Building Generational Wealth: Otto Gebhardt on Financial Literacy, Real Estate, and Entrepreneurship
September 19, 2024 • 30 mins
Have you ever wondered how early financial education can shape your future? Otto Gebhardt of Gebhardt Development joins us to share his journey from growing up in Madison to becoming a successful real estate developer. Otto's story is a testament to the importance of financial literacy, hard work, and living within one's means. We'll uncover the essential principles of compounding wealth and parents' critical role in teaching financial responsibility. Otto's experience offers invaluable lessons on avoiding the pitfalls of generational wealth and ensuring that the next generation is financially savvy and self-sufficient.
Are you interested in real estate investing or entrepreneurship? This episode is packed with Otto's insights on navigating market cycles, the importance of patience, and strategic timing in real estate. Learn from historical financial shifts and gain practical advice on avoiding common investment mistakes. Otto also shares his experiences in the restaurant and real estate development sectors, emphasizing the value of mentorship and hands-on learning. Whether you're a budding entrepreneur or a seasoned investor, Otto's strategies for future planning and market preparedness will inspire and inform your journey.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
What's up everybody?
This is your host, dee Starhere with Otto Gebhardt.
Gebhardt Development how youdoing man, Good man.
Thanks for having me.
I do my best.
So for the people that don'tknow you, can you tell us a
little bit about yourself?
Speaker 2 (00:12):
Yeah, been working in real estate and development.
Born and raised in Madison,been working in the business
since I was about 13.
My dad was in propertymanagement.
Got a real good education onhard work at a young age, me and
my brothers working in theindustry and then started real
(00:33):
early getting into investing inproperties that we could put
some sweat equity into managerun flip in the future.
And just started there Withfirst offer I think I had on a
property.
It was about 15.
Still remember the address 2677Milwaukee Street.
Speaker 1 (00:44):
Is that place still standing today?
Yeah, it's just an old house.
Speaker 2 (00:47):
But at the time I think I still have the offer.
I keep everything, I'm ahoarder but it was like 30 grand
$25,000 back in the day.
It's a long time ago.
That's a lot of money.
Well, back then, yeah, didn'tget it but ended up getting our
first property probably a coupleyears after that a fixer-upper
on the east side as well, andthen just kept parlaying it from
(01:08):
there.
I always had a passion forbuildings and architecture and
again, learning the hard work inthe beginning was a positive
because I mean, that's kind ofthe part that's just required
that is maybe as fun as the restof it.
But I always just had a passionfor buildings, development,
(01:30):
interesting development.
And then on top of that I kindof always had a knack for
investing at a young age andkind of understood the dynamics
of the market.
We've really been in for thelast 50, 60 years of continuing
inflation and the dollardevaluing and really being able
to get into something you canleverage.
Let that grow with thedirection they're kind of taking
the economy.
Speaker 1 (01:48):
I was going to go down a rabbit hole when you said
the direction that they'reputting.
We could go all day.
I was like you know what?
Speaker 2 (01:56):
Let's not go there yeah.
Speaker 1 (01:57):
But you spoke about the foundation.
You have a strong foundationand it started way early and it
started with that education andsweat equity and things of that
nature.
So why do you believe thatfinancial literacy should be a
core part of school curriculums?
Speaker 2 (02:13):
Well, I think it's just imperative if you want to
become self-sufficient, being ina proper place financially.
What is it really?
I mean?
It's freedom, it's the abilityto do what you want to do when
you want to do it, how you wantto do it.
So I think becoming financiallysound and self-sufficient as
young as possible is a way to beable to do ultimately what
(02:35):
you're most apt to be doing,opposed to be doing things that
you have to do.
Speaker 1 (02:39):
So what financial concepts or skills do you think
are more important for youngpeople to learn earlier?
Speaker 2 (02:48):
on.
Well, a big one, I would say,is understanding the idea of
compounding wealth andcompounding debt.
You know two opposite ends ofthe spectrum, but working
equally.
Whereas if you're going intodebt, that tends to be a spiral
that you continue to compound.
It gets bigger and bigger, theinterest gets bigger and bigger
(03:08):
and you can't ever get out fromunderneath it.
Whereas compounding wealth, ifyou can find residual income or
different investments that canbe earning income while you
sleep and whatnot, I mean thatcan compound in a positive
direction.
The other way.
Speaker 1 (03:22):
What role do you think parents should play in
their child's financialeducation, and how can schools
support that?
Speaker 2 (03:31):
I mean I think parents' first job is really to
teach to earn for what they wantin the future, to be again
self-sufficient, to not think ofit in a way that you don't want
them to be living above theirmeans at a young age, right, and
you don't want that to lead toadulthood.
If you live within your means,you realize you understand
working hard, gettingcompensated for your work,
(03:51):
putting a certain amount away,so to speak, for a rainy day,
having dry powder or money setaside is imperative that when
something comes along thatreally makes sense as an
investment or otherwise, thatyou have that ability to do that
.
Speaker 1 (04:03):
With that being said, what does generational wealth
mean to you and why is itimportant?
Speaker 2 (04:10):
Generational wealth.
I mean that can be adouble-edged sword.
I mean it can be a bad thing.
I mean growing up, if too manykids that start off with too
much and don't understand thevalue of work and having to work
for something, really, in mymind, are at a huge disadvantage
.
Have you ever seen that?
Speaker 1 (04:28):
Oh God, yeah, You've seen.
I think we've all seen it,haven't we?
Speaker 2 (04:32):
Somewhere, people we know, kids we grew up with or
something maybe didn't work ashard or didn't save, didn't
understand value.
Speaker 1 (04:43):
Oh, I definitely know some spoiled brats that they're
not kids now.
Right, you're talking 30 yearsago, sure, but I grew up with
some guys that well.
I knew some kids that were welloff and their concept of time
and money were very, verydifferent, especially their
(05:05):
concept of time, because wethink, like man, I could go to
work and make some money andthey just didn't have a care in
the world.
As soon as they turned 16, boom, they got given a car they
didn't have to work for it.
They didn't have to do anythingand it was probably a nice car
and it was nicer than theteacher's car Brand new Cadillac
(05:26):
.
This girl gets everything paidfor, fully loaded, didn't even
have a job.
She was 16.
You know, she could have beenworking at McDonald's, subway,
anything, never had a job.
And she's driving around thisbrand new Cadillac and it's just
like, wow, like why would yougive her that and not make her
(05:46):
earn it?
You know, or not make her workfor it or teach her anything
about anything?
Speaker 2 (05:51):
you know it's tough when you have the means,
especially to not want to givethem things you didn't have.
That's the balance right it's ahuge balance.
And it's like you've got to justwalk that tightrope.
You know you've got to say no,you've got to put your foot down
and you've got to try to getthem to understand that you know
to get anything of value youneed to put hard work and
(06:13):
dedication into that or you'llnever appreciate it.
I mean the kids that the peoplethat grew up with that got
whatever they wanted and neverhad to work for it.
They never appreciate it.
I mean it's kind of feel badfor them in some ways.
Speaker 1 (06:29):
It's like you never really had a real appreciation
you know, to earn that car, orthe money to buy the car, or you
know, whatever it may be.
My first car was a 1985Oldsmobile.
I bought the car.
I earned it, so it was specialto me.
It was a piece of junk and youlove that car.
Right, it's a piece of junk butI bought it.
(06:50):
You know what I mean.
I think had I been given it Iwouldn't have loved it, I
wouldn't have showed it therespect you know.
So I really do understand whereyou're coming from with that.
But, like you said, if you havethe means, it's really really
hard to say no.
It's like hey, can I get a pairof shoes?
It's like, yeah, I could getyou 100 pairs of shoes, but what
did you do to earn that pair ofshoes?
