik (10:22.256)

But the rates are still still at the elevated level. So it's not exactly that, that easy and cheap. What do you think?

Gino (10:27.791)

It's interesting. Right now we're seeing a lot of supply come online. I don't think supply came online back in 11 and 12. I think builders stop. That's the weird part right now that you're getting the supply and there's there's assets being absorbed. That's the good part. But it's taking time. occupancies dropped around 92 % in our market, which it was 95 96 and economic occupancy in our portfolios at 90%, which is traditionally very low because we're fighting for those higher assets, those assets in the A's.

that have just come online, they're giving these massive concessions. And that's the weird part. I'm trying to figure it out. And as you know, real estate is not national, it's really local. And it can even go down into neighborhoods from neighborhood. So as I'm saying this, somebody in another market may say, hey, like Rochester, New York, believe it or not now, it's hot, because they don't have any supply. I mean, there's nothing being built up there. And of course, whatever product you have, they're fighting for that product. Whereas in our market, we've had hundreds and hundreds of new units come on. The other thing

If you go back in 2011 and 2012, that's very similar to right now. Back then it was harder to get debt. I think debt, as I like to say, is the circulatory engine of the economy. And as right now, it's a little bit harder to get debt. So if you can't raise money and you can't get debt in a deal, these sellers have to come to this Jesus moment, as I like to say, is their assets are still 20 to 30 % overpriced, especially on these old 60s asset builds. They're still asking four and five caps.

When interest rates are six, I don't want to go into a deal right now in this part of the market cycle with negative leverage. I don't want to do that. That's the fear that I see. If I'm going to buy an old asset right now and take all the risk as rents, believe it or not, are either flatlining or they're dropping in some markets, I don't want to catch a falling knife and say, okay, I'm getting this deal. I'm going to underwrite this deal for the next two to three years. Be very careful of how you're underwriting rents right now. And also expenses, know, expenses have jumped up.

but I don't see expenses slowing down over the next 12 to 24 months. So don't go in with these rosy colored glasses and say, hey, I'm gonna get 5 % rent growth the next three years and my expenses are gonna be flatlined. Just be very careful. All that being said, I still think Mike, there is a great opportunity in the next 12 months with a lot of this debt that's resetting, a lot of these sellers that have to get out of these assets, a lot of these, you know, LPs, they're pushing the deals, right? It's constantly pushing, kicking the can.

Gino (12:50.223)

Those deals sooner or later are gonna have to matriculate. And I think that's where the opportunity is in the next 12 to 24 months.

Mike Zlotnik (12:57.166)

I hear you. I am completely in agreement with your point of view. But what are you seeing? What are you able to actually buy? Because you have an issue here of, I mean, we definitely need to have a positive spread between the cap rate and the interest rate. So the interest rates are at the elevated level. So you got to get really meaningfully higher cap rates. Otherwise, you're not getting a deal at all. So what kind of deals are you seeing in the markets that you're operating? And the

Gino (13:05.346)

Hmm.

Gino (13:15.684)

Yes.

Yes.

Mike Zlotnik (13:25.156)

You're still seeing downward pressure on rental rates and occupancy because of the oversupply, right? So if you're buying existing, you got to get a really good deal. What does a really good deal look like? Are you buying anything now? What do you like today?

Gino (13:29.293)

Yes.

Gino (13:35.682)

A great deal.

Gino (13:39.759)

For us, we're very simple when we underwrite because we're cash flow investors. We want to buy in profit per unit. We want to buy cash on cash. So if we can look at a deal, very simple the underwriting. If you're buying an asset for $100,000 a door, we'd like to see $1,000 in rents on that asset. I mean, that's the reality. It's so simple. But 1%, that makes a deal work. And then with these interest rates, then when rates drop, you can refi, great. But the problem is, we saw this Cardinal deal right now. Cardinal deals are

Mike Zlotnik (13:55.974)

Still 1 % ratio.

Gino (14:09.231)

pretty crappy deals. They're smaller property, smaller bills, 300 square feet, 600 square feet units, they get an amazing price price per rent on these on the square on the square footage of those things. But even those like they want like 100,000 a unit for a property built in the 90s. That is it's it's it's suspect you got to do roofs. And there's not much meat on the bone there. So if you're to buy an asset like that, you have to be on you have to understand what your exit strategy is if you're looking to buy that deal as a syndicator.

and flip out in the next three years, because you think you're gonna catch a wave. That's not the kind of asset you need to be doing it. Now for us, if we can get a lower price point, maybe in the mid 70s, per door, and we have like, let's say, 900 to $1,000 in rents, that makes sense to us. Because we can hold it long term, we can refinance some of that capital out, and we can continue to operate that asset. But to your point, you need to be careful right now, because in a lot of the markets, rents are flat.

And in a lot of the markets, in my opinion, rents are actually dropping and occupancy is dropping. So when you're trying to underwrite, it's so difficult. I've looked at, I don't know, maybe 10 T12s and 10 rent rolls in the last two or three weeks. Everyone's occupancy, the highest I've seen is 91%. I've seen a lot of delinquencies on these rent rolls and I'm seeing that occupancy is dropping. So just be very careful because that's the reality right now. And that's, think, the storm that's going on right now. And if you can hold on.

and you can find the motivated seller. That's what you're looking for. But for us, if we can buy a newer asset, anything newer, just, our last deal we did in April was a 2024 build. We bought it from a builder. We had bought two previous assets from him. 2024 build, we paid 180,000 a unit. Three bedroom, two and a half bath town homes, two bedroom, two bath town homes, rents are around 1,700 bucks a month. That deal works. Cause you walk into that deal at 6%.

You're getting interest only for two years from a credit union, right? You know rents, I think at end of two years are probably gonna get to 1800. They're gonna get to the 1 % rule, but it's such a great asset in a great market where there is rent growth actually. There's job growth also there in that market. It's a little bit outside of Knoxville and the CapEx requirements are none. It's a brand new asset. It's built really well. It's something where, if I'm gonna own this for the next 10, 15 years, it fits really well in my legacy thinking as well.

Gino (16:30.477)

And it fits well there because we already own two other assets. So we'll be able to strengthen our position in that market as well.

Mike Zlotnik (16:37.606)

So, Jean, let me just dissect what you said because the 1 % rule, you got a 1 % rule and almost just under 1 % on a new product, right? If you're buying an old product, have to be well above, well better than 1%. In other words, you said 70,000 per door and we're 70 something in the 70s and then you're trying to collect a thousand dollar rent, right? That's on an older product. On the newer one,

Gino (16:48.3)

and your new product.

Gino (16:55.776)

Yes.

Gino (17:04.825)

Yes.

Mike Zlotnik (17:06.918)

You said 180,000 adorning and the rent is 1700. You're almost 1 % on a new product, right? That means you're buying well.

Gino (17:10.287)

17, 1800, but the newer properties, that's phenomenal. It's phenomenal because they're easier to match. So the whole idea is when you're looking at your portfolio, what you're trying to do is you're trying to balance your own portfolio. There's gonna be some opportunities that are complete value add where you're gonna make a killing, you wanna work on the equity, there's so much upside. You can't continue to buy all those assets all of the time in your portfolio because you don't have the bandwidth to do that.

We have capex crews that are working on those assets that are older. This asset is a lot easier to manage. The managers love this because the resident base is higher. The median income is in the 80,000s, probably between 80 90,000. There's no capex. It's such an easy turn. So right now where we are in our portfolio, it also fits the strategy that we're employing. We have a little bit of value add going on over here. We have this asset that's stable. It's gonna cash roll for us pretty well. And over the long term, over the next two to three years,

We're not going to have to do a roof. We're not going to have to do a driveway. Decks are great. There's not much that's required to manage that asset. So that's what I'm saying. When you're looking at your buying ability, you need to understand what your portfolio looks like, what your requirements are. I mean, we got caught, Mike, back in 2023. We did 130 unit property in February. We did 105 unit property in July. And then we did 97 unit in December in 2023.

There were all three significant value adds. There was so much work involved. We had to hire so many CapEx members that it stressed us out. It stressed the portfolio out. I mean, like when you have like 300 plus units going on all at once, it's a lot of work to do. So when you're buying these newer assets, there's a lot less requirement from that end. And they're also also a lot easier to manage as well.

Mike Zlotnik (18:57.508)

Yeah, I really appreciate your brilliance here because you're really stating sort of the obvious common sense type of thing, but these things are not common. Capacity, ability to execute, bite what you can chew is critical. So if you bite more than you can chew, you choke.

Gino (19:13.155)

You know why, Mike? I'm gonna cut you off. I gotta cut you off real quick, I'm sorry. I'm gonna let you finish your thought. But it's common sense to me, because I have not been able to execute. I made those mistakes. And I'm like, well, why did I make that mistake? I outgrew my infrastructure. I've done it so many times. I've learned that mistake. And I'm just telling people here right now, just make sure that you, just because there's a deal out there and maybe you can execute that deal, can you execute the business plan of the deal? And if you can't,

No deal is better than a bad deal. I've learned that one as well. So make sure it fits your business plan. Make sure you understand what the exit strategy is. See, on some of these value heads, we can sell these things and make a ton of capital or we can refinance these things. On these newer assets, we're gonna hold them for the next three to five years. They're on credit unions right now. We're gonna push them off the Fannie in the next three to five years when rates drop. There's not really not much of a cash out potential, but it doesn't matter.

We're to be getting making between 8 10 % on a brand new asset that's easy to manage. So just be aware when you're trying to position and grow your portfolio, you may have to say to yourself, well, I can do this much with a complete value add. I may want to do this much. And by the way, what's wrong with investing passively in somebody's deal? If you've got excess capital and you don't have all the time in the world and you want to park some money in somebody's deal as a limited partner, there's nothing wrong with that.

You're really spreading your eggs around and you're not stressing your infrastructure out as well.

Mike Zlotnik (20:41.498)

Yeah, and I really like the element that you're adding to your value-add projects is a low value-add or very core, core plus type of a very stable new product fits, right? And that's a walk in the park. And it's kind of interesting enough, but the same token we're looking at, so triple net industrial. The easier the property management, the less aggravation you have.

Gino (20:49.561)

Mm-hmm. Yes.

Gino (20:56.11)

Yes.

Gino (21:03.094)

Yes.

Gino (21:07.812)

Yes.

Mike Zlotnik (21:07.878)

Brand new asset has that element or something that you're not involved with heavy Value-add improvements construction property management all those things are hard. Most people don't understand how hard it is But on the other side if you can if you can get that asset at the right price And it's just give it enough time when the interest rates come down. You're have way better cash flow on on the refi Yeah, so it makes a lot of sense. I I certainly

Gino (21:23.161)

Mm-hmm.

Gino (21:30.879)

yeah.

Mike Zlotnik (21:38.214)

I give you five stars for just real basic observations. If it's a hard value add, what's your capacity? And then if it's an easy one, get the right price. You need to get the right price on both of them. It's just the price is different from the older asset that means the word versus the brand new build.

Gino (21:43.137)

Mm hmm. Mike.

Gino (21:57.371)

And it's interesting the new build we're able to get it at that price because builders are creatures of habit. What do they do builders? They build and they build and they build and they build until they can't build anymore. And then they have cash flow problems because they're not really they're not really to me. They're not executing a business. They're just building. If they were able to map out their jobs and understand cash flow and understand personal financial statements and understand when there's cash flow coming in, great.

They have cash calls. You have two jets, you have a Bentley, and then you have a business, and then you have 30 projects going on. That's where the opportunities are right now. Now, is this going to be the same opportunity in the next six to 12 months? I don't know, but I think builders are at their limit right now where it's hard to lease up and they're not property managers. They don't want to lease it. It was easy to lease two and three years ago. You build a product and there's a lot of demand for it. Now there's a lot of product coming online all at the same time.

They're lucky and they're thankful they're just finishing this product. Now they gotta lease it up. If you can buy it during the lease up phase, man, that's where the opportunity is right now. And I think the next six to 12 months will offer that opportunity as well.

Mike Zlotnik (23:09.274)

Yeah, interesting. It's kind of funny. I have this philosophy very much aligned with what you said. People have floated to us and they continue to float these new construction projects. And I tell them, I don't want to do them. I don't care because you can't get a discount. It's going to cost you to build or it's going to cost you to build. And then you got to get the rents that you want. And if you can't, or if you're trying to sell, if you don't get your prices, you have a liquidity squeeze.

Gino (23:37.987)

Yes.

Mike Zlotnik (23:38.023)

But you can get a really good deal in existing, right? Even get it from a builder who is liquidity squeezed and then the bank wants to get repaid and they can't float the mortgage. They're very motivated to transact and you can come in and lowball or give them a low price and as much as they don't want to take it, but what options do they have? So that approach makes a lot of sense.

Gino (23:40.452)

Yes.

Gino (23:58.905)

Mm-hmm.

I give builders a lot of respect, a lot of respect and a lot of credit because they're the ones who are actually solving rent pricing and inflation in rents because they are putting supply into the market. To me, I'm not smart enough to know where rents are going to be in the next 36 months. So I can't underwrite for that. I can't underwrite for what the cost is going to be. They take such massive risks. And I don't think people really appreciate what they've done for affordable housing. Everyone wants to bash on the builders.

And you're always looking at when they make a ton of money. Well, right now they're not making a ton of money right now. They're losing money. They've taken a lot of risks and they've helped out. So I think when you, when you step back and you look at it from that perspective, I don't want to build cause I don't know how to limit my downside risk. And that's the problem. Like as Trump says, if you can limit your downside risk in the art of the new art of the deal, the upside will take care of itself. I don't know how to do that in building. And it's very difficult. And people who have been doing it for two, three, four market cycles, honestly, Mike, they don't seem as if they've

figure it out unless they're really massive or they've got enough capital set aside that they can weather the storm and I don't want to I don't want to have a business like that where I'm always scrolling away capital working worrying about it things are gonna crash do I have to be completely dependent on the market cycle to make money I'd rather buy a good asset at a good cost basis with good debt to be able to manage this property to be able to look the future stream of revenue where I can sort of I can sort of say hey rents are 1100 they're probably gonna be 1300 in next five years

and I can buy an asset like that, I'm more comfortable. I may not make as much money as a builder, but that's my risk tolerance and that's my relationship with money and I'll be able to sleep at the end of the day with that kind of mindset.

Mike Zlotnik (25:41.457)

You know, I kind of like I bow to you. This is exactly the right thinking and philosophy. I agree 100%. I just had a couple more comments exactly the same line. So lots of respect for builders. But exactly the challenge that their business is speculative in nature. So they are subject to market cycles when they when they they they do it at the wrong time. They the market cycle can wipe them out or hurt them a lot. And the difference is exactly what you said.

Gino (25:52.323)

Mm-hmm. Yes.

