May 27, 2025 • 49 mins
Brian Davis is a seasoned real estate investor and co-founder of Spark Rental. With over two decades of experience, Brian shares his journey from being an active landlord to a successful passive investor, owning shares in over 3,000 units. He discusses the benefits of fractional real estate investing, involving smaller investments in large syndications, making high-return opportunities more accessible to typical investors. Brian explains how his investment club vets various real estate deals monthly across diverse asset types and geographies, enabling inclusive and diversified investment opportunities. He also emphasizes the importance of dollar-cost averaging, the resilience of certain asset classes like mobile home parks and raw land, and avoiding pitfalls by thoroughly vetting operators and understanding market risks.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
When it's a good time to buy iswhen no one thinks it's a good
(00:03):
time to buy, right?
It's when all the headlines aredoom and gloom and the sky is
falling, and the world isending, that's actually usually
the best time to buy, right?
Welcome to the Wayfinder Showwith Louis Hernandez, where
(00:24):
guests discussed the why and howof making changes that led them
down a more authentic path orallowed them to level up in some
areas of their life.
Our goal is to dig deep andprovide not only knowledge, but
actionable advice to help youget from where you are to where
you want to be.
Come join us and find a way toyour dream life.
(00:57):
Welcome back to the WayfinderShow.
I'm your host, Louis Hernandez.
Yeah, that's my name, LouisHernandez.
And today's guest is BrianDavis.
He is a recovering landlord,turned passive investor and
co-founder of Spark Rental.
With over two decades in realestate and finance, Brian now
invests$5,000 at a time intofractional property deals,
(01:22):
owning shares in over 3000units.
He's also a sought after writerfeatured on BiggerPockets.
Inman and go banking rates.
And he's here to share howanyone can design their ideal
life through smart real estateinvesting in a bit of contrarian
thinking.
Brian, welcome to the WayfinderShow.
(01:42):
Louise, thank you so much forhaving me here.
I'm excited, man.
You got a great life.
Maybe, I know when you're in itit may not seem that way, but
from the outside looking in, youhave lived a pretty idealistic
life that what we can all aspireto.
So I'm really excited to learnabout how you designed that,
which is pretty interesting.
But before we get into it, tellus about, how you got to where
(02:04):
you are, which I didn't eventalk about where you are yet,
but.
Yeah.
So Luis is alluding to the factthat I'm an expat, my wife and
daughter and I live in Lima,Peru, at least for the moment.
We're about to move back to theUS in a couple months.
But we've been abroad for 10years now.
My wife is a school counselorand for the last 10 years she's
been working at American schoolsaround the world.
(02:26):
Most of'em were embassy schoolsas a college counselor, helping.
Juniors, seniors get intocollege.
And I have an online business inthe US and I also do some
freelance writing on the side,and that's all done remotely.
I've been able to work remotelyaround the world.
We started for four years in AbuDhabi was our first little jaunt
(02:47):
overseas.
And then we moved to Brasiliafor four years.
And we've been in Lima for thelast two years.
So it's been a lot of fun.
It's been a ride.
That is so cool.
Did you did your destination,was that something you guys got
to choose or was it chosen foryou?
Yeah, so what happened was this,so back in 2015, my, my wife, I.
(03:09):
Had or she knew that I had somewanderlust.
So she, unbeknownst to me as asurprise, she went out and she
talked to a friend of mine whoworked for an overseas school
about how that works.
How you end up working forinternational schools around the
world.
So she signed up for thisrecruiting service and then
surprised me with it.
And she said, Hey, there's a jobfair up in Boston.
(03:29):
Do you want to go up there?
And I.
I'll interview four jobs aroundthe world and they wanna meet
you too.
And, if one comes along thatlooks awesome, we can take it.
So we did, we went up to Bostonand within 24 hours of getting
there we, she had a job offer inAbu Dhabi and we took it.
But yeah, she interviewed with abunch of different schools
(03:49):
around the world.
Got a handful of job offers.
That was the one that we feltmost drawn to.
Our lives.
Changed, they changed trajectorypretty quickly in that moment.
And we thought we were justgonna have this little two year
adventure overseas and then juststep right back into our
previous life.
And we rented out our housefurnished with all of our stuff
(04:11):
in it, and we thought we werejust gonna move right back into
our house with all of ourfurniture.
And but that's not whathappened.
That was 10 years ago and we'restill abroad.
It's been a lot of fun being anexpat.
Yeah.
That's interesting.
So let's talk about your side ofit though, how you were a
landlord, right?
I was I hated it.
I absolutely hated it.
(04:33):
Yeah the short version of thatstory is I graduated college in
2003, which sounds like a reallylong time ago.
And I guess it was, but I didn'tknow what I wanted to do.
Yeah.
Thank you.
It made me feel a little bitbetter there, but yeah, I didn't
know what I wanted to do with mylife.
Like a lot of college grads.
I ended up just falling into ajob working for a mortgage
company where the owner, one ofthe two owners was friends with
(04:53):
my stepdad, so just fell into asummer internship by accident
with them, and at the end of thesummer they said, hey, we don't
need another loan officer.
What we do need is we needsomeone to manage our personal
hard money loans because the twoowners.
On the side of theirconventional mortgage business,
they lent out hard money loans.
And I said I don't know anythingabout that, but sure, why not?
(05:15):
So I started working with realestate investors, flippers,
people doing burr deals.
And I'm watching these guys makemoney hand over fists back in
the mid aughts, right?
'cause it was a big party and inreal estate back then, and
everybody's making lots ofmoney.
So I was like, oh, I can do thistoo.
And if I buy enough properties,I can just, retire at 30 or
whatever.
And, that's of course in thereal world, it's a little bit
(05:37):
more complicated than that.
It, that was the premise of firebefore fire was a thing.
And so I went out and put all mymoney into rental properties and
I didn't know what I was doing.
And I was this young, cocky,arrogant 20 something who
thought that he could justfigure it all out on his own.
And way over purchased, wayoverbought for these properties.
Got in way over my head and then2008 hit and just totally cut.
(05:59):
Me off at the knees.
Not only with my investments,but also my work as a loan
officer for a hard money lender,that all dried up too overnight.
'cause no one's flipping housesanymore in 2008.
Anyway I went off and I took atotally new job for an
e-commerce company thatspecialized in landlord forms,
legal forms for landlords.
And the only reason I got thatjob was because I was a landlord
(06:21):
myself.
I didn't know anything about.
E-commerce or digital marketingor any of that stuff.
But I got the job because I wasa landlord and that just, it
goes to show that.
A door closes, a window opens,that just is how the universe
works, and you have to beopen-minded about that stuff.
Even when you're going throughsomething that feels like a big
crisis there are opportunities.
And that's how it was for me.
(06:41):
So yeah, in 2015 I moved abroad.
I was still working for thate-commerce company actually when
I moved abroad, but within sixmonths or so after moving abroad
a coworker of mine from thatcompany, she and I, we split off
when we started Spark Rentaland, and we've been doing it for
over nine years since but I've,yeah, I wanted to have income
that I could.
(07:01):
Have some control over and Iwanted to be able to earn money
from anywhere in the worldworking any hours that I wanted
to work because at that point, Iwas living in Abu Dhabi, which
was nine hours ahead of Easterntime and 12 hours ahead of
Pacific time.
Yeah, it was very much abouttrying to design a life around
what I wanted to do, which wastravel a lot and, live overseas
(07:24):
and have some control over myincome.
Yeah, very interesting.
I think a lot of us have that,right?
I like how you used the termwanderlust.
I hadn't heard that one in awhile.
Actually stayed in a really coolhostile one.
It's called Wanderlust and thatwas where, at an exposure to in
Gunison, Colorado.
Okay.
All right.
The but the so tell us about thebusiness.
(07:44):
This is really interesting.
Tell us what Spark Rental does.
So there's gonna be a slightwandering here, but I promise
it'll come back around.
Sure.
So when we first started ourbusiness we thought that we were
gonna start a software companyand create landlord software for
mom and pop landlords.
(08:05):
'cause at the time, there wasn'treally a good solution out there
for people that just had ahandful of properties.
And one of the lessons that Ilearned.
Early on as an entrepreneur, isthat the business that you think
you're in, or the business youthink you should be in, not
necessarily the business thatthe market thinks you should be
in or what your customers thinkyou should be doing, and you
(08:26):
have to listen to the market andlisten to your customers or, and
listen to your.
Prospective customers.
My partner and I, we spent a lotof money and time, chasing down
this rabbit hole of trying tocreate software.
And meanwhile, neither she nor Iare technical founders, we don't
know how to code.
So we just, we wasted all thistime and effort on that.
And.