Speaker 2 (07:06):
you know, besides just asking, I'm guilty of it,
my wife's guilty of it as far asspoiling our son too much.
And every day you're trying topull it back a little bit and
going, hey, no, listen, you goclean the bathrooms, you go
downtown and work cleaning this.
We were down cleaning turnoversfor apartment turnover students
.
Speaker 1 (07:22):
That just happened.
It just happened.
Speaker 2 (07:23):
And I had them down there with some friends cleaning
up trash out of the dumpsterlike I used to do as a kid.
Right, and you'll get this, andthen you'll get paid, and then
you can decide what you Then yougot to teach them too.
I'm trying to teach my son.
Well then you don't get yourmoney and then go spend 100% of
it, put 50% away, buy what youwant with the other Again, save
that, try to get some type ofsavings.
(07:43):
I mean we've-.
How old is this one?
He's 14.
12, excuse me.
Speaker 1 (07:46):
He's 12?
, yeah, 12.
Getting him to try tounderstand that concept is going
to be a struggle.
Speaker 2 (07:51):
A huge struggle, Well , and kids have changed today.
I mean when.
Speaker 1 (08:05):
I was a kid, it was a , than it is today.
Speaker 2 (08:06):
So it's always a battle, but it's for their own
good, and you've got to teachthese life lessons that are
going to continue on for therest of their life.
Speaker 1 (08:11):
I got girls so that they're even harder to say no to
.
Speaker 2 (08:15):
What age?
Speaker 1 (08:16):
I got them all ages, so I got a three-year-old, I got
a 16-year-old, an 18-year-old,yeah, I got a 21-year-old, and a
22-year-old, it's really tough,I'm assuming, to not spoil the
girls.
Speaker 2 (08:32):
I mean you couldn't do it, I'd be useless.
Speaker 1 (08:38):
So what strategies do you recommend for families who
want to start building wealthfor future generations?
Speaker 2 (08:45):
It's living within your means.
It's trying to find, you know,investments that can build on
their own.
You know, residual income, Imean it's just a huge one.
I mean, if you're, you know,working a regular everyday, you
know nine to five job is greatand we've all done it, and you
know the government's going totake its share.
Inflation, I mean, I think onereason I'm in the business real
estate that I'm in is because Iknew at a young age inflation
(09:07):
was such a big part of theirplan.
The fact of the matter is, youknow, in this time now, maybe
we're losing 20% of the value ofyour money that you're saving
or earning not taxes is beingtaken away by just inflating the
money Exactly.
Speaker 1 (09:20):
So you know they take 30% out of taxes, 20 in
inflation, you're not left witha whole lot at the end of the
day, right?
So that $30 that you put in,you know a year ago, it's not
worth $30 anymore.
It's not the same money.
Speaker 2 (09:32):
And this has been a trend that's been going on, you
know, for 100 years.
You know, if you look at thevalue of things, you know 100
years ago to, and you know youlook at the value of an ounce of
gold back, you'll pick any time.
(09:52):
You know 1850, an ounce of goldmight've been 30 bucks, but it
bought a custom made suit.
Let's say, well, today gold'sat about 2,400.
What's it cost for a customizedsuit?
You know 2,400.
It's kind of something that'sbeen a barometer that you can
kind of rely on to watchinflation.
Speaker 1 (10:02):
Wow, and who taught you that?
Speaker 2 (10:04):
I was kind of self-taught in all that.
Really Most of my financialeducation was all self-taught
reading a lot, connecting thedots, not believing everything.
You see, a great book that wasgiven to me years ago was the
Creature of Jekyll Island, whichkind of talks about how the
bankers got together in 1913 tocreate the Federal Reserve which
kind of controls our day-to-daylife and interest rates and
(10:24):
credit.
And it's a fascinating book.
Speaker 1 (10:26):
but you know, and is that the story of how they took
us off the gold standard?
And create.
Speaker 2 (10:31):
They've taken us off the gold standard a couple of
times.
That was one of the times aboutthen.
They took us off about 1913.
The last time they took us offthe gold standard was 1971, when
Nixon took us off because theVietnam War was.
They were spending too muchmoney.
They didn't have enough gold toback the money which it was at
the time, so he had to take usoff because they needed the
ability to print money freely.
Speaker 1 (10:50):
Okay, so what tips and tricks?
What are the first stepssomeone should take if they want
to start investing in realestate, in real estate.
Speaker 2 (11:00):
I'd really look at past trends and try to find
people that either locally thatare doing it well and maybe over
a period of time, or find amentor through books and
different reading that you knowsomeone that's done it.
I've always enjoyed looking atpeople that did it from the
ground up.
I mean, if somebody was givenyou know $10 million to start,
(11:20):
that really isn't the same thing.
So if you couldn't find someonelocally, if I couldn't find
someone locally that kind of youknow mirror mimic talk to
bounce things off of, I would gojust into media and try to find
who did this, who started atzero, who and how did they do it
?
It was always fascinating.
It was never as fascinating tome once they got there.
It was always more fascinatingwhat they did to get you know
(11:42):
how they built up.
Speaker 1 (11:43):
It was always more fascinating what they did to get
you know how they built up theclimb.
Yeah, what is the biggestmistake you see new investors
make and how can they avoid it?
Speaker 2 (11:51):
Every cycle and I think we're kind of at the cusp
of another bubble, like 2008-9during the housing crash.
That was the last one as far asthe cycle went.
People always make the mistakeat the top of the bubble to get
in and think things only go onedirection.
Values only go up, you know,rents only go up, you know.
So I can kind of overpay forthis property, but rents are
(12:13):
going to go up.
And I talk to people likelocally, that are doing big
projects and I'm like how isthis project going to work?
It doesn't make any sense.
And they're like, well, therents are just going to come
back down.
And I kind of look at them andgo, what if they don't?
Right?
So you really got to payattention to cycle because it's
always a cycle.
(12:33):
I mean real estate, like somany things, is a constant,
moving, ebbing cycle.
It never goes one directionforever.
It's always changing, ebbingand flowing.
And what I've seen the biggestmistake to answer your question
is people get in kind of nearthe top you know, and everyone
else rode that wave for the lastthree, four, five years and say
, well, I'm just going to buythis four unit, this eight unit,
(12:55):
and you know rents are going toonly go up and interest rates
are going to go down or keepgoing down or go back down, and
I always ask people that I say.
So what if interest rates keepgoing up, your rents go down,
your vacancies go up and yourexpenses go up?
Speaker 1 (13:09):
Right.
Speaker 2 (13:10):
Then what?
Then you've got probably what'scoming in the next couple of
years here probably a majorcollapse in the real estate
market again.
Speaker 1 (13:16):
And so when you have that major collapse, what does
that do to someone?
Speaker 2 (13:21):
like you, we get busy .
I mean, we play these.
This is going to be our thirdcycle, so we're probably one of
the few players, locally atleast, that really plays more of
the down cycle than the upcycle.
I mean, we're kind of boredright now because we've got five
development projects put onhold because you can't make the
numbers work, the buildconstruction costs don't work
for the rents and everything.
So it's just and we don't fallinto that.
(13:41):
Things are going to keep risingrents wise every year.
We look kind of for the trends.
We're patient.
Patience is a big part of thisgame because real estate is a
slow-moving ship, unlike certainthings like the stock market.
You could wake up tomorrow.
It could be down 5,000 points,it could be whatever.
Right.
The real estate market is likea big tanker.
It moves one direction, onedirection starts turning and
then it turns all at once.
So you've got to be patient.
(14:02):
Rates have gone up.
Speaker 1 (14:03):
What we're seeing locally here is we're seeing
rent starting to come down,vacancy starting to go up,
expenses starting to go up and,as we know, interest rates have
doubled from what they wereabout a year Ago.
