July 21, 2025 • 49 mins
Ron Danz never set out to be a podcast guest. He just quietly built one of the most resilient real estate portfolios in the Pacific Northwest.
Starting with $500 down on a beat-up house near the University of Washington, Ron spent the next 53 years methodically acquiring 2,000+ apartment units and 400,000 square feet of commercial real estate—without ever blowing up.
In his first-ever podcast interview, he shares the timeless lessons that helped him survive six major real estate cycles, from the Boeing Bust to the Volcker Fed to the Great Recession.
Inside this episode:
- Why Ron never took as much debt as the bank would offer
- His "tortoise strategy" for building generational wealth
- What actually kills most real estate investors (hint: it’s not leverage alone)
- The simple 3-question test he asks before every major deal
- How he built an in-house management company to control outcomes
If you're tired of hype, debt-fueled scaling, and Instagram gurus promising quick riches—this conversation is your antidote.
📚 Mentioned: Timeless Wealth by Arie Van Gemeren, The Slight Edge by Jeff Olson
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Think Well. Act Wisely. Build Something Timeless.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:01):
Hello, ladies and gentlemen.
Welcome back to another episodeof The Timeless Investor Show.
I'm your host, Ari Van Gemeren,real estate fund manager and
student of history.
I'm thrilled to be joined todayby an exceptional guest.
I may write The TimelessInvestor, but our guest today is
The Timeless Investor, and we'regoing to learn a lot from him
(00:24):
and his story.
We're joined by Ron Dans, aclose friend, mentor, and
business partner of mine inSeattle, who personally owns and
or controls 2,000 plus apartmentunits.
And I just discovered 400,000square feet of commercial real
estate, has 53 plus years ofexperience in this business, and
(00:44):
is here to share with theTimeless Investor Network and
everybody who joins our show hisdecades of wisdom in this
business.
Ron, did I miss anything on myintroduction of you?
SPEAKER_00 (00:55):
No, but you make me sound better than I am.
SPEAKER_01 (01:00):
You are the man.
So we're thrilled to have youhere.
I cannot be more excited.
And I also, ladies andgentlemen, this is an exclusive.
I just found out Ron has neverdone a podcast before.
So this will be the first timefor our network of really
exceptional people in this groupto hear from Ron and kind of
hear what all the amazing thingshe's accomplished.
(01:22):
So, you know, I just...
Love to start, Ron.
I mean, I think we have a lot ofpeople with varied backgrounds
in our audience.
I would love to just hearbriefly how you got into the
business.
You know, it's been a long time.
You've been in it for a longtime, but love to hear your
founding story.
Like what brought you to it?
How'd you get into it?
SPEAKER_00 (01:39):
You know, everybody has their own story, I think,
right?
Mine is a story of chance.
When I was about 21 years old, Iwas working for a company that
did automotive repair.
And they specialized in havinglittle garages that were like
vacated by a gas stationsomewhere near a college campus.
(02:03):
I was doing administrative work.
But one day they said to me, canyou help us find a garage near
the University of Washington?
So I said, sure, I'll do thebest I can.
I called some realtors.
And this lady says to me, oh,I've got a garage you should
see.
Perfect spot.
So we go out to see the garage.
What it was was a smalltwo-bedroom house with a car
(02:24):
garage.
And I laughed and I said, no,no, I'm talking about a garage
like in the sense of acommercial repair shop.
So that didn't work out,obviously.
But a couple of days later, Iwas having coffee with a friend
of mine.
He and I had been talking aboutsome business stuff.
(02:45):
And I mentioned to him that thislady showed me this house with
this garage and told me we couldget it for like$500 down on a
$15,000 price and a real estatecontract.
So he and I decided to do that.
And we shared the down payment.
I had to borrow my credit card,but we shared the down payment
(03:07):
and we got this house.
Then my friend says, you know,let's live in it.
So that way we won't spend tworents.
So we just had our ownapartment.
So I said, sure.
So we did a lot of sweat laborto get this thing ready to live
in.
And then the same friend says,you know, I changed my mind.
I don't want the responsibilityof living in a house.
(03:29):
Let's sell it.
Well, this was in what's knownas the Boeing crunch, where the
billboards in Seattle said, ifyour last one out, please turn
out the lights.
So I said, well, that's notgoing to be very easy.
Nobody's buying anything.
So let's give it a shot.
So he put an ad in the paperhimself and asked$4,000 more
(03:50):
than we paid for it, includingour costs.
and got it on the first weekendfrom a professor from Sweden who
calls and says, I'm going toteach at the University of
Washington.
Can I get this house just forall cash?
Is that okay?
Yeah, that's okay.
We took the money.
We paid off our loan to theseller.
(04:11):
And my friend says, this isgreat.
Now let's take six months.
We made like$2,000 each.
Let's take six months and let'sget motorcycles.
and drive around the country.
And I said, well, my problem isthat in my situation, I think
I'd rather take the money andbuy at least one or two new
(04:33):
ones, see if we could do thisagain.
So that's kind of the beginningto a longer story, but
ultimately very quickly afterreal estate agents started
showing me the property atvarious choices, I started
saying to myself, I really likethis process.
I really like this idea of doingreal estate.
So I went and got myself aresidential agent's license and
(04:56):
started selling houses at acompany near the University of
Washington.
And then, of course, that led toother things.
For example, after I sold housesfor a while, I decided you need
to have your money work for you,not always you work for your
money.
So I decided to get a job changeand I got myself hired on a
(05:19):
commercial broker so I couldlearn about apartments and
things like that then i decidedsince i had no money to spend i
should get partners and weshould syndicate says i didn't
have the money to buy on my ownand the other issue was if you
had a vacancy in a single tenantbuilding you have no income but
(05:43):
if we could get four or five orsix or ten units it'd be easier
to weather an economic storm sothat's what led to eventually
just being a buyer, both asyndicator and an individual
owner.
SPEAKER_01 (05:56):
Yeah.
I mean, it's an incredible storyand it's also not all the
brokers I know.
I think they would look at yourpath as the one that they really
want to take and they'd bereally excited about.
So I think, I mean, that'sawesome.
You know, one of the thingsabout this day and age is
there's so much research, notresearch, but, um, resources
available for people to want toget into syndication, to want to
(06:18):
learn how to be a syndicator.
I'm sure that there wasn't awhole syndication coaching guru
business when you got started.
How did you learn to dosyndication in the first place?
With no internet, no resources,just figure it out.
Did you have a mentor?
SPEAKER_00 (06:32):
That's a great question.
I've got to give that a moment'sthought.
I think I did reading and Italked to One person who
syndicated oil well investments,not real estate, just to get a
general idea.
And then I talked with anattorney and eventually pieced
(06:53):
it all together in my mind as tohow I could do it.
And it does always start withfriends and family, right?
And now we've got hundreds ofinvestors in our pool.
In those days, it was just ahandful of friends and family.
So they kind of were patientwith you.
SPEAKER_01 (07:11):
Yes, of course.
Easier to have the rightinvestors in the early days, for
sure.
And obviously, you chose toinvest in King County in
Seattle.
That was your home market.
But you had no idea at the timethat Amazon would happen,
Microsoft would happen, all ofthe kind of massive growth
factors.
What was it about other thanbeing in Seattle that you liked
(07:31):
about it at the time?
SPEAKER_00 (07:32):
Well, I realized it was very expensive to go out of
property in other locations.
You have airplane flights, andif you have a plumbing problem,
you can't just fly there.
And with the beginning, when youhave maybe one small building,
there's not much to spread thatout over.
So I decided I want to stay inthe Northwest.
And I kind of looked at the cityof Seattle, and there's a part
(07:55):
of the city which is calledCapitol Hill.
And those days, it was like themost highly desired in-city
neighborhood ever.
And it had all the nightclubsand the sports stadiums.
But most importantly, in thosedays, it was all the hospitals.
There's like six major hospitalsthere.
Plus, it was on the edge of thefinancial district.
(08:17):
So the tenancy was the Port ofSeattle, was the hospitals, was
all kinds of things, not Boeing.
And there were no other majorbusinesses.
So I thought that was a safeplay.
And that's where I decided Iwould focus on.
SPEAKER_01 (08:32):
Yeah.
And I love your callback to the,may the last person in Seattle
turn off the lights.
Because imagine if someone hadlistened to that feedback at the
time and followed the hype andthe narrative versus the
reality, right?
And you missed out on 50 yearsof incredible growth if you kind
of listened to the doomsayers,right?
SPEAKER_00 (08:51):
Of course, nobody projected, like you mentioned,
nobody knew about high tech.
We had no projection for medicalscience.
All the things which are now farsurpassed Boeing, right?
you know, diversity ofindustries for the Northwest.
SPEAKER_01 (09:05):
Yeah.
Well, I always say, I thinkSeattle has probably the
deepest, I mean, I guess if youcounted Vancouver, BC as well,
but Seattle has an incrediblydeep and robust economic
ecosystem today, you know, majortech players, major industrial
players, aerospace, obviously.
So it's a great market and we'redefinitely following your lead
and, and continuing to investand acquire in that market.
(09:27):
It's, it's fantastic.
UNKNOWN (09:30):
Um,
SPEAKER_01 (09:30):
So, you know, Ron, one of the things you and I have
talked about in person that Ireally would love for the
audience to hear your feedbackon is you've been in this
business for 53 years, right?
53, I believe, is the rightnumber.
So, you know, you've seen, Idon't know how many real estate
cycles in that time, five, six,right?
I mean, the current one, 08, thesavings and loan crisis, like
(09:54):
every single one over the time.
What is the, what do you, like,And you've known people in this
business.
What do you think is thecommonality for the guys like
yourself that have survived?
What are the timeless principlesthat underlie your investment
philosophy that has allowed youto survive that many cycles?
Because as you know, mostsyndicators and most
(10:17):
professional investors don'tsurvive one cycle, right?
And so what is the difference?
SPEAKER_00 (10:22):
Well, you know, there's multiple things, I
think, that participate orcontribute to to be able to
last.
But I think fundamentally, oneis maintaining discipline.
So when the cycle's changing,you have to focus on the change
and try and think through whatit means and be disciplined in
(10:45):
your approach.
So for example, in the savingsand loan crisis, we tried to
focus on acquiring propertiesfrom the lenders who needed to
move them because they weredefaulted loans and got
discounts on the loan, discountson the price, and made
reasonable deals, which held upwell, right?
And you came in at a disciplinedapproach.
(11:07):
We came in at a price and terms,which allowed us to be
successful for the rest of thedownturn, right?
So I think discipline is one.
Focus is kind of the same thing,I guess.
I think you have to be focusedon what is it you want to do.
Don't get yourself into a wholebunch of deals that you don't
know or understand or understandThey sound, people say, well,
(11:30):
this is great.