What we were doing in themeantime to make money while we
(08:47):
were trying to build out thissoftware was we just had an
educational blog and we startedselling online courses and and
just teaching people about realestate investing and property
management and, some of theseprinciples and financial
independence and lifestyledesign.
And our course students keptasking us, Hey, I'm not ready to
buy a property by myself justyet, but can I just invest a
(09:08):
little bit of money with youguys in a project that you're
doing?
We kept saying no, we must havesaid no 50 times to people who
asked that question.
And finally my partner and Ilooked at each other and we were
like maybe we should actuallypay attention to what people are
asking us for.
And at the time I was not buyingrental properties anymore from
Abu Dhabi, but I was starting toinvest passively in real estate.
(09:30):
I was, it started with realestate crowdfunding platforms,
and then I got into syndicationsand.
We did a couple pilot deals withsome of our core students on
rental properties.
It was way too much work.
We weren't making any money offof doing that other than just
the returns that we were earningas partial owners from those.
But we liked the premise ofco-investing with other people.
(09:53):
In some of these big real estateprojects.
So we did a pilot deal for ourreal estate syndication where we
all went in on a syndicationtogether.
'cause syndications have a highminimum investment, 50 grand, a
hundred grand, sometimes more,sometimes 250 grand or even a
million dollars.
So that makes it.
Really prohibitive to diversifyif you have to park a hundred
grand at a time in eachinvestment.
(10:14):
And the same applies to rentals.
If you're going out and buying arental by yourself, you're gonna
put 50 grand or a hundred grandin between the down payment and
closing costs and cash reservesand whatnot.
So anyway we went in on asyndication deal with some of
our course students.
It went well and people likedit.
So we thought what if we startedan investment club around this
and, opened it up to the publicand, we could all vet deals
(10:37):
together and we could go in onthem together financially, so
each person could invest smallamounts.
And, so we spoke with anattorney of course, to make sure
that was legal.
And and we did, we launched theco-investing club as just a
passive real estate investmentclub for people to go in on
investments together and vetthem together and have 50 sets
of eyeballs all on the samedeal.
(10:57):
And talking over the pros, cons,risks, returns, and it's been a
lot of fun.
That was three years ago, fouryears ago that we started doing
that.
And it's, we've been doing itever since.
Every single month we gettogether and we vet a new deal
together as an investment club.
Yeah, that.
When I first heard this conceptI just thought it was really
interesting'cause like for ourlisteners who don't know a lot
(11:19):
of times, like you messmentioned to invest in these big
syndications.
Yeah.
Some of them require big lumpsums of money.
Some of them, depending on thestructure, you also have to be
an accredited investor.
Not all of us are.
So we have to meet certainincome thresholds or net worth
thresholds and that can beprohibitive.
So with your co-investing club,is this somebody that anybody
(11:41):
could anybody.
Could join something thatanybody could join.
Yeah.
Yes.
Is the answer to that question.
And that is one of our corevalues as an investment club is
inclusivity to everybody becauseit's pretty easy for accredited
investors to find these dealsand to find reputable operators.
It's a lot harder fornon-accredited investors because
(12:01):
the SEC makes it.
Difficult for them.
Yeah.
The SEC doesn't wantnon-accredited investors
investing in private equity realestate.
They just don't, they don'tthink that they are
sophisticated enough to do it.
So when an operator goes tooffer a syndication they
typically have two options.
They can file it as a 5 0 6 Bsyndication, which does allow up
(12:23):
to 35 non-accredited investors,but.
This, the operator is notallowed to advertise it at all
to the public.
So those 35 non-accreditedinvestors, that's really
supposed to be like friends andfamily or an operator, can file
it as a 5 0 6 C syndication andmake it only available to
accredited investors.
(12:44):
And when they, if they do that,then they are allowed to
advertise it to the public sothat if you're a non-accredited
investor, that creates a cash22.
Where you can't.
No one's allowed to market theseinvestments, so how are you
supposed to know about them?
Again it's really designed forjust friends and family of
operators.
So that's one of the things thatwe do as an investment club is
(13:04):
we look at non or investmentsthat allow non-accredited
investors and we.
So my partner and I, we do a lotof networking with operators and
that's part of the service thatwe offer.
We get on all their email listsand we talk to'em about what
they're doing.
And so every day we have dealscoming across our plate and we
just try to pick the one eachmonth that we think is the best
fit for our investment club.
(13:25):
But yeah, so they, part of theclub is that deal flow of having
constant access to new deals asa non-accredited investor
because it's so hard to findthose deals otherwise.
Yeah, but so you.
You put together your fund youra group of investors that each
puts in.
So you have a minimum of$5,000,right?
(13:46):
Correct.
Everybody has to put in So theypay to no one has to put in
anything.
E every deal is to put totallyoptional.
Sure.
But if they do, it's a$5,000minimum, right?
Yeah.
Yeah.
$5,000 or more if you wannaparticipate in that month's
deal.
Again, everyone's optional.
So collectively we'll beinvesting a lot more, nowadays
we're investing between 400 and$800,000 a month as an
(14:08):
investment club.
But yeah, each person can investfive grand.
A lot of times these funds, whenthey want investors, they want
bigger lump sums because itbecomes administratively easier
to manage.
They have to, issue like there'smore compliance and they have to
issue more K nines and other taxforms and such into this.
But so they don't like toreceive little, payment or,
(14:31):
investment to 5,000'cause it'salmost not worth it for them.
But you are actually are youtaking all of that and you're
doing that work pretty much forthem?
Yeah, so we form a new LLC foreach deal that we do.
And, and everyone whoparticipates in that deal, they
get listed as an owner of theLLC proportionate to whatever
they invested.
(14:51):
And then that LLC is a singularinvestor in the broader deal,
whether it's a syndication or anode or a private partnership.
So the operator only has to dealwith one investor, one entity
investor, right?
And they only really have tocommunicate with.
One person, me or my partnerDenny.
And then, we will forward allthose communications on to
everyone who participated inthat deal.
(15:13):
But yeah, it makes it way easierfor the operator to deal with
one entity that's writing a halfmillion dollar check, for
example.
That's right.
Yeah.
As opposed to, a hundred peoplewriting 500,$5,000 checks.
Yeah.
But on, on the flip side, that'smaking it more complicated for
you, right?
Because you're taking on all ofthat.
You could have more investors inyour investment, your one
(15:34):
investment to that investmentthan they could theoretically,
right?
Yeah.
No, absolutely.
So we have a lot ofadministrative burden.
Yeah.
Yeah.
That's an investment club.
And that's why we charge money,right?
You, so we.
People, if you want to invest asmaller amount in these deals
you can do that through ourinvestment club.
And there's a cost to do itbecause it does require more of
(15:57):
that administrative burden asopposed to just going out and
investing directly.
Yeah.
So to be a part of your club,there's also a membership to
that.
So you do get access to all ofthese investments this way,
right?
Yeah.
So we're a flat fee investmentclub.
It's$59 a month or 4 97 a year.
And then if someone doesparticipate in a deal, we form
(16:18):
that joint LLC, like I said,that LLC does have its own
accounting and administrativecharges or costs involved in it.
That's$75 per person, per yearjust to handle things like the
tax return for the LLC andsplitting up all the K ones to
everybody.
But yeah, it's way cheaper than.
Any other way of going in onthese investments.
(16:39):
Yeah.
And are there any other feesthere?
Like when you get into a fee, isthere a management fee or any,
anything else when you get in?
Not from our end.
So yeah, we charge a membershipfee and then and$75 and then
yeah, if you're, and that's itfor any deals you're
participating in you know thatwe have to, we all chip in money
just to cover the LLCs operatingcosts.
(16:59):
Sure.
But the operator, they chargetheir own sets of fees, of
course.
That's amazing.
And yeah you've pretty muchdemocratized, investing into
these big deals for people likethis is fantastic.
That's the idea.
Yeah.
We want to keep it verytransparent, very democratic.
If there is our goal with thisis that there is never any
(17:21):
involvement or activity, we wantto keep this all completely
passive for all of us.
But if there is a decision thathas to be made, we just take a
vote in the LLC everyone gets.
Joint, or everyone gets viewaccess to the joint bank account
so they can see everytransaction that's taking place.
'cause it's a joint LLC, it's ajoint bank account.
We all can see it, we can seewhen distributions come in, we
can see when everyone'sdistributions get divvied up and
(17:43):
sent out to everybody.
Yeah, it's very democratic.
That's amazing.
All right, so your job is themanager of the club.
Essentially is throughout themonth.
So you got one that goes upevery month.
You guys review it as a club,and then whoever chooses to
invest says, I'm in.
Here's how much I'm investing,here's$75.