Speaker 2 (14:15):
So you said that rent is starting to come down.
Yeah, really, certain sectors,certain sectors, and inevitably
That'll happen.
That will theoretically happenin all sectors, because what
happens is you get a pent-updemand, rents are going up,
vacancies are down.
People like us get in, startbuilding new units, put them on
the market.
As long as that keeps working,people keep building, but we
always overbuild, right.
Speaker 1 (14:35):
Because somebody's but they were just saying what,
a year or two ago that we didn'thave enough buildings?
Build, build, build build,build, build.
Speaker 2 (14:41):
Yeah, and in some areas that's correct.
Madison was a unique situationbecause years ago Madison put
into a place a law that was 10%inclusionary housing, which
meant that every apartment,building, condo, whatever,
needed to have 10% affordable init.
And there was no credit forthat, there was no subsidy for
that.
It was just kind of the priceof doing business.
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I thought that there was sometype of incentive, because I
(16:08):
know they had to.
You had to take some type oflike low income Section 8.
It had to be like at least oneof those.
Speaker 2 (16:16):
Section 8.
Well, section 8, you have totake by law, which is fine and
that's not an issue withanything, that's just a separate
program.
What they put into place,probably about and I'm just
guessing at the timeframe, itwas probably about 2003, maybe
give or take this Madison-wide.
It was just kind of like theprice to do business in Madison
to build apartments housing isyou have to put 10% in, but
(16:37):
there's going to be no.
There are programs now to dothat but people get tax credits
and things for differentprograms.
But when Madison did that backin 2003, what it did was it
stifled development in Madison.
So no one built anythingbecause the numbers just didn't
pencil out.
So people built in Middleton,even the outskirts, middleton,
sun, prairie, verona, et cetera.
Well, so that was like I said,I'm guessing about 2003,.
(17:00):
That kind of stifled newdevelopment.
Again, what we talked about,supply and demand coming on
creates the ebb and flow of theaffordability of housing.
So unfortunately it had theopposite effect that they wanted
to have on housing prices.
Rents and things went upbecause development was stopped.
People were going on theoutside so they didn't have any
new product coming online.
(17:21):
Then jump ahead a few years.
It was being challenged incourt by I don't know who if it
was the Realtors Association orsomething.
And then 2008, 2009 hit.
The housing crisis hit, so wewent into the recession.
The bubble burst Right, soeverything fell apart then and
credit seized up.
No one was building then at all.
I mean, we were doing a coupleof things and then, shortly
(17:43):
after that, the Supreme Courtshot down that law of the 10%
inclusionary housing.
The only reason I bring thatpart of the big picture up is
because we didn't have anybuilding going on for a long
period of time that you wouldhave just naturally had,
creating supply and creatingthat ebb and flow in the rents
to keep things more affordable.
Rents went up during that timebecause there was no supply.
Now there's been a huge demand.
(18:04):
There's been a huge demand nowsince we came out of that which
you've been seeing here in thelast five, six, seven, eight
years.
Right, so you're saying we needall these units.
A lot of that was pent-updemand from that whole process.
Speaker 1 (18:18):
From 2008.
Going back and prior to.
Speaker 2 (18:23):
When they put that inclusionary zoning in, we
weren't getting the naturalproduct being built into the
market.
To add to it, new stuff comeson.
It's the nice, higher end stuff.
The older product becomes moreaffordable.
You didn't have that for 10years.
So where do you think we arenow?
I think we're peaking thebubble's peaking kind of as it
was, in a sense, in 2008, 2009.
Cheap easy money I mean takingthe rates to zero really
(18:45):
stimulated a lot of speculation,a lot of growth.
Some needed a lot of it needed,obviously.
But I think people are stilljumping in with the expectations
that rates are coming down,rents will keep going up and I
mean for sure I know expensesare going up.
I mean across the board.
Oh yeah, I mean everything.
Speaker 1 (19:02):
And promises have been made.
Speaker 2 (19:04):
Yes, expenses are going through the roof across
the board.
I mean, and that's probablyevery industry, specifically
ours.
We've got insurance, you know,water, sewer, everything is just
way, way, way up.
And we are seeing a lot of thesectors we're in having a
softness now in rents andvacancies.
I think it's people have, youknow, a point they can only pay.
You know, even if they want to,they can only pay.
(19:25):
And you're coming out of COVIDa couple of years ago where
people were getting stimuluschecks.
They were working from home sothey weren't spending money
other places.
At that point during COVID,somewhere in that neighborhood,
we had the highest savings ratewe've had in the last 30, 40
years, I mean.
Speaker 1 (19:39):
but the restaurant industry's tanked, bar
industry's tanked, like you said, evan Flo, right, so that is it
was what it was.
I wanted to ask you what wasthe best investment that you
ever made, and why, and what wasthe worst?
Speaker 2 (20:00):
Oh, start with the worst.
I got involved in a restaurantdeal, speaking of restaurants,
with you got hit with arestaurant too.
Yeah, I did, I did.
Speaker 1 (20:11):
I got pulled into a restaurant and lost my shirt.
Speaker 2 (20:13):
There you go, that's me.
So I went into it as the realestate end of it, you know,
going.
Oh, that's fine.
I mean, I had no illusions thatI was a restaurateur or
anything.
I was like I'll be the main,I'll buy the real estate.
Basically we'll finance it,we'll get the other partners and
they'll run it.
They'll do what they need to do.
Well, when your partner's allbail on you, all of a sudden you
find yourself cleaning thegrease trap out and you know the
fryers right, and that was moreof a prideful thing too.
(20:36):
It was like then, once we wereinto it and everyone bailed on
us, I'm gonna make this.
Me and my brother were gonnalike.
You know, we're not gonna letthis go down, we're gonna show
them where I should have pulledthe plug three years earlier.
Right, and eventually we justgot out of it, sold it, sold the
restaurant, but it was, uh, itwas probably the least fun,
profitable experience.
Speaker 1 (20:52):
The restaurant business is a separate world
Right and you have to haveextreme attention to detail and
you have to know that industry.
Speaker 2 (21:05):
Oh, 100%, you have to know, and I knew, I didn't, I
knew I didn't.
We thought we had people onboard that did.
Speaker 1 (21:10):
Unfortunately, they bailed and then you're kind of
stuck and that's not the type ofbusiness you want to try to
learn on the fly Right, becauseit's already expensive.
Yeah, you know, food costs.
Speaker 2 (21:21):
Well, I couldn't even imagine today, I mean at the
time, and that was God, that was, you know, almost 18 years ago,
Right.
Speaker 1 (21:33):
I couldn't imagine today, but it was terrible then,
so you lost your shirt on thatLost my shirt on that so what
was the best?
Speaker 2 (21:37):
Best.
You know it's kind of hardbecause everything that I've
done has been a success.
It's always been bigger.
You know, I'm not saying that'sthe way it was planned.
It was, you know, starting fromthe one single unit, flipping
into two units, flipping intofour, I mean.
So, just over time there's beenmany of them.
I mean I think most recently,you know, coming out of the last
recession, you know we gotinvolved in the East Washington
(21:59):
Avenue programs with theConstellation, the Galaxy
Festival, foods.
Those were obviously thebiggest we've done, because
everything kind of got bigger aswe went and the timing was just
right on it.
I mean, we were coming out of arecession.
The neighborhood and the city,you know, really wanted to get
something done when Madison attimes can be a city of no.
You know we don't like that.
Our high-rise used to be threestories.
We don't want to go anythingover three stories and I'm like
(22:22):
I've always been an advocate fordensity and mixed use and I
worked on that for 15 years withthe city until they finally
came along and agreed to take achance on it down there on East
Washington Avenue and now it'sdone well, and now they kind of
use it as a model.