You gotta decide what is yourniche, I think, and then how do
you focus on that and create thesystems and the plans you need
to execute.
SPEAKER_01 (11:41):
It's interesting, because I don't think we usually
get to talk to people that haveheld and managed real estate
through the cycles you've beenthrough.
One that's pertinent to today,although we're nowhere close to
it, is owning and being a realestate investor through the
Volcker Fed and massive rateincreases at that time.
(12:03):
I mean, how did you...
And you mentioned the savingsand loan.
Obviously, every crisis presentspurchase opportunities, but it
also creates problems forexisting assets.
How did your portfolio...
How did you...
What was the principlesunderlying your investment
strategy that allowed you toweather the Volcker Fed, that
allowed you to weather thesavings and loan crisis, all the
different things that have comethrough?
(12:23):
Because I think people today arestruggling to weather what's
going on, and it's useful, theprinciples that helped you.
SPEAKER_00 (12:30):
Again, if you have a disciplined approach, so for
example, let's take theinflation, stagnation inflation
of the early 1980s.
We just didn't buy.
You didn't buy?
We were never willing to jump inat the interest rates required.
(12:51):
Relative to today, they werehigh, and even today they would
be high, but they were runningup into the 10%, 12%, 15%, 20%
interest rate, which isbasically the lender saying, we
don't really want a loan.
But we were quite disciplinedand just said, this isn't the
right time.
Let's just manage what we haveas well as we can and be
(13:13):
patient.
And I think sometimes you justhave to be patient, right?
Each cycle is a littledifferent, right?
And I think one thing that wasinteresting to me in looking
back is that 2008 through 2010kind of high-tech bust, we had a
(13:34):
lot of things coming on themarket and you could offer and
make lower price offers.
In this current period with thetariffs or whatever current
issue is last year or two,there's not much real estate
even being put on the market,right?
Even though you would think alot of people need to move real
estate now.
So each one, I think you have tokind of just be disciplined and
(13:56):
figure out that approach forthat aspect, right?
For that particular problem.
SPEAKER_01 (14:02):
Yeah, that makes an enormous amount of sense.
I mean, I guess the particularchallenge people are facing
today is, and I've written a lotabout this on the Timeless
Investor Newsletter, But theparticular challenge is the
shadow banking and bridge debtindustry really, really took off
after the Great Recession or the2008 Great Recession.
(14:25):
And that industry was built foracquiring truly distressed
assets and then kind of turninga really distressed 50% vacancy
play and resolving it.
And by the end of 2019, 2020,2021, it became the only way to
acquire anything.
because no deal pencil unlessyou took on really short-term
(14:46):
debt.
And to me, with much lessexperience than you, debt seems
to be the thing that eitherkills you or helps you a lot in
this business.
Obviously, it's a debt-centricbusiness.
So you mentioned you didn't buyin the Volcker Fed period, but
how did you manage your currentdebt obligations on existing
buildings?
I mean, did you have aphilosophy on debt that
(15:07):
protected you in thosedownturns?
SPEAKER_00 (15:09):
Yeah, being that I started with, no funds, I was
always really cautious aboutdebt.
And I have sort of a, I'm not animmigrant, I was born here, but
my family, my parents were firstgeneration here, later in life
arrived here around the timethat I was born.
(15:30):
And so we had a prettyconservative approach about
conserving money, using money,trying to get established in the
family established, right?
So I always had a very cautiousapproach to debt.
And I think that the best thingI can say about debt is if you
think about it, good financingcan turn a medium deal to a good
(15:55):
deal.
It can't turn a bad deal to agood deal.
I think it can take an okay dealand make it a pretty good deal.
Bad financing can take a greatdeal and destroy it.
SPEAKER_01 (16:07):
So
SPEAKER_00 (16:07):
I was concerned always about trying to get
non-recourse loans, which inapartments are easy to get.
I was concerned about getting,at those days, we had 10,
20-year, 15 to 30-year payouts.
Now it's less common.
They're more five, seven, or 10.
But we got the longest loan at afixed rate that we could get.
(16:30):
And so we had stability of thepayment.
And of course, the other thingis, if you over-leverage, which
is a whole nother topic, But ifyou're over leverage and you
don't have backup capital, thenit's a problem too.
Because in those periods,sometimes you need to dip down a
little bit, pay a littlesomething to carry something,
(16:51):
knowing you've got six months ora year to work out of it, right?
Right.
So it's kind of beingconservative, right?
And I used to tell some of myinvestors and friends, I'd say,
you have to think of me as atortoise.
I'm not going to go out and tryand do a deal it would put my
whole portfolio at risk.
If the deal is that big, I'm notgoing to take that risk.
(17:14):
So you said I'm going to go slowbut steady.
So I did smaller deals, slightlylarger deals, slightly larger
deals over a progression of manyyears to where I do much more
significant deals now.
As opposed to some, maybe as youwould call it, the developer
mentality, risk everything youhave to do the next huge deal.
(17:36):
and make your fortune, but thenif that doesn't work, you're out
of business.
So it was always veryconservative.
SPEAKER_01 (17:43):
I really liked that approach.
I mean, I think the way I'vealways thought about it, and
it's different when you'restarting, you take a little
more, I mean, in some cases youtake more risk, but there's
certainly a tendency in theyounger generation, myself
included in it, to want to scalefaster and grow bigger.
(18:03):
because we're more impatient.
I don't know if it's true thatthis generation is more
impatient or that we just feelmore pressure to go big faster.
And maybe it's the techinfluence or it's the, you see,
you know, mid 20 year oldselling companies for a hundred
million dollars.
And you're like, gosh, I needto, I need to go faster.
I need to go bigger.
You know, that has an influence.
(18:24):
But it was interesting.
I remember a particularconversation with you asking you
about this.
And you said to me, I never tookas much debt as the bank offered
me, which I thought wasfascinating because I think in
this day and age, we, we try tofinancially engineer the best
possible returns and you havevery sophisticated tools and
software, but engineering thebest returns and competing for
(18:46):
equity capital means trying toengineer the top IRR or returns
you can get for a deal, whichusually means taking as much
debt as the lender gives you.
And I, I really love that.
I've told multiple people thatyou told me that, and I just
thought it was a fascinatingapproach.
Like, I'll just take less thanthey give me every time.
SPEAKER_00 (19:02):
You know, it's a little bit the outgrowth of
something else, too, or in mycase.
When I started selling and I wasthe broker, and I started by
syndicating a little thing hereand there, my basic job was
making brokerage fees to pay mybills.
At some point, I realized, likeI said, I want to have some
(19:22):
stability there.
from investments, not mypersonal work when I'm older.
But to me, that was when I was20-ish and I was talking in my
mind about where will I be whenI'm 60 or 70, right?
So I never was focused much onIRR because IRR is a great
(19:42):
number and it has its value, butit's so many assumptions, right?
I'm going to sell this in fiveyears for a certain amount of
money.
But that's really an assumption.
There's no way to know, right?
So I sort of got to a pointwhere I would focus on what's my
actual return.
And I'd start from a littledifferent place.
I'd say, do I love thisbuilding?
(20:04):
Do I love this location?
Do I believe it could be a greatpiece of real estate over 30, 40
years?
And then if I do that, Thelittle bit of a little percent
more or less of return in thefirst few years doesn't matter
if it's a good program,especially if you're buying
something to remodel a littlebit and you know you're going
(20:26):
for bigger rents over a coupleof years because you just can't
predict that accurately what thefuture is.
In case of the Boeing crunch,the future was vastly better
unexpectedly when we came out ofit than negative, but it could
go either way, right?
SPEAKER_01 (20:42):
Right, of course.
Yeah.
Well, I always say the key issurviving in this business,
which you've exemplified anddone really well, which leads to
my next question, which isyou've survived.
You've been in this businessthrough I don't know how many
cycles now, and you've built amassive portfolio.
Without naming names, obviously,and protecting people, what are
(21:05):
the commonalities in the peoplewho have blown up that you've
witnessed blow up over theyears?
SPEAKER_00 (21:13):
Under?
capitalized or vice versa, oranother way of saying over
leveraged, under capitalized,maybe not paying attention to
detail.
In their due diligence or intheir operations.
(21:37):
The management of the propertyis one of these penny makes
dimes, dimes make dollardifference.
So I think it's really in thosekinds of areas.
It's being more excited aboutthe potential for this new idea
than it is really knowing theins and outs of this new idea
and trying to judge what'swrong.
(21:59):
One of the things I used toalways, but I still do, and I do
it even with people that workfor me, is before we make a
decision or I make a decision tobuy or sell, I usually say to
the people in my office with me,what are the three things we
forgot to ask ourselves?
SPEAKER_01 (22:14):
Okay, I love
SPEAKER_00 (22:15):
that.
What could we have forgotten toeven look at or do?
And I get all the you don't knowthe unknowns and whatever,
whatever.
But we sit down, at least take aminute and say, okay, did we
really check everything out?
Is there something we forgot toask?
Is there some possibility forgood or bad that we've not
talked about?
And if there isn't, that's verycomforting.
(22:37):
If there is, we work on it.
SPEAKER_01 (22:39):
Yeah.
Do you have an example ofsomething that someone maybe
brought up one time and you guyswere like, oh, light bulb, we
need to work on that?
SPEAKER_00 (22:46):
It's hard to do a specific example, but sometimes
it could be in the direction ofan industry where we're not
sophisticated.
We want to do this building,which is by some high-tech
companies, but are they going tolast or not last?
Are they startups, which has arealistic chance of failures?
(23:09):
or they long established like aMicrosoft or Amazon where
they're not going anywhere.
Even then, they do change,right?
You know, Seattle, even Amazonis changing jobs between some
locations, but they're all inthe Pacific Northwest.
And so it's good for us.
SPEAKER_01 (23:27):
Yeah, absolutely.
Yeah, it seems like ourphilosophies are aligned.
in terms of, I've always thoughtthe idea of being a quote
unquote path of progressinvestor was a bridge too far
for me from a risk standpoint.
Like I always, I never wanted tomake the bet.
I still don't want to make thebet that so-and-so
(23:48):
neighborhood's about to gentrifyand change and prices are going
to take off.
Has that been your philosophy orhave you, I mean, have you
always been like, we're going togo to the best neighborhoods and
just stay there?
Or do you take those kinds ofbets in your
SPEAKER_00 (23:59):
investment?
Yeah, one of my early, people Italked to sort of helped me a
little bit was an attorney intown.
And he was interested in helpingbecause he wanted to be an
investor with me.
He said to me once, he said, thetrouble with being a pioneer is
you get the arrows in your ass.
Okay.
So, you know.
Very fair.
(24:19):
You can't get too far.
You know, it's the same thing assaying don't get over your skis
or something.