(18:04):
And that's it.
And then they get access to thefinancials and voting if there's
any votes to be had.
Yeah.
So you're dur during the month,you're vetting.
Which investment you're gonnabring to the club, I'm assuming.
What kind of deals do you lookat?
Oh man.
So that's one of the fun thingsabout this club is that.
(18:24):
There's just a hugediversification of deals, and
that's part, that's by design.
That's really our other corevalue as a club, is diversifying
across geography, acrossoperators, across types of real
estate investments.
So it's real estate investment.
I'm sorry.
So yeah, so just real.
So we do passive, yeah, we dopassive real estate investments.
(18:44):
But that can includesyndications, it can include
private notes, it can includeprivate partnerships debt funds,
equity funds but it's allpassive real estate investments.
Now these, we do deals.
All across the US we do dealswith different types of
operators.
We do deals at differentinvestment timelines.
(19:06):
So we've invested in investmentsas short as nine months and as
long as indefinite.
Because that is part ofdiversification, right?
Is, the length of timecommitment for the investment.
Yeah, diversification is ourother core value.
And we do, it's every month it'ssuper different, which is fun.
This month it's a syndicationthat is.
(19:27):
It's aiming for that, thatinfinite returns strategy, if
you're familiar with that.
But the idea is that theoperator goes out, they buy an
apartment complex, they renovateit to create value, and then
they refinance it.
And this operator is planning torefinance within the next three
and a half to four years inreturn a hundred percent of our
capital.
So we'll get our money back butwe will retain our ownership
(19:51):
interests in the property.
So we'll keep.
Collecting distributions fromthe property even after we've
gotten our money back.
And when the property sells in7, 8, 9, 10 years from now our
ownership interest will havekept appreciating, of course.
And we'll get our share of theprofits when the property sells.
Again, even though we've alreadygotten our money back, three and
a half years into the deal, sowe can go out and reinvest that
(20:13):
money elsewhere.
But we'll keep collecting cashflow from the this property.
And then when it sells,eventually we'll get a nice big
check from the profits.
So it's a fun model.
And then last month it wassomething completely different.
It was a partnership with a landflipping company.
So they're basically going outand they're flipping as many
parcels of land as they canbetween now and the end of 2025.
And every time they sell one ofthose parcels.
(20:34):
Our portion of the profits comeover to us and they keep
reinvesting our capital to flipparcels of land.
The month before that it was anote with a company that buys
starter homes.
Basically they'll buy a starterhome and then they'll sell it to
a first time home buyer as apurchase a lease purchase
agreement, basically, oractually, no it's an installment
contract technically.
But anyway every one of thesedeals is completely different,
(20:57):
and that's part of what makesthis fun.
Yeah.
Do you do you, from seeing somany different types of asset
classes and investment deals,have you developed a bias
towards any that you like morethan another?
Yeah, I probably do have acouple biases.
And I say that, we still,diversification is our first
priority again, we're gonna keepbringing in.
(21:19):
Every different type of dealthat we possibly can.
Of course.
But there are a couple that Ireally like.
I really like raw land.
Okay.
Because there are so many fewerthings that can go wrong with
raw land.
So I'll give you just a quickexample there.
So the deal that we did lastmonth with that land flipping
company, so they have twodifferent business models and I
(21:39):
really like.
This because the big risk withraw land is market risk, right?
That's right.
It's the risk that a recessionhits and then all of a sudden no
one wants, no, no one has theextra money to go out and buy a
parcel of land for hunting orcamping or, whatever it is that
they bought this extra parcel ofland for.
That's right.
So the only real risk there,'cause this, I don't know how
(22:02):
familiar you are with the landflipping model I sell, but for
anyone who's not.
Yeah.
Yeah.
So for anyone who's not familiarwith it company goes out.
They buy a pro, a parcel of landfor pennies on the dollar.
Somewhere between 30 and 60cents on the dollar.
And then they'll turn around,maybe they'll add a little bit
of value to it, maybe they'llsubdivide it into a couple of
lots.
(22:22):
Or maybe they'll add like dirtroad access or something like
that, but they're not buildingon it or anything like that.
And then they'll turn around,they'll sell it for retail.
Price.
So there's no propertymanagement risk, there's no
construction risk, there's norisk of a roof caving in or
anything like that.
It's a pretty simple andstraightforward deal with
minimal risk.
So it's really just market risk.
The risk of a major recessionhitting and the demand for this
(22:45):
stuff drying up.
What was unique about thiscompany that we partnered with
last month was they have asecondary strategy, which is
buying parcels of land andinstalling manufactured homes on
them, and then selling them asresidential properties to first
time home buyers.
Yeah.
Because even in a recession,there is still going to be
(23:06):
demand for, affordable housingstarter homes.
Yeah.
And in the market where theyoperate, for example in North
Carolina.
The median home price, wherethey're doing business is
$460,000.
They are selling thesemanufactured homes for 230,000,
so literally half.
Wow.
What the median home price is.
So even in a recession, there'sgoing to be demand for.
(23:29):
Starter homes at that level ofaffordability.
So it's, they, what's nice aboutthem is that they've got this
two-pronged investing strategy,one of which, the only real risk
to it is recession, and theother of which is pretty
recession proof.
So it's a, yeah, it was a fun,it was a fun investment and it
was actually a record amount ofparticipation we had in that
(23:51):
particular month's investment,are they keeping the land and
just settling the homes, kindlike the space?
No, they're selling the entirething.
The whole, the land, thehomeowner improve the land.
Yeah.
It's a, it's a.
With a, through a real estateagent.
It's a traditional residentialhome sale at that point.
Yeah.
Okay.
Yeah it's amazing to me themanufactured home space right
now.
(24:11):
What's happening there?
It's it's really disrupting homebuilding.
'cause it, some of theseproducts are better than
stick-built homes and they'remaking affordable.
It's amazing.
Yeah.
And even like modular homes, oneof my closest friends back in
Baltimore he bought this veryhigh end home that ended up
needing to be torn down becauseof the way the water table.
(24:31):
Anyway, but he repre, he built anew home from scratch that was a
modular home, and you wouldnever know.
This is a, this is a.
Seven figure, multi, sevenfigure home that he has.
Yeah.
But it was a modular home thatwas basically like a Lego home.
Yeah.
And you'd never know.
It's a, yeah.
A stunning, gorgeous, 3000square foot home in a very
(24:53):
upscale area.
And he was telling me that thethe energy efficiency in modular
homes is actually so good thatthey have to intentionally
reduce it.
So for safety reasons, becauseotherwise if there were like a
gas leak or something the housesare so airtight Yeah.
(25:13):
That, it would be a health risk.
Wow.
So they actually have tointentionally make them less
energy efficient.
Amazing.
For safety reasons, becausemodular homes have gotten so
good.
Wow.
What else?
Okay.
So is there another particulartype that you like.
Yeah, so I really like mobilehome parks.
Yeah.
And in particular with tenantowned homes.
Yes.
(25:33):
Because they're the ultimaterecession resilient investment.
Yes.
And I'll just explain how thatworks really quickly.
A lot of people who've neverinvested in mobile homes.
Aren't familiar with the twodifferent models.
So you've got park owned homeswhere the, tenants are moving in
and they're renting a house or amobile home that is owned by the
park.
Or you have tenant owned homeswhere they're just renting the
(25:54):
lot and they're bringing theirown mobile home in the tenant
owned home model is great as arecession resilient investment
because it costs a lot of moneyto move your mobile home.
And I was actually I actuallyhave the fresh numbers on this.
I was just doing research onthis a couple weeks ago for an
article that I was writing.
So the average cost to move us asingle wide mobile home in the
(26:17):
US is$6,500.
The average cost to move adouble wide mo mobile home is
$11,500.
Meanwhile, lot rents aretypically like 500 bucks, in, in
that, 600 bucks in that range.
So if you have a choice, let'ssay a recession hits, you're
feeling a little bit pinched andyou have a choice between paying
your$500 lot rent to keep yourhome where it is, or$6,500 to
(26:43):
move your mobile home to anotherpark to save.
What, 50 bucks a month?
A hundred bucks a month.
Like it's a no brainer.
You're just gonna stay where youare.
And you don't want to be, youdon't wanna stop paying your lot
rent'cause your entire mobilehome will be kicked off the
park.
So anyway it's a reallyrecession resilient investment.
Mobile home parks with.
Tenant owned homes.
(27:03):
Now, park owned homes is adifferent story.
Those still do have somerecession risk tenants
defaulting and that sort ofthing.
So yeah, I love raw land.
I love mobile home parks,especially with tenant owned
homes.
Certain types of industrialproperties I like a lot.
Some industrial real estate isrecession resilient.