Mike Zlotnik (26:11.25)

You could get a great deal today from that perspective. And I'll give you just one comment that I thought about this quarter bill. The reason people build is because they can't find enough of existing. They're not good marketers on the existing. No, for no other reason, they didn't build a machine to market for existing. What they build is a machine to find land and then they know how to build. So it's not necessarily easier. It's just different. And finding land.

Gino (26:26.147)

Yes.

Gino (26:30.34)

Mm-hmm.

Gino (26:34.351)

Mm-hmm.

Gino (26:38.136)

Yes.

Mike Zlotnik (26:40.294)

And building is in some ways way easier than trying to find and renovate So the simplicity of that business of the building business what people go for because it's scalable You could do a lot of the same and that's why people have kind of gone into this but it is susceptible to cycles and and I think now is a great time to Come in and buy from a builder or buy existing because you can get a way better price from a motivated situation But you have to be very disciplined

Gino (26:45.615)

Yeah, I you're right.

Gino (26:52.772)

Yes.

Gino (27:08.438)

Mm-hmm.

Mike Zlotnik (27:08.91)

So next we go into 26. What do you think? Are we going to see a whole bunch of these great deals for motivated sellers? In order for the market to find the absolute bottom, you got to have enough of these transactions to clear the supply side. The supply side is still coming in and the supply is happening for two reasons. One is people are still finishing what they started to build. The rents are still in many markets. They have negative rent growth.

Gino (27:32.217)

Mm-hmm. Mm-hmm.

Mike Zlotnik (27:37.657)

Exactly what you said. saw an article, Sunbelt is seeing a lot of that. Like you said, Tennessee is seeing this plenty of market, Carolinas, where there were hot markets before things got overbuilt and that absorption is taking longer than everybody thought. But on the other side, can you actually get really good pricing on existing? Because people are trying to hold off the banks, continue to extend and pretend loan modifications.

Gino (27:37.742)

Yes.

Mike Zlotnik (28:07.898)

So they're trying to manage the supply. What happened in 2008, nine, those years, they didn't control the distressed supply and then the market got flooded. As a result, you had real heavy price crashes. So we see significant correction now. Are you seeing more and more supply and continuous softer pricing or it feels like things gonna come to sort of a bottom?

and you're going to be able to transact for some amount of time and then things will start recovering. I'm just curious. It's a crystal ball question.

Gino (28:38.953)

For me, the Fed has always been late to the party. And it's interesting, they probably should have dropped rates a lot sooner, because inflation came in on Friday, it was like 3%. And what I personally think, and I read an article about six months ago, maybe a little bit longer, they said the Fed was slowballing this because they wanted deals to fail. They didn't want to bail people out. And I sort of believe that, because there's a lot of bad operators out there. And they didn't want to drop rates so people could refi their deals. And I'm like, well, that seems pretty harsh.

But that's the reality. And I agree with that. And they're late to the party again. They should have dropped rates. There's no inflation going on. If you know what's going on, there's been no, at least on the rent side, you've got energy prices dropping. We've been, in my opinion, we've been in a recession or at least a flat economy for the last 18 months to two years. It just feels like nothing is moving. And that's their silver bullet is the drop rates. And now if they drop rates, some of these operators who've been holding out,

I think they are going to be, they're going to be saved. They're going to, but for me, there's just a lot of deals out there that they're not going to be saved. They overpaid. They just didn't have the capex requirements. There's a lot of people that try to operate multifamily and whatever debt they have, they still can't solve for the fact that they suck at operating a business. So those are the people that are going to fail. And it comes down to the strength of the banks. Can the banks continue to kick the can down the road? In a way, no one, they couldn't do that anymore.

and the credit problems and the bank problems. I don't know what happened with like signature and all those failing banks a couple years ago. Everyone was said that was the end of the world. Didn't come to fruition. It seems like banks can hold off. Everyone was saying survive to 25. Well, now we're in 25. What are they going to say in 26? That was the whole slogan. And I just think that they have to drop rates in my opinion, because all these lenders, they just need to spur the economy. They need to get some activity. And I'll be honest, when you see rates drop,

I don't care what anybody tells you activity does pick up deals start to pencil again. And that's what I think they're they're they're saying to themselves. I think we're gonna have to drop rates because we can't keep saying, you know, inflation, inflation, inflation. No, they're gonna have to figure this out because they're neat. They're gonna I think they're gonna have to need to spread this economy.

Mike Zlotnik (30:52.622)

Yeah, it's a lot of wisdom and I'll just add to what you said. I've actually thought about this quite a bit. One is we have only one Fed and one level of national interest rates and it impacts all kinds of industries, all kinds of locations. So the AI industry is seeing a massive boom and that's giving GDP probably 1 % 2 % boost per year while because of massive investment in AI, while the real estate is suffering tremendously.

Gino (31:10.041)

Yes.

Yes.

Gino (31:17.23)

Yes.

Mike Zlotnik (31:20.398)

And if you could just set the interest rate higher for AI people and lower for real estate people, that'd be wonderful. So this is one of the most obvious things. I literally was thinking about it today. This is how you actually have to national one single level of interest rates that reflects various market conditions is not fair and it's not right, but that's what we have. And the second point exactly what you said is the

Gino (31:20.419)

Yes.

Gino (31:25.271)

Yes.

Gino (31:42.157)

Mm-hmm.

Mike Zlotnik (31:49.669)

The opportunities that we're seeing now will come partially from bank, how much distress they want to tolerate. But the Fed, remember, the Fed was founded as a organization, as a cartel of banks. They support banks. They don't care about equity investors. They care about what's going to happen with banks because they have a systemic responsibility to make sure that banks don't fail versus

Gino (31:59.012)

Yes.

Gino (32:10.553)

Mm-hmm.

Gino (32:15.843)

Mm-hmm.

Mike Zlotnik (32:16.954)

whether investors who speculated on the market fail or not, they don't care. So they were perfectly okay to let investors lose their equity capital. That's not that concern. But today, they are beginning to be more concerned about bank balance sheets and problems. And they probably quietly providing liquidity behind the scenes. But we don't even know exactly what's going on. Some of the stuff, some of the facilities they provide is all ultra quiet until

Gino (32:38.777)

Mm-hmm.

Mike Zlotnik (32:46.392)

It breaks in a massive scale. So I'm sure they're providing already some support because we know it's anecdotally and practically. Plenty of banks, they're not getting paid in the mortgage the way they were supposed to because the operators can't pay. They just can't pay. They don't have liquidity. They have struggles with operations. On top of all this, when liquidity hits pretty hard, what happens with maintenance? People don't have money to maintain properties. Occupancy starts falling and you have further pressure.

Gino (32:48.793)

Mm-hmm.

Mike Zlotnik (33:15.278)

even worse maintenance, worse liquidity because you don't have NOI supporting the mortgage payment and the property upkeep.

Gino (33:25.862)

Mike, let me ask you question real quick. Do you think that a lot of banks have protected themselves over the last several years with getting more of a down payment? I think there's a lot of LP capital. You said the Fed doesn't care about LP equity. I think a lot of that is wiped out. I think operators are holding on because they don't want to lose investors' capital. And I think banks can take back these deals with the debt. I think that

maybe attractive, maybe they discounted 5 % or even maybe 10%. But it's not like it was back in the way where you're taking 30, 40 % haircut. And a lot of these investors, they didn't have much into these deals. I think that's something that we may be looking at. What are your thoughts on

Mike Zlotnik (34:06.886)

I it's pretty standard, like multifamily. Most of the deals transacted used to be 75 % leverage, although it has changed after the 2022. When the market was at the peak, right, there was a standard and there was even additional leverage through junior debt. But the primary debt has always been maxed at 75%. I mean, unless you had some heavy construction loans, you could have had some funds for improvements. But in general, that equity, the 25 % is broadly wiped out.

Gino (34:12.44)

Yes.

Gino (34:26.583)

Yes.

Mike Zlotnik (34:36.58)

Unfortunately, the market conditions with deals falling 20 to 40 % of the peak, right? That equity is gone. And that's not just the equity, it's liquidity. It's liquidity that's under pressure because, you know, higher for longer is what's been draining these deals. So I think a lot of the deals are coming into the environment where the bank's realizing they can no longer even sell for the value of the mortgage. They have to start taking haircuts. And this is where the Fed starts carrying because it's no longer

Gino (34:36.76)

Yes.

Gino (34:42.702)

Yes.

Gino (34:52.473)

Mm-hmm.

Gino (35:01.229)

Yes. Yes.

Mike Zlotnik (35:07.214)

Yeah, you see some assumptions buyers coming in. Yeah, I'll just assume existing loans from what I'm hearing is even I was listening to Bloomberg was there was a woman who was a CEO of a multifamily company and she's saying they're buying properties from assuming the loan, but not only assuming the loan banks even lowering the rates for them to transact. Otherwise, otherwise she said they would have if they didn't get a low interest rate, they'd have to bid even lower than the mortgage balance.

Gino (35:11.374)

Yes.

Gino (35:27.567)

that's awesome.

Gino (35:34.797)

Yes.

Mike Zlotnik (35:36.775)

So where do we go from here? I don't know, but I do agree that the Fed is late. They've always been late. And in essence, because their job is difficult, they're solving the whole country problem. It's back to the thought process that they can't lower the rate for real estate because they got other parts of the economy that are doing fine. So now they're beginning to see more and more problems. I don't know, JP Morgan, CEO, Jamie Dimon mentioned that was a comment a few weeks ago about

Gino (35:54.869)

Yes.

Mike Zlotnik (36:05.988)

regional banks having no balance sheet problems because some of these things are coming through and they're going to be, they might require some liquidity. We don't know that. So I think the Fed is starting to gradually ease. The other thing I was listening in today this morning on Bloomberg, as of this meeting that's happening this week, from what I understand in October, again, 25, after this, they will no longer do quantitative tightening.

Gino (36:17.143)

Mm-hmm.

Mike Zlotnik (36:35.344)

they'll actually turn to light easing. In other words, instead of rolling things off the balance sheet, they're going to gradually allow things to start increasing on their balance sheet, which actually helps interest rates. So this is how they actually move interest rates down, not only the lower end of the curve, but they can actually impact the high end of the yield curve through the QE, a version of not QT, but light QE, and then see what happens. that's what I...

Gino (36:37.935)

Gino (36:44.783)

yes.

Gino (37:04.367)

That's interesting.

Mike Zlotnik (37:05.286)

That's what I heard.

We'll see. you coming on our podcast. Lots of great nuggets. We're past the time again. All good things must come to an end. So does this podcast. How would folks reach out if they wanted to learn from you, speak with you, learn more about what you're doing? What's the best way to reach out?

Gino (37:21.839)

I've had you on our podcast. Just go to JakeandGino.com. Mike's been a guest. This show is airing in a couple of weeks. We just love talking about real estate. I do a how to show and it's basically multifamily thought leaders entrepreneurs. So just go to JakeandGino.com.

Mike Zlotnik (37:37.403)

Thank you, Gino. Really appreciate you coming on our podcast. Lots of great nuggets and definitely enjoyed your show. For those who listening to this podcast, you should definitely visit and check it out. Thank you.

Gino (37:49.625)

Thanks, Mike.

_______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

In this episode of the BigMikeFund Podcast, Big Mike sits down with Lancelot Lennard, a dynamic real estate and mortgage broker from Florida's Daytona area. Recorded in December 2025, they dive into the evolving Florida real estate market, including softening values, rising construction costs, and the impact of DeSantis' proposed property tax cuts for primary residences. Lancelot shares insights on negotiating deals in a buyer's market, the surge in inventory, and how commercial developments like Amazon warehouses are boosting local infrastructure. They also explore his family legacy-building through The Lancelot Group, blending real estate, construction, mortgages, and philanthropy. Whether you're eyeing Florida investments or seeking strategies to maximize home sales, this episode offers actionable tips for navigating volatility and seizing opportunities.

Lancelot Lennard is the founder of The Lancelot Group (thelancelotgroup.com), a multifaceted enterprise spanning real estate brokerage, mortgages, construction, and philanthropy. A Hungarian immigrant and proud father of two, Lancelot has built a legacy-focused business in Port Orange, Florida, helping clients buy, sell, and develop properties while advocating for efficient governance.

HIGHLIGHTS OF THE EPISODE0:00 - Welcome to the BigMikeFund Podcast

0:19 - Guest Intro: Lancelot Lennard

0:46 - Lancelot Group: Real Estate, Construction, Mortgages, Philanthropy

1:26 - Name Origin

2:10 - Location: Port Orange/Daytona Area

2:16 - Family

3:36 - Father's 1956 Hungarian Revolution Role

4:14 - Residential Market: Softening, Easier Negotiations

5:10 - Commercial: Larger Multifamily Unrealistic

5:45 - Price Drops Emerging on Listings

6:11 - Rate Uptick: High 5s Boosting Activity

7:06 - Leverage Window: Negotiate Before Rates Drop Further

8:35 - Transaction Volume: 20% Aug-to-Aug Increase

9:38 - Inventory High: 3600 vs. 2400 Average

10:34 - DeSantis Bill: Eliminate Primary Residence Property Taxes

11:47 - Funding: Audits Cut Waste (e.g., $2M Orlando Poetry)

13:46 - Excess Spending from Rising Assessments

15:22 - Commercial Influx: Pepsi, Boeing, Amazon

16:12 - Developer Negotiations for Infrastructure

17:02 - High FL Insurance Costs Post-Hurricanes

18:43 - Bill's Appeal: Attract Seniors, Offset Insurance

19:57 - Low-Insurance Areas vs. FL's Single Bill Relief

21:31 - Daytona: Rare Direct Hurricane Hits

23:02 - Book: "How to Prepare Your Home for the Market"

30:27 - Closing: Website for Free PDF DownloadIf you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: https://www.thesirlancelotgroup.com/

Instagram: @sirlancelottherealtor

Full Transcript:Mike Zlotnik (00:02.413)

Welcome to the Big Mike Fund podcast. the Big Mike, Mike Zlatnik, and today it is my pleasure and a privilege to welcome Lancelot Lennard. Should I call you Sir Lancelot? How are you?

Lancelot Lennard (00:13.998)

Mike, it's on you. can call me Lance, Lancelot, however you want to, however you feel comfortable.

Mike Zlotnik (00:21.443)

And at the very start, you have a website, your business is thelenselatgroup.com. Is this correct?

Lancelot Lennard (00:28.526)

The Sir Lancelot Group. Yes, yes. I'm trying to build this enterprise, Mike, which is really interesting and has a lot of real estate aspects to it. We talked about that back when I interviewed you. I have real estate as my main umbrella, and then I have construction, have mortgages, and I have a philanthropy side of things as well. So I'm working on the Sir Lancelot Group as a whole, being the umbrella company and then sub companies for that.

to build up this enterprise basically for my kids. It's something legacy type business.