Speaker 1 (22:34):
For the longest time they use that.
Well, we don't want anythinghigher than the Capitol.
We want you to be able to seethe Capitol from every direction
, and so they stood behind thatfor a long, long time.
Speaker 2 (22:45):
They're still behind that, like all our buildings on
East Wash are below thatthreshold.
They're right to the foot,literally, and they're checking.
Oh yeah, oh yeah, they takethat serious.
So that's still in place.
Speaker 1 (22:58):
How do you sit down and brainstorm?
Speaker 2 (23:00):
the next move.
Well, it depends on what movethat is.
Right now we're kind ofanticipating.
Like I said, I think we'regoing to see a big pullback.
So we're getting cash heavy.
We liquidated things that wedon't see as long-term plays to
add to that cash and credit, sothat we're in a position that,
if things happen as weanticipate that, we're in a
(23:21):
position to pick up propertiesand things that we're interested
in at substantial discounts.
Right, because they just don'thave the money to pay for it,
right.
Speaker 1 (23:36):
I mean, these numbers just don't pencil out for a lot
of these projects.
No, they got like a 20-yearplan.
Yeah, not that they're gonna beimplementing east side.
It's gonna be totally differentand I'm really excited about
I've seen some of like thedrawings of it yeah, uh, it
looks really, really cool.
Speaker 2 (23:47):
They had that a 20-year plan in for east
washington avenue for like 30,30 years and we used to always
look at the pictures and go, ohyeah, that looks great, but how
is it going to get done, youknow.
So I mean, I think coming upwith the plans are great.
I mean a lot of it's just youknow it's a cycle, you've got a
timing.
Timing is everything,especially with development it's
you know, you've got to find.
You know the credits got to bethere, the rates have to be
(24:09):
there, the demand has to bethere.
Construction the rates have tobe there, the demand has to be
there.
Construction costs I meanthere's just a lot of moving
parts.
Speaker 1 (24:15):
So what advice would you give to someone starting
from scratch?
No family wealth or financialknowledge?
Speaker 2 (24:22):
I would strongly suggest again finding somebody,
ideally locally, personally,that is in the business or that
you can kind of, you know, workfor them for free.
You know, be a gopher, justlearn how they do what they do.
I've had many times where in myoffice with Darlene, people
call and contact us you knowyounger people about.
I've never said no, I mean I'lljust, I'll talk to them, I'll
run through, I'll give themhomework to do.
(24:43):
You know, go out and find fiveproperties you think are you
know interesting and you thinkare you know a possible good
investment.
Bring them to me, we'llscrutinize it.
I'll tell you what I think isgood and bad about it.
But I mean ideally, you justcan't really.
I don't think you can reallylearn it in the classroom and
you know you also can't learnthe cycles.
You know that you're in.
You've got to be able to look ata bottom line.
(25:05):
If a young person came to meand they do, and we look at, say
, different properties and kindof analyze them, you know, look
at the line item, income, theexpenses, each line, figure out
what can change and how it canchange, what can impact that.
You know, federal Reserveraises rates, your mortgage goes
up.
The city raises property taxes.
That goes up.
Hopefully rents go up.
But you got to look at kind ofthe whole picture and look at
(25:26):
past trends and where you're attoday and kind of try to kind of
guess where you're going.
Speaker 1 (25:30):
And it sounds really really confusing.
Speaker 2 (25:35):
It's really not If I can figure it out.
Anyway, if I can do it right,it's simple.
Speaker 1 (25:39):
I want to say I want to give a special shout out to
Steve Meyer.
Speaker 2 (25:43):
Yeah, big Steve man, good man, great guy, good man,
hilarious.
We'll see him tonight at Cards.
Speaker 1 (25:54):
Yep cards.
Yep, yeah, he's a great guy.
I love Steve man.
Steve has been a really reallygood influence on me ever since
I was in seventh or eighth grade.
Yeah, yeah.
Speaker 2 (25:59):
Great, great guy, yep .
I've known him a long time aswell.
Speaker 1 (26:00):
I wanted to ask this question what daily habits or
routines do you think contributemost to long-term financial
success?
I mean just really againkeeping an eye on your expenses,
your personal expenses, makingsure that you're never living
above your means.
Speaker 2 (26:11):
I mean just really again keeping an eye on your
expenses, your personal expenses, making sure that you're never
living above your means, I meanI think is number one, because I
mean that's just once you getinto that cycle.
Like we talk about compoundingdebt, I mean when the debt
starts compounding.
I mean consumer debt right nowis at an all-time high of, you
know, $1.2 trillion.
That's some of the highestinterest we've seen ever.
Speaker 1 (26:30):
Before we go.
Is there anything that you wantto say, any advice that you
want to give the youngergeneration?
Speaker 2 (26:39):
Yeah, I mean, if you want to get into something like
this, I think anything, I meanbe passionate about it, go out
and find the answers and thepeople that do it, but don't
just kind of go into ithalf-hearted.
I mean, if you really want todo it, put the time in, the
energy in, because I mean asgood as it can go if you do it
(26:59):
right, you know it can go bad,like anything the other
direction.
So just put the time and energyinto it.
You know, explore it, connectthe dots.
I think education and beingself-educated.
I think in a lot of ways,because nobody can learn the
stuff out of a book.
You know that you can learnreally from people that are
truly doing it and regions andsectors are different.
So you know, if you read a book, you know that's not going to
(27:21):
apply to California real estateIn certain areas it is to
Wisconsin or Florida or whatever.
Speaker 1 (27:26):
So there is no shortcut there's no shortcut and
be patient.
Speaker 2 (27:29):
There's no easy way Shortcut no, there's no shortcut
.
And be patient.
I think that's probably thebiggest thing I talk to when I'm
mentoring people on it is thatyou know, especially when things
are really kind of in the media, you know you hear a lot of
hype, you know real estate andeveryone's making so much money
in real estate which again is acyclical thing is that you know,
be patient.
I always tell my people thatI'm working with shop, let's
(27:51):
explore what's out there, let'slook at it, figure it out.
If that looks like a good deal,okay, then maybe we look at it
and go well, let's just kind ofkeep our eye on it.
It's kind of shopping andwaiting for the sale.
That's hard.
Patience is a big thing becausein real estate you make your
money when you buy, not when yousell.
You ever hear that sell.
Speaker 1 (28:11):
Well, that is true.
Speaker 2 (28:12):
Yeah, that is true.
It is because you got-.
Speaker 1 (28:13):
Because if the numbers don't work-, correct, if
they didn't work from thebeginning, they'll never work.
Yeah, yeah.
And you don't even know if youcan afford this thing.
Speaker 2 (28:22):
Right, you know if certain things go take us, you
know positive direction ornegative direction and sort of,
just like you know big picturerisk management.
Speaker 1 (28:37):
Absolutely.
What do you think about thisbeautiful office that Husky
Homes has provided us to do thisinterview?
Beautiful Shout out to JonathanGaspero.
Speaker 2 (28:47):
Thanks, jonathan, appreciate it, man, he is such a
nice guy.
Thank you.
Speaker 1 (28:50):
Him and his team said you know what you can do the
interview here.
We would love to sponsor thisepisode.
So thank you, thank you, athousand thank yous to Husky
Homes, yeah.
Speaker 2 (29:02):
Thank you, husky Homes.
It's very nice.
I got a table just like this inMexico.
Yeah, yeah, it's very similar.
Speaker 1 (29:08):
I got to get down there to Mexico man, you come
down so much stuff is going ondown there, yep.
Big Steve told me somethingthat y'all potentially might
have going on down there.
Speaker 2 (29:18):
Man, I don't know if you're in it.
Well, he's got a buddy downthere, that's got some property.
Speaker 1 (29:21):
He's got a buddy yeah .