Some of it is not.
You have to be somewhat carefulthere.
(27:24):
We did an industrial deal inJanuary.
That was, it was quite recessionresilient.
Let's say I don't know how muchyou wanna get in the weeds with
these things.
I'm a real estate geek myself.
I love stuff.
I find it.
Me too.
Okay, there you go.
Yeah, it's okay.
I love it.
This particular investment.
Yeah, so this was a sellerleaseback deal where it was an
industrial company.
(27:45):
They owned the real estatearound their factory, their
manufacturing plants, and theywanted capital to expand.
So they were selling off thereal estate.
While retaining, obviously theirownership of their business.
So the investment we made was.
Buying their land, their realestate, and then leasing it back
to them.
(28:06):
And, with an option for them tobuy it back, with a certain
premium and so forth.
But this had a coupleprotections in place.
One of those protections is justmaking sure that if they did
default and if we did have toevict them, that we could
re-rent that property.
For more than what they werepaying.
And having, some marketprotection in that sense.
(28:27):
But also this company was bookedout more than three years in
advance with backlogged orders.
So they were booked through theend of 2028 with a backlog of
orders.
And OA huge percentage of theircustomer base was actually the
US government was the, in theNavy in particular.
So they served a, they, it was aweldman company for.
(28:48):
Large steel products and, sothey're like building ships and
like other sort of stuff for theNavy.
Again, the US Navy's not goinganywhere.
Obviously there's been some,there's been more disruption
than anyone expected in the USgovernment.
Yeah.
But the US Navy is still.
Gonna be around.
Yeah.
Even in three years from now.
But yeah they're pre-booked outwith prepaid orders for years
(29:12):
into the future.
It's a very stable company, sovery recession resilient.
So yeah, like I like deals likethat.
So yeah those are a few examplesof more niche stuff that we
like.
And of course we do the moremainstream multifamily
syndications as well.
It's multifamily has had a bearmarket for the last few years,
so now is actually a pretty goodtime to invest in multifamily.
(29:34):
Yeah.
Even though all of the newsheadlines are awful and have
been awful for the last coupleyears, that's good to buy.
What makes it a.
Yeah, that makes now a good timeto buy.
So yeah.
A few weeks ago I wrote anarticle for BiggerPockets about
how multifamily valuations nowlook very similar to how single
family valuations looked in2012.
(29:55):
If, yeah.
So anyone who was in real estateback then remembers.
How low single family homeprices got.
They crashed 25 to 30%nationwide from 2008 to down to
2012.
And then of course, they turnedaround and had just a stellar,
decade plus since then.
But that's where multifamilyinvestments are right now.
(30:15):
They've fallen between 25 and30% since 2022.
And and they're poised for arebound and.
There's a graph that's that Iincluded in that article for
BiggerPockets, but if you canimagine the long term trend
line.
So in like in the pandemic in 2020, 20 21, multifamily
valuations jumped way high upabove that trend line.
(30:38):
And then in 2022, they crashedway down below that trend line
and have just started.
I.
Trending back upward toward thelong-term trend line.
Yeah.
So yeah, I actually think thatnow is a good time to invest in
multifamily not despite of thebad headlines, but because of
the bad headlines and, now isactually around that bottom, at
least in my personal opinion forthat.
(30:59):
Yeah, we like the mainstreammultifamily syndication stuff.
We also like the weird stuff,the land flipping stuff and the
industrial and the mobile homeparks and all that.
Do you look for stabilizedproperties or value add?
Both.
Again, core value isdiversification, so we do some
of both.
And a lot of the deals that wedo we like to see income
(31:21):
somewhat.
Post to when we invest, it makeseveryone just feel a little bit
more reassured about theinvestment, if it starts paying
income, within a few quarters ofinvesting.
But that being said, some of thebest returns out there are the
stuff where there is someheavier lift, of course.
So here's a quick example of akind of different deal that we
(31:42):
did where there's a longer delayon the income.
This company specializes in thisvery niche strategy called the
Section eight Overhang Strategy.
So they go out and they buylitech properties, the low
income housing tax creditproperties.
So you go to these tax benefitswith those, but they come with,
the big downside of, they'recapped at how much out of pocket
(32:03):
tenants can pay each month.
So what they do is they have aloophole that they use for that,
where.
As their cash tenants leasesend, they non-renew them and
then they refill those unitswith Section eight tenants
because the cap on Litech is howmuch the tenant is paying out of
their own pockets, not how muchyou as the owner is collecting
(32:26):
in rents.
So you, they can earn fullmarket rents.
By renting to Section eighttenants.
That's right.
While retaining their litech,their tax credit.
So they're able to add a hugeamount of value to these
properties.
By boosting the revenue andearning full market rents while
keeping the tax credit.
So it's a super niche and funand unique strategy, but it
(32:48):
takes time to implement that,right?
Sure.
It takes a couple years to fullyturn over all of those cash
tenants to section eighttenants.
So that one has not startedpaying distributions yet, but we
still like it.
As a niche and unique value addstrategy.
Yeah, that's inter I've done alot of work in the multifamily
affordable housing space and I,I never thought about that
strategy.
(33:08):
That's an interesting onebecause oftentimes the deed
restrictions require that theymaintain some kind of affordable
component, whether it be Litechor hud, section eight or what
have you.
And by doing that, you stillmaintain that.
But are able,'cause oftentimessection eight is higher rent and
it's usually the government whopays it, not the people.
So it's more dependable.
(33:29):
Yeah.
And there's some recessionresilience there too.
For sure.
For sure.
Because obviously thegovernment's paying the bulk of
the rent and Section eighttenants themselves, they don't
wanna lose their vouchers bydefaulting.
That's right.
That's right.
So there's some good recessionresilience there as well.
I like that.
Do you do project-basedbuildings in that or no.
We never have we never have justindividual section eights so
(33:52):
that, that property, they'rejust, they're renting to,
individual section eighttenants.
Yeah, no, we've never done anyproject based buildings.
One other kind of interestingand unique affordable housing
investment that we made lastyear.
The operator, when they bought aproperty, they partnered with
the local municipality to setaside half of the units for
(34:14):
affordable housing.
Yeah.
In exchange for getting a hugediscount on their property tax
bill.
So from day one, they added tothe NOI of the property.
Excuse me, because the lost rentfrom the units that were
designated for affordablehousing was the income, the loss
of income from that was waylower than the savings on the
(34:36):
property tax bill.
So right away they got a boostin NOI just from that alone.
And they are.
So they're going through andthey are renovating the market
based rent units, but they'releaving the affordable units
untouched.
But that too is a recessionresilient investment.
Because there's a waiting listfor those units that are marked
(34:59):
for affordable housing.
'cause they're a little bitunder market rents.
Yeah.
Even in a healthy economy, therewas a waiting list for those
units in a recession.
Those units have become evenmore.
Coveted, right?
Yeah.
Yeah, we like that kind of stuffwhere there's some kind of
recession resilient component toit.
I love that.
We're in real danger of goingtoo far into the weeds here
(35:19):
because you, I know, right?
You triggered my real estategeek mind and I could go, but
we'll stay higher level.
How about, I'm wondering youmentioned you, you pretty much
believe in dollar cost averagingreal estate investment.
That's what your program allowsyou to do, right?
So is that how people treat it?
They just set up a fund withinyours and just dump money in
(35:41):
there every paycheck or?
Yeah.
So real quick, I just wannaspecify that we don't operate a
fund.
It's, we're not sellingsecurities ourselves.
Sorry.
Yeah.
We're just organizing aninvestment club for people to
vet deals on their own.
We, we get together and we vetdeals together, but but yeah,
that is how I approach my owninvestments on the stock side.
(36:02):
I just set up my RoboAdvisor topull money outta my checking
account every week on the realestate side.
Every month I'm putting fivegrand into a new real estate
investment, into an investment.
Regardless of what the market isdoing, regardless of, whether
everyone is freaking out aboutsomething or whether everyone
thinks it's a giant party inreal estate I just keep
investing every single monthbecause I.
(36:24):
I'm not smart enough to time themarket and every time that I
thought that I was gonna getreally clever in, in time in the
market or doing something likethat, I've gotten burned.
And of course I'm totallycontradicting the thing that I
just said five minutes ago abouthow now is a good time to invest
in multifamily.
Yeah.
But but no I truly believe indollar cost averaging, putting
relatively small amounts.
(36:46):
Into investments every week,every month.
Whether that's stocks, whetherthat's real estate, whatever
your strategy is, just put, keepinvesting every month.
Steady amounts.
Don't try to get cute or clevertiming the market because.
When it's a good time to buy iswhen no one thinks it's a good
time to buy, right?