Mike Zlotnik (01:06.425)

What's a wonderful name, right? It's who doesn't know the story, right? So it's very, very catchy. And you don't see too many people with the first name Lancelot nowadays. It seems to be like from medieval times that might've been popular then, but not too many folks today. Unless I am just, you maybe I'm in the U S maybe it's more popular in the United Kingdom.

Lancelot Lennard (01:27.482)

I've been on this earth for almost 40 years now and I've only met one other Lancelot and he was an Indian bartender on Carnival Cruise Line.

Mike Zlotnik (01:36.288)

That's interesting. I think it's a great name. Everybody knows the Knights of the Round Table and sort of lends a lot, it's not popular. Well, the name definitely has a great reputation. Let me put it this way. So you hail from the East Coast of Florida around Daytona area. How is it there? Tell us a little bit about your family. You got kids, you said, and...

Just tell us a couple of words about your family and just confirm exactly where you work.

Lancelot Lennard (02:09.624)

So we're in Port Orange to be more accurate, but yes, the Daytona, a greater Daytona area is our little nest where we built our little empire sort of. I have my wife, we've been married for 12 years. She is from Russia. I am from Hungary originally. So we're Eastern European and she's Siberian. So I could say Central Asia almost.

And we have two beautiful children that were both born here in the United States. Max, he is two years old. He's our youngest. And Elizabeth is our six year old. And they're both wonderful and smart kids. High achievers and leaders seems like it. We're like hit the jackpot with them. Elizabeth is in scouts and she plays tennis. Besides, she's in a gifted class in school. she's above and beyond, you know, testing scores and everything is amazing.

Max is too little to see that yet, but he has definitely shown signs of leadership and stuff like that. He likes to delegate as a two-year-old. I don't know, I think it's a toddler thing, but it might be him too, you know? And what else I could tell you? I still have my mom. She lives back and forth, sometimes here with us and sometimes in Hungary. She's the American part of the family.

And my father passed about 15 years ago from cancer. He was a revolutionary in the 1956 war, a revolution in Budapest against the Russians. And he had a really exciting and long life, sort of, I think. I don't know if you want to talk about him a little bit, but he just...

Mike Zlotnik (03:55.728)

Well, thank you for sharing that. Yeah, thank you for sharing. You have a wonderful family. God bless. next, let's talk a little bit about business. So you're a real estate and mortgage broker in that part of Florida, and you have a construction business. So let's talk a little bit about how's the market, how things are looking in that part of Florida. We've seen some...

volatility I know on the left coast of Florida west coast there's been number of obviously hurricanes lots of lots of problems with hurricanes but a lot of softening in values has you know it's not exactly news it's already yesterday's news but I'm not aware what's happening on the on the right coast of Florida are you also seeing some softening

Lancelot Lennard (04:48.75)

So I do a lot of residential, some commercial. On the residential side, definitely see the softening much easier for buyers to go out there, negotiate, get a better deal. Even on the commercial side, small triplexes or multi-families, do those. Larger multis, people still don't see the reality. And you and I had a conversation about this that what's the value of a property?

the purchase price is higher and the carrying cost is higher, you can't afford to pay what a lot of people are asking per door price for multifamily, large multifamily. And that's what's going on here is I think the realization is starting to set in because I have gotten a few emails in the last week from some of my bigger commercial guys. They're sending out like big price drop, $2 million, $3 million. And I'm like, okay, so finally the owners are starting to realize that

what they were asking for was a little bit too much for the current market situation, interest rates, et cetera, et On the residential side, we had a little uptick here in the last couple months, which I think was due to the weight of the interest rates dropping a little bit. We're finally in the fives, at least my company is, where I work.

mortgages were in the high fives, 5.75, 5.99, somewhere around that mark, which is great because I think that a realistic interest rate is somewhere in the fives. know, the threes, threes and a halfs, that was really unrealistic, but we had them. So if you picked up a property when it was super low, you're super lucky. Hold on to it, you know? But I think in the fives, my first mortgage was in the fives on my first multifamily. So I think that is

where we are and where we're standing about that. I always tell my buyers, guys, if the rates keep dropping, people will keep coming to the market more and more and more. the best time to go and negotiate is probably from now until rates keep dropping, you know? Because you have leverage. You're going in and these people are desperate. They want to sell. They've been on the market for six months. They haven't experienced that because when they bought, everything was flying off the shelves. Now they're like,

Lancelot Lennard (07:08.398)

What is this 90 days, 180 days? That's a normal market. That's a normal market to be on the market for 90 days. So I always tell them to go in, let's go in and then let's negotiate our butts off and get some good deals.

Mike Zlotnik (07:23.055)

Yeah, these are great comments. I mean, they all make sense. Kind of the environment of high or for longer interest rates build up the pressure on owners, sellers, especially if it's a financial pressure and then operating challenges. And then obviously if they need to liquidate and the buyers are not there, then it's going to be buyer's market when they do show up. It's kind of interesting, as you said, as the rates have been going down. It's the Fed action plus the

At the of day, the mortgage rates are affected by the 10-year treasury yield as the primary driver. And that has come down sub 4%. So mortgage rates trade on a spread. And that spread is somewhere around 2%. So you're now could be sub 6 % range. then the fives, that's exactly, it's good news. It's definitely good news. It creates more affordability.

Is transaction volume still pretty slow? I realized that the activity level may be picking up, maybe more people looking around, but as far as the closings, are you still seeing decent volume or the volume is still subdued versus when the rates were super low? And then next we'll switch to the what's going on with the dissenters bill to cut taxes, which could be tremendous boost to values.

Lancelot Lennard (08:45.102)

Definitely, definitely. think that transactions has uptick too as well. this year's not my best year. I haven't been in it as much because I've been focusing a lot more on the construction side of things because I'm building that company up in the ground. So I had a lot more focus on that, not as much on real estate. But I'll be honest with you, at beginning of the year was super slow. And the last two months, know, four, five, six deals in a row, you know, so boom, boom, boom, boom, one after the other. So I think that

that shows if you're not really focused on it but still getting deals done, then I'm pretty sure the guys that are focused on it are closing a lot more deals. So I think there's an uptick. I read it somewhere that it was a 20 % uptick from last August to this August in sales. So I think it's coming, finally. We're going back into the sales part of the business and we're starting to sell some homes.

People are finding homes that they like they're they're realizing that hey rates are coming down. Finally. Let's get in the market You do have a high inventory. So I When I started up here in this area about six years ago the average inventory like 2400 homes on the market. We're at 3600 right now so

Mike Zlotnik (09:59.024)

So inventories are high, but more buyers coming out, so transactions picking up a little bit.

Lancelot Lennard (10:01.704)

Yes, finally, they're coming out. And I think a lot of people came here during the COVID era and they're like, hey, I want to move back north. So a lot of those people are hitting the market as well, not just the locals. And that's what that extra 1,000 homes probably are in our statistics.

Mike Zlotnik (10:21.601)

Interesting. So what's happening with DeSantis Bill? He is proposing to cut taxes on residential properties, owner-occupied. I guess not investment properties yet, not commercial, just more of owner-occupied. Is that what's happening?

Lancelot Lennard (10:39.47)

So this is really big. I think this is a game changer in the whole United States. I don't think there's any state that's doing this. He came out basically and said that you shouldn't pony up money or quote, this is quoting him, you shouldn't pony up money or something that you already paid for. Like you go into Best Buy and buy a TV, you pay one sales tax for it, then it's yours. You don't have to pay taxes on it again. So basically what he was saying is you never really own your property because you always have that tax hanging over your head.

So he's trying to eliminate property taxes for primary residences. I think this is the first step. I'm pretty sure if he could pass further on those tax savings to other properties, I'm sure they're going to work on that too. But this is something that he could probably push through because more people will say yes to that than no.

Mike Zlotnik (11:30.9)

How are you gonna pay for this? Because here's the thing, right? This is definitely a very popular bill, right? Who's gonna say no to get their home property cut, right? That's a no-brainer. He's gonna get the vote. The big question is, Florida has no income tax, no state income tax. How do you pay for infrastructure? How do you pay for...

policing for ambulance for all the things you need to do to maintain a healthy environment. maybe sales tax on on is the only tax. I'm just curious because again, Florida taxes are well known for again, no income tax, no state income tax, but the property tax is what generates a bulk of the revenue. You got property tax. How do you pay for things?

Lancelot Lennard (12:27.918)

So he has multiple avenues or he has the one avenue he's talking about is he created a Florida Dodge basically and he hired a new CFO for Florida and they're going around auditing all the cities, all the towns, all the counties and everything and they're finding a lot of excessive spending that is unnecessary. Just for an example, in Orlando, they were paying out $2 million for people to send them poetry.

Why? You know, like these are things that is unnecessary. Of course, fire, police infrastructure, super necessary. We need to focus on that. Teachers, know, schools, really important. We got to fund that and make that work. But all in all, they found, I think West Palm Beach had like $250 million of overspending for stuff that's unnecessary for a city to have, you know, grants and things like that. That is

really unimportant for what their job is. Their job is to run the city, make sure you have good roads, make sure you have good education, you have good policing, good fire department, medical, et cetera, et cetera. That's their job. And then above that, why are they looking at all these like side things? This is what happened. As the prices are growing in Florida, they might not have raised millage rates, but they're collecting more and more and more taxes. And if you look at, well,

Mike Zlotnik (13:55.065)

Through what? what? Sales tax?

Lancelot Lennard (13:57.774)

You know, as the properties prices go up, they get assessed higher. Every sale that happens in Florida, you get reassessed on the value of the home. So when you reach, you know, that's obvious. They might not be raising millage rates, but the money is more that's coming in. And what does the city do? Well, we can't have excessive money because then they're going to be like, why are they paying so much taxes? So what they figure out is, let's just make a grant for this, a grant for that. Let's just spend the money.

Because that's what Paul is.

Mike Zlotnik (14:28.163)

Which is normal, typical and common. The government's love collecting taxes because the bureaucrats in charge wind up with more cash and they could even spend it on their pet projects. I mean, that stuff actually breeds more corruption and inefficiency. that, yeah, it makes sense.

Lancelot Lennard (14:44.718)

So they're out there cracking down on these people now and saying, you don't need to spend money on this, this, this, this, this. This is not your responsibility as a responsibility of someone else. You should focus on what you're supposed to focus on. Make sure that the grass is cut. Make sure the roads are good, all that stuff. And I think they're over a few billion dollars of excessive spending already and they just started like a few weeks ago.

Mike Zlotnik (15:11.247)

I understand the idea makes sense, right? You could find savings with better efficiency and eliminate waste. So that's the whole concept of Dodge.

property taxes on a lot of people move to Florida. So owner occupied is probably majority of the of the population. Again, I don't know, maybe half of them an investment property, half owner occupied. Not sure. But the point is the amount of tax collected versus the savings they realize. I haven't seen the math, right? I mean, maybe these projections exist somewhere, but it looks it looks

If he can do it, that'd be a miracle. It'd be... Yeah.

Lancelot Lennard (15:57.422)

I think we would have a flux of senior citizens on fixed income moving to Florida to finally have and own their property. This is the thing. And I come from a country where we don't have property taxes. And once you purchase your home, it's yours. So you don't have to worry about every year putting up, you know, four, five, six, seven, 10, 20, 30, $40,000 in instances in property taxes. have, we have a really nice neighborhood on John Anderson.

here in Ormond Beach. And I think that every third or fourth house is on the market right now. Imagine those tax bills, know, 30, $40,000 because they're nice waterfront properties, $30,000, $40,000 every year to pay for your property taxes. That's a lot of money. That's a lot of money going into the pockets. And we have a lot of condos. condos. I think we have a really good rate of rentals slash homeowner.

Think about one building and this is, talked to one of my friends about this. He lives in one of the towers. There's 400 or 500 unit, one parcel. Each unit pays $6,000 in property taxes. How much money is that? You know, like that building on its own could pay for all the teachers' salaries pretty much in the city. I'm just, you know, if you put it in perspective and we have a coastline going north to south,

with condos full of units. So there's a lot of money being collected and probably not spent the right way. Also, we have an influx of businesses. Now we have Pepsi, have Boeing coming to town, Amazon just built the largest warehouse in the last few years. We have Trader Joe's. We have so much infrastructure and commercial coming into town and those will stay taxed.

You know, the bigger lots they get, the larger they build, the more value, you know, on the assessor paper, it says the more taxes they'll pay. They also, when you're negotiating deals with these guys that are coming in and doing commercial and developing land, you negotiate infrastructure into those. It's like, hey guys, we'll allow you to do that, but fix up the roads or add another lane or do this or do that. That can get a lot of the weight off the city shoulders to

Lancelot Lennard (18:26.018)

fix infrastructure. Now, those are probably one of the most expensive items to fix for a city is infrastructure. If you can get the developers to do that for them to be allowed to come in and do the work they're doing, I think that could offset a lot of the costs that they have.

Mike Zlotnik (18:45.389)

Yeah, it makes a lot of sense. guess the financial backing of the bill has got to be on growth. Growth of Florida GDP through commercial and other activities which create tax revenues versus their residential owner occupied primary residence. guess Florida can get by without that tax. I mean, that would be fascinating and it would drive more people to move to Florida.

because the cost of ownership ultimately comes down. You have interest rates coming down and you eliminate taxes. The insurance is the difficult part, right? The insurance has been very difficult to obtain. The rates are through the roof because of increases in hurricanes. But the elimination of property tax is a huge step forward for property owners.

Lancelot Lennard (19:43.374)

To balance out the scales on your insurance costs compared to, now you don't have two, four, $5,000 bills to pony up. You only have one for your insurance costs. Yes, there's parts of the country where it's $500 to $1,000 for a year insurance. Yes, in Florida, we are higher than that. Yes, we have a higher insurance cost because of what happens here every year, every two years, every three years we get hit by a hurricane. A lot of claims go in and the insurance companies are

are for profit. they obviously want to make their money back. I disagree a lot of times when I get the bill because I'm like, my house didn't have any issues. I went through two hurricanes, not a new roof, not a claim, but my insurance doubled or tripled in some cases.

Mike Zlotnik (20:31.213)

Yeah. And, and, and the crazy part is, yeah. And you, you haven't been hit that much. I your part of Florida has actually been spared the last couple of years on the other side, but everybody pays. They can't, you know, they can't assess the rates only on those who got hit. So that says that rates on everyone who is in potential risk, you don't know another year or two passes. There could be a serious hurricane on the, East coast of Florida. You just don't know that. So.