Speaker 2 (29:22):
Steve's got buddies all over the place with property
and projects.
Speaker 1 (29:27):
He's saying he's like man I got this resort that he's
working on you know, and he'slike I'll take you down there,
you can come see.
And he's like I've been downthere yeah.
Speaker 2 (29:37):
He said it's legit.
I was talking to him on thephone last time we were down
there.
We never had a chance to meetup, but we'll probably meet up
next time.
Speaker 1 (29:43):
Okay, yeah, well, otto, thank you so much for
coming and stopping by.
What's up everybody?
This is your host, dee Starhere with Otto Gebhardt.
Gebhardt Development how youdoing man, Good man.
Thanks for having me.
I do my best.
So for the people that don'tknow you, can you tell us a
little bit about yourself?
Speaker 2 (00:12):
Yeah, been working in real estate and development.
Born and raised in Madison,been working in the business
since I was about 13.
My dad was in propertymanagement.
Got a real good education onhard work at a young age, me and
my brothers working in theindustry and then started real
(00:33):
early getting into investing inproperties that we could put
some sweat equity into managerun flip in the future.
And just started there Withfirst offer I think I had on a
property.
It was about 15.
Still remember the address 2677Milwaukee Street.
Speaker 1 (00:44):
Is that place still standing today?
Yeah, it's just an old house.
Speaker 2 (00:47):
But at the time I think I still have the offer.
I keep everything, I'm ahoarder but it was like 30 grand
$25,000 back in the day.
It's a long time ago.
That's a lot of money.
Well, back then, yeah, didn'tget it but ended up getting our
first property probably a coupleyears after that a fixer-upper
on the east side as well, andthen just kept parlaying it from
(01:08):
there.
I always had a passion forbuildings and architecture and
again, learning the hard work inthe beginning was a positive
because I mean, that's kind ofthe part that's just required
that is maybe as fun as the restof it.
But I always just had a passionfor buildings, development,
(01:30):
interesting development.
And then on top of that I kindof always had a knack for
investing at a young age andkind of understood the dynamics
of the market.
We've really been in for thelast 50, 60 years of continuing
inflation and the dollardevaluing and really being able
to get into something you canleverage.
Let that grow with thedirection they're kind of taking
the economy.
Speaker 1 (01:48):
I was going to go down a rabbit hole when you said
the direction that they'reputting.
We could go all day.
I was like you know what?
Speaker 2 (01:56):
Let's not go there yeah.
Speaker 1 (01:57):
But you spoke about the foundation.
You have a strong foundationand it started way early and it
started with that education andsweat equity and things of that
nature.
So why do you believe thatfinancial literacy should be a
core part of school curriculums?
Speaker 2 (02:13):
Well, I think it's just imperative if you want to
become self-sufficient, being ina proper place financially.
What is it really?
I mean?
It's freedom, it's the abilityto do what you want to do when
you want to do it, how you wantto do it.
So I think becoming financiallysound and self-sufficient as
young as possible is a way to beable to do ultimately what
(02:35):
you're most apt to be doing,opposed to be doing things that
you have to do.
Speaker 1 (02:39):
So what financial concepts or skills do you think
are more important for youngpeople to learn earlier?
Speaker 2 (02:48):
on.
Well, a big one, I would say,is understanding the idea of
compounding wealth andcompounding debt.
You know two opposite ends ofthe spectrum, but working
equally.
Whereas if you're going intodebt, that tends to be a spiral
that you continue to compound.
It gets bigger and bigger, theinterest gets bigger and bigger
(03:08):
and you can't ever get out fromunderneath it.
Whereas compounding wealth, ifyou can find residual income or
different investments that canbe earning income while you
sleep and whatnot, I mean thatcan compound in a positive
direction.
The other way.
Speaker 1 (03:22):
What role do you think parents should play in
their child's financialeducation, and how can schools
support that?
Speaker 2 (03:31):
I mean I think parents' first job is really to
teach to earn for what they wantin the future, to be again
self-sufficient, to not think ofit in a way that you don't want
them to be living above theirmeans at a young age, right, and
you don't want that to lead toadulthood.
If you live within your means,you realize you understand
working hard, gettingcompensated for your work,
(03:51):
putting a certain amount away,so to speak, for a rainy day,
having dry powder or money setaside is imperative that when
something comes along thatreally makes sense as an
investment or otherwise, thatyou have that ability to do that
.
Speaker 1 (04:03):
With that being said, what does generational wealth
mean to you and why is itimportant?
Speaker 2 (04:10):
Generational wealth.
I mean that can be adouble-edged sword.
I mean it can be a bad thing.
I mean growing up, if too manykids that start off with too
much and don't understand thevalue of work and having to work
for something, really, in mymind, are at a huge disadvantage
.
Have you ever seen that?
Speaker 1 (04:28):
Oh God, yeah, You've seen.
I think we've all seen it,haven't we?
Speaker 2 (04:32):
Somewhere, people we know, kids we grew up with or
something maybe didn't work ashard or didn't save, didn't
understand value.
Speaker 1 (04:43):
Oh, I definitely know some spoiled brats that they're
not kids now.
Right, you're talking 30 yearsago, sure, but I grew up with
some guys that well.
I knew some kids that were welloff and their concept of time
and money were very, verydifferent, especially their
(05:05):
concept of time, because wethink, like man, I could go to
work and make some money andthey just didn't have a care in
the world.
As soon as they turned 16, boom, they got given a car they
didn't have to work for it.
They didn't have to do anythingand it was probably a nice car
and it was nicer than theteacher's car Brand new Cadillac
(05:26):
.
This girl gets everything paidfor, fully loaded, didn't even
have a job.
She was 16.
You know, she could have beenworking at McDonald's, subway,
anything, never had a job.
And she's driving around thisbrand new Cadillac and it's just
like, wow, like why would yougive her that and not make her
(05:46):
earn it?
You know, or not make her workfor it or teach her anything
about anything?
Speaker 2 (05:51):
you know it's tough when you have the means,
especially to not want to givethem things you didn't have.
That's the balance right it's ahuge balance.
And it's like you've got to justwalk that tightrope.
You know you've got to say no,you've got to put your foot down
and you've got to try to getthem to understand that you know
to get anything of value youneed to put hard work and
(06:13):
dedication into that or you'llnever appreciate it.
I mean the kids that the peoplethat grew up with that got
whatever they wanted and neverhad to work for it.
They never appreciate it.
I mean it's kind of feel badfor them in some ways.
Speaker 1 (06:29):
It's like you never really had a real appreciation
you know, to earn that car, orthe money to buy the car, or you
know, whatever it may be.
My first car was a 1985Oldsmobile.
I bought the car.
I earned it, so it was specialto me.
It was a piece of junk and youlove that car.
Right, it's a piece of junk butI bought it.
(06:50):
You know what I mean.
I think had I been given it Iwouldn't have loved it, I
wouldn't have showed it therespect you know.
So I really do understand whereyou're coming from with that.
But, like you said, if you havethe means, it's really really
hard to say no.
It's like hey, can I get a pairof shoes?
It's like, yeah, I could getyou 100 pairs of shoes, but what
did you do to earn that pair ofshoes?
Speaker 2 (07:06):
you know, besides just asking, I'm guilty of it,
my wife's guilty of it as far asspoiling our son too much.
And every day you're trying topull it back a little bit and
going, hey, no, listen, you goclean the bathrooms, you go
downtown and work cleaning this.
We were down cleaning turnoversfor apartment turnover students
.
Speaker 1 (07:22):
That just happened.
It just happened.
Speaker 2 (07:23):
And I had them down there with some friends cleaning
up trash out of the dumpsterlike I used to do as a kid.
Right, and you'll get this, andthen you'll get paid, and then
you can decide what you Then yougot to teach them too.