(37:06):
It's when all the headlines aredoom and gloom and the sky is
falling, and the world isending, that's actually usually
the best time to buy, right?
That's right.
When there's blood in thestreets, as they say.
Yeah.
But it doesn't feel like a goodtime to buy.
It feels horrible.
You're laying awake at night,chewing on your fingernails,
worrying about what's going onworrying that the world's about
to end.
Yeah don't invest based on whatyou think is going on in the
(37:27):
market.
Just invest steadily month in,month out, as they say, time in
the market.
Way more important and valuablethan timing the market.
Yeah.
Very good.
I'm curious with all of thedeals that you see, I know you
only bring one a month, butyou're spending the rest of the
month vetting other deals.
You probably see dozens if nothundreds every month.
(37:48):
You see a lot.
Yeah.
So with that, you probablydevelop a really good radar for
who's, what's gonna be a goodinvestment, who's gonna be a
good operator, what's gonna be alower risk, a higher return kind
of thing, I would imagine.
Tell us a few of the things thatwe can look for in, maximizing
return and minimizing risk.
(38:10):
Yeah, so first things first,high level, the operator risk is
the most important thing to, tofocus on.
And I've had people push backagainst me for saying that I
100% stand by that I have seen.
Bad operators ruin perfectlygood deals, and I've seen good
(38:32):
operators salvage deals thathave gone sideways.
Always focus on the operatorfirst.
Vet them heavily first.
Look for, a lot of experience.
Not just in real estate ingeneral, but in that specific
market, in that specific assettype in that particular in
investing strategy.
Make sure that they have done alot of those.
(38:54):
Make sure this is not theirfirst rodeo.
So that's really important.
And of course you want to gaugetheir trustworthiness and that's
harder to do.
It's not as easily quantifiedbut.
Keep grilling an operator withquestions until you feel
satisfied that you can trustthem with your money.
On the deal level debt risk isone of the first things that we
(39:15):
look at.
What's the debt term?
Is there enough runway for theoperator to wait out a bad
market for selling a bad marketfor refinancing?
The longer the term on the debt.
The more runway they have, ifthings go against them, market
wise.
Also look at interest rate.
A lot of deals went belly up in20 22, 20 23, and even now when
(39:38):
interest rates shot through theroof in 2022, a lot of operators
had variable interest loans andtheir payments just.
Shot upward and all of a suddenthey were had, they had negative
cash flow every month.
Yeah.
Look at debt risk.
Look at construction risk.
So if there is some heavy valueadd, if they're going in and
(40:00):
renovating properties how muchexperience do they have working
with the people who are actuallyswinging the hammers?
Whether they're outsourcing thator whether they have an in-house
construction team, that's notreally the big question.
The big question is.
How many deals has thatconstruction team worked on with
this operator?
(40:21):
And the same thing goes withproperty management.
Property management risk,another big one.
It's less about whether theproperty management team is
vertically integrated with theoperator, whether they're owned
together versus outsourced.
That's not the really the bigquestion.
Big question is how many deals.
Has this property managementteam worked on with this
operator?
If it's their first dealtogether, that's high risk.
(40:43):
If it's their 20th, very lowrisk.
Property management can make orbreak a deal.
There, there is a deal where alot went wrong in this deal.
This was an operator who did geta variable interest loan and
their payments, their monthlypayments went really high.
They were able to keep the dealalive and salvage it because the
(41:06):
property management was so good.
Like they were able to keep 94%,95% occupancy in this property
and just barely eke out, apositive cash flow in that deal.
And stayed alive with it becausethey had really good property
management.
So property management matters.
Regulatory risk is somethingthat we also look at.
We don't like to invest inresidential investments in areas
(41:29):
that have really tenant friendlylaws.
We'll invest in other types ofreal estate there.
For example we have invested ina deal in Southern California
that was it was a an Airbnb, itwas like a cabin resort kind of
property in an unincorporatedtown in the mountains a couple
hours to the east of LA and SanDiego.
(41:50):
I would be very nervous buyingor investing in multifamily
properties in SouthernCalifornia because it's so
tenant friendly.
That's right.
But this property, was finebecause it wasn't bound by those
landlord tenant laws.
We will make exceptionsoccasionally if there is a
really good like mitigatingfactor.
So for example.
We invested in a it was anapartment complex in outside of
(42:14):
Portland, Oregon.
Very tenant friendly market.
From a legal standpoint.
But this operator they actuallystarted 20 years ago as a
property management company.
So they have deep localexperience in property
management.
They know the regulations insideand out.
They have deep experience withit.
They have obviously managed alltheir own properties over the
(42:35):
decades, so we thought that wasa mitigating factor.
With that.
But yeah, so regulation riskthere's market risk is of course
a thing.
You don't wanna be puttingyourself in a position where
you're trying to predict themarket in any sense.
And then lastly, concentrationrisk.
You don't want to have too muchmoney in one asset class in one
(42:55):
city with one operator, right?
And that's part of why we dowhat we do.
We wanna spread our money acrossall of these different axes,
right?
Different geographical markets,different operators, different
asset types, differenttimelines, investment timelines.
So yeah, watch out forconcentration risk as well.
Yeah.
That's interesting.
Very good.
Brian, we're at that point wherewe'd like to go over our world.
(43:17):
Famous.
And since you're from Peru inPeru, there you go.
We are now world.
It's the way, world famousWayfinder four.
So are you ready?
I'm ready.
Let's do it.
All right.
Gimme a hack that you use, likea life hack you use all the
time.
So my favorite life hack isworking out in the middle of the
day.
So I work out right beforeeating lunch, and that gives me
(43:41):
a boost of energy andconcentration for the afternoon,
when otherwise I'd be lagging alittle bit.
And just not operating at fullsteam.
But working out midday it givesyou that, that recharge for the
afternoon.
I love that.
I just moved into a new officeand we have a gym downstairs.
I'm about to join it becauseyeah, that's exactly what I'm
gonna do.
I love that.
(44:01):
How about a favorite, this couldbe anything, an activity, a
book, a child.
I only one time only, so thatone, that's an easy one.
I knew you did.
That's why I let you, becauseyeah, my, I'm very intentional
about how I consume news.
For daily business news.
I love Morning Brew as anewsletter.
(44:23):
I also for a weekly politicalpodcast, I like left and center.
Which is hosted on NPR, but theythe center, the political center
is the host of the show.
And there's a guest whorepresents the left and there's
a guest who represents theright.
And they just talk through, the,that week's news, that week's
current events and so forth.
And you get to hear thedifferent perspectives all
(44:44):
across the political spectrum.
And it's a thoughtful andrespectful conversation that
they're having from people whoactually represent.
The philosophical Right.
And the philosophical left.
As opposed to just, whatever theparties happen, the party Yeah.
To be doing in that moment,which don't necessarily align
with philosophical conservatismor philosophical liberalism.
That's right.
(45:05):
That's right.
Do, yeah.
Check out left and center.
I will.
And if you're looking for abusiness book, check out, buy
Back Your Time by Dan Martel.
Okay.
Thank you.
What about a piece of advice foryour younger self?
I.
I would tell my arrogant,younger self to go out and get
(45:25):
help from mentors, coaches, joincommunities of people who are
further ahead than I am.
And don't, avoid that trap ofhubris thinking that you can
just figure it out all on yourown.
You can really compress yourtimeline by leveraging other
people's mindsets.
And other people's knowledge.
(45:47):
What about either a bigopportunity or a limiting
belief?
Yeah, so you know, some, one ofit is, you can, that notion of
compressing your timeline by,leveraging other people who have
gone ahead of you and donewhatever it is that you are
trying to do.
For example, I joined amastermind group this past year
for the first time ever.
(46:08):
And it was not cheap.
It was five grand to, to join itfor a year.
And I was pretty nervous aboutmaking that investment.
It took me a few months to buildmy courage up to take that leap
of faith, not knowing what Iwould actually get outta that.
And it has been.
Fantastic.
It really has.
I've have a coach through thatnow, and that, that coach has
actually been working me forfree as he's building up his
(46:30):
book of business.
I have I've had the courage tomake a lot of changes in my
business, based on, talking thatthrough with my pod of people
who I meet with every week.
There's just all of these these.
Not obvious benefits that youget by joining a community of
people who share your ambitionsand, share your goals and maybe
(46:53):
are a little bit further downthe path than you are.
That's really useful.
So I would highly recommendthat.
Because you don't, bydefinition, limiting beliefs.
You think they're real, butthey're not actually real.
That's right.
So you, we all have these blindspots and getting help from a
community, from a coach or amentor or a therapist or someone
(47:13):
else, they can help you spotthese blind spots that you can't
see'cause you're just too closeto it.