Lancelot Lennard (20:59.032)

That's thing about Daytona. This is a good thing about Daytona and its area. If it's coming from the Atlantic, it usually curves up because the streams are going far out from the shoreline that it takes them up. Direct hit, I don't think there was maybe one direct hit to Daytona in the last hundred years. So it's pretty good. We do get hit because whatever comes through Tampa and through Orlando, we get that too. So the last few years,

Mike Zlotnik (21:27.181)

You still get wind damage. You might not get a storm surge, not the water gets pushed, but you get the heavy wind. But it weakens if it goes through land, it weakens usually.

Lancelot Lennard (21:29.006)

Yes.

Lancelot Lennard (21:35.706)

we get water too. we get water too because of the way it's twisting. It's pushing the water back onto our shores once it passes us or right above us. We got flooded in the last three hurricanes in most of our cities here too. It is risky. know, we're in Florida, we understand, but I think that it would charm people here to have no taxes on their homes.

Mike Zlotnik (21:52.569)

So it's still a risk zone. So this still.

Mike Zlotnik (22:04.047)

I think it'll be fascinating. It's an exact contrast to what everyone else is doing in other parts of the country where the governments try to get more revenue, higher taxation, both income tax and property tax to give away more free services to... And ultimately it's corruption, right? It's just like we're in New York City here, we're expecting to get a socialist mayor and at the end of the day he wants, you know...

free bus rides, wants to give freeze rands and a bunch of other ideas that's gonna theoretically help those who are in need in practice. It's more co-offers for the government to justify higher taxes. And then ultimately, these side projects siphon a lot of money to their buddies, their friends and family. And that's how the...

Lancelot Lennard (22:55.02)

Yeah, there are people. Exactly. I totally agree with you. Like this poetry thing I told you about, I mean, I'm pretty sure nobody knew about it except for the people that are around the mayor or, you know, that circle that made that happen. And $2 million a year? I mean, that's a lot of money for poetry, I think, to be honest with you.

Mike Zlotnik (23:16.291)

Yeah, yeah agreed. All right. So let's remind people once again how to reach out to you if they want to learn more about That part of Florida Maybe they want to buy something in your neck of the woods And then we'll talk a little bit about construction business. So once again the website the Lancelot Not come and let's go now to the construction a business house construction business III

Lancelot Lennard (23:36.024)

thesirlanceloggroup.com.

Mike Zlotnik (23:45.248)

What are you doing? What's what's new? What's different? Are the costs higher lower? Everybody's talking about potential inflation But now are you seeing inflation other materials with tariffs are the cost of material that up what's happening? Just curious

Lancelot Lennard (23:57.582)

So cost of materials up about 30 % from a few years ago and you can see it when you go shopping. I used to buy a 2x4 for 2 bucks, now it's 4 bucks. So that's actually 100 % increase on that one. Drywalls up a little bit too, went from $10, $12 to $18 a sheet. It affects the builds of course, but you always try to still be...

really considerate with your clients and give them the best deal possible. In my shop, what we do is I give them whenever I get a discount and I don't charge them more for materials than what it costs me. That way they can put some savings on there. Labor is also higher. So it used to be 15 bucks an hour for a guy. Now it's 20, 25 to start with. So we're going up in labor prices too. So we try to save them money on

on things we can.

Mike Zlotnik (24:54.735)

Why is that happening? this because we've had significant Trump administration has been deporting a lot of illegal, undocumented, whatever we want to call it, Folks who are here, here, the border without legal status, right? And many of them are being deported. And I came here legally, isn't it? And I'm sure you came here legally too, and your wife too.

But at the end of the day, I am pro-immigration, pro-legal immigration. But obviously, illegal immigration, we don't know who has come over, but a lot of folks in the construction industry were undocumented or illegal, whatever you want to call it. Now, a lot of you folks working now in that group, is that what's happening? I'm just curious. I don't know how to call it. I'm trying to be politically correct. Yeah.

Lancelot Lennard (25:52.224)

That's right. Yes, I think that we had a lot of laborers that came through and that's the only job they could find because a lot of times you can pay cash, so you can pay cash, et cetera, et cetera. But at the end of the day, losing labor is not the main reason why prices are going up for labor. It is inflation that happened in the last few years. Prices of food

of everything has gone up, rents, et cetera, et cetera. So if those prices go up, they need to make more money to be able to survive. When a guy was able to survive on $2,000 a month, they can't do that anymore. An average rent for a one-bedroom home is over $1,000 now. That's 50 % of a $2,000 income. So you want to make that affordable for everybody. And the way you do that is you pay them more so they can afford their rents more. So it kind of helps both of my

all my businesses in a way, because it just goes back into the system in a way at the end of the day. If you're looking at a one bedroom, maybe three, 400 square foot, 500 square foot apartment, not in a luxury development with the pool and all that stuff, those are going from somewhere from 11 to $1,500 now. So if you don't pay them more, they can't afford to work. So they're going to go somewhere where who's going to pay them more. So everybody's raising their

their their pays, daily pay or

Mike Zlotnik (27:18.371)

Yeah, and this overall wage inflation is following the cost inflation and cost of living inflation. Yeah, it makes a lot of sense. So and the amount of work I assume is still pretty significant. Are you seeing new construction or it's mostly renovation projects on existing properties because the interest rates are high, right? Still, mean, they're still higher than before. They're coming down, which is good news. But typically,

Lancelot Lennard (27:22.584)

Correct. Correct.

Mike Zlotnik (27:45.296)

Any type of new development requires lower interest rate. mean higher rates make it more difficult to justify these projects. So new construction is not really happening in any kind of a volume or at least it's subdued. What are you seeing? I'm just curious.

Lancelot Lennard (27:55.15)

So the main point is...

Lancelot Lennard (28:01.55)

So what I'm seeing with the big boys, the Art Horton, the big players in the field of residential real estate that build new homes, they have bought, spent a ton of money on buying rates down prior. So they just bought lower rates and they're given, in the last few years, we had, when it was 7 % on a regular market, they were given 599, 565 interest rates to upload homes. They knew this was gonna be temporary.

for short period of time. Of course, these guys have massive analysts working the whole field of how we're going to do this. And they still want to be selling a lot of homes because that's what their business model is just to pump them out. We see new developments popping up everywhere still today. Yes, they've slowed down. They don't pre-build 30, 40 homes at the same time. They're a little bit slower on the construction side, but that could be due to labor issues. You know that they don't have the power of

build them that fast. It could also be due to the high interest rates, they're not selling as fast as before. I remember going into a place a few years ago and if you didn't put a deposit down that day, you didn't get that house. That's not the case anymore. You could go back two, three, four times and the house is still there and then even negotiate with builders, which is unheard of.

But something like, could you guys do this for me or that for me? And they're offering incentives for agents. They're offering incentives for buyers. They're putting it out there. They pay closing costs. They don't want to touch their bottom line. So the house price, they don't want to touch that because that's how their growth happens is they keep the price going up little by little by little after every sale.

Mike Zlotnik (29:47.562)

It's the concessions. They're giving you lot of concessions, seller credits, mortgage through their subsidiary with a bought down rate by the seller. Yeah, all those things make sense.

Lancelot Lennard (29:51.576)

Yes.

Lancelot Lennard (30:00.843)

Yes, that's what they're doing.

Mike Zlotnik (30:03.119)

Very cool. Any final comments, any book recommendation? And we got to wrap up. All good things must come to an end, unfortunately, and so does this episode. So any final comments and thoughts?

Lancelot Lennard (30:14.446)

So if you are a seller, you go to my website, www.desertlamps.com, you can download my book, How to Prepare Your Home for the Market. I wrote this in a buyer standpoint, over 200 transactions now under my belt. A lot of them were buyer transactions and I went through this book. It's free download, PDF, you you can get a copy on my website. It's about when you walk through a home as a buyer, what you're looking at.

You know, what a buyer is looking at your front yard, your driveway, your house, your paint jobs, all that stuff. anything I've learned from my buyers, I put in that book. you guys can, as sellers can profit from that and learn that, hey, it's not always just put it on the market. Let's go, let's go, let's go. It's how to make the most money of your home. Small things like a paint job or removing clutter.

just removing clutter, putting it in a storage. You're moving out anyways. So just put it in a storage and declutter the home and make it pure for a person to come in and look at it as a blank canvas can boost your value by tens of thousands of dollars. And a lot of people don't get that. And I'm like, here's the book. I wrote this just for you guys to make more money on your homes. Also, fixed up home will sell a lot faster. So if you guys are ready to sell, like, hey, I need this off the market.

put some effort into it. You could do sweat equity if you need to, but you could hire a good crew and get out there and pick up the home a little bit, update it little bit, and make some money. It's not hundreds of thousands of dollars to do that. That's what flippers do all day long.

Mike Zlotnik (31:55.427)

But by the way, I've seen something really interesting. As you mentioned, just very briefly, we're going to wrap up. I have friends who actually will work with the owners to enhance their sales value doing the spruce up of a home. So literally instead of the owner who may not have the resources or the ability to actually do that, some folks like you or other folks who do construction and renovations.

can come in and say, listen, pay me on sale, right? I'm going to invest $30,000, $50,000 in this home and that'll increase the value by a hundred. Just pay me 50 and maybe a little more for the delay. So I've seen those, those types of arrangements.

Lancelot Lennard (32:39.854)

We do that. Yeah, that was one of my ideas when I started construction businesses to help my sellers get their homes into a better shape so they can net more. And of course, it would be a benefit to me too, because I'd make some more money as well, but it really benefits them more. And it will raise the price of the home. It will help the neighborhood, help the neighbors and everybody else in the community sell their homes at a better value.

Mike Zlotnik (33:05.133)

Yeah, that's a great tip and and yeah, thank you for sharing and Letting for folks know about the book. I'm sure it's it's a it's a wonderful book to help folks Make their home ready to sell which is just important Way to maximize the value Thank you. Lance a lot. I appreciate you coming on a podcast Really enjoyed the conversation learn a few things about the Florida dissenters bill. Hopefully it'll go through it'll enhance a lot of Florida residents experience and

help them financially. good luck with that and thanks for coming on a podcast.

Lancelot Lennard (33:40.27)

Thank you Mike for having me. It was a pleasure._______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

Join Big Mike for a no-holds-barred chat with Mike Stohler, Navy veteran, former commercial airline pilot, and co-founder of Gateway Private Equity Group. With a battle-tested portfolio of over 150 value-add units—from multifamily gems scooped during the 2008 crash to boutique hotels in the U.S. and beyond—Mike embodies the grit of turning setbacks into seven-figure wins.

From his small-town Indiana roots and early landlord fails in the pre-Google days to full-time investing by 2003, Mike reveals how he navigated market crashes, pivoted strategies, and uncovered untapped opportunities abroad. Facing U.S. hotel headwinds like soaring rates and labor costs, discover his bold shift to Spain's Costa Brava—where low-financing deals and tax-smart structures deliver outsized returns. Tune in for raw insights on global diversification, contrarian plays, and building a "lifestyle investment" empire that lets investors vacation at their assets.If you're ready to think beyond borders and crush cycles, this episode is your launchpad.

HIGHLIGHTS OF THE EPISODE0:00 - Welcome to the BigMikeFund Podcast

0:19 - Guest Intro: Mike Stohler

1:24 - Small-Town Indiana to Navy and Early RE

1:44 - Pre-Google Landlord Failures

2:05 - Airline Pilot Career and Injury Pivot

2:32 - Full-Time RE Investing in 2003

3:01 - 2008 Crash: Buying Multifamily at 10+ Caps

3:52 - Pivot to Hotels ~10 Years Ago

4:05 - Napkin Deal: Selling Portfolio at 4.5 Caps

5:17 - Partnering with 25-Year Hotel Expert

5:50 - COVID Survival: From 84% to 7% Occupancy

6:30 - Current US Hotel Market: High Rates, Expenses

7:21 - Shift to Spain's Costa Brava: Lower Costs, 15 Caps

8:50 - Example: €1.5M Medieval Boutique at 15 Cap

10:09 - Low Financing: 2.55-2.7% Rates

11:12 - Focus: Catalonia/Costa Brava Tourism Hub

12:11 - Tax Structure: No Double Taxation via Treaty

14:15 - Deductible Vacations as Business Expenses

15:18 - Operations: Local Team, Niche Marketing

17:53 - SEO for Castles/Estates, Wedding Focus

20:47 - Projections: 21% IRR, 8-14% Cash Flow

21:34 - Exits: 3 Strategies, Long-Hold Lifestyle Model

23:34 - Structure: 80/20 Split, Simple Waterfalls

26:34 - Fees: 1% Management/Investor Relations

32:58 - Connect with Mike Stohler

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: gatewaype.com

LinkedIn: https://www.linkedin.com/in/michaelstohler/

Full Transcript:Mike Zlotnik (00:02.039)

Welcome to the Big Mike Fund podcast. the Big Mike, Mike Zlatnik. And today it is my pleasure and a privilege to welcome Mike Stoller. Hey, Mike.

Mike Stohler (00:10.55)

How you doing, Mike?

Mike Zlotnik (00:12.696)

Thanks for coming on a podcast. you said you hail from Scottsdale and you're between Scottsdale and Barcelona. And let me do a formal introduction. So Mike is a former commercial airline pilot, Navy veteran. Thank you for your service. And a co-founder of Gateway Private Equity Group, a real estate investment firm whose portfolio includes hotel, multifamily, residential properties.

Between apartment complex as houses Mike hotels Mike also owns and operates 150 over 150 units seeking value at opportunities higher returns Mike pivoted from multifamily to hotels and now focuses exclusively on that niche so Mike welcome and let's Just a couple of words about you your family and then we'll jump straight into the hotels US Spain and we'll see where this journey goes

Mike Stohler (01:10.026)

Sure, sounds great. I'm a small town redneck from Indiana and it was one of those things where I could go work in the factory or I could do something in that small town and it just wasn't me. So I the Navy and started buying properties because I knew that that was it. And back in, I call it the pre-Google days when I got started. It was easy.

Eight units failed miserably because I couldn't Google how to be a landlord or what forms were there. Couldn't do anything. So failed miserably. so shifted, became an airline pilot. You know, that was my dream. While I was an airline pilot, I started buying again, because now Google came so I could actually Google how to do things. And I got injured pretty bad while flying into Houston and made that decision there that I could quickly and easily.

replace my income so I headfirst into real estate investing.

Mike Zlotnik (02:14.986)

And when was it? When did you go real estate full time? What year?

Mike Stohler (02:22.102)

Full time, I started in 99. I went full time in 2003 and had multi, built up multifamily portfolio. then I saw kind of something, you know, the prices were starting to go up in five and six. And so I just held on to a lot of cash. And then 2008 came the crash and that's when I just started buying everything.

anything and everything, did a lot of seller financing, did a lot of bank takeovers. And that's where when I build up my portfolio and everyone was like, oh my God, you know, I was ruined. And a lot of people were ruined during that, but not to say that I took advantage of the situation. I bought 90 % of my multi-family portfolio between 2008 and 2012 and 13.