SPEAKER_01 (24:24):
Sure,
SPEAKER_00 (24:24):
yeah.
This thing was don't get, youknow, you can never hit the
exact top And the exact bottomwas his philosophy.
So he'd say, just try and besomewhere near them.
And you won't know you hit themor not till you see if they
change.
So if the sale after you ishigher, you bought cheaper.
(24:45):
If the sale after you is lower,you overpaid, right?
Right.
But it really was just bepatient again, right?
Be patient.
Look at fundamentals.
SPEAKER_01 (24:54):
Yeah.
You hit on a point I want todouble back to, which I think is
really important.
fascinating which is you knowthe obvious answer to why do
people blow up is debt overleverage they took on too much
debt they got greedy but you hiton a second point which is they
didn't pay attention to thedetails which i think is a
really fascinating point and youknow you've you've in my opinion
(25:15):
pioneered kind of the verticalintegration approach of you
eventually brought managementin-house you built your own
management group you mentionedbefore we started this call just
in our pre-conversation that youguys managed another four
million square feet ofcommercial real estate for other
clients.
But I think that's a reallyimportant point.
(25:37):
And it goes back to this conceptof understanding your business
from a first principles basis.
And it seems to me like thefatal flaw of many people that
jump into this and scale quicklyand do social media advertising
and raise a bunch of capital isthey don't like understand the
business from a first principlesbasis.
(25:57):
Can you just, for the benefit ofthe audience, kind of go through
how you, because today youmanage a massive portfolio,
right?
Like you cover all of KingCounty.
You have hundreds of thousandsof square foot.
How do you still stay in touchwith the details?
You know, similar to, Imentioned, that you get to
follow on our Andrew Carnegieepisode.
But Carnegie was well known for,even when he was vacationing in
(26:19):
Scotland, to be reviewing thelatest reports from his steel
mills every single point.
I mean, I'm not sure you dothat, but how do you stay on top
of everything and how did youbuild that practice when you
started your business?
SPEAKER_00 (26:32):
So originally when I was still acting as a broker and
I had one or two or three smallsyndicated buildings, I hired an
outside property managementcompany and made a sort of deal
was, you guys do my accounting,pay the bills and all that
stuff, and help with certainaspects, but I want to be
(26:52):
involved in the day-to-day.
So we would meet once or twice aweek and go over my three or
four little things, and I wouldbe on top of it.
Then I decided, well, now I'mgoing to go to the actual
property once a week.
It wasn't that hard.
They're all near each other, andI decided, actually would go on
my own and meet the buildingmanager and walk the building,
(27:15):
check the cleanliness, discusshis rentals, things like that.
And of course, as the portfoliogrew, I can't do that.
Now there's a layer, we have amanager, a group of managers
handling 100 buildings orwhatever it is, and we have a
regional person sort of managingthe managers.
We have a marketing departmentfor internet.
(27:37):
We have a marketing departmentfor other ways.
We have accounting, maintenance.
So I can't obviously do that.
So what I have done though,besides feel I have really great
people, but I think the otherthing I've done for me is even
now where you wouldn't think Iwould do this, I go to once a
week, for example, we have ameeting in the office where
(27:59):
there's a bunch of us on Zoom orin the room, and it's all the
department heads and all theon-site managers.
There's a large group of people,and we literally take a second
and talk about any given vacancyin any project.
Should we remodel this more?
Should we leave it the way itis?
(28:19):
Can we raise the rent?
Should we lower the rent?
What's the problems in theneighborhood?
Why did we get notices?
So I'm very hands-on like that.
And I spend a lot of my days inthe office talking with and
being involved in the actualdecision-making for problems.
Because I think it gives youmarket knowledge.
(28:39):
It makes it much easier whenyou're looking over a potential
deal to decide on your ownwhether you agree or disagree
with the broker projections.
The projections are alwaysdifficult.
So I like to feel like I'mprojecting something myself
where I'm really aware of
SPEAKER_01 (28:56):
it.
Yeah.
Well, I love the anecdote aboutyou touring your own buildings.
I think in this day and age,what I've observed is a lot of
people invest in markets thatare not their own.
And every time I talk tosomebody, and I'm not that far
into the business myself, butevery time I talk to somebody
that's trying to get into it,they're like, oh, I live in
Denver and I want to invest inPhoenix.
(29:17):
And I always say, just invest inDenver, just invest in your
market.
Why would you go to Phoenix?
And that proximity, especiallyif you're just getting started,
that proximity to your ownbuildings is so critical.
But there's this there's thisconstant wheel of like, let me
do more deals.
Let me do more deals.
And you end up not being onsite.
You don't end up meeting theresidents.
I mean, just the other day, Iwent to one of our properties
(29:38):
and I was just on site and Istarted talking with a resident.
She was saying, maintenancehasn't dealt with the lights
downstairs and I'm scared to gointo the laundry room.
So I immediately was like, okay,we're going to fix that.
And she was saying, my husbandjust had a really bad head
injury and I need to get him upthe curve on a wheelchair.
And I was like, okay, well, letme find a ramp for you to assist
you with that.
But as an owner, especially whenyou're third-party managing,
(30:02):
sometimes you don't have thatday-to-day experience of
talking.
You start to hear things.
On another property, theresident said to me, our utility
bills are really high.
Have you looked into X, Y, and Zprogram to help bring the cost
down?
And I hadn't because themanagement company I don't want
to say they don't care, but theydon't really care.
You talk to your resident, youtalk to your clients, if you
(30:23):
will, and they're saying, canyou help bring the utility bill
down for us?
Of course.
We'll figure out waterefficiency solutions.
We'll figure out how to helpyou.
I
SPEAKER_00 (30:32):
still tour around.
It takes me a bit of time.
Maybe four mornings out of themonth, I'll just pick a quarter
of the area that we live in hereand I'll look at a drive-by or
stop-in or combination, a bunchof properties.
And a week later, do a bunchmore.
(30:52):
So I don't probably get aroundmore than once a month to
everything that I still do.
The other thing is, I think ittells your property manager,
owners care.
Right.
Right.
You know, we're aware of and wecare about the way we look, the
way we present.
SPEAKER_01 (31:10):
Yes.
And doing the right thing forthe people that are paying our
bills.
The
SPEAKER_00 (31:13):
residents.
Right.
SPEAKER_01 (31:15):
Right.
So I know you brought managementin-house.
What was the catalyst for you?
And tell me about that process.
Well,
SPEAKER_00 (31:23):
as I grew the portfolio, it became just
physically harder and harder todo what I wanted to do, control
things, have the information inmy fingertips that I wanted.
And I realized I just need toget more organized.
And at a certain point, I hadenough units, but I felt I could
amortize the expense.
(31:44):
It was really a matter ofgetting to enough unit count.
I don't honestly remember rightnow, Ari, but I'm going to guess
it was maybe 20 buildingsbecause they're all smaller
buildings.
I said, okay, now I'm not goingto be a broker anymore.
I'm just going to be asyndicator and I'm going to run
my portfolio.
SPEAKER_01 (32:03):
Amazing.
And did you feel when you madethat change that that better
control, better finger on thepulse of the business changed?
produced a materially betterreturn for your investors?
Was it better or were there prosand cons?
SPEAKER_00 (32:18):
No, I think it was better return, but maybe of more
value to me was my marketknowledge, rent, expense, what's
going on in a neighborhood wasso great that I felt really
comfortable almost literallysaying, you could give me an
address, I could drive by it andgive you the comp rents already.
(32:39):
Okay.
I think it was knowledge ispower sort of thing, right?
And it really helped, I think,me determine, in many cases, do
a deal or not do a deal.
SPEAKER_01 (32:50):
Yeah.
Yeah, I mean, it kind of goesback to the point on
understanding your business fromthe inside out.
And I really feel that the realestate industry today really
perpetuates this idea that, oh,if you buy a fourplex, you
should immediately give it overto a management company and go
try to buy another buildingbecause you want to scale.
(33:10):
And I ascribe to that.
I mean, that's how I started mycompany.
That's how we did it.
But I really had a completeconversion on the topic, which
is I think people are poorlyserved.
I mean, you did the same thing.
You started with third party.
But now when people ask me, Isay, I think you should manage
your own fourplex.
I think it's good for you tounderstand all the different X's
and O's of how this actuallyworks.
(33:31):
How do you find residents?
How do you communicate withresidents?
So I think it's awesome and ittotally makes a ton of sense.
Yeah,
SPEAKER_00 (33:39):
I do remember sometimes too, Ari, that if you
want to be a real estate personand acquire and focus on it, I
think it's hard to do it as ahobby, so to speak.
It's one thing to haveinvestments in real estate where
you have syndicate partners whohandle it or REITs, things like
that.
But if you really want to ownthe direct property, I think you
(34:02):
have to think of it, I'm in abusiness, right?
I'm not just in a hobby.
SPEAKER_01 (34:07):
Yeah.
Yeah.
No, for
SPEAKER_00 (34:08):
sure.
It just takes time, right?
It's a detailed business.
And, you know, the propertymanagement is particularly
detailed, but every detail isimportant in everything here.
SPEAKER_01 (34:18):
Yeah, absolutely.
And, you know, following theflow of funds, understanding
money going in, money going out.
Like, you know, I think peoplethink that they can pass the
accounting on to someone else,but I don't think in the early
days.
I think in the early days, youhave to be the accountant.
Like, you
SPEAKER_00 (34:31):
have to really understand.
You have to understand yourcosts too, right?
SPEAKER_01 (34:35):
Yeah, of course.
Yeah.
The time to turn.
I mean, there's so many thingsabout it that are incredible.
I mean, yeah.
Well, I want to ask you anotherslightly different question, but
in your 53 years of experience,there must have been a downturn
or a bad period of the marketthat tried to kill you.
(34:59):
What was the hardest cycle foryou and what were the biggest
challenges you faced?
SPEAKER_00 (35:05):
Well, this is going to sound like a kind of vain
answer.
It never happened?
It never really happenedbecause, for example, as I
mentioned, in the savings andloan crisis, we just didn't buy
more.
And so we had adequate cash flowfrom properties we owned, and we
(35:25):
had some reserve in case weneeded it.
And so that was never apressure.
In 2010, and you know thepeculiarities of Seattle, Prices
went down on acquisition, butrent stayed the same.
So there's never a cash flowcrunch because we weren't over
leveraged in any property.
(35:45):
So I think that it was moredifficult to find how to buy or
sell if that's your goal inthose times for us that
SPEAKER_01 (35:57):
operate.
SPEAKER_00 (36:01):
We never took short-term debt.
SPEAKER_01 (36:03):
Right.
SPEAKER_00 (36:04):
We never had any loans being called or any
finance issues.
We just had to make our monthlypayment.
SPEAKER_01 (36:09):
Yeah.
