Creating Clear Decisions and Uncovering Investor Biases

Today’s guest is Colm McEvilly   Colm McEvilly works with an internal team and directly with prospective and current investors to guide them to the projects that best fit their needs and their goals. In 2018, he took the plunge out of the corporate world and into full-time real estate investing, where he heard he leveraged his engineering background and the data-driven investing methodology that he had learned.    Show summary: In this episode, Colm shares his journey from engineer to investor advocate, emphasizing the importance of process over outcome in investment decisions. He discusses three common decision-making biases in real estate investing: decision bias, results bias, and confirmation bias.  -------------------------------------------------------------- Understanding Decision Biases [00:04:51]   Validating Information Sources [00:06:01]   Results Bias and the Quality of Decision-Making [00:08:15]   The decision-making process [00:09:21]   Results biases in investing [00:10:27]   Different approaches for different investors [00:15:44]   Attracting new listeners and ranking higher on directories [00:18:50]   Decision-making biases in real estate investing [00:18:50]   Experience in multifamily syndication [00:18:50] --------------------------------------------------------------   Connect with Colm:  Instagram: https://www.instagram.com/tga_ip/  Web: tgaip.com  Linkedin: https://www.linkedin.com/in/colm-mcevilly-1480b94a/     Connect with Sam: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.     Facebook: https://www.facebook.com/HowtoscaleCRE/ LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/ Email me → [email protected]   SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234 Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f -------------------------------------------------------------- Want to read the full show notes of the episode? Check it out below: Colm McEvilly (00:00:00) - If you're making a decision and you're looking back on your best investments, a lot of times people say that their best investment was the one that had, or their best investment decision was the one that had the highest return. But in actuality, that's a mistake because they're judging the quality of their decision based on the result and not based on the process taken to get there.   Intro (00:00:21) - Welcome to the how to Scale Commercial Real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.   Sam Wilson (00:00:34) - Comic evil has gone from being an engineer to an investor advocate. He's experienced the journey from serving oneself to one to serve a community is also an investor of mine and some of our deals, and I've certainly appreciate getting to know him here over the last few years, meeting up at conferences and whatnot. So it's a pleasure to have you back here on the show. Colm, thank you so much for coming on today.   Colm McEvilly (00:00:55) - Oh my gosh, thank you, Sam, and thank you for exposing people to alternative investing opportunities outside of multifamily.   Sam Wilson (00:01:01) - Absolutely, man. The pleasure, the pleasure is mine. It's a blast to do those things today. You know, there's three questions I ask every guest who comes on the show in 90s or less. Can you tell us where did you start? Where are you now and how did you get there?   Colm McEvilly (00:01:13) - I started in single family. I had a heart failure, which basically had me have a midlife crisis in my late 20s, and that pushed me to creating multiple income streams. So I looked towards multifamily syndication. I connected and worked with Neal Bawa, and then I also work with Viking Capital. So I helped raise collectively about 160 million from retail investors. Personally, about 60 million I've converted are the 160, but I've exposure to different systems and processes. And over that journey we had more than 6000 documented investor calls. So what we're talking about today, and the whole purpose of the call today, is to help individuals realize that everybody has certain types of biases, and you need to create a decision making process to reduce heartache and headache, and it's going to save you time and put you in the driver's seat as an investor.   Colm McEvilly (00:02:07) - So, you know, at the end of this, reach out to me. I don't have any deals to pitch, but we can help create a decision making process that's appropriate for you. So I had a I had this midlife crisis. It pushed me into creating different multiple income streams because my W-2 wasn't fulfilling, but I was being compensated well. And so currently I've been involved in about 24 Syndications help raise money for 19. And then I'm currently in 17. And some of those are actually your investments as I'm an LP and seven and an eight in a general partner in ten right now.   Sam Wilson (00:02:42) - Wow, dude. That's amazing. I mean, that's that's a really cool journey. You know, at some point would love to get your more of your back story. No, we don't have time for that here today. But I think that's really cool that you've decided and you found real estate as a way to augment and support the life that you needed to lead while you were taking care of getting your own health back on track.   