You're trying to read theprescription from inside the
bottle right in your own life,as they say.
But you can't do it.
You need some outsideperspective to help you see
those blind spots.
So anyway, yeah that's what Iwould, that's what I would tell
people or my younger selfrather.
Thank you Brian.
(47:33):
If people wanna know a littlebit more about you, maybe join
the community, the investingclub and such a, how can we find
you?
Check out spark rental.com.
We're also on all the majorsocial platforms, LinkedIn,
Facebook at Spark Rental, andyou can also email us
support@sparkrental.com.
We are very much a mom and popcompany, so you know, my, my
(47:55):
co-founder, her daughter is ouronly full-time employee.
Yeah we are a small business,very much mom and pop.
And, we're out there investingour own money in these deals
every month.
This is my own strategy forfinancial independence.
Yeah.
We're in the weeds with you.
I love what you're doing, Brian.
I thank you for it because Ithink a lot of people who wanna
get involved in real estateinvesting on a bigger scale,
(48:17):
with the big investments nowhave a chance to do it without
having big investment.
I.
Money to do so it, it's great.
And also that, that mind sharethat you have, I can only, I'm
gonna join because I just wannabe there every month and review
the deals and have that mindshare.
I just think it's amazing.
Just that alone.
I feel like even if I don't putin five grand.
Sometimes I can do it, sometimesI can't.
But that 59 bucks of, to havethat mind share, I think will,
(48:41):
alone would be worth it for me.
It, it's a huge education.
Being able to hear everyoneelse, vetting these deals
totally alongside of you.
I've mean, I've been in realestate investing for over 20
years.
Yeah.
And every month when we vetthese deals together.
Our club members are askingquestions that would never have
occurred to me, but they'rereally good questions.
Yeah.
So you know, that's the beautyof betting these deals together
(49:05):
as a community and having 50sets of eyeballs on these and
then talking it all overtogether.
I love it, man.
Thank you.
All right.
Thank you very much, Brian.
Luis, thank you so much forhaving me.
This was a lot of fun.
We hope you've enjoyed theWayfinder Show.
If you've got value from thisepisode, please take a few
seconds to leave us a five starrating and review.
(49:27):
This will allow us to help morepeople find their way to live
more authentic and excitinglives.
We'll catch you on the nextepisode.
When it's a good time to buy iswhen no one thinks it's a good
(00:03):
time to buy, right?
It's when all the headlines aredoom and gloom and the sky is
falling, and the world isending, that's actually usually
the best time to buy, right?
Welcome to the Wayfinder Showwith Louis Hernandez, where
(00:24):
guests discussed the why and howof making changes that led them
down a more authentic path orallowed them to level up in some
areas of their life.
Our goal is to dig deep andprovide not only knowledge, but
actionable advice to help youget from where you are to where
you want to be.
Come join us and find a way toyour dream life.
(00:57):
Welcome back to the WayfinderShow.
I'm your host, Louis Hernandez.
Yeah, that's my name, LouisHernandez.
And today's guest is BrianDavis.
He is a recovering landlord,turned passive investor and
co-founder of Spark Rental.
With over two decades in realestate and finance, Brian now
invests$5,000 at a time intofractional property deals,
(01:22):
owning shares in over 3000units.
He's also a sought after writerfeatured on BiggerPockets.
Inman and go banking rates.
And he's here to share howanyone can design their ideal
life through smart real estateinvesting in a bit of contrarian
thinking.
Brian, welcome to the WayfinderShow.
(01:42):
Louise, thank you so much forhaving me here.
I'm excited, man.
You got a great life.
Maybe, I know when you're in itit may not seem that way, but
from the outside looking in, youhave lived a pretty idealistic
life that what we can all aspireto.
So I'm really excited to learnabout how you designed that,
which is pretty interesting.
But before we get into it, tellus about, how you got to where
(02:04):
you are, which I didn't eventalk about where you are yet,
but.
Yeah.
So Luis is alluding to the factthat I'm an expat, my wife and
daughter and I live in Lima,Peru, at least for the moment.
We're about to move back to theUS in a couple months.
But we've been abroad for 10years now.
My wife is a school counselorand for the last 10 years she's
been working at American schoolsaround the world.
(02:26):
Most of'em were embassy schoolsas a college counselor, helping.
Juniors, seniors get intocollege.
And I have an online business inthe US and I also do some
freelance writing on the side,and that's all done remotely.
I've been able to work remotelyaround the world.
We started for four years in AbuDhabi was our first little jaunt
(02:47):
overseas.
And then we moved to Brasiliafor four years.
And we've been in Lima for thelast two years.
So it's been a lot of fun.
It's been a ride.
That is so cool.
Did you did your destination,was that something you guys got
to choose or was it chosen foryou?
Yeah, so what happened was this,so back in 2015, my, my wife, I.
(03:09):
Had or she knew that I had somewanderlust.
So she, unbeknownst to me as asurprise, she went out and she
talked to a friend of mine whoworked for an overseas school
about how that works.
How you end up working forinternational schools around the
world.
So she signed up for thisrecruiting service and then
surprised me with it.
And she said, Hey, there's a jobfair up in Boston.
(03:29):
Do you want to go up there?
And I.
I'll interview four jobs aroundthe world and they wanna meet
you too.
And, if one comes along thatlooks awesome, we can take it.
So we did, we went up to Bostonand within 24 hours of getting
there we, she had a job offer inAbu Dhabi and we took it.
But yeah, she interviewed with abunch of different schools
(03:49):
around the world.
Got a handful of job offers.
That was the one that we feltmost drawn to.
Our lives.
Changed, they changed trajectorypretty quickly in that moment.
And we thought we were justgonna have this little two year
adventure overseas and then juststep right back into our
previous life.
And we rented out our housefurnished with all of our stuff
(04:11):
in it, and we thought we werejust gonna move right back into
our house with all of ourfurniture.
And but that's not whathappened.
That was 10 years ago and we'restill abroad.
It's been a lot of fun being anexpat.
Yeah.
That's interesting.
So let's talk about your side ofit though, how you were a
landlord, right?
I was I hated it.
I absolutely hated it.
(04:33):
Yeah the short version of thatstory is I graduated college in
2003, which sounds like a reallylong time ago.
And I guess it was, but I didn'tknow what I wanted to do.
Yeah.
Thank you.
It made me feel a little bitbetter there, but yeah, I didn't
know what I wanted to do with mylife.
Like a lot of college grads.
I ended up just falling into ajob working for a mortgage
company where the owner, one ofthe two owners was friends with
(04:53):
my stepdad, so just fell into asummer internship by accident
with them, and at the end of thesummer they said, hey, we don't
need another loan officer.
What we do need is we needsomeone to manage our personal
hard money loans because the twoowners.
On the side of theirconventional mortgage business,
they lent out hard money loans.
And I said I don't know anythingabout that, but sure, why not?
(05:15):
So I started working with realestate investors, flippers,
people doing burr deals.
And I'm watching these guys makemoney hand over fists back in
the mid aughts, right?
'cause it was a big party and inreal estate back then, and
everybody's making lots ofmoney.
So I was like, oh, I can do thistoo.
And if I buy enough properties,I can just, retire at 30 or
whatever.
And, that's of course in thereal world, it's a little bit
(05:37):
more complicated than that.
It, that was the premise of firebefore fire was a thing.
And so I went out and put all mymoney into rental properties and
I didn't know what I was doing.
And I was this young, cocky,arrogant 20 something who
thought that he could justfigure it all out on his own.
And way over purchased, wayoverbought for these properties.
Got in way over my head and then2008 hit and just totally cut.
(05:59):
Me off at the knees.
Not only with my investments,but also my work as a loan
officer for a hard money lender,that all dried up too overnight.
'cause no one's flipping housesanymore in 2008.
Anyway I went off and I took atotally new job for an
e-commerce company thatspecialized in landlord forms,
legal forms for landlords.
And the only reason I got thatjob was because I was a landlord
(06:21):
myself.
I didn't know anything about.
E-commerce or digital marketingor any of that stuff.
But I got the job because I wasa landlord and that just, it
goes to show that.
A door closes, a window opens,that just is how the universe
works, and you have to beopen-minded about that stuff.
Even when you're going throughsomething that feels like a big
crisis there are opportunities.
And that's how it was for me.
(06:41):
So yeah, in 2015 I moved abroad.
I was still working for thate-commerce company actually when
I moved abroad, but within sixmonths or so after moving abroad
a coworker of mine from thatcompany, she and I, we split off
when we started Spark Rentaland, and we've been doing it for
over nine years since but I've,yeah, I wanted to have income
that I could.