Mike Zlotnik (03:18.158)

And that's very cool. the way, it's not, you know, taking, not taking advantage of anyone. It's just kind of the market, the market cycles, right? And these things do happen. And we just see in the other market cycle in multifamily as well. So these things do happen from time to time. And, and people who think there are no market cycles, they, get surprised again and again. And what about hotels? When did you switch to hotels? Uh, how long have you been in that strategy and, um, where is the market now?

Mike Stohler (03:25.258)

Yeah. Yeah.

Mm-hmm. Yeah.

Mike Zlotnik (03:47.79)

from the market cycle perspective.

Mike Stohler (03:49.642)

But I tell you, great questions. So what happened to someone from Idaho, all places came in and for four times wanted to buy my portfolio. And I said, no, you know, golfing, I'm living life. I'm, you know, I've got, I was on cruise control. Well, they came down to Phoenix area. So Mike, want to meet you at IHOP. And I'm like, okay. So over pancakes and coffee, they wrote.

a number on a napkin that I couldn't refuse. And you have to understand that I was buying at over a 10 cap, you know, during the crash. mean, they were, and now was selling it at a four and a half. So I had to make a decision. Do I want to take all this money, 1031 it into more multifamily at four, four and a half caps? And I said, no, yes.

It didn't make sense to me. So long story short, I had a real good friend, got 25 years of hotel experience and had coffee with him. And I said, look, explain this to me. And he goes, yeah, hotels are still 10, 12 caps. And I said, well, I have the money. You tell me how to buy them. You show me how to buy them. I want you to run those hotels for me. And if you do that, I'll give you a cut on the back end. So I made

I wanted to make sure that he had an incentive to make me money because then he would make money. And that was the start of it. That was about 10 years ago. And it's been pretty good and pretty bad ever since, know, COVID, owning hotels and COVID. I would joke that I had a full head of hair prior to COVID. Then COVID hit and, you know, I bought a hotel in November of 2019.

And you know what happened just a few months later, went from I think an 84 % occupancy down to seven within four or five months. And, uh, but those types of things made me much better hotelier because I had to think outside of the box and see how it can make these hotels survive. All of our hotels did survive. Um, but to your point, where's the market now I'm seeing for the last couple of years.

Mike Stohler (06:17.462)

The sellers want 2019 prices, but the debt to service coverage ratio doesn't support it at 78 % interest rates. So you're buying it upside down basically, or zero net profit. So it's very hard to get into hotels in the US right now. Labor's gone up. In the last two years, expenses have gone up 30%, 35%. So it's been really, really squeezed. I'm still finding some.

in small towns in the Midwest, Indiana, Ohio, Georgia has some good, but it's more of the Midwest where there's not a lot of appreciation, but really, really cash flows. But what I did was that original partner lives half of half the time also in Barcelona. And he said, Mike, you need to come over here and look at these places. And I kind of poo-pooed it at first. like, I'm not going to do anything in Barcelona. But then

I got there and the prices, the expenses, I can make more money and pay a tenth of what it cost. For a $10 million hotel in the United States, I make a 10 % return. I can make more of a return on a $1.5 million, 600 year old castle that's been converted to a boutique hotel because labor is down, expenses are down.

you're buying at a fraction of the price. So we're concentrating in the Costa Brava region of Spain right now.

Mike Zlotnik (07:56.483)

Very interesting. So you found a unique niche, I guess, Porsche, part of EU that is just the boutique hotels, they exist. People go on vacation from the US and they go on vacation from Europe and so it's a niche market. So what kind of cap rate are you buying them at? It's all relative to the price and expenses. It's all computed in the cap rate. So of course, of financing now is up, but

What cap rates are you getting?

Mike Stohler (08:26.836)

Yeah, not in Spain. Financing in Spain is not up. It's actually crazy. So we're buying it around 15 caps. One five. To give you an idea of the one that I have an open syndication now for a 14 room boutique in a medieval town that's in the middle of a medieval town. The whole hotel is carved out of rock and stone. It's something out of the movies. He doesn't have, he's had it.

Mike Zlotnik (08:35.946)

One five.

Mike Stohler (08:56.374)

Second generation has had it for 15 years. It's tired of it. He's not really a hotelier. He has zero website, zero marketing. He still makes 500,000 euros a year with no effort. We're buying it at 1.5 million. He's carrying 600,000 euros at 2.7 % interest. So that means I have to raise.

Instead of the whole thing, I only have to raise $800,000 and we have something that already makes 500,000 euros. So what is that return? If I'm only raising 800,000, it already makes 500,000. It's crazy returns. But as far as the interest rates, the apartment that we bought in Barcelona, 25 year mortgage at 2.55%. Those are the interest rates there.

Mike Zlotnik (09:55.036)

Is this real? Is this real? The interest rates are that low so you can still get these type of insane loans in Spain?

Mike Stohler (10:04.597)

100%. Yep, we just closed on the apartment last month, 2.55%. And the commercial rates are 2.7. And they apologize that they had to charge me so high because the resident rates are even lower than.

Mike Zlotnik (10:22.21)

Wow, that's fascinating. It's something worth further research from for US investors. Again, now it's a different country now, the different laws, but you know, it's not a third world country. mean, Spain is a developed country, part of the EU. You're not investing in, I don't know, some country with this war on instability. There's a lot more stability.

Mike Stohler (10:25.459)

I know it.

Mike Stohler (10:49.93)

Yeah, it's not Venezuela. I'm not investing in Venezuela or Colombia. And we only invest in Catalonia, which is the more capitalistic side. If you don't know Spain as kind of two countries, Catalonia has its own, that's where Barcelona is. They have their own flag, they have their own language, they have their own, they wanted to succeed from Spain because they were tired of...

I don't know if it's the king or just more of the socialistic views. They're kind of the capitalistic side of Spain. So I will only concentrate in that. And then we concentrate in the Costa Brava region, which is right now, I think number one or number two tourist destination in the world is that region.

Mike Zlotnik (11:38.326)

Yeah, that's very fascinating. And how do you find these deals over there? how do you, you know, how is the income taxed from Spain? know, if you got a US investor, what kind of, you know, are they taxed on both sides? I'm just curious, is that tax treaty?

Mike Stohler (11:55.446)

Yeah, great question. These are questions that all of our investors ask. Number one, I have a team in Barcelona and people that live there their entire lives. Jordi has done a lot of deals for Blackstone. And so he was the one that found them, appraised them, looked at the property.

I figured, hey, know, Blackstone could hire him. Now he's retired. And his whole dream was to go after these old castles in these old estates. So we brought him on board. We have Vic who does the operations and then we have caretakers, husband and wife teams that run them. That's how we find them. It's just once you kind of get your work name out. It's kind of like here in the U.S. all of a you get off these off market deals from brokers and that's.

It's kind of the same. As far as the taxes go, so how it works is we had to set up a Spanish company, Spanish LLC, get on their tax system. So we have all the day to day operations are run through a Spanish company. That company is owned by an American company and that's where the investors are. There's a Spanish American tax treaty. So there is no double taxation.

All the taxes are paid by the Spanish LLC. when I move distributions from euros to US dollars to the American entity, all we have to worry about is the conversion and you know, from euros to the US and then that American LLC then distributes the distributions to the investors. So as far as your CPAs and everything's concerned, it's just an American LLC.

giving you money and then you're taxed off of that and it just becomes like an American LLC. The great thing is because there's no double taxation, there's a lot of different, we still get depreciations, we still get benefits from the K1s and what the investors are really liking is every time they go to Europe on vacation, now what does it become?

Mike Stohler (14:19.926)

you're going over to see a business asset. So that airfare and a lot of those expenses, if you have a good CPA are now tax deductible.

Mike Zlotnik (14:30.998)

Yeah, that's pretty cool. If people get to visit there, the investment could be a business purpose. Yeah, it makes sense. I looked at a tax treaty years ago and the US has some really good tax treaties with most of the developed world like, know, UK, Australia, Germany, Spain, all typically, you know, things are taxed on one side. Although it's different, without spending much time, I'm sure you figure it out.

Mike Stohler (14:39.286)

You guys.

Mike Zlotnik (15:00.802)

So.

These operating businesses in most people, it's one of the concerns that I've always had in hotels, senior living facilities, car washes, they're all literally operating businesses. So real estate is only valuable if you're operating well. So, you know, it's really an investment in the confidence of your team. I mean, you and your team operating these assets.

And I assume you are the direct operator. you basically have local staff and you're doing local marketing. How are you marketing these hotels? I'm just curious. Is it like booking.com or some other websites?

Mike Stohler (15:47.038)

Yeah. Yeah. You know, great question. So certain assets, you know, one that we're looking at is a castle. And right now it is in coastal province, the number one wedding destination. So you get a lot of marketing in like Rob reports, wedding websites, wedding destination magazines.

And it's more event planners than OTAs, which are the booking.com and travel-osity type thing. So you heavily market and you bring on these wedding destination type of event planners. Other ones that are more of a hotel, you do, you set up a website because it's an independent property. And then the marketing is a lot of the OTAs here in the U.S.

It'll be marketing companies and leisure destination magazines, partner with like American Express or the different credit cards as far as the unique destinations of the world. Because they're not cheap to stay there at night. They're 3,400.

Mike Zlotnik (17:05.486)

So it's a boutique niche market. That's what I'm hearing is boutique niche market, destination market. You really have to cater to very specific audience. Again, like you said, events. And it makes sense. I mean, if you want to have a wedding in a castle, that's pretty cool.

Mike Stohler (17:23.478)

Yeah. And most of the people that go to Spain don't want to stay at the Marriott or Hilton or regular franchise. They want to stay in the castle. They want to stay in an old estate that's in the middle of a medieval town. So you have to make sure there's a lot of SEO work on the backend to make sure that they, if you say. Castle in Spain or a state in Spain or Costa Brava, you want to be on the first page. So there's a lot of SEO and backend marketing.

Mike Zlotnik (17:54.925)

Yeah, it's a niche business. mean, everything you're saying is it's a great niche business. You could be very successful at this if you've got it figured out. now again, age of AI. I'm just curious. even Google search is all changing to the AI now. People are just going to be running AI. I'm just curious if you've, if you've thought about this, if there's any modifications to your strategy, how do you make sure you continue to be, you know, on top of these AI driven.

Mike Stohler (18:12.234)

Yep.

Mike Zlotnik (18:24.59)

Questions from investor searches so any quick comments just

Mike Stohler (18:29.044)

Yeah, it's called paying money to SEO people and people that this is what they do all day long. I found out a long time ago, it's like, why would I ever do the SEO work in the marketing work? That's not what I do. I find hotels and we operate them. So you partner with people that this is their entire job is to get you on the first page. They do.

newsletters, blogs, we do guest posts on in magazines and they they handle all that stuff.

Mike Zlotnik (19:07.982)

So how many of them you have in Spain right now? just curious of the size of operation. Are they all similar?

Mike Stohler (19:13.558)

No, it's very small. They're not similar at all. two that we have, two that one is in the mountains of Costa Brava. It's more of a, it's 45 minutes from Barcelona and it's a summer getaway. It's an hour from France and 45 minutes from Barcelona. So you're just in that part and it's just that perfect 72 degree.

Mike Zlotnik (19:40.59)

It's a seasonal hotel. It's heavily seasonal.

Mike Stohler (19:44.619)

This one is more seasonal in the winter time and there's a lot of mountain biking and hiking in the area. So people come and do that. Another one is in the Priorat winery. So it's right in the heart of the vineyards. So they're very different types. One that we're looking at is the castle. Another one we're looking at is the one in the medieval town. The goal is to develop the website into a drop down box.

Spain, Italy, Portugal, people will pick. you know, instead of trying to get them to a specific property, we'll do the SEO driven analytics to get them into that website. And then they can just drop down and say, where do I want to go?

Mike Zlotnik (20:33.442)

Yeah, understood. Just curious now, you know, basic question on what kind of returns these things generate from, you know, projections perspective, what kind of cash flows and, and, you know, is it the five year hold? Are they similar to the US syndication concept? And also, you know, you're buying at a 15 cap. You're probably going to sell it to somebody else, maybe at a 12 cap. I'm using an example. It's not going to be like suddenly you buy 15 and sell at a five cap.

It's a market for these assets local and people expect these strong returns otherwise why bother with these boutique type of assets? I'm just curious how you basically look at the whole thing.

Mike Stohler (21:17.844)

Yeah. So most of the buyers and sellers are foreign nationals. In Spain, they don't have a lot of...

You know, I'm not going to say that, you know, the way that the mindset is, but you don't have a lot of Europeans that buy them. The cash flows because of expenses, you know, for instance, for instance, here in the U.S. my housekeepers make 20, $22 an hour. In these boutiques, we have a husband and wife team. make about 25,000 euros a year. And then if they need a housekeeper.

The going rate for housekeepers around 8.6 euros, so 9 euros an hour. They make about 16,000 a year. So the expenses are a lot lower. The returns, for instance, this one that we're buying, it's already making 500,000 euros. About a 40 % expense ratio right now because he runs his entire life through it.

So we're going to cut that. So let's say that it's making 250,000, 300,000 net off of an $800,000 total investment. And the returns are really good. What we found is that my investors don't really want us to ever sell these. It's a different concept in the US. In the US,

No one's ever told me that I can't wait to see your Comfort Inn and Topeka. These they want to say, like, okay, how much can I invest to get two weeks at these properties? And then they say, well, what if I don't want you to sell these? So we came up with this new term. more of like a lifestyle investment where because interest rates are so low, we're buying these in cash. We're waiting about three years.

Mike Stohler (23:29.526)

We refinance them at 2.7%. And then we use that money and buy another one. And right now the investors that I'm talking to, it's like, Mike, I want you to hold onto these for 10 years, 12 years. I want to be able to go vacation with them. I want to be able to have a glass of wine in this castle and say, you know what? I actually own a part of this. So it's more of a vacation lifestyle type of investment than just a regular box hotel here in the US.

Mike Zlotnik (23:59.875)

Yeah, that's very interesting. So you're looking for even a niche investor, not even not a money investor in essence, looking for sort of a strategic value investor, they can claim that they own piece of it. And the very long time horizon is almost counterintuitive. It's almost like some people actually want to know that this thing is going to have an exit strategy versus you're saying, well, you know, maybe 10 years at the end of the day, it's

Mike Stohler (24:22.229)

Yeah.

Mike Zlotnik (24:30.402)

So who controls the decision when to sell? Is it still you?

Mike Stohler (24:35.049)

Well, it's always me, we have, if, ladies and gentlemen, if you looked at the fund, there's three extra strategies. The first one is I can sell as soon as we hit our IRR mark. And we can just say, we're going to sell them all. Number two is that three to five year, usually three to four, depending on what the P &Ls are, you know, they want in Spain, they want to see three to four years of P &Ls.