Is there a rough loan to valuethat you kind of cap yourself
at?
Are you like, it needs to be60%?
Was there a rough number for youthat was like around the
ballpark?
SPEAKER_00 (36:20):
Well, when I was younger, it was higher, right?
SPEAKER_01 (36:22):
Sure.
SPEAKER_00 (36:23):
Of course, yeah.
Because I didn't have capital.
So it probably started at 80-20.
But it has gone down to morelike 60-40 or 50-50.
SPEAKER_01 (36:33):
Yeah.
And how do you, you know, one ofthe things you said to me in
another conversation that Ifound fascinating is you made
the comment, because we weretalking about some of these
cautionary tales that arehappening right now.
And people of your tenurethroughout the country, they're
kind of blowing up, right?
They got a little tooaggressive.
They went too big.
(36:53):
And you made the comment, someguys just can't stop themselves.
What is it psychologically thatyou think has enabled you to,
not get carried away with that,the kind of God complex.
It's always worked.
I'm just going to go big.
I'm going to go huge.
What is different about yourapproach?
SPEAKER_00 (37:13):
I don't know if it's different or not, but I would
say fear.
SPEAKER_01 (37:16):
Okay.
Sure.
You have healthy fear.
SPEAKER_00 (37:20):
Fear of failure, fear of going back to having no
capital, whatever that fear is,fear of disappointing my
investors if I'm in a syndicate,or fear of disappointing my
myself if I'm losing my money,so to speak.
So I think I was alwaysmotivated by I'd rather just be
cautious.
And, you know, there's a sort ofalso thing I told my kids and my
(37:44):
son-in-laws as they were gettingmarried and we would talk, have
little meetings together aboutrewards and risk of real estate.
I said, you have to also judgenot only the risk that you're
willing to take financially, soto speak, but also emotionally,
right?
Sure.
If you take a risk, that's goingto make you stay up every night
(38:04):
all night because you're so sureyou might lose too much money.
Maybe you shouldn't take thatrisk.
SPEAKER_01 (38:11):
Right.
SPEAKER_00 (38:12):
Yeah.
You should find the level thatyou can accept.
Right.
So I think to me it was sort offear of failure, fear of not
having the money, fear ofdisappointing other people,
disappointing myself, harmingmy, my wife and my kids.
If I did something stupid.
SPEAKER_01 (38:28):
Sure.
Yeah, absolutely.
Do you, Do you, as you'reobserving the younger generation
of real estate people, and youtalk to me, you talk to a bunch
of other guys, my peers inSeattle that do exactly what I
do, do you observe a differencein mentality or kind of
emotional makeup for the youngergeneration?
Is there more impatience?
Is there more FOMO, fear ofmissing out, needing to do stuff
(38:51):
now?
Do you see a difference or isthat just in my head?
SPEAKER_00 (38:54):
Well, I think about this sometimes in other ways
too, Ari.
about how we operate and worknow compared to before, I think
human personality is prettyfixed.
And I think 50 years ago, 30years ago, 20 years ago today,
there were bigger risk takers,smaller risk takers, more
(39:17):
detailed people, less detailedpeople, people that were more
interested in what's theprestige of this deal rather
than is this a good deal.
So I don't think overall It's abig change, but I do understand
that I think or what I notice isthere's probably a bit more of
that now.
(39:37):
And like you said earlier, Ineeded to act faster to make
money now.
And the other thing I've noticedis I believe strongly this is a
people business.
And if you don't have a lot ofextensive contacts, you can miss
a lot of important deals,transactions, opportunities.
(39:58):
So I've always been big on phonecalls, personal meetings,
getting together with people.
When I was renting my own units,I wouldn't do anything on the
phone with you except set anappointment so I could meet you
there and really sell you,right?
I've noticed a lot of theyounger people in my own office
included are morecomputer-oriented now.
(40:23):
They'd like to be able to stayat their screen and at their
desk in the office all day andnot have to drive to the
building, make a deal withoutmeeting the people.
So there's some pros and cons,right?
But I think that may be asignificant change.
There's a lot less personalcontact.
You know, I used to, sometimesin real estate, and this
happened to you, I'm sure otherpeople, you'll do a deal and a
(40:46):
couple of years later, some ofyou will say, boy, you were
lucky.
That was a fantastic deal.
But you know, you don't knowthat till a bit later, right?
It looks good to the outside.
And I think sometimes to findthat once every 10-year deal
that really is a great dealgoing in, I think you have to be
everywhere all the time.
(41:07):
Yeah.
So I think that means talkingwith people, going places, being
involved in people that do thereal estate business.
So not necessarily a brokerconference about a cap rate, but
where are the buyers?
Where are the brokers who mightbring me a deal I want?
How do I spend time with themand develop a relationship so
(41:28):
we're early on?
So in apartments, usually, Iknow it's not 100%, but
frequently we get calls in theoffice from a local broker
saying, I got this deal.
I know you guys could buy it ifyou wanted.
We think it's great.
Will you take it or not before Igo to market?
UNKNOWN (41:47):
Right?
SPEAKER_00 (41:47):
Because that's because of relationship deals,
right?
SPEAKER_01 (41:52):
Yeah.
Yeah.
That's incredible.
Yeah, that's a good point.
I mean, I do think there'ssomething to be said to that.
You know, technology has broughtus closer together, but also
made us further apart in manyways.
And yeah, we're definitelyseeing that.
I see it when I go back to myhigh school for alumni events.
A lot of the kids, you know,have struggled to have a human
(42:14):
conversation with me.
And I, you know, I just, I,obviously there's some
substantial changes thattechnology is bringing to
society, not all positive.
So- Awesome.
Well, I want to I want to windup with you.
You're our second guest, Ron.
So thank you for being on theshow.
We are going to just for thelisteners, we're going to I'm
(42:34):
going to try to end everyepisode with one of our
distinguished guests like Ronwith a question that's near and
dear to my heart, which is whatis the most impactful book you
ever read?
And what would you recommend toyour your children or your
grandchildren say you must readthis book?
SPEAKER_00 (42:54):
That's a tough question, but given the nature
of the podcast, I would sayTimeless Wealth.
SPEAKER_01 (43:02):
Okay.
Really?
SPEAKER_00 (43:02):
Okay.
Of all the books?
All right.
It's a bit of a joke, but it'salso a serious joke because
Timeless Wealth, which I readmaybe twice actually, was a
really excellent real estatebook because so many of the real
estate books that we talk aboutfocus on The technical things,
(43:25):
what's the cap rate?
How do you analyze this?
What's probable, what'spossible?
They don't really talk about themindset that the investor needs.
And you bring up your 10 specialpoints, for example.
And if you look at those, thoseare not technical formulas.
Those are not real estaterequired pieces of information,
(43:49):
but they make you focus on risk,reward, what you can and can't
do it.
So all jokes aside, I thinkthat's an excellent book.
And if your listeners haven'tread it, they should.
SPEAKER_01 (44:01):
Thank you.
I appreciate
SPEAKER_00 (44:03):
it.
In terms of other books, I'vealways been a person who reads
extensively.
At any one time, I have four orfive books open on my Kindle,
and frequently they relate tothe same topic.
And I was a history major with aserious interest tension in
philosophy, which has nothing todo with real estate, right?
(44:26):
Sure.
That's because I thought I wasgoing to be a teacher before I
got sucked into the houses.
Sure.
So I have a little differentbent.
There's a lot of great realestate books just to learn
technical things.
But I think sometimes if youreach out beyond the traditional
thought of what's a real estatebook, for example, one book I
(44:48):
found kind of valuable iscalled...
Slight Edge by Jeff Olson.
He's got a couple of books,three or four, and maybe a
little series.
The basic thing he's trying todo is point out if you want to
have that slight edge, if youwant to have the deal nobody
else got, if you want to losethe weight that you want to
(45:11):
lose, not smoke when you don'twant to, whatever it is, his
basic thing, what you talk aboutis you have to remember that
it's in every single littledetail.
It's easy to say, if I don'twork out today, it's not going
to make me less healthy.
Or if I do work out today, it'snot going to make me healthier,
(45:32):
right?
Or if I eat this one piece ofcandy on my diet, it's not
really going to make me waymore.
And really his point is, whetherit's in business or personal
things, whatever, to build thosehabits, you have to keep
executing them even at thesmallest detail consistently.
And I think that was veryhelpful because it helped me
(45:54):
stay on task.
SPEAKER_01 (45:56):
I love that.
I will pick that up right afterthis call and we'll make sure to
link the book in the show notesas well for all the listeners.
We'll also link Timeless Wealth,but we usually do that anyway.
So I appreciate the shout outfor my book, but that's amazing.
I also learned something newabout you today, Ron, that I
(46:16):
didn't know, that you were ahistory and philosophy major.
I also studied history andphilosophy.
So I always knew we got alongfor a good reason, but I didn't
know that we shared the historyand philosophy background, which
is amazing.
SPEAKER_00 (46:30):
When people ask me, especially friends in my age
group, who now say my kids andmy grandkids are thinking about
going to real estate, whatshould they read and stuff?
I usually say business degree isimportant.
I'm not ever going to say that abusiness degree isn't important
but it gives you a lot of inputon the technical stuff what's
(46:55):
this formula what's that formulaand i think sometimes in
philosophy i found uh it helpedme i think do better learning
how to how to go through aprocess of coming to a
conclusion Not skipping to theconclusion or falling into my
(47:17):
own trap of this is what Iwanted to say, but here's how
you become logical and you stickto it.
In philosophy, I think theimportance of setting things to
test things against.
And then it gets into your ownpersonalities and risks, right?
So I think philosophy was reallya great, I wouldn't say better
(47:42):
or worse, It was a great subjectto work on, even going into
business.
SPEAKER_01 (47:48):
Yeah.
Well, I'll take a harder stancethan you.
I think that you can learnbusiness by doing business.
And for all the youngerlisteners, I think focus on
something you love and thatteaches you how to think.
And then learn business by doingbusiness.
And I still rememberinterviewing at Goldman Sachs
(48:09):
back in the day and They werelike, oh, you didn't study
business, blah, blah, blah.
And I said, well, I actuallythink it's to my benefit that I
didn't study traditionalbusiness in college because I
was taught how to think andanalyze and think through it.
And I'm not saying businessdegrees are not taught that, but
you learn all that doingbusiness, right?
You learn how to think from thesocial sciences, from these
(48:30):
different things.
And so I'll take a strongerposition than you and say, I
think there's an immense amountof value to philosophy, to
history, political science,these different studies that
give you respect for what camebefore.
I mean, that's the whole premiseof this show, right?
And everything we write is whatcan we take from history?
So I really, really appreciatethis.
(48:51):
This was a fantastic interview.