(07:01):
Have some control over and Iwanted to be able to earn money
from anywhere in the worldworking any hours that I wanted
to work because at that point, Iwas living in Abu Dhabi, which
was nine hours ahead of Easterntime and 12 hours ahead of
Pacific time.
Yeah, it was very much abouttrying to design a life around
what I wanted to do, which wastravel a lot and, live overseas
(07:24):
and have some control over myincome.
Yeah, very interesting.
I think a lot of us have that,right?
I like how you used the termwanderlust.
I hadn't heard that one in awhile.
Actually stayed in a really coolhostile one.
It's called Wanderlust and thatwas where, at an exposure to in
Gunison, Colorado.
Okay.
All right.
The but the so tell us about thebusiness.
(07:44):
This is really interesting.
Tell us what Spark Rental does.
So there's gonna be a slightwandering here, but I promise
it'll come back around.
Sure.
So when we first started ourbusiness we thought that we were
gonna start a software companyand create landlord software for
mom and pop landlords.
(08:05):
'cause at the time, there wasn'treally a good solution out there
for people that just had ahandful of properties.
And one of the lessons that Ilearned.
Early on as an entrepreneur, isthat the business that you think
you're in, or the business youthink you should be in, not
necessarily the business thatthe market thinks you should be
in or what your customers thinkyou should be doing, and you
(08:26):
have to listen to the market andlisten to your customers or, and
listen to your.
Prospective customers.
My partner and I, we spent a lotof money and time, chasing down
this rabbit hole of trying tocreate software.
And meanwhile, neither she nor Iare technical founders, we don't
know how to code.
So we just, we wasted all thistime and effort on that.
And.
What we were doing in themeantime to make money while we
(08:47):
were trying to build out thissoftware was we just had an
educational blog and we startedselling online courses and and
just teaching people about realestate investing and property
management and, some of theseprinciples and financial
independence and lifestyledesign.
And our course students keptasking us, Hey, I'm not ready to
buy a property by myself justyet, but can I just invest a
(09:08):
little bit of money with youguys in a project that you're
doing?
We kept saying no, we must havesaid no 50 times to people who
asked that question.
And finally my partner and Ilooked at each other and we were
like maybe we should actuallypay attention to what people are
asking us for.
And at the time I was not buyingrental properties anymore from
Abu Dhabi, but I was starting toinvest passively in real estate.
(09:30):
I was, it started with realestate crowdfunding platforms,
and then I got into syndicationsand.
We did a couple pilot deals withsome of our core students on
rental properties.
It was way too much work.
We weren't making any money offof doing that other than just
the returns that we were earningas partial owners from those.
But we liked the premise ofco-investing with other people.
(09:53):
In some of these big real estateprojects.
So we did a pilot deal for ourreal estate syndication where we
all went in on a syndicationtogether.
'cause syndications have a highminimum investment, 50 grand, a
hundred grand, sometimes more,sometimes 250 grand or even a
million dollars.
So that makes it.
Really prohibitive to diversifyif you have to park a hundred
grand at a time in eachinvestment.
(10:14):
And the same applies to rentals.
If you're going out and buying arental by yourself, you're gonna
put 50 grand or a hundred grandin between the down payment and
closing costs and cash reservesand whatnot.
So anyway we went in on asyndication deal with some of
our course students.
It went well and people likedit.
So we thought what if we startedan investment club around this
and, opened it up to the publicand, we could all vet deals
(10:37):
together and we could go in onthem together financially, so
each person could invest smallamounts.
And, so we spoke with anattorney of course, to make sure
that was legal.
And and we did, we launched theco-investing club as just a
passive real estate investmentclub for people to go in on
investments together and vetthem together and have 50 sets
of eyeballs all on the samedeal.
(10:57):
And talking over the pros, cons,risks, returns, and it's been a
lot of fun.
That was three years ago, fouryears ago that we started doing
that.
And it's, we've been doing itever since.
Every single month we gettogether and we vet a new deal
together as an investment club.
Yeah, that.
When I first heard this conceptI just thought it was really
interesting'cause like for ourlisteners who don't know a lot
(11:19):
of times, like you messmentioned to invest in these big
syndications.
Yeah.
Some of them require big lumpsums of money.
Some of them, depending on thestructure, you also have to be
an accredited investor.
Not all of us are.
So we have to meet certainincome thresholds or net worth
thresholds and that can beprohibitive.
So with your co-investing club,is this somebody that anybody
(11:41):
could anybody.
Could join something thatanybody could join.
Yeah.
Yes.
Is the answer to that question.
And that is one of our corevalues as an investment club is
inclusivity to everybody becauseit's pretty easy for accredited
investors to find these dealsand to find reputable operators.
It's a lot harder fornon-accredited investors because
(12:01):
the SEC makes it.
Difficult for them.
Yeah.
The SEC doesn't wantnon-accredited investors
investing in private equity realestate.
They just don't, they don'tthink that they are
sophisticated enough to do it.
So when an operator goes tooffer a syndication they
typically have two options.
They can file it as a 5 0 6 Bsyndication, which does allow up
(12:23):
to 35 non-accredited investors,but.
This, the operator is notallowed to advertise it at all
to the public.
So those 35 non-accreditedinvestors, that's really
supposed to be like friends andfamily or an operator, can file
it as a 5 0 6 C syndication andmake it only available to
accredited investors.
(12:44):
And when they, if they do that,then they are allowed to
advertise it to the public sothat if you're a non-accredited
investor, that creates a cash22.
Where you can't.
No one's allowed to market theseinvestments, so how are you
supposed to know about them?
Again it's really designed forjust friends and family of
operators.
So that's one of the things thatwe do as an investment club is
(13:04):
we look at non or investmentsthat allow non-accredited
investors and we.
So my partner and I, we do a lotof networking with operators and
that's part of the service thatwe offer.
We get on all their email listsand we talk to'em about what
they're doing.
And so every day we have dealscoming across our plate and we
just try to pick the one eachmonth that we think is the best
fit for our investment club.
(13:25):
But yeah, so they, part of theclub is that deal flow of having
constant access to new deals asa non-accredited investor
because it's so hard to findthose deals otherwise.
Yeah, but so you.
You put together your fund youra group of investors that each
puts in.
So you have a minimum of$5,000,right?
(13:46):
Correct.
Everybody has to put in So theypay to no one has to put in
anything.
E every deal is to put totallyoptional.
Sure.
But if they do, it's a$5,000minimum, right?
Yeah.
Yeah.
$5,000 or more if you wannaparticipate in that month's
deal.
Again, everyone's optional.
So collectively we'll beinvesting a lot more, nowadays
we're investing between 400 and$800,000 a month as an
(14:08):
investment club.
But yeah, each person can investfive grand.
A lot of times these funds, whenthey want investors, they want
bigger lump sums because itbecomes administratively easier
to manage.
They have to, issue like there'smore compliance and they have to
issue more K nines and other taxforms and such into this.
But so they don't like toreceive little, payment or,
(14:31):
investment to 5,000'cause it'salmost not worth it for them.
But you are actually are youtaking all of that and you're
doing that work pretty much forthem?
Yeah, so we form a new LLC foreach deal that we do.
And, and everyone whoparticipates in that deal, they
get listed as an owner of theLLC proportionate to whatever
they invested.
(14:51):
And then that LLC is a singularinvestor in the broader deal,
whether it's a syndication or anode or a private partnership.
So the operator only has to dealwith one investor, one entity
investor, right?
And they only really have tocommunicate with.
One person, me or my partnerDenny.
And then, we will forward allthose communications on to
everyone who participated inthat deal.
(15:13):
But yeah, it makes it way easierfor the operator to deal with
one entity that's writing a halfmillion dollar check, for
example.
That's right.
Yeah.
As opposed to, a hundred peoplewriting 500,$5,000 checks.
Yeah.
But on, on the flip side, that'smaking it more complicated for
you, right?
Because you're taking on all ofthat.
You could have more investors inyour investment, your one
(15:34):
investment to that investmentthan they could theoretically,
right?
Yeah.
No, absolutely.
So we have a lot ofadministrative burden.
Yeah.
Yeah.
That's an investment club.
And that's why we charge money,right?
You, so we.
People, if you want to invest asmaller amount in these deals
you can do that through ourinvestment club.
And there's a cost to do itbecause it does require more of
(15:57):
that administrative burden asopposed to just going out and
investing directly.
Yeah.
So to be a part of your club,there's also a membership to
that.
So you do get access to all ofthese investments this way,
right?
Yeah.
So we're a flat fee investmentclub.
It's$59 a month or 4 97 a year.
And then if someone doesparticipate in a deal, we form
(16:18):
that joint LLC, like I said,that LLC does have its own
accounting and administrativecharges or costs involved in it.