At that three and four year mark, can, when we refinance, we'll cash out those people that want to exit. If Mike, you are an investor, you want to cash out. Another Mike was an investor. He'd just buy your shares because he wants to keep it on. So there is a plan. There's a three stage exit strategy. The second one, you can, we can cash you out when we refinance and you can go your merry way. And then the third one is our

It's those people that want five of these, they want 10 of these. And they're getting distributions, they're getting paid, but they get to deduct their European vacations, they get to stay at their asset. One of my investors I had to talk to a couple of days ago, his daughter to get married at one of the assets, it becomes just more of this vacation, this lifestyle. So we have all...

different types of investors, those that want to cash out, and we let them in year three to five. But there's a lot of them that just want, like, know, if I can get distributions and cash flow for the next 10 years and be able to vacation in my own castle in the state, you know, that's what they want. So it's different investors.

Mike Zlotnik (26:22.638)

Understood. So what kind of distributions are you projecting to investors?

Mike Stohler (26:28.118)

On the two that we're getting rated by, it's a life cycle IRR around 21 % and we're expecting year one, it's always a lot lower. I always am conservative at around 8 to 10 % and then it goes up to about a 14%.

Mike Zlotnik (26:51.084)

Yeah, using the numbers you mentioned. And I don't know what your terms with investors, if you're giving them a pre-return or a split and what that waterfall looks like. Are you able to share that? What kind of, you know, how are these deals structured? I'm just curious how you're approaching, because you're finding deep, you know, that's called deep value, but they require operating expertise. So it's kind of like they're almost like operating businesses. It's real estate, but they're operating. And then

Mike Stohler (26:59.296)

Mm-hmm.

Yeah, sure. Yeah.

Mike Stohler (27:19.678)

It is business. hotels are both. Hotels are a business that sits on real estate.

Mike Zlotnik (27:21.388)

Yeah, it's a

Mike Zlotnik (27:27.054)

So just curious, how are you splitting cash flows and profits with investors?

Mike Stohler (27:32.663)

Yep. In Europe, it's different than the United States. I am of the mindset, I'm the GP that hates complicated waterfalls. If there's more than two levels, I can figure it out. And then I, know, in the portal cycle, if this happens and that happens and if we have 15 % IRR, I'm like, what in the world is going on here? Simplicity. So in Europe, I don't even have a prep. I do for the life.

Mike Zlotnik (27:53.484)

Yes, simplicity is easy to understand. Agreed.

Mike Stohler (28:02.774)

80-20 split. And if I distribute 50,000 investors get 80%, we get 20%. We put it back into the operations because I don't bring anything over in the United States. I just keep it over there. And then a lot of them don't even want the 80%. They want it to be reinvested back in. But in the United States, I'll do a preff and then a split. And it's just

None of this IRR stuff, here's an 8 % preff, then 75.25 or an 80.20. I just want to keep it simple. But because we're not dealing with hundreds of thousands of dollars in distributions on like a 10 or 15 million dollar hotel here, we're talking about $250,000 net cash, or we're talking about 10 or 20,000 a quarter. They're smaller distributions.

because of just the size of the boutique. Investors are okay with, you know what, it's 80-20 split.

Mike Zlotnik (29:10.414)

Yeah, it's listen, I'm not questioning criticizing this at all. It's just I wanted to know what it is and 80 20 split by the way, it's not unreasonable. We've seen that the structure plenty of times where people do you take a management fee in addition to the 80 20 split or the 20 % includes the your compensation. That's the only

Mike Stohler (29:32.383)

There's a 1%. Well, there's a management fee that goes into...

Being that person that's doing the day-to-day operations like Vic, that has to go to the asset. He's in Barcelona, he has to travel 45 minutes. So there's a property management fee. And then there's a 1 % investor relation fee. And what that does is it helps pay for the people that are on our backend that are doing all the newsletters, all the reports, all the distributions. We do monthly.

Mike Zlotnik (30:08.706)

Yeah, I understood. you have an asset management fee and the asset management fee is fair. People have to keep the lights on, right? You've got to be able to give them the reports. You've got to be able to update them. yeah, so I'm listen, this is is I expected worse than people, you know, a with with big opportunity, you know, 50 50 split, maybe some six profit to split. But 80 20 is definitely, you know, reasonable one from investors perspective.

Mike Stohler (30:10.465)

So it's a 1%.

Mike Stohler (30:25.194)

I don't do worse things.

Mike Stohler (30:37.719)

I have these hotels because of the investors. And if I take care of the...

Mike Zlotnik (30:44.59)

But the amount of capital you need is not that large, by the way. It's like you need small checks. You need a very small set of investors who kind of love your strategy and really know, like, and trust you.

Mike Stohler (30:47.339)

Kusprach!

Mike Stohler (30:51.051)

Yeah, I know.

Mike Stohler (30:58.711)

Yeah, the hotel in the Priorette wine region, which does very well. It's an elderly lady. She has to sell. She's just a health. We could buy that. It's seven rooms and we're getting for about 650 to 700,000 euros total. And it has a little restaurant. She does wine tastings. And I'm like, I mean, that's cheaper than a lot of our houses, you know, in the U.S.

Mike Zlotnik (31:26.445)

So just hearing you out a little bit, when you're buying assets, know, six, 700,000, you're buying an asset, earn a million and a half, you're basically assembling a portfolio of relatively, you know, not very expensive hotels. You're not paying, you know, $20 million or... Is it difficult to manage in the different parts of the country? I just wanted to kind of understand one of the biggest difficulties that I've seen when people do this is management.

Because you got property here, you got to drive an hour that way, two hours this way, you got to fly. It's a lot of complexity related to that.

Mike Stohler (32:02.071)

Yeah, well that's why we have a team that's full time in Barcelona. If I didn't have that, there's no way that I'd ever be able to manage it. And because...

Mike Zlotnik (32:11.502)

So everything is not too far from Barcelona, right? You're basically saying that every single one of these assets.

Mike Stohler (32:14.557)

Everything is within 45 minutes. Everything that we own is within 45 minutes of our salon. And so it's very small.

Mike Zlotnik (32:20.61)

Got it. Mike, yeah, I appreciate your explanation. This was very interesting. This is different and definitely unique. So how would folks reach out? What's the best way to reach out if they wanted to talk to you, understand more about the strategy, cetera?

Mike Stohler (32:30.892)

Yeah.

Mike Stohler (32:39.925)

Yeah, website's gatewaype.com. And you can find me on LinkedIn. I'm very active on LinkedIn. Michael Stoler.

Mike Zlotnik (32:51.01)

Very cool. I appreciate you sharing. Appreciate you coming on a podcast. Good luck. Enjoy Spain. It's just a beautiful country and it sounds like you found a phenomenal niche. So sounds like an awesome strategy.

Mike Stohler (32:57.099)

Thank you.

Mike Stohler (33:05.591)

It's a lot of fun. Yeah, I'm heading to Barcelona next weekend for three weeks. So it's going to be fun.

Mike Zlotnik (33:11.15)

Safe travels and enjoy. I appreciate you being on a podcast.

Mike Stohler (33:13.921)

Thank you, take care.

Mike Zlotnik (33:15.533)

You too.

_______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

Join Big Mike in a new episode with Chris Miles, founder of Money Ripples and author of The Work Optional Blueprint. Chris, a former Wall Street advisor who retired at 28, shares his journey from millionaire to welfare during the 2008 recession, rebuilding his wealth twice by 39. Discover how to achieve “work optional” freedom—passive income replacing job earnings—through infinite banking, tax strategies, and diversification beyond stocks. Chris warns against Wall Street complacency, predicts market peaks, and advocates rebalancing into alternatives like real estate amid overvalued equities.

HIGHLIGHTS OF THE EPISODE00:00 - Welcome to the BigMikeFund Podcast

0:19 - Guest Intro: Chris Miles

0:43 - New Book Launch: The Work Optional Blueprint

2:05 - Becoming Work Optional Through Passive Income

2:34 - Chris's Journey: Retired at 28, Recession Recovery, Retired Again at 39

3:39 - Anti-Wall Street Stance Amid Market Complacency

5:18 - Chris's Background as Financial Adviser and Stock Trader

6:03 - Noise vs. Signal: Filtering Media Distractions

8:05 - False Security and Scaling Out of Overvalued Stocks

9:21 - Average Investors Sell at Bottom; Smart Ones Bail Early

11:07 - Taking Profits: Crypto Example and Stock Strategy

11:29 - Be Greedy When Others Are Fearful (Warren Buffett Wisdom)

12:51 - Diversification and Rebalancing Portfolios

13:38 - Opportunities in Beaten-Up Commercial Real Estate

15:22 - Infinite Banking Update: Steady Dividends Rising

16:05 - Warren Buffett's Cash Hoard and Float Strategy

18:58 - Infinite Banking Advantages Over Buffett's Approach

19:51 - Life Insurance as 6% Tax-Free Temporary Holding

20:10 - Vanguard's Low S&P 500 Return Prediction (2.8-4.8%)

22:22 - MAG 7 Dominance in S&P 500 (30% Weight)

23:06 - Approaching Market Peak: Signs of Elevated Risk

24:23 - Final Thoughts: Hope Through Contrarian Choices

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: moneyripples.com

Podcast: Money Ripples

Social Media Platforms: @moneyripples

Full Transcript:Mike Zlotnik (00:02.167)

Hey, Chris.

Chris Miles Money Ripples (00:03.371)

Hey, how's it going Mike?

Mike Zlotnik (00:05.274)

Great to see you.

Chris Miles Money Ripples (00:06.658)

Same here.

Mike Zlotnik

Welcome to the BigMikeFund Podcast. I'm the Big Mike, Mike Zlotnik. And today it is my pleasure and a privilege to welcome back my really good friend. Chris miles with money ripples. Hey Chris.

Chris Miles Money Ripples (01:47.586)

Hey Mike, it's good to be back on again.

Mike Zlotnik (01:50.114)

Awesome to have you back. How things are going? What's going on? We are getting this recording done in mid October 25. So what's new and exciting in your world?

Chris Miles Money Ripples (02:01.464)

Well, new and exciting, we're about to launch our book, the work optional blueprint that's coming out here. And well, depending on when this airs, probably after the time this airs. So, we actually have the pre-launch coming out in October and then we're officially launching the book in November. So we're really excited to have that come out. That's my first official real actual book that I've done. I've done contributions to books. I've done an ebook that was like 35 pages long.

This was definitely a big project that we've been working on for the last really year, almost year and a half. So, decided to get that baby born.

Mike Zlotnik (02:36.975)

You know, it's harder to get a book out sometimes than to have a real baby. I have my book in working for two years now, well, the second book, but it's a hard process because you write it and then you try to make it better and better and things change and you make it better. So congratulations. That's wonderful. How would folks sign up to get a copy? there an easy way? What's the page?

Chris Miles Money Ripples (03:01.102)

Yeah.

Mike Zlotnik (03:06.479)

Sayonara Peach

Chris Miles Money Ripples (03:08.216)

Yeah, easy thing you could just go on Amazon, obviously, and get it there. Obviously, you can go to moneyripples.com as well.

Mike Zlotnik (03:15.631)

Okay, that's great. So hopefully it'll be a bestseller, bestseller on Amazon and in moneyripples.com. What is the book all about?

Chris Miles Money Ripples (03:23.726)

Yeah, so work optional blueprint, what it's really about, it's about how to become work optional, which is really a term we refer to is when you have enough passive income coming in from your investments, investment income that's coming in, where you no longer have to work at your job. You work by choice, not by necessity. And so you really become work optional, right? It's like what Robert Kiyosaki talks about is getting out of the rat race. The thing is that, you we hear about that, we read about it in Rich Dad Poor Dad, but we don't really know how to do it.

And in my story specifically, I actually did it the first time when I was 28 years old back in 2006. Came out of retirement 2007 to teach people how I did it because I was so amazing. And then about 2007 through 2009, we hit the recession and all of a sudden our business is starting to fail. My real estate's failing. And I went from millionaire to welfare essentially, right? I was literally on welfare, you know, getting food and things like that. and so I was, I was struggling and, luckily during that time I was able to

Mike Zlotnik (04:12.057)

Yeah.

Chris Miles Money Ripples (04:21.198)

not just start over, but I had to start from really a million dollars in debt and had to dig back out of that hole. I didn't go bankrupt. So I had to pay off that debt, build it back up, build up my portfolio to where by the end of 2016, I did it again. And so I didn't just do it for myself twice by the time I was 39 years old, but I've also had clients do the same thing over and over again with the same system and process. And so that's what the book really focuses on. It's about my journey, but it's also about how you can actually create that time freedom through financial freedom.

Mike Zlotnik (04:50.361)

That's that makes a lot of sense. That's actually a wonderful journey. So let me ask you some tough questions. Really, really tough. They're very relevant to the times. And I know you are on the Wall Street financial advisor or I'm not sure how you call yourself, but I remember on the Wall Street and then the rest is unfortunately for all of us who are in the alternative investments on the Wall Street, the Wall Street is doing great. This is the crazy part. So we're kind of seeing

Chris Miles Money Ripples (04:54.467)

Yeah.

Chris Miles Money Ripples (04:58.958)

Mm-mm.

Mike Zlotnik (05:19.961)

There's been some struggles with alternatives and a lot of success with Wall Street and people are incredibly complacent. It's almost like they don't want to do anything because things are going good with the stock market. And how do you get people to actually take action today? Because it's, it's kind of like when the volatility is high and the stock market is not doing well and people naturally are thinking I need something better than this.

But today it feels like it's the reverse.

Chris Miles Money Ripples (05:49.752)

Right.

Chris Miles Money Ripples (05:53.197)

Yeah, well, I don't blame them one bit because this is exactly what happens before there's a crash, right? Like for example, I mean understand my background when I started I was a financial advisor I was a financial advisor selling mutual funds securities for four years I was all about Wall Street and not only was I a financial advisor But even towards the latter end of that I was also a stock trader and a stock coach

I was teaching people how to trade stocks and options and different strategies of how you can do it, you know, and things like that. I was teaching people how to do married puts so could buy the stock and buy the put option just like Mark Cuban did when he got bought out by Yahoo. And even though Yahoo tanked after Google came on board in 2005, still he had enough money because his put option protected it. So I'm no stranger to Wall Street at all. The reason I'm not a fan of Wall Street, especially right now, is that it's extremely overvalued, which

What's happening right now is most people just don't care. They don't care about facts. They don't care about what's going on. And I'm talking about the general public and even the media, right? Which the media, by the way, anything the media says is pretty much gonna, it's gonna keep you broke, right? Because by the time it makes news, you're already too late. So when you're hearing about gold, even right now, I'm not saying you're too late for gold necessarily, but the fact is now all the media is talking about gold and somewhat about silver, even though I think silver has more potential than gold does.

but they're all talking about gold and everything else, right? Well, this is at the point where you know you're at the run up and everybody's talking about it. Well, I think this is what's happening right now is when it comes to the stock market, especially, with the average saver and I wouldn't even call them investors, your average saver, right? People that have mutual funds and 401ks, Vanguard funds, whatever it might be. The problem is this, and I like what Alastair McDonald talks about, is that there's a difference between signal and noise, right?