And just, I think to summarizesome of the key points, be
conservative, start small, bedetail-oriented, be in the
weeds, understand yourproperties, and don't get blown
up by, as Sam Zell would callit, edifice mania.
I must own this building.
And then you blow yourself up,which is what we're seeing
(49:11):
happening today.
And obviously you and Sam Zellboth exemplified that trait and
didn't take insane risks, right?
So thank you again, everyone,for being here for another
episode of the Timeless InvestorShow, where we match history,
stories, and great investors tomodern day investing to find an
(49:33):
edge and be the best we canpossibly be.
Think well, act wisely, buildsomething timeless.
I'll see you next week.
Hello, ladies and gentlemen.
Welcome back to another episodeof The Timeless Investor Show.
I'm your host, Ari Van Gemeren,real estate fund manager and
student of history.
I'm thrilled to be joined todayby an exceptional guest.
I may write The TimelessInvestor, but our guest today is
The Timeless Investor, and we'regoing to learn a lot from him
(00:24):
and his story.
We're joined by Ron Dans, aclose friend, mentor, and
business partner of mine inSeattle, who personally owns and
or controls 2,000 plus apartmentunits.
And I just discovered 400,000square feet of commercial real
estate, has 53 plus years ofexperience in this business, and
(00:44):
is here to share with theTimeless Investor Network and
everybody who joins our show hisdecades of wisdom in this
business.
Ron, did I miss anything on myintroduction of you?
SPEAKER_00 (00:55):
No, but you make me sound better than I am.
SPEAKER_01 (01:00):
You are the man.
So we're thrilled to have youhere.
I cannot be more excited.
And I also, ladies andgentlemen, this is an exclusive.
I just found out Ron has neverdone a podcast before.
So this will be the first timefor our network of really
exceptional people in this groupto hear from Ron and kind of
hear what all the amazing thingshe's accomplished.
(01:22):
So, you know, I just...
Love to start, Ron.
I mean, I think we have a lot ofpeople with varied backgrounds
in our audience.
I would love to just hearbriefly how you got into the
business.
You know, it's been a long time.
You've been in it for a longtime, but love to hear your
founding story.
Like what brought you to it?
How'd you get into it?
SPEAKER_00 (01:39):
You know, everybody has their own story, I think,
right?
Mine is a story of chance.
When I was about 21 years old, Iwas working for a company that
did automotive repair.
And they specialized in havinglittle garages that were like
vacated by a gas stationsomewhere near a college campus.
(02:03):
I was doing administrative work.
But one day they said to me, canyou help us find a garage near
the University of Washington?
So I said, sure, I'll do thebest I can.
I called some realtors.
And this lady says to me, oh,I've got a garage you should
see.
Perfect spot.
So we go out to see the garage.
What it was was a smalltwo-bedroom house with a car
(02:24):
garage.
And I laughed and I said, no,no, I'm talking about a garage
like in the sense of acommercial repair shop.
So that didn't work out,obviously.
But a couple of days later, Iwas having coffee with a friend
of mine.
He and I had been talking aboutsome business stuff.
(02:45):
And I mentioned to him that thislady showed me this house with
this garage and told me we couldget it for like$500 down on a
$15,000 price and a real estatecontract.
So he and I decided to do that.
And we shared the down payment.
I had to borrow my credit card,but we shared the down payment
(03:07):
and we got this house.
Then my friend says, you know,let's live in it.
So that way we won't spend tworents.
So we just had our ownapartment.
So I said, sure.
So we did a lot of sweat laborto get this thing ready to live
in.
And then the same friend says,you know, I changed my mind.
I don't want the responsibilityof living in a house.
(03:29):
Let's sell it.
Well, this was in what's knownas the Boeing crunch, where the
billboards in Seattle said, ifyour last one out, please turn
out the lights.
So I said, well, that's notgoing to be very easy.
Nobody's buying anything.
So let's give it a shot.
So he put an ad in the paperhimself and asked$4,000 more
(03:50):
than we paid for it, includingour costs.
and got it on the first weekendfrom a professor from Sweden who
calls and says, I'm going toteach at the University of
Washington.
Can I get this house just forall cash?
Is that okay?
Yeah, that's okay.
We took the money.
We paid off our loan to theseller.
(04:11):
And my friend says, this isgreat.
Now let's take six months.
We made like$2,000 each.
Let's take six months and let'sget motorcycles.
and drive around the country.
And I said, well, my problem isthat in my situation, I think
I'd rather take the money andbuy at least one or two new
(04:33):
ones, see if we could do thisagain.
So that's kind of the beginningto a longer story, but
ultimately very quickly afterreal estate agents started
showing me the property atvarious choices, I started
saying to myself, I really likethis process.
I really like this idea of doingreal estate.
So I went and got myself aresidential agent's license and
(04:56):
started selling houses at acompany near the University of
Washington.
And then, of course, that led toother things.
For example, after I sold housesfor a while, I decided you need
to have your money work for you,not always you work for your
money.
So I decided to get a job changeand I got myself hired on a
(05:19):
commercial broker so I couldlearn about apartments and
things like that then i decidedsince i had no money to spend i
should get partners and weshould syndicate says i didn't
have the money to buy on my ownand the other issue was if you
had a vacancy in a single tenantbuilding you have no income but
(05:43):
if we could get four or five orsix or ten units it'd be easier
to weather an economic storm sothat's what led to eventually
just being a buyer, both asyndicator and an individual
owner.
SPEAKER_01 (05:56):
Yeah.
I mean, it's an incredible storyand it's also not all the
brokers I know.
I think they would look at yourpath as the one that they really
want to take and they'd bereally excited about.
So I think, I mean, that'sawesome.
You know, one of the thingsabout this day and age is
there's so much research, notresearch, but, um, resources
available for people to want toget into syndication, to want to
(06:18):
learn how to be a syndicator.
I'm sure that there wasn't awhole syndication coaching guru
business when you got started.
How did you learn to dosyndication in the first place?
With no internet, no resources,just figure it out.
Did you have a mentor?
SPEAKER_00 (06:32):
That's a great question.
I've got to give that a moment'sthought.
I think I did reading and Italked to One person who
syndicated oil well investments,not real estate, just to get a
general idea.
And then I talked with anattorney and eventually pieced
(06:53):
it all together in my mind as tohow I could do it.
And it does always start withfriends and family, right?
And now we've got hundreds ofinvestors in our pool.
In those days, it was just ahandful of friends and family.
So they kind of were patientwith you.
SPEAKER_01 (07:11):
Yes, of course.
Easier to have the rightinvestors in the early days, for
sure.
And obviously, you chose toinvest in King County in
Seattle.
That was your home market.
But you had no idea at the timethat Amazon would happen,
Microsoft would happen, all ofthe kind of massive growth
factors.
What was it about other thanbeing in Seattle that you liked
(07:31):
about it at the time?
SPEAKER_00 (07:32):
Well, I realized it was very expensive to go out of
property in other locations.
You have airplane flights, andif you have a plumbing problem,
you can't just fly there.
And with the beginning, when youhave maybe one small building,
there's not much to spread thatout over.
So I decided I want to stay inthe Northwest.
And I kind of looked at the cityof Seattle, and there's a part
(07:55):
of the city which is calledCapitol Hill.
And those days, it was like themost highly desired in-city
neighborhood ever.
And it had all the nightclubsand the sports stadiums.
But most importantly, in thosedays, it was all the hospitals.
There's like six major hospitalsthere.
Plus, it was on the edge of thefinancial district.
(08:17):
So the tenancy was the Port ofSeattle, was the hospitals, was
all kinds of things, not Boeing.
And there were no other majorbusinesses.
So I thought that was a safeplay.
And that's where I decided Iwould focus on.
SPEAKER_01 (08:32):
Yeah.
And I love your callback to the,may the last person in Seattle
turn off the lights.
Because imagine if someone hadlistened to that feedback at the
time and followed the hype andthe narrative versus the
reality, right?
And you missed out on 50 yearsof incredible growth if you kind
of listened to the doomsayers,right?
SPEAKER_00 (08:51):
Of course, nobody projected, like you mentioned,
nobody knew about high tech.
We had no projection for medicalscience.
All the things which are now farsurpassed Boeing, right?
you know, diversity ofindustries for the Northwest.
SPEAKER_01 (09:05):
Yeah.
Well, I always say, I thinkSeattle has probably the
deepest, I mean, I guess if youcounted Vancouver, BC as well,
but Seattle has an incrediblydeep and robust economic
ecosystem today, you know, majortech players, major industrial
players, aerospace, obviously.
So it's a great market and we'redefinitely following your lead
and, and continuing to investand acquire in that market.
(09:27):
It's, it's fantastic.
UNKNOWN (09:30):
Um,
SPEAKER_01 (09:30):
So, you know, Ron, one of the things you and I have
talked about in person that Ireally would love for the
audience to hear your feedbackon is you've been in this
business for 53 years, right?
53, I believe, is the rightnumber.
So, you know, you've seen, Idon't know how many real estate
cycles in that time, five, six,right?
I mean, the current one, 08, thesavings and loan crisis, like
(09:54):
every single one over the time.
What is the, what do you, like,And you've known people in this
business.
What do you think is thecommonality for the guys like
yourself that have survived?
What are the timeless principlesthat underlie your investment
philosophy that has allowed youto survive that many cycles?
Because as you know, mostsyndicators and most
(10:17):
professional investors don'tsurvive one cycle, right?
And so what is the difference?
SPEAKER_00 (10:22):
Well, you know, there's multiple things, I
think, that participate orcontribute to to be able to
last.
But I think fundamentally, oneis maintaining discipline.
So when the cycle's changing,you have to focus on the change
and try and think through whatit means and be disciplined in
(10:45):
your approach.
So for example, in the savingsand loan crisis, we tried to
focus on acquiring propertiesfrom the lenders who needed to
move them because they weredefaulted loans and got
discounts on the loan, discountson the price, and made
reasonable deals, which held upwell, right?
And you came in at a disciplinedapproach.
(11:07):
We came in at a price and terms,which allowed us to be
successful for the rest of thedownturn, right?
So I think discipline is one.
Focus is kind of the same thing,I guess.
I think you have to be focusedon what is it you want to do.
Don't get yourself into a wholebunch of deals that you don't
know or understand or understandThey sound, people say, well,
(11:30):
this is great.
You gotta decide what is yourniche, I think, and then how do
you focus on that and create thesystems and the plans you need
to execute.
SPEAKER_01 (11:41):
It's interesting, because I don't think we usually
get to talk to people that haveheld and managed real estate
through the cycles you've beenthrough.
One that's pertinent to today,although we're nowhere close to
it, is owning and being a realestate investor through the
Volcker Fed and massive rateincreases at that time.
(12:03):
I mean, how did you...
And you mentioned the savingsand loan.
Obviously, every crisis presentspurchase opportunities, but it
also creates problems forexisting assets.