I'm trying to teach my son.
Well then you don't get yourmoney and then go spend 100% of
it, put 50% away, buy what youwant with the other Again, save
that, try to get some type ofsavings.
(07:43):
I mean we've-.
How old is this one?
He's 14.
12, excuse me.
Speaker 1 (07:46):
He's 12?
, yeah, 12.
Getting him to try tounderstand that concept is going
to be a struggle.
Speaker 2 (07:51):
A huge struggle, Well , and kids have changed today.
I mean when.
Speaker 1 (08:05):
I was a kid, it was a , than it is today.
Speaker 2 (08:06):
So it's always a battle, but it's for their own
good, and you've got to teachthese life lessons that are
going to continue on for therest of their life.
Speaker 1 (08:11):
I got girls so that they're even harder to say no to
.
Speaker 2 (08:15):
What age?
Speaker 1 (08:16):
I got them all ages, so I got a three-year-old, I got
a 16-year-old, an 18-year-old,yeah, I got a 21-year-old, and a
22-year-old, it's really tough,I'm assuming, to not spoil the
girls.
Speaker 2 (08:32):
I mean you couldn't do it, I'd be useless.
Speaker 1 (08:38):
So what strategies do you recommend for families who
want to start building wealthfor future generations?
Speaker 2 (08:45):
It's living within your means.
It's trying to find, you know,investments that can build on
their own.
You know, residual income, Imean it's just a huge one.
I mean, if you're, you know,working a regular everyday, you
know nine to five job is greatand we've all done it, and you
know the government's going totake its share.
Inflation, I mean, I think onereason I'm in the business real
estate that I'm in is because Iknew at a young age inflation
(09:07):
was such a big part of theirplan.
The fact of the matter is, youknow, in this time now, maybe
we're losing 20% of the value ofyour money that you're saving
or earning not taxes is beingtaken away by just inflating the
money Exactly.
Speaker 1 (09:20):
So you know they take 30% out of taxes, 20 in
inflation, you're not left witha whole lot at the end of the
day, right?
So that $30 that you put in,you know a year ago, it's not
worth $30 anymore.
It's not the same money.
Speaker 2 (09:32):
And this has been a trend that's been going on, you
know, for 100 years.
You know, if you look at thevalue of things, you know 100
years ago to, and you know youlook at the value of an ounce of
gold back, you'll pick any time.
(09:52):
You know 1850, an ounce of goldmight've been 30 bucks, but it
bought a custom made suit.
Let's say, well, today gold'sat about 2,400.
What's it cost for a customizedsuit?
You know 2,400.
It's kind of something that'sbeen a barometer that you can
kind of rely on to watchinflation.
Speaker 1 (10:02):
Wow, and who taught you that?
Speaker 2 (10:04):
I was kind of self-taught in all that.
Really Most of my financialeducation was all self-taught
reading a lot, connecting thedots, not believing everything.
You see, a great book that wasgiven to me years ago was the
Creature of Jekyll Island, whichkind of talks about how the
bankers got together in 1913 tocreate the Federal Reserve which
kind of controls our day-to-daylife and interest rates and
(10:24):
credit.
And it's a fascinating book.
Speaker 1 (10:26):
but you know, and is that the story of how they took
us off the gold standard?
And create.
Speaker 2 (10:31):
They've taken us off the gold standard a couple of
times.
That was one of the times aboutthen.
They took us off about 1913.
The last time they took us offthe gold standard was 1971, when
Nixon took us off because theVietnam War was.
They were spending too muchmoney.
They didn't have enough gold toback the money which it was at
the time, so he had to take usoff because they needed the
ability to print money freely.
Speaker 1 (10:50):
Okay, so what tips and tricks?
What are the first stepssomeone should take if they want
to start investing in realestate, in real estate.
Speaker 2 (11:00):
I'd really look at past trends and try to find
people that either locally thatare doing it well and maybe over
a period of time, or find amentor through books and
different reading that you knowsomeone that's done it.
I've always enjoyed looking atpeople that did it from the
ground up.
I mean, if somebody was givenyou know $10 million to start,
(11:20):
that really isn't the same thing.
So if you couldn't find someonelocally, if I couldn't find
someone locally that kind of youknow mirror mimic talk to
bounce things off of, I would gojust into media and try to find
who did this, who started atzero, who and how did they do it
?
It was always fascinating.
It was never as fascinating tome once they got there.
It was always more fascinatingwhat they did to get you know
(11:42):
how they built up.
Speaker 1 (11:43):
It was always more fascinating what they did to get
you know how they built up theclimb.
Yeah, what is the biggestmistake you see new investors
make and how can they avoid it?
Speaker 2 (11:51):
Every cycle and I think we're kind of at the cusp
of another bubble, like 2008-9during the housing crash.
That was the last one as far asthe cycle went.
People always make the mistakeat the top of the bubble to get
in and think things only go onedirection.
Values only go up, you know,rents only go up, you know.
So I can kind of overpay forthis property, but rents are
(12:13):
going to go up.
And I talk to people likelocally, that are doing big
projects and I'm like how isthis project going to work?
It doesn't make any sense.
And they're like, well, therents are just going to come
back down.
And I kind of look at them andgo, what if they don't?
Right?
So you really got to payattention to cycle because it's
always a cycle.
(12:33):
I mean real estate, like somany things, is a constant,
moving, ebbing cycle.
It never goes one directionforever.
It's always changing, ebbingand flowing.
And what I've seen the biggestmistake to answer your question
is people get in kind of nearthe top you know, and everyone
else rode that wave for the lastthree, four, five years and say
, well, I'm just going to buythis four unit, this eight unit,
(12:55):
and you know rents are going toonly go up and interest rates
are going to go down or keepgoing down or go back down, and
I always ask people that I say.
So what if interest rates keepgoing up, your rents go down,
your vacancies go up and yourexpenses go up?
Speaker 1 (13:09):
Right.
Speaker 2 (13:10):
Then what?
Then you've got probably what'scoming in the next couple of
years here probably a majorcollapse in the real estate
market again.
Speaker 1 (13:16):
And so when you have that major collapse, what does
that do to someone?
Speaker 2 (13:21):
like you, we get busy .
I mean, we play these.
This is going to be our thirdcycle, so we're probably one of
the few players, locally atleast, that really plays more of
the down cycle than the upcycle.
I mean, we're kind of boredright now because we've got five
development projects put onhold because you can't make the
numbers work, the buildconstruction costs don't work
for the rents and everything.
So it's just and we don't fallinto that.
(13:41):
Things are going to keep risingrents wise every year.
We look kind of for the trends.
We're patient.
Patience is a big part of thisgame because real estate is a
slow-moving ship, unlike certainthings like the stock market.
You could wake up tomorrow.
It could be down 5,000 points,it could be whatever.
Right.
The real estate market is likea big tanker.
It moves one direction, onedirection starts turning and
then it turns all at once.
So you've got to be patient.
(14:02):
Rates have gone up.
Speaker 1 (14:03):
What we're seeing locally here is we're seeing
rent starting to come down,vacancy starting to go up,
expenses starting to go up and,as we know, interest rates have
doubled from what they wereabout a year Ago.
Speaker 2 (14:15):
So you said that rent is starting to come down.
Yeah, really, certain sectors,certain sectors, and inevitably
That'll happen.
That will theoretically happenin all sectors, because what
happens is you get a pent-updemand, rents are going up,
vacancies are down.
People like us get in, startbuilding new units, put them on
the market.
As long as that keeps working,people keep building, but we
always overbuild, right.
Speaker 1 (14:35):
Because somebody's but they were just saying what,
a year or two ago that we didn'thave enough buildings?
Build, build, build build,build, build.