The signals is actually what you can hear when everything's silent. The noise is everything else that's going on. When you have all the social media and media talking about what's happening and you trying to turn on the news channels and the financial, especially even the financial news, you're turning on all these different things. You're hearing all kinds of noise. You're hearing about Trump and tariffs. You're hearing about immigration issues. We're hearing about, you know, possible, you know, inflation still sticky. We're hearing about the feds. We're hearing about government shutdowns. We're hearing about

Chris Miles Money Ripples (08:08.16)

all this kind of stuff, right? Is there a recession or not? It seems like there's no recession in sight. Is unemployment really as bad as it seems or is it worse? Nobody knows because they keep adjusting the numbers. You know, is the government even tell us the truth? Right? I mean, all these things, is the government spending too much money? We're going to too much debt. Is social security going to be okay? This is all noise. Yes, there could be signals within that noise, but the problem is because there's all this 24 seven news happening, which the news companies love. The media loves it. They're going to exploit it.

And if you get sucked into that, you're going to get caught up in all the noise. And when that happens, what happens is that you freeze. You don't do anything. You're not proactive. You're reactive. And as a result, you start hearing all this stuff going on and you don't know where to turn. And again, I've heard this from clients all the time. They don't even know where to turn. They're like, well, I just, I'm going to stay the course because I, if I go to real estate, well, it seems like real estate's having issues. What if I

You know, go towards gold, silver or crypto, but still, you know, there's, mean, those things have been going up a lot. know, stocks seem like it's okay. Everybody else is doing stocks. Maybe I'm okay. And people get lulled away into this real false sense of security. Right. And that's what's happening right now. And I know what's bad right now. When someone like me, who knows these things, someone who's like, no way I'm going to touch it. And I know other traders, stock traders that don't want to touch the market right now either. And still.

It's hard not to get FOMO, right? That fear of missing out. And if you know that you're getting FOMO and if I'm getting FOMO about maybe I was wrong about stock market, maybe I should have been at the whole time. Maybe it would have been better than real estate, especially these last few years. Ooh, that's been rough. And that's when you start saying those things, that's exactly when you know things are about to shift. Because when I start getting FOMO of something, that's usually when it's already at the tippy top, right? Um, especially when I know otherwise. And, and the problem is that most

average people are going to find themselves because when the market does drop, it drops hard and fast, right? It drops super fast. mean, even look back at, you know, 2007, it really didn't start dropping until about the latter part, like the end of 2007, we started to see that happen fourth quarter, but then a pop break back up a year and a half later. But in that year and a half period of time, when it went down, the stock market lost about half of its value.

Chris Miles Money Ripples (10:31.776)

So by the time most people finally have the courage to say enough's enough, they'd sell out at the bottom. They're too late, right? That's what average people do. Smart people, the people that actually say, you know what? I'm not gonna be like every other American that ends up being broke. I wanna do something faster. They say, screw the FOMO, screw all that. I'm gonna take my profits and run because the truth is any person who's been in the market for at least the last few years, hello.

Mike Zlotnik (11:01.817)

Well, let's continue chatting. I know your battery is a little low.

Chris Miles Money Ripples (11:06.99)

I just have to re-plug it in. Sometimes it just

Mike Zlotnik (11:11.201)

Yeah, let's continue. Okay.

Chris Miles Money Ripples (11:13.342)

All right. I'll start right back up where I said, so the problem is that even though they know, you know, there could be something better, right? They just, they still stay there. So smart investor will say, I'm going to bail out now. I'm going to take my profits and run now because in the last few years and beyond, and then the really the last 16 years, it's been this nice, huge bull run. Why not take your chips off the table now? And it doesn't mean you have to pull out all of your money out of the market. It might just mean.

Maybe I take a good chunk of my chips off the table, leave a little bit in, because what if it does go up? And when we're doing stock trading, we would call that scaling out, where we would take a position and take some of those profits out. Because if it was still going up, there's no evidence of going down yet. We would just take some of the profits, right? We'd take enough to maybe even make a gain and then leave the rest to ride. I did the same thing with crypto, you know, back in, you know, when the, the, hit the previous like back in like, was it 2017, it hit a high of $20,000 on Bitcoin.

I remember like I was telling everybody it's about to crash and it did and it came crashing down and when it got down to about $6,000, I said, you know what? I'm going to buy in now. Even though it just the year prior, I told people don't, don't you dare buy that stupid Bitcoin. I went ahead and bought it because I saw an opportunity granted. It did go down a little bit further to about 3,400 bucks, but then it popped right back up. And so when it got up to roughly about $20,000 again, I said, you know what? I'm going to make sure I take all the money invested.

plus 20 % gains, I'm gonna take all that out and let the rest play. Because then I knew I made a 20 % gain and even if it lost, even if it went to zero, I didn't lose a dime. Why can't you do that in the stock market? Why can't you say, you know what, I'm gonna take a lot of these chips off the table, I've made a lot of money and maybe I could put it somewhere else where it can actually do, a place where people haven't been saying where it is. Because if everybody's telling you that one thing is good, that's when it's not good, that's when it's too late. You wanna go to the places where people don't think it's good anymore.

That's where you buy the best deals and find the best growth in your investments.

Mike Zlotnik (13:12.877)

Yeah, agreed. Be greedy when I was a fearful, be fearful when I was a greedy. Warren Buffett, this wisdom applies even more. If you follow market cycles, this is exactly what happens. Howard Marks, the risks have increased significantly with all the price growth in crypto, stock market, Magnificent 7, AI, Superboost, all these leading AI.

Chris Miles Money Ripples (13:16.942)

You got it.

Mike Zlotnik (13:42.928)

companies they called you know it's the Googles it's the chat GPT's it's the Oracle all these anyone with anything that touches AI what do they call them accelerators or AI they're leading the space but Ray Dalio said recently it reminds him of dot-com boom and bust this feels like 1999 you're

Chris Miles Money Ripples (13:50.446)

You have Oracle.

Mike Zlotnik (14:12.535)

right, you know, give it a little more time and a crash could be imminent. And this super race against China, super race where a win at all costs, there will be winners and losers and the prices people are paying for these assets are in stratosphere. And they expecting growth to be faster than anything imaginable. So we, yeah, we, we, we, we share this, this, this thought that at least people should consider diversification.

Whatever you want to call it, but rebalancing diversification is something that folks should consider even if they love Whatever they have in their portfolio. It only makes sense to diversify to whatever reasonable degree even to the point I think I've said this many times But a friend of mine used to be in CG. I just not gonna mention his name Called me, you know Ten months ago or or or about a year ago and said I got so much crypto

I can retire many times over. What do you got in real estate? Right? That's the right thinking, right? I was like, yeah, thank you for calling me because we got some phenomenal opportunities today in a beaten up market and commercial real estate is truly and genuinely beaten up. So the opportunities today for the new capital are just phenomenal on a risk adjusted basis. At the same time, people are still ultra complacent and he struggled just to be very clear. He struggled to sell a little bit of a crypto.

And to diversify that little bit, which is not little bit of money, it's actually a pretty sizable check into real estate deals because it's a mindset, it's a complacency, it feels like a bull run, but when will it end? And all these exactly the noise versus signal. There's a lot of noise and really big picture conversations about national debt and...

Chris Miles Money Ripples (15:57.431)

Yeah.

Mike Zlotnik (16:07.191)

fact that you can't trust central governments, central banks, all that said, we're still a lot more likely to see deflationary pressures than ultra inflationary pressures, as crazy as it sounds, because AI is actually highly deflationary in nature. If you think about it, it's going to eliminate a bunch of jobs and we may have needs to cut way faster than to deal with these ultra inflow, know, high end, high inflation. Who knows, right?

Chris Miles Money Ripples (16:19.618)

Mm-hmm.

Mike Zlotnik (16:36.313)

But let's continue. So I love your angle. I like how you put it, that folks need to actually be contrarian. I don't know how else to put it. Because if you follow mainstream, they lead you straight down the road to a cliff. Until you get to the point of a cliff, you don't know. It feels like you're still climbing, you're still doing well. And what's ahead? It's a cliff. So what's new on the...

Chris Miles Money Ripples (17:00.802)

Mm-hmm.

Mike Zlotnik (17:05.559)

infinite banking site, anything new happening, anything interesting are now the days as good as before better or it's been around so long and it's such a steady eddy that it's good. was good yesterday, it's still good today.

Chris Miles Money Ripples (17:20.986)

It's kind of the latter for sure. I mean, it's it's one of those things that doesn't make a lot of news Which is kind of why I like it, right? Now granted that being said because interest rates have been higher for longer Dividends have come up, you know, not huge amounts, but they're they're creeping up back upward again, right? And and this is especially important where This is what I'm seeing I'm seeing a lot of people as they're talking about like you said diversify diversifying themselves right and where do they diversify and If you look at Warren Buffett

You know, again, Harold is the Oracle of Omaha. By the way, he's never an or he's never an Oracle until after a crash. And then people call him an Oracle. But before the crashes, they think he's an idiot, right? They think he's missing out. He's old. He doesn't get it. And then also when they don't have money and he does, they're like, that's why. Well, right now, Buffett's got 30 % of his portfolio, the most he's ever had in cash, over 340 billion sitting in cash right now.

Now he has been starting to buy slowly like he's bought into some energy, you know, like energy type companies and things like that. he's, he's

Mike Zlotnik (18:26.447)

In the petrochemical companies, they just announced that he was from a petroleum company with their division because they needed liquidity and he was already a shareholder. He decided to basically buy their great other business. But he's not doing it in any heavy volume. He's basically it was like a $10 billion transaction and he has 300 billion in a bank. He's he's he's transacting, but just in a small manner.

Chris Miles Money Ripples (18:29.55)

That's right.

Chris Miles Money Ripples (18:54.382)

Yeah, it's interesting because I'll hear normal, you know, people, even people that have been good discipline savers and think they know a little bit about stock market. We're like, oh yeah, I've got my Apple stock. I love it. Well, he sold off his Apple Apple stock last year, you know, Bank of America. He sold off, right? He, he actually bailed out Bank of America during the last recession. That's why he got such a good deal. He's been selling that off, right? He's been selling out of a lot of the tech based type companies, which is what everybody's telling you to get into. Right? So he's doing again, he's doing the opposite.

And people will think he's an idiot for doing that because he's missing out on these returns. Yet his returns actually year to date have exceeded the stock market. Even with all this cash on hand. one thing that's interesting when he bought that petroleum company, he actually didn't use his own cash. You know, he did. He actually has ownership in insurance companies and he did what's called he bought it on float. Very similar to infinite banking that we teach about where you have your cash tax free savings account, right? And you can

get a line of credit against it. Well, Buffett can do the same kind of thing, but he does on a bigger scale. He literally owns insurance companies that they will have money to sitting there, money that they can invest and do things with. You know, they'll have it sitting there because they know that eventually they might have to keep some money on hand in case there's claims, right? Whether it's, if it's auto accidents, it's like auto accident claims. They keep some money on hand just in case. You know, you've got life insurance companies that they wait for people to pass on.

but they have all this money sitting around that they could do something with in the meantime. And so they can invest it and do stuff. Well, guess what? Cause Warren Buffett has ownership in those companies. He literally has his own piggy bank with those insurance companies to go borrow at 0 % to then go use their money to go make money off of it. So yes, he has a loan against it, but he's not paying any interest on it, right? And then he's going to make money off of it. This is kind of somewhat similar what we teach with infinite banking, where you can do the same thing. You can literally have money. Now the difference is this is that

You know, he's obviously taken that money out, right? And doing it as a line of credit and he's not paying interest, but he's not really earning the interest other than on his investment. You have an advantage over Warren Buffett because you can actually be earning interest on your money and then get a line of credit from the insurance company and then still go make money with that money. Because that's the thing you don't, you can't withdraw your money, but if you withdraw your money, you stop earning interest in that account. what if you left all that money in there? You just get a line of credit with the insurance company. You borrow it from them.

Mike Zlotnik (21:10.051)

Yeah, the balance is growing two places.

Chris Miles Money Ripples (21:19.008)

at a very low rate and then you use that to invest. So not only are making money in the investment, but you're still making little spread over here too with the money they're paying you. And so that's the thing that's kind of awesome. I'll tell you, mean, even though that's a really cool strategy, I'm still telling people, hey, listen, if you're thinking you need to be in cash right now, for example, a of people are wondering what if I do pull money out of the market, where do I put it? Because I'm kind of scared. I don't know where to invest it quite yet.

Well, a great temporary holding place could be in your life insurance where it's earning right now at 6 % a year tax free. Just so you're aware, Vanguard predicts that the next 10 years, the S &P 500 will only do between 2.8 and 4.8 % average per year for the next decade. That's worse than a CD.

Mike Zlotnik (22:04.623)

That's an amazing prediction. Usually the Wall Street firms avoid this type of prediction because it's not in their best interest to market. In order to market their funds, you want to sound rosy and optimistic. to predict that kind of low rate of return, you have to be a very, what's the word for it? A genuine, realistic, conservative.

player because they they they you know it's a confirmation bias they they they believe and then they they select the news and they follow the the views that support their own business the wall street business so rare rarely ever you're going to hear that kind of prediction that is fascinating

Chris Miles Money Ripples (22:47.416)

Yeah, that's right.

Chris Miles Money Ripples (22:53.57)

Yeah, it's true. Like it has to make you wonder how bad they think it's going to be over the next 10 years, but they obviously know it's like a airplane. Even if you haven't seen it in real life, like at an air show, if you've ever seen in the movies when airplay is going vertical, right? It's trying to climb, climb, climb. And pretty soon you start hearing it sputtering and still climbing, but it's sputtering and that's going to stall. And then it falls, right? It's the same thing that's happening in the market right now. They know that the gas is out of the tank.

Mike Zlotnik (23:13.839)

until it stalls.

Chris Miles Money Ripples (23:21.292)

They know that it's gone up so hard, so fast for so long that you have to have amazing news just to keep the market going up. Or in this case, no news is good news because that's why Wall Street's been going up with the government shutdown, right? Because they're like, well, hey, I don't care. I didn't hear anything. know, nothing's going on because government shutdown. There's no new numbers coming out. We're fine. Buy. But even that they're buying, it's very slow. It has all this upward resistance. And so that's where I'm just telling people like

Mike Zlotnik (23:49.561)

Yeah, I.