How did your portfolio...
How did you...
What was the principlesunderlying your investment
strategy that allowed you toweather the Volcker Fed, that
allowed you to weather thesavings and loan crisis, all the
different things that have comethrough?
(12:23):
Because I think people today arestruggling to weather what's
going on, and it's useful, theprinciples that helped you.
SPEAKER_00 (12:30):
Again, if you have a disciplined approach, so for
example, let's take theinflation, stagnation inflation
of the early 1980s.
We just didn't buy.
You didn't buy?
We were never willing to jump inat the interest rates required.
(12:51):
Relative to today, they werehigh, and even today they would
be high, but they were runningup into the 10%, 12%, 15%, 20%
interest rate, which isbasically the lender saying, we
don't really want a loan.
But we were quite disciplinedand just said, this isn't the
right time.
Let's just manage what we haveas well as we can and be
(13:13):
patient.
And I think sometimes you justhave to be patient, right?
Each cycle is a littledifferent, right?
And I think one thing that wasinteresting to me in looking
back is that 2008 through 2010kind of high-tech bust, we had a
(13:34):
lot of things coming on themarket and you could offer and
make lower price offers.
In this current period with thetariffs or whatever current
issue is last year or two,there's not much real estate
even being put on the market,right?
Even though you would think alot of people need to move real
estate now.
So each one, I think you have tokind of just be disciplined and
(13:56):
figure out that approach forthat aspect, right?
For that particular problem.
SPEAKER_01 (14:02):
Yeah, that makes an enormous amount of sense.
I mean, I guess the particularchallenge people are facing
today is, and I've written a lotabout this on the Timeless
Investor Newsletter, But theparticular challenge is the
shadow banking and bridge debtindustry really, really took off
after the Great Recession or the2008 Great Recession.
(14:25):
And that industry was built foracquiring truly distressed
assets and then kind of turninga really distressed 50% vacancy
play and resolving it.
And by the end of 2019, 2020,2021, it became the only way to
acquire anything.
because no deal pencil unlessyou took on really short-term
(14:46):
debt.
And to me, with much lessexperience than you, debt seems
to be the thing that eitherkills you or helps you a lot in
this business.
Obviously, it's a debt-centricbusiness.
So you mentioned you didn't buyin the Volcker Fed period, but
how did you manage your currentdebt obligations on existing
buildings?
I mean, did you have aphilosophy on debt that
(15:07):
protected you in thosedownturns?
SPEAKER_00 (15:09):
Yeah, being that I started with, no funds, I was
always really cautious aboutdebt.
And I have sort of a, I'm not animmigrant, I was born here, but
my family, my parents were firstgeneration here, later in life
arrived here around the timethat I was born.
(15:30):
And so we had a prettyconservative approach about
conserving money, using money,trying to get established in the
family established, right?
So I always had a very cautiousapproach to debt.
And I think that the best thingI can say about debt is if you
think about it, good financingcan turn a medium deal to a good
(15:55):
deal.
It can't turn a bad deal to agood deal.
I think it can take an okay dealand make it a pretty good deal.
Bad financing can take a greatdeal and destroy it.
SPEAKER_01 (16:07):
So
SPEAKER_00 (16:07):
I was concerned always about trying to get
non-recourse loans, which inapartments are easy to get.
I was concerned about getting,at those days, we had 10,
20-year, 15 to 30-year payouts.
Now it's less common.
They're more five, seven, or 10.
But we got the longest loan at afixed rate that we could get.
(16:30):
And so we had stability of thepayment.
And of course, the other thingis, if you over-leverage, which
is a whole nother topic, But ifyou're over leverage and you
don't have backup capital, thenit's a problem too.
Because in those periods,sometimes you need to dip down a
little bit, pay a littlesomething to carry something,
(16:51):
knowing you've got six months ora year to work out of it, right?
Right.
So it's kind of beingconservative, right?
And I used to tell some of myinvestors and friends, I'd say,
you have to think of me as atortoise.
I'm not going to go out and tryand do a deal it would put my
whole portfolio at risk.
If the deal is that big, I'm notgoing to take that risk.
(17:14):
So you said I'm going to go slowbut steady.
So I did smaller deals, slightlylarger deals, slightly larger
deals over a progression of manyyears to where I do much more
significant deals now.
As opposed to some, maybe as youwould call it, the developer
mentality, risk everything youhave to do the next huge deal.
(17:36):
and make your fortune, but thenif that doesn't work, you're out
of business.
So it was always veryconservative.
SPEAKER_01 (17:43):
I really liked that approach.
I mean, I think the way I'vealways thought about it, and
it's different when you'restarting, you take a little
more, I mean, in some cases youtake more risk, but there's
certainly a tendency in theyounger generation, myself
included in it, to want to scalefaster and grow bigger.
(18:03):
because we're more impatient.
I don't know if it's true thatthis generation is more
impatient or that we just feelmore pressure to go big faster.
And maybe it's the techinfluence or it's the, you see,
you know, mid 20 year oldselling companies for a hundred
million dollars.
And you're like, gosh, I needto, I need to go faster.
I need to go bigger.
You know, that has an influence.
(18:24):
But it was interesting.
I remember a particularconversation with you asking you
about this.
And you said to me, I never tookas much debt as the bank offered
me, which I thought wasfascinating because I think in
this day and age, we, we try tofinancially engineer the best
possible returns and you havevery sophisticated tools and
software, but engineering thebest returns and competing for
(18:46):
equity capital means trying toengineer the top IRR or returns
you can get for a deal, whichusually means taking as much
debt as the lender gives you.
And I, I really love that.
I've told multiple people thatyou told me that, and I just
thought it was a fascinatingapproach.
Like, I'll just take less thanthey give me every time.
SPEAKER_00 (19:02):
You know, it's a little bit the outgrowth of
something else, too, or in mycase.
When I started selling and I wasthe broker, and I started by
syndicating a little thing hereand there, my basic job was
making brokerage fees to pay mybills.
At some point, I realized, likeI said, I want to have some
(19:22):
stability there.
from investments, not mypersonal work when I'm older.
But to me, that was when I was20-ish and I was talking in my
mind about where will I be whenI'm 60 or 70, right?
So I never was focused much onIRR because IRR is a great
(19:42):
number and it has its value, butit's so many assumptions, right?
I'm going to sell this in fiveyears for a certain amount of
money.
But that's really an assumption.
There's no way to know, right?
So I sort of got to a pointwhere I would focus on what's my
actual return.
And I'd start from a littledifferent place.
I'd say, do I love thisbuilding?
(20:04):
Do I love this location?
Do I believe it could be a greatpiece of real estate over 30, 40
years?
And then if I do that, Thelittle bit of a little percent
more or less of return in thefirst few years doesn't matter
if it's a good program,especially if you're buying
something to remodel a littlebit and you know you're going
(20:26):
for bigger rents over a coupleof years because you just can't
predict that accurately what thefuture is.
In case of the Boeing crunch,the future was vastly better
unexpectedly when we came out ofit than negative, but it could
go either way, right?
SPEAKER_01 (20:42):
Right, of course.
Yeah.
Well, I always say the key issurviving in this business,
which you've exemplified anddone really well, which leads to
my next question, which isyou've survived.
You've been in this businessthrough I don't know how many
cycles now, and you've built amassive portfolio.
Without naming names, obviously,and protecting people, what are
(21:05):
the commonalities in the peoplewho have blown up that you've
witnessed blow up over theyears?
SPEAKER_00 (21:13):
Under?
capitalized or vice versa, oranother way of saying over
leveraged, under capitalized,maybe not paying attention to
detail.
In their due diligence or intheir operations.
(21:37):
The management of the propertyis one of these penny makes
dimes, dimes make dollardifference.
So I think it's really in thosekinds of areas.
It's being more excited aboutthe potential for this new idea
than it is really knowing theins and outs of this new idea
and trying to judge what'swrong.
(21:59):
One of the things I used toalways, but I still do, and I do
it even with people that workfor me, is before we make a
decision or I make a decision tobuy or sell, I usually say to
the people in my office with me,what are the three things we
forgot to ask ourselves?
SPEAKER_01 (22:14):
Okay, I love
SPEAKER_00 (22:15):
that.
What could we have forgotten toeven look at or do?
And I get all the you don't knowthe unknowns and whatever,
whatever.
But we sit down, at least take aminute and say, okay, did we
really check everything out?
Is there something we forgot toask?
Is there some possibility forgood or bad that we've not
talked about?
And if there isn't, that's verycomforting.
(22:37):
If there is, we work on it.
SPEAKER_01 (22:39):
Yeah.
Do you have an example ofsomething that someone maybe
brought up one time and you guyswere like, oh, light bulb, we
need to work on that?
SPEAKER_00 (22:46):
It's hard to do a specific example, but sometimes
it could be in the direction ofan industry where we're not
sophisticated.
We want to do this building,which is by some high-tech
companies, but are they going tolast or not last?
Are they startups, which has arealistic chance of failures?
(23:09):
or they long established like aMicrosoft or Amazon where
they're not going anywhere.
Even then, they do change,right?
You know, Seattle, even Amazonis changing jobs between some
locations, but they're all inthe Pacific Northwest.
And so it's good for us.
SPEAKER_01 (23:27):
Yeah, absolutely.
Yeah, it seems like ourphilosophies are aligned.
in terms of, I've always thoughtthe idea of being a quote
unquote path of progressinvestor was a bridge too far
for me from a risk standpoint.
Like I always, I never wanted tomake the bet.
I still don't want to make thebet that so-and-so
(23:48):
neighborhood's about to gentrifyand change and prices are going
to take off.
Has that been your philosophy orhave you, I mean, have you
always been like, we're going togo to the best neighborhoods and
just stay there?
Or do you take those kinds ofbets in your
SPEAKER_00 (23:59):
investment?
Yeah, one of my early, people Italked to sort of helped me a
little bit was an attorney intown.
And he was interested in helpingbecause he wanted to be an
investor with me.
He said to me once, he said, thetrouble with being a pioneer is
you get the arrows in your ass.
Okay.
So, you know.
Very fair.
(24:19):
You can't get too far.
You know, it's the same thing assaying don't get over your skis
or something.
SPEAKER_01 (24:24):
Sure,
SPEAKER_00 (24:24):
yeah.
This thing was don't get, youknow, you can never hit the
exact top And the exact bottomwas his philosophy.
So he'd say, just try and besomewhere near them.
And you won't know you hit themor not till you see if they
change.
So if the sale after you ishigher, you bought cheaper.
(24:45):
If the sale after you is lower,you overpaid, right?
Right.
But it really was just bepatient again, right?
Be patient.
Look at fundamentals.
SPEAKER_01 (24:54):
Yeah.