Speaker 2 (14:41):
Yeah, and in some areas that's correct.
Madison was a unique situationbecause years ago Madison put
into a place a law that was 10%inclusionary housing, which
meant that every apartment,building, condo, whatever,
needed to have 10% affordable init.
And there was no credit forthat, there was no subsidy for
that.
It was just kind of the priceof doing business.
Speaker 1 (15:02):
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(15:27):
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I thought that there was sometype of incentive, because I
(16:08):
know they had to.
You had to take some type oflike low income Section 8.
It had to be like at least oneof those.
Speaker 2 (16:16):
Section 8.
Well, section 8, you have totake by law, which is fine and
that's not an issue withanything, that's just a separate
program.
What they put into place,probably about and I'm just
guessing at the timeframe, itwas probably about 2003, maybe
give or take this Madison-wide.
It was just kind of like theprice to do business in Madison
to build apartments housing isyou have to put 10% in, but
(16:37):
there's going to be no.
There are programs now to dothat but people get tax credits
and things for differentprograms.
But when Madison did that backin 2003, what it did was it
stifled development in Madison.
So no one built anythingbecause the numbers just didn't
pencil out.
So people built in Middleton,even the outskirts, middleton,
sun, prairie, verona, et cetera.
Well, so that was like I said,I'm guessing about 2003,.
(17:00):
That kind of stifled newdevelopment.
Again, what we talked about,supply and demand coming on
creates the ebb and flow of theaffordability of housing.
So unfortunately it had theopposite effect that they wanted
to have on housing prices.
Rents and things went upbecause development was stopped.
People were going on theoutside so they didn't have any
new product coming online.
(17:21):
Then jump ahead a few years.
It was being challenged incourt by I don't know who if it
was the Realtors Association orsomething.
And then 2008, 2009 hit.
The housing crisis hit, so wewent into the recession.
The bubble burst Right, soeverything fell apart then and
credit seized up.
No one was building then at all.
I mean, we were doing a coupleof things and then, shortly
(17:43):
after that, the Supreme Courtshot down that law of the 10%
inclusionary housing.
The only reason I bring thatpart of the big picture up is
because we didn't have anybuilding going on for a long
period of time that you wouldhave just naturally had,
creating supply and creatingthat ebb and flow in the rents
to keep things more affordable.
Rents went up during that timebecause there was no supply.
Now there's been a huge demand.
(18:04):
There's been a huge demand nowsince we came out of that which
you've been seeing here in thelast five, six, seven, eight
years.
Right, so you're saying we needall these units.
A lot of that was pent-updemand from that whole process.
Speaker 1 (18:18):
From 2008.
Going back and prior to.
Speaker 2 (18:23):
When they put that inclusionary zoning in, we
weren't getting the naturalproduct being built into the
market.
To add to it, new stuff comeson.
It's the nice, higher end stuff.
The older product becomes moreaffordable.
You didn't have that for 10years.
So where do you think we arenow?
I think we're peaking thebubble's peaking kind of as it
was, in a sense, in 2008, 2009.
Cheap easy money I mean takingthe rates to zero really
(18:45):
stimulated a lot of speculation,a lot of growth.
Some needed a lot of it needed,obviously.
But I think people are stilljumping in with the expectations
that rates are coming down,rents will keep going up and I
mean for sure I know expensesare going up.
I mean across the board.
Oh yeah, I mean everything.
Speaker 1 (19:02):
And promises have been made.
Speaker 2 (19:04):
Yes, expenses are going through the roof across
the board.
I mean, and that's probablyevery industry, specifically
ours.
We've got insurance, you know,water, sewer, everything is just
way, way, way up.
And we are seeing a lot of thesectors we're in having a
softness now in rents andvacancies.
I think it's people have, youknow, a point they can only pay.
You know, even if they want to,they can only pay.
(19:25):
And you're coming out of COVIDa couple of years ago where
people were getting stimuluschecks.
They were working from home sothey weren't spending money
other places.
At that point during COVID,somewhere in that neighborhood,
we had the highest savings ratewe've had in the last 30, 40
years, I mean.
Speaker 1 (19:39):
but the restaurant industry's tanked, bar
industry's tanked, like you said, evan Flo, right, so that is it
was what it was.
I wanted to ask you what wasthe best investment that you
ever made, and why, and what wasthe worst?
Speaker 2 (20:00):
Oh, start with the worst.
I got involved in a restaurantdeal, speaking of restaurants,
with you got hit with arestaurant too.
Yeah, I did, I did.
Speaker 1 (20:11):
I got pulled into a restaurant and lost my shirt.
Speaker 2 (20:13):
There you go, that's me.
So I went into it as the realestate end of it, you know,
going.
Oh, that's fine.
I mean, I had no illusions thatI was a restaurateur or
anything.
I was like I'll be the main,I'll buy the real estate.
Basically we'll finance it,we'll get the other partners and
they'll run it.
They'll do what they need to do.
Well, when your partner's allbail on you, all of a sudden you
find yourself cleaning thegrease trap out and you know the
fryers right, and that was moreof a prideful thing too.
(20:36):
It was like then, once we wereinto it and everyone bailed on
us, I'm gonna make this.
Me and my brother were gonnalike.
You know, we're not gonna letthis go down, we're gonna show
them where I should have pulledthe plug three years earlier.
Right, and eventually we justgot out of it, sold it, sold the
restaurant, but it was, uh, itwas probably the least fun,
profitable experience.
Speaker 1 (20:52):
The restaurant business is a separate world
Right and you have to haveextreme attention to detail and
you have to know that industry.
Speaker 2 (21:05):
Oh, 100%, you have to know, and I knew, I didn't, I
knew I didn't.
We thought we had people onboard that did.
Speaker 1 (21:10):
Unfortunately, they bailed and then you're kind of
stuck and that's not the type ofbusiness you want to try to
learn on the fly Right, becauseit's already expensive.
Yeah, you know, food costs.
Speaker 2 (21:21):
Well, I couldn't even imagine today, I mean at the
time, and that was God, that was, you know, almost 18 years ago,
Right.
Speaker 1 (21:33):
I couldn't imagine today, but it was terrible then,
so you lost your shirt on thatLost my shirt on that so what
was the best?
Speaker 2 (21:37):
Best.
You know it's kind of hardbecause everything that I've
done has been a success.
It's always been bigger.
You know, I'm not saying that'sthe way it was planned.
It was, you know, starting fromthe one single unit, flipping
into two units, flipping intofour, I mean.
So, just over time there's beenmany of them.
I mean I think most recently,you know, coming out of the last
recession, you know we gotinvolved in the East Washington
(21:59):
Avenue programs with theConstellation, the Galaxy
Festival, foods.
Those were obviously thebiggest we've done, because
everything kind of got bigger aswe went and the timing was just
right on it.
I mean, we were coming out of arecession.
The neighborhood and the city,you know, really wanted to get
something done when Madison attimes can be a city of no.
You know we don't like that.
Our high-rise used to be threestories.
We don't want to go anythingover three stories and I'm like
(22:22):
I've always been an advocate fordensity and mixed use and I
worked on that for 15 years withthe city until they finally
came along and agreed to take achance on it down there on East
Washington Avenue and now it'sdone well, and now they kind of
use it as a model.
Speaker 1 (22:34):
For the longest time they use that.
Well, we don't want anythinghigher than the Capitol.
We want you to be able to seethe Capitol from every direction
, and so they stood behind thatfor a long, long time.
Speaker 2 (22:45):
They're still behind that, like all our buildings on
East Wash are below thatthreshold.
They're right to the foot,literally, and they're checking.
Oh yeah, oh yeah, they takethat serious.
So that's still in place.
Speaker 1 (22:58):
How do you sit down and brainstorm?
Speaker 2 (23:00):
the next move.