Colm McEvilly (00:03:03) - So think about with with stock investing. If you were to call Amazon and say, hey, can I get a loan to buy some of your stocks, they would laugh at you. But the power of real estate and like even in the project, I'm involved with you where our cost of money with 6% fixed, you know, and we have leverage in real estate. And that's why real estate, if done properly over time, is a get rich, slow way to do it because we have leverage. And then when you're partnering with other investors, it does two things. As an active side, we're leveraging other people's money and bank money. And then as a passive side, I think the most important thing is I get to leverage my time. I have five single family rentals, and those take way more time than any of the 24 commercial syndication investments I've been involved. And I make I make an incredible amount of return on my time as a passive investor, and that's that's my ultimately, my goal is to be 100% passive.   Sam Wilson (00:04:02) - I love that, man. That's that's fantastic. Yeah. And that's that's it. I do love most not all. I've got a couple passive investments that, you know, there are my own fault because they were, they were we were talking about this last night. You know, when your gut tells you early on that man we're gambling on on this, so I can't I can't say I love all of them, but I love most of them. Yeah. But that's, you know, the ones I'm not happy with are my own fault. So they got nobody to blame but me for that. But no, this is this is really great. I want to talk because I know, again, you know, time is time is of the essence here today. Unfortunately, for both of us. But you mentioned early on about the decision making process. You're approaching this conversation from the investor standpoint. Is that right?   Colm McEvilly (00:04:45) - Well, because I'm an individual, because I'm an LP, you know, I'm a passive investor myself.   Colm McEvilly (00:04:51) - I think of a lot of different things. But because I've had over 6000 documented investor half an hour calls, I recognize the decision making biases that people have. And there's three big ones that stand out. There's one. It's called a decision bias, where every decision you need to realize a bit. And so if you don't, if you don't actually break down the process of making a decision as a level of risk on each of the different criterias you are, you're probably going to make inconsistent decisions. So the first thing is, is understand every decision you make is bias and that it's based on the info that you have. So the tangible takeaway from this is have you validated? Where you're getting the information that you're making your decision on. If you're getting it from the selling broker, that is the you know, they have a financial incentive to to swoon you. So you need to understand, are you getting all your assumptions based on validated information from reliable sources? That's the first thing. And so I'll talk to investors over these calls and they'll they'll bring up they'll bring up objectives.   Colm McEvilly (00:06:01) - And sometimes it's really clear that they got an objective from from like Yahoo Finance. And it was a it was a market data for the entire country. But it's like we're talking about, you know, something hyper local. You know, real estate's hyper local. And in a perfect example is, you know, you go to where Elvis Presley grew up, you know, isn't that a pretty dangerous area? Right? But like a mile away isn't really nice. I don't yeah, great.   Sam Wilson (00:06:31) - Graceland is certainly not in the nicest portion of Memphis, that's for sure.   Colm McEvilly (00:06:35) - Yeah. And so but like, you go to Georgetown or Germantown and it's a completely different demographic and and income and and so. So. But if you make that that investment decision based on the data from the entire metro, you're going to miss out on that and you're going to miss the granularity. So so the key thing is understand where your information is coming from and where you're getting the information. They have something to gain. So always ask for the CoStar report and then the underwriting.   Colm McEvilly (00:07:04) - But that's another thing. So another thing is results biases I don't know are you are you big American football fan.   Sam Wilson (00:07:11) - You know unfortunately I would I would lose on anything sports related. So.   Colm McEvilly (00:07:15) - Oh that's right, that's right. But oh that's fine. So but the whole point is results by I see is another, another thing that if you if you're making a decision and you're looking back on your best investments, a lot of times people say that their best investment was the one that had or their best investment decision was the one that had the highest return. But in actuality, that's a mistake because they're judging the quality of their decision based on the result and not based on the process taken to get there. So what I mean is in 2018, there was there was an interception by Malcolm Butler on the Patriots. Pete Carroll, the coach of the Seahawks, made a call of of doing a one yard throw on a first or second down because he wanted to use all four downs. And everyone's like, why did you do a one yard throw that got intercepted? When you have the best running back in the league, Marshawn Lynch, he could have just slammed into it and try to get the touchdown.   