Chris Miles Money Ripples (23:50.832)

you've got to be careful. You really got to make sure that you don't have all your chips in, in literally blue chips or tech heavy things like the S and P, which by the way, the top 10 stocks of the S and P make up 40 % of the SP. You are no longer diversified in the S and P index. That should scare you.

Mike Zlotnik (24:06.095)

Yeah, it's the Max 7. The Max 7 weight in S &P 500 is insane. mean, essentially...

Chris Miles Money Ripples (24:11.791)

Yeah, it's about 30 % for the Mag 7. Top 10 is about 40 % right now.

Mike Zlotnik (24:17.401)

Yeah, I mean great minds think alike and I agree with concur with you. This is the time of extreme extreme danger and extreme caution and Elevated risk and of course, we don't know this this party can continue but it feels like I'm a huge fan of all these investment gurus, know, Warren Buffett Ray Dalio and Howard Marks and I've been really listening to the Mustering the market cycle by Howard Marks. It's a great book and

You just kind of, the things that happening right now is so many real basic common sense indications. We are approaching a relative peak. The cycle always continues. There's no start or end, but we are approaching the peak and it's exactly the behavior. And on the other side, we're heavily at the bottom. The opportunities in commercial real estate are so attractive. It's almost the fear is high.

The liquidity is low. feels like everything is falling in there, but that's exactly the best time when you got to open your mind and just like you said, take some chips off the stock market table and put it into what's relatively cheap. So we'll see what happens, but I don't know. It's kind of like people are sick and tired of listening to this. You tell them this so many times and they're not paying attention until it happens. And then suddenly,

You know kind of people learn Afterwards, but but until it happens. It's very difficult to convince We are out of time Chris appreciate you. This was wonderful to have you back always love to have you back and final you know any any final thoughts very quickly how would folks reach out money ripples calm any other websites

Chris Miles Money Ripples (25:50.212)

Yes.

Chris Miles Money Ripples (26:06.755)

Yeah. Final thoughts is just that there's always hope, right? And there's hope, especially if you're not following the mainstream mainstream savers end up being broke later on, right? They're the ones that become asset rich, cash poor, don't know how to create any real financial freedom. And they're the ones that suffer the most when there's a market pullback. You have an opportunity to make a choice right now. You don't have to be the victim of circumstance. You can take control of your own life. And yeah, definitely. If you want to do that, feel free to follow us at moneyripples.com. also have our money ripples podcast.

or social media, it's all at Money Ripples.

Mike Zlotnik (26:40.048)

Thank you, Chris. Appreciate you and have a wonderful fall. Enjoy the colors. Thank you.

Chris Miles Money Ripples (26:46.071)

You too.

_______________________Thank you for listening to The BigMikeFund Podcast. To receive your copy of Mike's how to choose a smart real estate fund book, head to BigMikeFund.Com or visit Amazon and type Mike Zlotnik.

Keep listening and keep investing, Big Mike style. See you in the next episode.

In this episode of the BigMikeFund Podcast, host Mike Zlotnik (Big Mike) sits down with real estate powerhouse Chris Prefontaine, Chairman and Founder of Smart Real Estate Coach®. Chris is a 4x best-selling author, Forbes Business Council Member, and a 3-time Inc. 5000 Honoree who has led one of the nation’s fastest-growing companies. With more than three decades of experience and hundreds of creative-finance real estate transactions under his belt, Chris has built a thriving community that empowers investors to succeed in any market.

Mike and Chris dive deep into the world of creative real estate, exploring how Chris rebuilt his business after the 2008 crash and why strategies like lease-purchase, owner financing, and subject-to deals remain powerful tools for today’s investors. Chris explains how his “buying on terms” approach works in both residential and commercial markets, why many sellers prefer creative structures over traditional cash offers, and how he and his family continue to complete deals weekly—while coaching students across 80+ markets to do the same.

They also discuss the importance of mentorship, real-world deal support, and proper expectations for long-term success. Chris shares how the Wicked Smart Community helps investors avoid common pitfalls, accelerate learning through hands-on deal flow, and build credibility through unique certifications.

Whether you’re new to creative real estate or looking to sharpen your strategy, this conversation offers practical insights, mindset shifts, and a clear look at how to thrive in any economic climate.

HIGHLIGHTS OF THE EPISODE00:00 - Welcome to the BigMikeFund Podcast

0:53 – Chris’s Background

1:17 – Chris’s Credentials & Wicked Smart Community

3:11 – Creative Real Estate After the 2008 Crash

4:45 – Lease Purchase, Owner Financing & Subject-To Explained

5:55 – Creative Finance in Commercial Transactions

6:10 – Recent Creative Finance Deal Example

8:59 – Principal-Only Payments & Deal Structure

9:43 – Creative Financing in Various Asset Classes

9:48 – How Students Work with Chris & His Team

10:59 – Coaching Model, Deal Review & Support System

12:44 – Certification & Credibility in Seller Conversations

13:31 – How to Reach Chris | Free Resources

14:54 – Current Market Conditions & 2025 Real Estate Environment

15:37 – AI, Technology & Faster Deal Analysis

17:22 – Modeling Success & Learning Through Technology

18:49 – AI Tools for Real Estate Due Diligence

19:30 – Integrated Tech Stack for Real Estate Students

21:40 – Scalability & Local Execution

21:52 – Recommended Podcasts

22:19 – Recommended Books

23:01 – Closing Thoughts

If you found this episode substantial and want to dig deeper into real estate, or maybe you want to discover better investment opportunities, be sure to check out www.tempofunding.com.CONNECT WITH US:Website: www.tempofunding.comYoutube: https://www.youtube.com/channel/UCnJkdVoOsUy85ydkmot9iVA

LinkedIn: https://www.linkedin.com/in/mzlotnik/Facebook: https://web.facebook.com/TFmanagementgroup/?_rdc=1&_rdr

X: https://twitter.com/management_tf

CONNECT WITH THE GUESTWebsite: https://smartrealestatecoach.com/

Books: https://wickedsmartbooks.com/tempo

Free class: https://smartrealestatecoach.com/mastersclass

Full Transcript:Mike Zlotnik (00:02.334)

Welcome to the Big Mike Fund podcast on the Big Mike Mike Zlatnik. It is my pleasure and a privilege to welcome Chris Prefrontaine. Hey Chris.

Chris Prefontaine (00:11.618)

Hey, my kawaii.

Mike Zlotnik (00:13.802)

Thanks for coming on the podcast. Appreciate you being here. You're sort of a neighbor, a Northeastern neighbor. You are in Rhode Island. Would you be so kind as to tell folks a little bit about you, family, and then we'll get into real estate and business.

Chris Prefontaine (00:28.418)

Yeah, yeah, so I've been, well, I'll start with I've been married 39 years this year, man, man. So thank you, we met in middle school. So that's an interesting journey we had. I've got two grandkids now, which is part of my why to create some really cool family experiences. And yes, I do live in Newport, Rhode Island for everybody to get a sense for how close to you.

Mike Zlotnik (00:34.056)

God bless.

Chris Prefontaine (00:52.238)

I've been in real estate now 34 years, so there's a lot to unpack. We can pick the high points, whatever you want to pick my brain on.

Mike Zlotnik (00:59.838)

Yeah, appreciate the info. I'm going to read actually the intro. Chris is a chairman and founder of the smart real estate coach. Is a Forex bestselling offer. Forth business council member. Three times Inc 5000 honoree and it's a long list of accomplishments and you have a community called wicked smart community to complete you. guided it to complete.

Hundreds of real estate transactions in North America. again, welcome to the podcast and I love Rhode Island. I've been many times in Rhode Island. One of my girls is a professional figure skater. She competes often in Boston and sometimes we've had competitions in Rhode Island at Providence and it's very cool. I love

Chris Prefontaine (01:32.344)

Thank you.

Chris Prefontaine (01:42.093)

nice.

Mike Zlotnik (01:50.033)

Rhode Island to come to the mentions, right? It's so cool. I'm sure you've been there many many times just it's a it's a unique place where you could see the vendor builds and the getties and all the the old American I guess it was 19th century wealthiest and beginning of 20th century wealthiest Americans

Chris Prefontaine (02:11.394)

Yeah, there's a house that's been being rehabbed for probably five years now along Bellevue Ave or all those mansions that you're talking about that's being done by Larry Ellison, the founder of Oracle. It is just, I don't know how long it's been going, probably more than five years. Crazy, millions of dollars.

Mike Zlotnik (02:30.024)

Yeah, those things are stunning and for the audience who haven't been there, it's a great place to visit. It's beautiful, especially warm part of the season when the weather is nice. It's a great vacation spot. All right. So let's switch to real estate. Let's talk a little bit about your coaching. Let's talk a little bit about how you helped folks to do hundreds of transactions. Is it residential, commercial? Take us through.

Chris Prefontaine (02:54.018)

Well, it's creative real estate. So let me answer that by saying a few things, Mike, thank you. So creative real estate, because after the 2008 crash, I was annihilated financially in every other way, right? Financially, mentally, et cetera. But it took me a while to get out of my own way. But once I did, 2012, I said, if I'm gonna get back in the game, which my wife encouraged me to, how am I gonna do that? I had no credit.

I was living in a one bedroom apartment. I had no money, certainly. So I wasn't bankable. So I started buying things, what I call on terms, but it's creative real estate. It's been around. You talked about Bellevue and the wealthy people back then. Well, if you read the old, there's an old Carnegie book I read that they talked about buying real estate on terms before banking. they called it master lease purchase. We call it lease purchase right now in the residential world, but also owner financing. So it's not new.

It's just that I said, okay, I can't buy unless I do that. So I buy that way. I buy lease purchase, financing and subject to existing financing. And then organically, people started asking me to show them how to do that. That was way back at like 13 or 14. And now fast forward, you know, we're in 80 markets doing deals with students. Why? Because we're not just selling something like we go, okay, you want to come on and learn this? We're going to do deals with you. Like we're not partners. It's your deal.

but we're gonna revenue share with you so we have a vested interest in seeing you to the finish line. And so to this day, we still buy as a family, my son and I, my son-in-law, Zach, who also a part of Wicked Smart, we buy homes every single week, every single month, and then we teach it to the community as well, again, in those 80 markets and growing. So it's pretty neat. So it's all what I call interactive, hands-on approach.

Mike Zlotnik (04:41.316)

Yeah, this is very cool and this creative finances by the way is true in Residential and commercial I've seen it done a lot easier to do it in residential because you don't have very sophisticated Owners, but I've seen it done in commercial too in terms when I literally had guests and I had conversations guest on a podcast and conversations with other Investors who literally say hey you can give a three offer

Chris Prefontaine (04:48.982)

Any aspect. Yeah.

Mike Zlotnik (05:10.126)

If somebody's selling a property, they need to sell this. There's a reason they're selling the property. It's listed. You could always come and make three offers. You can make an offer cash, could be low ball offer. You can make an offer with some, you know, traditional financing. You can make an offer on terms where, just like you, you, you said. You as the buyer don't need to bring a lot of cash to the table. You don't need bank financing, but you, you, you give the owner what it feels like a better price, right?

But because of a term, you're actually winning more than if they took a cash offer. So give us an example of what you've done recently. Something along these lines on kind of creative finance. Something that kind of stands out in your memory.

Chris Prefontaine (05:50.243)

Yeah. I have one on my desk. Yeah, I have one on my desk right now, Mike. And to your point, any asset class you can do, right? People do it with boats and planes. So you can do it with anything. I literally, here's the, I have this file on my desk because I'm working on a particular deal that is local here. And tonight on our mastermind call, I'm going to outline it. Here's the deal. It came from a for sale by owner. So they weren't selling on their own. She's overpriced. That's why it wasn't selling. I said to her, look,

Anyone trying to get financing on this is not going to get financing. It's not going to appraise out. I'm on your team. I don't make up the numbers. They are what they are. So I offered her, she was asking like 820. I offered her 780 grand. She's free and clear. So here's the structure. That's who I like to speak with, free and clear owners, no mortgage. 780 grand, 10 year owner financing, monthly payments of $1,670 principle only. That's the key.

because how we exit is very important, but anyone doing that deal with that heavy of a principal pay down, all of it, every month, puts themselves in a really good position. It's sort of a recession hedge, if you will. Now we parlay that into much bigger numbers the way we exit, but that's a simple, simple structure that we use all the time. No money down, however, we will pay her transfer tax and any other fees because you can't expect these cells to take no money down and then come out of pocket. Now,

Why would they take that? People go, well, how do you convince these, you don't convince them to your point. They're getting a little better price. She cannot, cannot, cannot get that on the open market. And if she did get it by luck, it wouldn't appraise. I know that. And so that's why she is incentivized to work with us. We bought our commercial building that same way I just described. Now I did put a little money down on our commercial building because it's for our own businesses. And I wanted to get in that building. But it was also a very creative deal.

because the owner wanted for trust in estate planning reasons and tax reasons, did not want a cash sale. He had offers at full price cash, didn't want them. So you're just gonna look at what is their problem or goal they're trying to accomplish that the conventional market can't and solve for that. You're never convincing. So I diverted a little bit with two deals there, but just so had an idea.

Mike Zlotnik (08:08.776)

Yeah, that's very powerful. You basically it's kind of rent to own essentially, especially if you have no money down, you you have a contract that's multi-year and not even paying interest. You're just paying the principal, right? So.

Chris Prefontaine (08:21.772)

Yeah, on the building we had a, he was very sophisticated. He's one of the largest landowners. So he said, what do mean no principal? So we did, I mean, no interest. We did principal for 18 months and then we converted it to a note that he liked, but still we got 18 months of no principal on a commercial building. On the houses we get, we stay with principal the whole way usually.

Mike Zlotnik (08:41.084)

Yeah, it requires an Excel spreadsheet and some creative thinking, but at the end of the day, if you can manage the payments, right, and you could turn the asset into a productive cash flow and you don't have much cash out of pocket, it's an immediate win-win, and you're very downside protected in essence. So yeah, I love it. It's just a very creative way to acquire anything. Even with

Interestingly enough, self-storage facilities and some multifamily assets. It's a function of if there's equity left on the deal, right? If it's an old owner and they've owned the property for long time, they have very little debt. You could even do a wrap if they have a mortgage payment. So, I mean, that's a phenomenal way to basically approach this. So, how do you, and you said you're working with your students. They're basically finding deals. They bring it to you.

You help negotiate because of your experience, which is really important. Some people teach how to negotiate and it's way better in my view. you tell me, maybe, you know, know better. It's to be, to get really good at something. If somebody is really good at finding deals, but they're not a master negotiator, and they work with you or anyone else who is a master at that. It's better to do it this way because learning every skill and be a jack of all trades is harder.