Well, it depends on what movethat is.
Right now we're kind ofanticipating.
Like I said, I think we'regoing to see a big pullback.
So we're getting cash heavy.
We liquidated things that wedon't see as long-term plays to
add to that cash and credit, sothat we're in a position that,
if things happen as weanticipate that, we're in a
(23:21):
position to pick up propertiesand things that we're interested
in at substantial discounts.
Right, because they just don'thave the money to pay for it,
right.
Speaker 1 (23:36):
I mean, these numbers just don't pencil out for a lot
of these projects.
No, they got like a 20-yearplan.
Yeah, not that they're gonna beimplementing east side.
It's gonna be totally differentand I'm really excited about
I've seen some of like thedrawings of it yeah, uh, it
looks really, really cool.
Speaker 2 (23:47):
They had that a 20-year plan in for east
washington avenue for like 30,30 years and we used to always
look at the pictures and go, ohyeah, that looks great, but how
is it going to get done, youknow.
So I mean, I think coming upwith the plans are great.
I mean a lot of it's just youknow it's a cycle, you've got a
timing.
Timing is everything,especially with development it's
you know, you've got to find.
You know the credits got to bethere, the rates have to be
(24:09):
there, the demand has to bethere.
Construction the rates have tobe there, the demand has to be
there.
Construction costs I meanthere's just a lot of moving
parts.
Speaker 1 (24:15):
So what advice would you give to someone starting
from scratch?
No family wealth or financialknowledge?
Speaker 2 (24:22):
I would strongly suggest again finding somebody,
ideally locally, personally,that is in the business or that
you can kind of, you know, workfor them for free.
You know, be a gopher, justlearn how they do what they do.
I've had many times where in myoffice with Darlene, people
call and contact us you knowyounger people about.
I've never said no, I mean I'lljust, I'll talk to them, I'll
run through, I'll give themhomework to do.
(24:43):
You know, go out and find fiveproperties you think are you
know interesting and you thinkare you know a possible good
investment.
Bring them to me, we'llscrutinize it.
I'll tell you what I think isgood and bad about it.
But I mean ideally, you justcan't really.
I don't think you can reallylearn it in the classroom and
you know you also can't learnthe cycles.
You know that you're in.
You've got to be able to look ata bottom line.
(25:05):
If a young person came to meand they do, and we look at, say
, different properties and kindof analyze them, you know, look
at the line item, income, theexpenses, each line, figure out
what can change and how it canchange, what can impact that.
You know, federal Reserveraises rates, your mortgage goes
up.
The city raises property taxes.
That goes up.
Hopefully rents go up.
But you got to look at kind ofthe whole picture and look at
(25:26):
past trends and where you're attoday and kind of try to kind of
guess where you're going.
Speaker 1 (25:30):
And it sounds really really confusing.
Speaker 2 (25:35):
It's really not If I can figure it out.
Anyway, if I can do it right,it's simple.
Speaker 1 (25:39):
I want to say I want to give a special shout out to
Steve Meyer.
Speaker 2 (25:43):
Yeah, big Steve man, good man, great guy, good man,
hilarious.
We'll see him tonight at Cards.
Speaker 1 (25:54):
Yep cards.
Yep, yeah, he's a great guy.
I love Steve man.
Steve has been a really reallygood influence on me ever since
I was in seventh or eighth grade.
Yeah, yeah.
Speaker 2 (25:59):
Great, great guy, yep .
I've known him a long time aswell.
Speaker 1 (26:00):
I wanted to ask this question what daily habits or
routines do you think contributemost to long-term financial
success?
I mean just really againkeeping an eye on your expenses,
your personal expenses, makingsure that you're never living
above your means.
Speaker 2 (26:11):
I mean just really again keeping an eye on your
expenses, your personal expenses, making sure that you're never
living above your means, I meanI think is number one, because I
mean that's just once you getinto that cycle.
Like we talk about compoundingdebt, I mean when the debt
starts compounding.
I mean consumer debt right nowis at an all-time high of, you
know, $1.2 trillion.
That's some of the highestinterest we've seen ever.
Speaker 1 (26:30):
Before we go.
Is there anything that you wantto say, any advice that you
want to give the youngergeneration?
Speaker 2 (26:39):
Yeah, I mean, if you want to get into something like
this, I think anything, I meanbe passionate about it, go out
and find the answers and thepeople that do it, but don't
just kind of go into ithalf-hearted.
I mean, if you really want todo it, put the time in, the
energy in, because I mean asgood as it can go if you do it
(26:59):
right, you know it can go bad,like anything the other
direction.
So just put the time and energyinto it.
You know, explore it, connectthe dots.
I think education and beingself-educated.
I think in a lot of ways,because nobody can learn the
stuff out of a book.
You know that you can learnreally from people that are
truly doing it and regions andsectors are different.
So you know, if you read a book, you know that's not going to
(27:21):
apply to California real estateIn certain areas it is to
Wisconsin or Florida or whatever.
Speaker 1 (27:26):
So there is no shortcut there's no shortcut and
be patient.
Speaker 2 (27:29):
There's no easy way Shortcut no, there's no shortcut
.
And be patient.
I think that's probably thebiggest thing I talk to when I'm
mentoring people on it is thatyou know, especially when things
are really kind of in the media, you know you hear a lot of
hype, you know real estate andeveryone's making so much money
in real estate which again is acyclical thing is that you know,
be patient.
I always tell my people thatI'm working with shop, let's
(27:51):
explore what's out there, let'slook at it, figure it out.
If that looks like a good deal,okay, then maybe we look at it
and go well, let's just kind ofkeep our eye on it.
It's kind of shopping andwaiting for the sale.
That's hard.
Patience is a big thing becausein real estate you make your
money when you buy, not when yousell.
You ever hear that sell.
Speaker 1 (28:11):
Well, that is true.
Speaker 2 (28:12):
Yeah, that is true.
It is because you got-.
Speaker 1 (28:13):
Because if the numbers don't work-, correct, if
they didn't work from thebeginning, they'll never work.
Yeah, yeah.
And you don't even know if youcan afford this thing.
Speaker 2 (28:22):
Right, you know if certain things go take us, you
know positive direction ornegative direction and sort of,
just like you know big picturerisk management.
Speaker 1 (28:37):
Absolutely.
What do you think about thisbeautiful office that Husky
Homes has provided us to do thisinterview?
Beautiful Shout out to JonathanGaspero.
Speaker 2 (28:47):
Thanks, jonathan, appreciate it, man, he is such a
nice guy.
Thank you.
Speaker 1 (28:50):
Him and his team said you know what you can do the
interview here.
We would love to sponsor thisepisode.
So thank you, thank you, athousand thank yous to Husky
Homes, yeah.
Speaker 2 (29:02):
Thank you, husky Homes.
It's very nice.
I got a table just like this inMexico.
Yeah, yeah, it's very similar.
Speaker 1 (29:08):
I got to get down there to Mexico man, you come
down so much stuff is going ondown there, yep.
Big Steve told me somethingthat y'all potentially might
have going on down there.
Speaker 2 (29:18):
Man, I don't know if you're in it.
Well, he's got a buddy downthere, that's got some property.
Speaker 1 (29:21):
He's got a buddy yeah .
Speaker 2 (29:22):
Steve's got buddies all over the place with property
and projects.
Speaker 1 (29:27):
He's saying he's like man I got this resort that he's
working on you know, and he'slike I'll take you down there,
you can come see.
And he's like I've been downthere yeah.
Speaker 2 (29:37):
He said it's legit.
I was talking to him on thephone last time we were down
there.
We never had a chance to meetup, but we'll probably meet up
next time.
Speaker 1 (29:43):
Okay, yeah, well, otto, thank you so much for
coming and stopping by.
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