Colm McEvilly (00:08:15) - This is like the fourth quarter. They ended up having the interception. The Patriots ended up winning the Super Bowl. And everybody called you know Pete Carroll Odinga's for calling that play. You know why would you give an opportunity to have an interception. But truthfully if you look back at the statistics of it and you look back at. What had happened earlier that year. There was zero one yard interceptions that entire year. So from a philosophy perspective, he actually had he actually had that the a solid decision. But the results is what crushed him even though it was the right decision. And then and then the last biopsy that you need to understand is investor is confirmation biases. So this is where you are tending to interpret new information as evidence to confirm your existing beliefs. And and so this is when you're dealing with an investor or you are an investor and you have an assumption that you know single families better for XYZ reason or, or, you know, this type of asset class or asset type is better for a certain type of reason.   Colm McEvilly (00:09:21) - So being cognizant of your own, your own beliefs when interpreting other information that can really that can really muddy the water of your decision making process and of your investors decision making process. So the way you want to, the way you want to do that is as an investor, you create a decision making process, an actual step by step journey that you go through. And we'll talk about that next. As somebody who's trying to raise money, you want to you want to learn how and where your investors are getting their decision. And then once you understand where the investors are getting their decision, you probably understand what type of messaging and what type of, you know, grant Cardone says certain things. Well, it's interesting that six months later, he has a project that aligns with what he was saying six months before. You know, it's his pre suasion. So when you're raising money, you really need to understand where your investors are are getting their information because you can't you can't dictate where they get their information.   Colm McEvilly (00:10:21) - You can only try to help how they interpret that information. And that's when you're dealing with their confirmation bias.   Sam Wilson (00:10:27) - That man that's that's that's powerful information. No it's great I mean and what you've broken down a very simple steps of what those different biases are. And you know what I don't think about myself as an investor as a as a deal sponsor. I mean, these these same things apply to, I think, all of us in some regard, you know, that decision making process. What. Well, we'll get to that, I guess going back though, the one, the one that really stood out to me was the results biases. I think that's that's one that's, that's that's hard for me to wrap my head around because there's so many different moving pieces inside of that, like results, biases. It might be that this sponsor has always made money. And so whatever deal they do, I'm just going to throw money at it because, hey, they've always made money. Yeah. Which you know, if if that's inside the decision making process, you could poke holes in that philosophy all day long by saying, wait, you know what? Just because they've hit ten out of the last ten doesn't mean that the 11th one's going to go well.   Sam Wilson (00:11:26) - Yeah, you'll need to get back in. And I'm guilty of that as a passive investor. Just going.   Colm McEvilly (00:11:31) - What's the strategy to you know.   Sam Wilson (00:11:34) - Yeah, absolutely.   Sam Wilson (00:11:35) - Absolutely.   Colm McEvilly (00:11:36) - It's a new type of asset type or class is a new a new type of strategy they've never done before, you know. But sometimes you take risks as an investor like, you know, even for like with you, I really liked you as a person. I liked your other strategies on your other projects. And one of the things I did is I asked you if I could invest below the minimum amount because I and I promised I wouldn't be a pain in the ass investor, and you graciously let me and I plan on investing with you in the future. And so that was an example of where I my I was going through my decision making process and I was unsure about the sponsor. I like to ethically but and but I liked everything else on the on the deal. Right. And there was actually a couple of things in the numbers where I thought, well, I think that is a little aggressive.   Colm McEvilly (00:12:29) - However, there were other areas that made me feel like even if there was misses in those areas, we're going to be okay because there's such a high ceiling to failure because of, you know, one particular example is, is the cap going in cap rate versus the cost of money, like there was a there's a positive difference, you know, or you know. So anyway, but that's part of the decision making process. So and if you want to learn more about how you can make decisions better I recommend two books. The first book is called How to Decide or or Thinking in Bets by Annie Duke. She's a professional poker player, and some of the philosophies that I just presented to you stem from that, but they're recognizable when you're having conversations with sponsors or when you're having conversations with investors. So look up Annie Duke. You don't even have to buy the book. I truthfully recommend you just put on YouTube and go water your plants. You know, just listen to listen to some summit, um, you know, the Cliff notes version on YouTube while you're watering your plants or, or driving your kids to school.   Colm McEvilly (00:13:32) - That way you don't have to. By the book. Let's get real. Sometimes people don't make time for that.   Sam Wilson (00:13:36) - Well, we don't make time for. And I've always thought that when you're reading books like that, it's always just the nuggets that stand out anyway. So you might just get the cliff notes version, be like, oh yeah, that's that's a great point. Without the the background filler information, I probably won't retain long term.   