You hit on a point I want todouble back to, which I think is
really important.
fascinating which is you knowthe obvious answer to why do
people blow up is debt overleverage they took on too much
debt they got greedy but you hiton a second point which is they
didn't pay attention to thedetails which i think is a
really fascinating point and youknow you've you've in my opinion
(25:15):
pioneered kind of the verticalintegration approach of you
eventually brought managementin-house you built your own
management group you mentionedbefore we started this call just
in our pre-conversation that youguys managed another four
million square feet ofcommercial real estate for other
clients.
But I think that's a reallyimportant point.
(25:37):
And it goes back to this conceptof understanding your business
from a first principles basis.
And it seems to me like thefatal flaw of many people that
jump into this and scale quicklyand do social media advertising
and raise a bunch of capital isthey don't like understand the
business from a first principlesbasis.
(25:57):
Can you just, for the benefit ofthe audience, kind of go through
how you, because today youmanage a massive portfolio,
right?
Like you cover all of KingCounty.
You have hundreds of thousandsof square foot.
How do you still stay in touchwith the details?
You know, similar to, Imentioned, that you get to
follow on our Andrew Carnegieepisode.
But Carnegie was well known for,even when he was vacationing in
(26:19):
Scotland, to be reviewing thelatest reports from his steel
mills every single point.
I mean, I'm not sure you dothat, but how do you stay on top
of everything and how did youbuild that practice when you
started your business?
SPEAKER_00 (26:32):
So originally when I was still acting as a broker and
I had one or two or three smallsyndicated buildings, I hired an
outside property managementcompany and made a sort of deal
was, you guys do my accounting,pay the bills and all that
stuff, and help with certainaspects, but I want to be
(26:52):
involved in the day-to-day.
So we would meet once or twice aweek and go over my three or
four little things, and I wouldbe on top of it.
Then I decided, well, now I'mgoing to go to the actual
property once a week.
It wasn't that hard.
They're all near each other, andI decided, actually would go on
my own and meet the buildingmanager and walk the building,
(27:15):
check the cleanliness, discusshis rentals, things like that.
And of course, as the portfoliogrew, I can't do that.
Now there's a layer, we have amanager, a group of managers
handling 100 buildings orwhatever it is, and we have a
regional person sort of managingthe managers.
We have a marketing departmentfor internet.
(27:37):
We have a marketing departmentfor other ways.
We have accounting, maintenance.
So I can't obviously do that.
So what I have done though,besides feel I have really great
people, but I think the otherthing I've done for me is even
now where you wouldn't think Iwould do this, I go to once a
week, for example, we have ameeting in the office where
(27:59):
there's a bunch of us on Zoom orin the room, and it's all the
department heads and all theon-site managers.
There's a large group of people,and we literally take a second
and talk about any given vacancyin any project.
Should we remodel this more?
Should we leave it the way itis?
(28:19):
Can we raise the rent?
Should we lower the rent?
What's the problems in theneighborhood?
Why did we get notices?
So I'm very hands-on like that.
And I spend a lot of my days inthe office talking with and
being involved in the actualdecision-making for problems.
Because I think it gives youmarket knowledge.
(28:39):
It makes it much easier whenyou're looking over a potential
deal to decide on your ownwhether you agree or disagree
with the broker projections.
The projections are alwaysdifficult.
So I like to feel like I'mprojecting something myself
where I'm really aware of
SPEAKER_01 (28:56):
it.
Yeah.
Well, I love the anecdote aboutyou touring your own buildings.
I think in this day and age,what I've observed is a lot of
people invest in markets thatare not their own.
And every time I talk tosomebody, and I'm not that far
into the business myself, butevery time I talk to somebody
that's trying to get into it,they're like, oh, I live in
Denver and I want to invest inPhoenix.
(29:17):
And I always say, just invest inDenver, just invest in your
market.
Why would you go to Phoenix?
And that proximity, especiallyif you're just getting started,
that proximity to your ownbuildings is so critical.
But there's this there's thisconstant wheel of like, let me
do more deals.
Let me do more deals.
And you end up not being onsite.
You don't end up meeting theresidents.
I mean, just the other day, Iwent to one of our properties
(29:38):
and I was just on site and Istarted talking with a resident.
She was saying, maintenancehasn't dealt with the lights
downstairs and I'm scared to gointo the laundry room.
So I immediately was like, okay,we're going to fix that.
And she was saying, my husbandjust had a really bad head
injury and I need to get him upthe curve on a wheelchair.
And I was like, okay, well, letme find a ramp for you to assist
you with that.
But as an owner, especially whenyou're third-party managing,
(30:02):
sometimes you don't have thatday-to-day experience of
talking.
You start to hear things.
On another property, theresident said to me, our utility
bills are really high.
Have you looked into X, Y, and Zprogram to help bring the cost
down?
And I hadn't because themanagement company I don't want
to say they don't care, but theydon't really care.
You talk to your resident, youtalk to your clients, if you
(30:23):
will, and they're saying, canyou help bring the utility bill
down for us?
Of course.
We'll figure out waterefficiency solutions.
We'll figure out how to helpyou.
I
SPEAKER_00 (30:32):
still tour around.
It takes me a bit of time.
Maybe four mornings out of themonth, I'll just pick a quarter
of the area that we live in hereand I'll look at a drive-by or
stop-in or combination, a bunchof properties.
And a week later, do a bunchmore.
(30:52):
So I don't probably get aroundmore than once a month to
everything that I still do.
The other thing is, I think ittells your property manager,
owners care.
Right.
Right.
You know, we're aware of and wecare about the way we look, the
way we present.
SPEAKER_01 (31:10):
Yes.
And doing the right thing forthe people that are paying our
bills.
The
SPEAKER_00 (31:13):
residents.
Right.
SPEAKER_01 (31:15):
Right.
So I know you brought managementin-house.
What was the catalyst for you?
And tell me about that process.
Well,
SPEAKER_00 (31:23):
as I grew the portfolio, it became just
physically harder and harder todo what I wanted to do, control
things, have the information inmy fingertips that I wanted.
And I realized I just need toget more organized.
And at a certain point, I hadenough units, but I felt I could
amortize the expense.
(31:44):
It was really a matter ofgetting to enough unit count.
I don't honestly remember rightnow, Ari, but I'm going to guess
it was maybe 20 buildingsbecause they're all smaller
buildings.
I said, okay, now I'm not goingto be a broker anymore.
I'm just going to be asyndicator and I'm going to run
my portfolio.
SPEAKER_01 (32:03):
Amazing.
And did you feel when you madethat change that that better
control, better finger on thepulse of the business changed?
produced a materially betterreturn for your investors?
Was it better or were there prosand cons?
SPEAKER_00 (32:18):
No, I think it was better return, but maybe of more
value to me was my marketknowledge, rent, expense, what's
going on in a neighborhood wasso great that I felt really
comfortable almost literallysaying, you could give me an
address, I could drive by it andgive you the comp rents already.
(32:39):
Okay.
I think it was knowledge ispower sort of thing, right?
And it really helped, I think,me determine, in many cases, do
a deal or not do a deal.
SPEAKER_01 (32:50):
Yeah.
Yeah, I mean, it kind of goesback to the point on
understanding your business fromthe inside out.
And I really feel that the realestate industry today really
perpetuates this idea that, oh,if you buy a fourplex, you
should immediately give it overto a management company and go
try to buy another buildingbecause you want to scale.
(33:10):
And I ascribe to that.
I mean, that's how I started mycompany.
That's how we did it.
But I really had a completeconversion on the topic, which
is I think people are poorlyserved.
I mean, you did the same thing.
You started with third party.
But now when people ask me, Isay, I think you should manage
your own fourplex.
I think it's good for you tounderstand all the different X's
and O's of how this actuallyworks.
(33:31):
How do you find residents?
How do you communicate withresidents?
So I think it's awesome and ittotally makes a ton of sense.
Yeah,
SPEAKER_00 (33:39):
I do remember sometimes too, Ari, that if you
want to be a real estate personand acquire and focus on it, I
think it's hard to do it as ahobby, so to speak.
It's one thing to haveinvestments in real estate where
you have syndicate partners whohandle it or REITs, things like
that.
But if you really want to ownthe direct property, I think you
(34:02):
have to think of it, I'm in abusiness, right?
I'm not just in a hobby.
SPEAKER_01 (34:07):
Yeah.
Yeah.
No, for
SPEAKER_00 (34:08):
sure.
It just takes time, right?
It's a detailed business.
And, you know, the propertymanagement is particularly
detailed, but every detail isimportant in everything here.
SPEAKER_01 (34:18):
Yeah, absolutely.
And, you know, following theflow of funds, understanding
money going in, money going out.
Like, you know, I think peoplethink that they can pass the
accounting on to someone else,but I don't think in the early
days.
I think in the early days, youhave to be the accountant.
Like, you
SPEAKER_00 (34:31):
have to really understand.
You have to understand yourcosts too, right?
SPEAKER_01 (34:35):
Yeah, of course.
Yeah.
The time to turn.
I mean, there's so many thingsabout it that are incredible.
I mean, yeah.
Well, I want to ask you anotherslightly different question, but
in your 53 years of experience,there must have been a downturn
or a bad period of the marketthat tried to kill you.
(34:59):
What was the hardest cycle foryou and what were the biggest
challenges you faced?
SPEAKER_00 (35:05):
Well, this is going to sound like a kind of vain
answer.
It never happened?
It never really happenedbecause, for example, as I
mentioned, in the savings andloan crisis, we just didn't buy
more.
And so we had adequate cash flowfrom properties we owned, and we
(35:25):
had some reserve in case weneeded it.
And so that was never apressure.
In 2010, and you know thepeculiarities of Seattle, Prices
went down on acquisition, butrent stayed the same.
So there's never a cash flowcrunch because we weren't over
leveraged in any property.
(35:45):
So I think that it was moredifficult to find how to buy or
sell if that's your goal inthose times for us that
SPEAKER_01 (35:57):
operate.
SPEAKER_00 (36:01):
We never took short-term debt.
SPEAKER_01 (36:03):
Right.
SPEAKER_00 (36:04):
We never had any loans being called or any
finance issues.
We just had to make our monthlypayment.
SPEAKER_01 (36:09):
Yeah.
Is there a rough loan to valuethat you kind of cap yourself
at?
Are you like, it needs to be60%?
Was there a rough number for youthat was like around the
ballpark?
SPEAKER_00 (36:20):
Well, when I was younger, it was higher, right?
SPEAKER_01 (36:22):
Sure.
SPEAKER_00 (36:23):
Of course, yeah.
Because I didn't have capital.
So it probably started at 80-20.
But it has gone down to morelike 60-40 or 50-50.
SPEAKER_01 (36:33):
Yeah.