Colm McEvilly (00:13:52) - So here's the thing. Here's the quote of the day. Information without integration is just a distraction.   Sam Wilson (00:14:00) - Yeah boy you.   Sam Wilson (00:14:02) - Said it man. That's it. And we are in that information overload point pointed point of our life. Yeah. You're you're yeah. You're speaking to my speaking my language right there where it's just like, just don't tell me I can't I can't take anything else in. So information without integration is just.   Colm McEvilly (00:14:19) - A distraction, a.   Sam Wilson (00:14:20) - Distraction.   Colm McEvilly (00:14:21) - Or it's just noise, you know, information without integrations. Just noise.   Sam Wilson (00:14:25) - Just noise.   Sam Wilson (00:14:25) - Man, this is this is great.   Sam Wilson (00:14:27) - So how else. And I know we're again we got three minutes left here. But how else have you taken this decision making process? You sound like you've figured out how to kind of crack the code for your own investments and things that you review, but you've also probably had to reverse engineer this and understand how this applies to investors as they look at opportunities you're presenting.   Colm McEvilly (00:14:49) - Yeah. It also it depends on also their profession that shapes how they entertain, how that shapes how they receive information. When I talk to software engineers they're very methodical. So my first, you know, I helped raise $80 million with one company. Those are mostly Bay area tech people. That was a very different conversation than when I was raising money with my second company, Viking Capital, which was almost 95% physicians. Um, you know, because the physicians don't necessarily have the business acumen and the numerical, um, the like the, the background from the math perspective, they're very smart and very intelligent, but you're dealing with different obstacles in conversations where a software engineer will ask you 85 questions and you can literally chew on their process.   Colm McEvilly (00:15:44) - You can tell they're making process, but it's a long, laborious thing. But you can you know that they're not going back, right where where there might be a more whimsical, emotional decision when you're dealing with a physician investor. And that's actually where my heart lies, because I do have. I do have these heart problems. So my goal is to do two things. One, create a nonprofit that pays for therapy for people that have had surgery like myself, and then to serve the life saving medical professionals, specifically cardiologists, because I've had heart problems and but I know we're running out of time. Would you be interested in maybe doing, like, a short part two sometime where we dive into the decision making process?   Sam Wilson (00:16:32) - Oh, 100% man no, this is this has been absolutely fantastic. I mean, it's one of those things that we've just begun to really, really dig in on on this. And yeah, we'll come back and we'll do part two here in the next couple of weeks. Then we can we'll let you know, obviously, listeners let you know when this goes live, but you've given us great things to think about even yet here today, as we've discussed really, the decision making process, validating that info results, biases, confirmation biases.   Sam Wilson (00:16:57) - How does that applies to your investors, how it applies to you as an investor? And then it as for us raising capital, it also applies to how we approach those various conversations with our different types of investors.   Colm McEvilly (00:17:09) - So the investor doesn't make a decision. So you have to help them create a process and put them in the driver's seat. They'll feel the tangible momentum of having a checklist, and it demystifies the process. It builds trust with them because you're transparent, gives them the control to look through many deals a lot quicker, and it will save them time and headache because they know that they follow their process every single time and they don't have to look back.   Sam Wilson (00:17:35) - I love it man. Calm. Thank you for taking the time to come on the show here today. I certainly appreciate it and as always, it's great to see you and catch up. If our listeners want to get in touch with you, what is the best way to do that?   Colm McEvilly (00:17:45) - Um, LinkedIn, my my name and number will be in the show notes.   Colm McEvilly (00:17:48) - Or you could do go to my website tga IP. I'm still building a website because I only started this company a couple a couple of months ago. But but we do have a mission to donate $10 million to to pay for therapy for people with heart surgeries. And that's a very personal thing to me. I know that you get back to your community yourself. So but we're all about impact investing and making a change because we have talents and skills that we can. We can touch people in our community a lot more than just, you know, increasing investor returns and offsetting their taxable income. Right?   Sam Wilson (00:18:26) - Absolutely. Colm, thank you again for your time today. I certainly appreciate it. It was a blast having you back on.   Colm McEvilly (00:18:31) - Awesome. Hey.   Sam Wilson (00:18:32) - Thanks, Sam.   Sam Wilson (00:18:32) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen.   Sam Wilson (00:18:45) - If you can do that for us, that would be a fantastic help to the show. It helps us both.   Sam Wilson (00:18:50) - Attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.