And how do you, you know, one ofthe things you said to me in
another conversation that Ifound fascinating is you made
the comment, because we weretalking about some of these
cautionary tales that arehappening right now.
And people of your tenurethroughout the country, they're
kind of blowing up, right?
They got a little tooaggressive.
They went too big.
(36:53):
And you made the comment, someguys just can't stop themselves.
What is it psychologically thatyou think has enabled you to,
not get carried away with that,the kind of God complex.
It's always worked.
I'm just going to go big.
I'm going to go huge.
What is different about yourapproach?
SPEAKER_00 (37:13):
I don't know if it's different or not, but I would
say fear.
SPEAKER_01 (37:16):
Okay.
Sure.
You have healthy fear.
SPEAKER_00 (37:20):
Fear of failure, fear of going back to having no
capital, whatever that fear is,fear of disappointing my
investors if I'm in a syndicate,or fear of disappointing my
myself if I'm losing my money,so to speak.
So I think I was alwaysmotivated by I'd rather just be
cautious.
And, you know, there's a sort ofalso thing I told my kids and my
(37:44):
son-in-laws as they were gettingmarried and we would talk, have
little meetings together aboutrewards and risk of real estate.
I said, you have to also judgenot only the risk that you're
willing to take financially, soto speak, but also emotionally,
right?
Sure.
If you take a risk, that's goingto make you stay up every night
(38:04):
all night because you're so sureyou might lose too much money.
Maybe you shouldn't take thatrisk.
SPEAKER_01 (38:11):
Right.
SPEAKER_00 (38:12):
Yeah.
You should find the level thatyou can accept.
Right.
So I think to me it was sort offear of failure, fear of not
having the money, fear ofdisappointing other people,
disappointing myself, harmingmy, my wife and my kids.
If I did something stupid.
SPEAKER_01 (38:28):
Sure.
Yeah, absolutely.
Do you, Do you, as you'reobserving the younger generation
of real estate people, and youtalk to me, you talk to a bunch
of other guys, my peers inSeattle that do exactly what I
do, do you observe a differencein mentality or kind of
emotional makeup for the youngergeneration?
Is there more impatience?
Is there more FOMO, fear ofmissing out, needing to do stuff
(38:51):
now?
Do you see a difference or isthat just in my head?
SPEAKER_00 (38:54):
Well, I think about this sometimes in other ways
too, Ari.
about how we operate and worknow compared to before, I think
human personality is prettyfixed.
And I think 50 years ago, 30years ago, 20 years ago today,
there were bigger risk takers,smaller risk takers, more
(39:17):
detailed people, less detailedpeople, people that were more
interested in what's theprestige of this deal rather
than is this a good deal.
So I don't think overall It's abig change, but I do understand
that I think or what I notice isthere's probably a bit more of
that now.
(39:37):
And like you said earlier, Ineeded to act faster to make
money now.
And the other thing I've noticedis I believe strongly this is a
people business.
And if you don't have a lot ofextensive contacts, you can miss
a lot of important deals,transactions, opportunities.
(39:58):
So I've always been big on phonecalls, personal meetings,
getting together with people.
When I was renting my own units,I wouldn't do anything on the
phone with you except set anappointment so I could meet you
there and really sell you,right?
I've noticed a lot of theyounger people in my own office
included are morecomputer-oriented now.
(40:23):
They'd like to be able to stayat their screen and at their
desk in the office all day andnot have to drive to the
building, make a deal withoutmeeting the people.
So there's some pros and cons,right?
But I think that may be asignificant change.
There's a lot less personalcontact.
You know, I used to, sometimesin real estate, and this
happened to you, I'm sure otherpeople, you'll do a deal and a
(40:46):
couple of years later, some ofyou will say, boy, you were
lucky.
That was a fantastic deal.
But you know, you don't knowthat till a bit later, right?
It looks good to the outside.
And I think sometimes to findthat once every 10-year deal
that really is a great dealgoing in, I think you have to be
everywhere all the time.
(41:07):
Yeah.
So I think that means talkingwith people, going places, being
involved in people that do thereal estate business.
So not necessarily a brokerconference about a cap rate, but
where are the buyers?
Where are the brokers who mightbring me a deal I want?
How do I spend time with themand develop a relationship so
(41:28):
we're early on?
So in apartments, usually, Iknow it's not 100%, but
frequently we get calls in theoffice from a local broker
saying, I got this deal.
I know you guys could buy it ifyou wanted.
We think it's great.
Will you take it or not before Igo to market?
UNKNOWN (41:47):
Right?
SPEAKER_00 (41:47):
Because that's because of relationship deals,
right?
SPEAKER_01 (41:52):
Yeah.
Yeah.
That's incredible.
Yeah, that's a good point.
I mean, I do think there'ssomething to be said to that.
You know, technology has broughtus closer together, but also
made us further apart in manyways.
And yeah, we're definitelyseeing that.
I see it when I go back to myhigh school for alumni events.
A lot of the kids, you know,have struggled to have a human
(42:14):
conversation with me.
And I, you know, I just, I,obviously there's some
substantial changes thattechnology is bringing to
society, not all positive.
So- Awesome.
Well, I want to I want to windup with you.
You're our second guest, Ron.
So thank you for being on theshow.
We are going to just for thelisteners, we're going to I'm
(42:34):
going to try to end everyepisode with one of our
distinguished guests like Ronwith a question that's near and
dear to my heart, which is whatis the most impactful book you
ever read?
And what would you recommend toyour your children or your
grandchildren say you must readthis book?
SPEAKER_00 (42:54):
That's a tough question, but given the nature
of the podcast, I would sayTimeless Wealth.
SPEAKER_01 (43:02):
Okay.
Really?
SPEAKER_00 (43:02):
Okay.
Of all the books?
All right.
It's a bit of a joke, but it'salso a serious joke because
Timeless Wealth, which I readmaybe twice actually, was a
really excellent real estatebook because so many of the real
estate books that we talk aboutfocus on The technical things,
(43:25):
what's the cap rate?
How do you analyze this?
What's probable, what'spossible?
They don't really talk about themindset that the investor needs.
And you bring up your 10 specialpoints, for example.
And if you look at those, thoseare not technical formulas.
Those are not real estaterequired pieces of information,
(43:49):
but they make you focus on risk,reward, what you can and can't
do it.
So all jokes aside, I thinkthat's an excellent book.
And if your listeners haven'tread it, they should.
SPEAKER_01 (44:01):
Thank you.
I appreciate
SPEAKER_00 (44:03):
it.
In terms of other books, I'vealways been a person who reads
extensively.
At any one time, I have four orfive books open on my Kindle,
and frequently they relate tothe same topic.
And I was a history major with aserious interest tension in
philosophy, which has nothing todo with real estate, right?
(44:26):
Sure.
That's because I thought I wasgoing to be a teacher before I
got sucked into the houses.
Sure.
So I have a little differentbent.
There's a lot of great realestate books just to learn
technical things.
But I think sometimes if youreach out beyond the traditional
thought of what's a real estatebook, for example, one book I
(44:48):
found kind of valuable iscalled...
Slight Edge by Jeff Olson.
He's got a couple of books,three or four, and maybe a
little series.
The basic thing he's trying todo is point out if you want to
have that slight edge, if youwant to have the deal nobody
else got, if you want to losethe weight that you want to
(45:11):
lose, not smoke when you don'twant to, whatever it is, his
basic thing, what you talk aboutis you have to remember that
it's in every single littledetail.
It's easy to say, if I don'twork out today, it's not going
to make me less healthy.
Or if I do work out today, it'snot going to make me healthier,
(45:32):
right?
Or if I eat this one piece ofcandy on my diet, it's not
really going to make me waymore.
And really his point is, whetherit's in business or personal
things, whatever, to build thosehabits, you have to keep
executing them even at thesmallest detail consistently.
And I think that was veryhelpful because it helped me
(45:54):
stay on task.
SPEAKER_01 (45:56):
I love that.
I will pick that up right afterthis call and we'll make sure to
link the book in the show notesas well for all the listeners.
We'll also link Timeless Wealth,but we usually do that anyway.
So I appreciate the shout outfor my book, but that's amazing.
I also learned something newabout you today, Ron, that I
(46:16):
didn't know, that you were ahistory and philosophy major.
I also studied history andphilosophy.
So I always knew we got alongfor a good reason, but I didn't
know that we shared the historyand philosophy background, which
is amazing.
SPEAKER_00 (46:30):
When people ask me, especially friends in my age
group, who now say my kids andmy grandkids are thinking about
going to real estate, whatshould they read and stuff?
I usually say business degree isimportant.
I'm not ever going to say that abusiness degree isn't important
but it gives you a lot of inputon the technical stuff what's
(46:55):
this formula what's that formulaand i think sometimes in
philosophy i found uh it helpedme i think do better learning
how to how to go through aprocess of coming to a
conclusion Not skipping to theconclusion or falling into my
(47:17):
own trap of this is what Iwanted to say, but here's how
you become logical and you stickto it.
In philosophy, I think theimportance of setting things to
test things against.
And then it gets into your ownpersonalities and risks, right?
So I think philosophy was reallya great, I wouldn't say better
(47:42):
or worse, It was a great subjectto work on, even going into
business.
SPEAKER_01 (47:48):
Yeah.
Well, I'll take a harder stancethan you.
I think that you can learnbusiness by doing business.
And for all the youngerlisteners, I think focus on
something you love and thatteaches you how to think.
And then learn business by doingbusiness.
And I still rememberinterviewing at Goldman Sachs
(48:09):
back in the day and They werelike, oh, you didn't study
business, blah, blah, blah.
And I said, well, I actuallythink it's to my benefit that I
didn't study traditionalbusiness in college because I
was taught how to think andanalyze and think through it.
And I'm not saying businessdegrees are not taught that, but
you learn all that doingbusiness, right?
You learn how to think from thesocial sciences, from these
(48:30):
different things.
And so I'll take a strongerposition than you and say, I
think there's an immense amountof value to philosophy, to
history, political science,these different studies that
give you respect for what camebefore.
I mean, that's the whole premiseof this show, right?
And everything we write is whatcan we take from history?
So I really, really appreciatethis.
(48:51):
This was a fantastic interview.
And just, I think to summarizesome of the key points, be
conservative, start small, bedetail-oriented, be in the
weeds, understand yourproperties, and don't get blown
up by, as Sam Zell would callit, edifice mania.
I must own this building.
And then you blow yourself up,which is what we're seeing
(49:11):
happening today.
And obviously you and Sam Zellboth exemplified that trait and
didn't take insane risks, right?
So thank you again, everyone,for being here for another
episode of the Timeless InvestorShow, where we match history,
stories, and great investors tomodern day investing to find an
(49:33):
edge and be the best we canpossibly be.
Think well, act wisely, buildsomething timeless.
I'll see you next week.
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