That's$75 per person, per yearjust to handle things like the
tax return for the LLC andsplitting up all the K ones to
everybody.
But yeah, it's way cheaper than.
Any other way of going in onthese investments.
(16:39):
Yeah.
And are there any other feesthere?
Like when you get into a fee, isthere a management fee or any,
anything else when you get in?
Not from our end.
So yeah, we charge a membershipfee and then and$75 and then
yeah, if you're, and that's itfor any deals you're
participating in you know thatwe have to, we all chip in money
just to cover the LLCs operatingcosts.
(16:59):
Sure.
But the operator, they chargetheir own sets of fees, of
course.
That's amazing.
And yeah you've pretty muchdemocratized, investing into
these big deals for people likethis is fantastic.
That's the idea.
Yeah.
We want to keep it verytransparent, very democratic.
If there is our goal with thisis that there is never any
(17:21):
involvement or activity, we wantto keep this all completely
passive for all of us.
But if there is a decision thathas to be made, we just take a
vote in the LLC everyone gets.
Joint, or everyone gets viewaccess to the joint bank account
so they can see everytransaction that's taking place.
'cause it's a joint LLC, it's ajoint bank account.
We all can see it, we can seewhen distributions come in, we
can see when everyone'sdistributions get divvied up and
(17:43):
sent out to everybody.
Yeah, it's very democratic.
That's amazing.
All right, so your job is themanager of the club.
Essentially is throughout themonth.
So you got one that goes upevery month.
You guys review it as a club,and then whoever chooses to
invest says, I'm in.
Here's how much I'm investing,here's$75.
(18:04):
And that's it.
And then they get access to thefinancials and voting if there's
any votes to be had.
Yeah.
So you're dur during the month,you're vetting.
Which investment you're gonnabring to the club, I'm assuming.
What kind of deals do you lookat?
Oh man.
So that's one of the fun thingsabout this club is that.
(18:24):
There's just a hugediversification of deals, and
that's part, that's by design.
That's really our other corevalue as a club, is diversifying
across geography, acrossoperators, across types of real
estate investments.
So it's real estate investment.
I'm sorry.
So yeah, so just real.
So we do passive, yeah, we dopassive real estate investments.
(18:44):
But that can includesyndications, it can include
private notes, it can includeprivate partnerships debt funds,
equity funds but it's allpassive real estate investments.
Now these, we do deals.
All across the US we do dealswith different types of
operators.
We do deals at differentinvestment timelines.
(19:06):
So we've invested in investmentsas short as nine months and as
long as indefinite.
Because that is part ofdiversification, right?
Is, the length of timecommitment for the investment.
Yeah, diversification is ourother core value.
And we do, it's every month it'ssuper different, which is fun.
This month it's a syndicationthat is.
(19:27):
It's aiming for that, thatinfinite returns strategy, if
you're familiar with that.
But the idea is that theoperator goes out, they buy an
apartment complex, they renovateit to create value, and then
they refinance it.
And this operator is planning torefinance within the next three
and a half to four years inreturn a hundred percent of our
capital.
So we'll get our money back butwe will retain our ownership
(19:51):
interests in the property.
So we'll keep.
Collecting distributions fromthe property even after we've
gotten our money back.
And when the property sells in7, 8, 9, 10 years from now our
ownership interest will havekept appreciating, of course.
And we'll get our share of theprofits when the property sells.
Again, even though we've alreadygotten our money back, three and
a half years into the deal, sowe can go out and reinvest that
(20:13):
money elsewhere.
But we'll keep collecting cashflow from the this property.
And then when it sells,eventually we'll get a nice big
check from the profits.
So it's a fun model.
And then last month it wassomething completely different.
It was a partnership with a landflipping company.
So they're basically going outand they're flipping as many
parcels of land as they canbetween now and the end of 2025.
And every time they sell one ofthose parcels.
(20:34):
Our portion of the profits comeover to us and they keep
reinvesting our capital to flipparcels of land.
The month before that it was anote with a company that buys
starter homes.
Basically they'll buy a starterhome and then they'll sell it to
a first time home buyer as apurchase a lease purchase
agreement, basically, oractually, no it's an installment
contract technically.
But anyway every one of thesedeals is completely different,
(20:57):
and that's part of what makesthis fun.
Yeah.
Do you do you, from seeing somany different types of asset
classes and investment deals,have you developed a bias
towards any that you like morethan another?
Yeah, I probably do have acouple biases.
And I say that, we still,diversification is our first
priority again, we're gonna keepbringing in.
(21:19):
Every different type of dealthat we possibly can.
Of course.
But there are a couple that Ireally like.
I really like raw land.
Okay.
Because there are so many fewerthings that can go wrong with
raw land.
So I'll give you just a quickexample there.
So the deal that we did lastmonth with that land flipping
company, so they have twodifferent business models and I
(21:39):
really like.
This because the big risk withraw land is market risk, right?
That's right.
It's the risk that a recessionhits and then all of a sudden no
one wants, no, no one has theextra money to go out and buy a
parcel of land for hunting orcamping or, whatever it is that
they bought this extra parcel ofland for.
That's right.
So the only real risk there,'cause this, I don't know how
(22:02):
familiar you are with the landflipping model I sell, but for
anyone who's not.
Yeah.
Yeah.
So for anyone who's not familiarwith it company goes out.
They buy a pro, a parcel of landfor pennies on the dollar.
Somewhere between 30 and 60cents on the dollar.
And then they'll turn around,maybe they'll add a little bit
of value to it, maybe they'llsubdivide it into a couple of
lots.
(22:22):
Or maybe they'll add like dirtroad access or something like
that, but they're not buildingon it or anything like that.
And then they'll turn around,they'll sell it for retail.
Price.
So there's no propertymanagement risk, there's no
construction risk, there's norisk of a roof caving in or
anything like that.
It's a pretty simple andstraightforward deal with
minimal risk.
So it's really just market risk.
The risk of a major recessionhitting and the demand for this
(22:45):
stuff drying up.
What was unique about thiscompany that we partnered with
last month was they have asecondary strategy, which is
buying parcels of land andinstalling manufactured homes on
them, and then selling them asresidential properties to first
time home buyers.
Yeah.
Because even in a recession,there is still going to be
(23:06):
demand for, affordable housingstarter homes.
Yeah.
And in the market where theyoperate, for example in North
Carolina.
The median home price, wherethey're doing business is
$460,000.
They are selling thesemanufactured homes for 230,000,
so literally half.
Wow.
What the median home price is.
So even in a recession, there'sgoing to be demand for.
(23:29):
Starter homes at that level ofaffordability.
So it's, they, what's nice aboutthem is that they've got this
two-pronged investing strategy,one of which, the only real risk
to it is recession, and theother of which is pretty
recession proof.
So it's a, yeah, it was a fun,it was a fun investment and it
was actually a record amount ofparticipation we had in that
(23:51):
particular month's investment,are they keeping the land and
just settling the homes, kindlike the space?
No, they're selling the entirething.
The whole, the land, thehomeowner improve the land.
Yeah.
It's a, it's a.
With a, through a real estateagent.
It's a traditional residentialhome sale at that point.
Yeah.
Okay.
Yeah it's amazing to me themanufactured home space right
now.
(24:11):
What's happening there?
It's it's really disrupting homebuilding.
'cause it, some of theseproducts are better than
stick-built homes and they'remaking affordable.
It's amazing.
Yeah.
And even like modular homes, oneof my closest friends back in
Baltimore he bought this veryhigh end home that ended up
needing to be torn down becauseof the way the water table.
(24:31):
Anyway, but he repre, he built anew home from scratch that was a
modular home, and you wouldnever know.
This is a, this is a.
Seven figure, multi, sevenfigure home that he has.
Yeah.
But it was a modular home thatwas basically like a Lego home.
Yeah.
And you'd never know.
It's a, yeah.
A stunning, gorgeous, 3000square foot home in a very
(24:53):
upscale area.
And he was telling me that thethe energy efficiency in modular
homes is actually so good thatthey have to intentionally
reduce it.
So for safety reasons, becauseotherwise if there were like a
gas leak or something the housesare so airtight Yeah.
(25:13):
That, it would be a health risk.
Wow.
So they actually have tointentionally make them less
energy efficient.
Amazing.
For safety reasons, becausemodular homes have gotten so
good.
Wow.
What else?
Okay.
So is there another particulartype that you like.
Yeah, so I really like mobilehome parks.
Yeah.
And in particular with tenantowned homes.
Yes.
(25:33):
Because they're the ultimaterecession resilient investment.
Yes.
And I'll just explain how thatworks really quickly.
A lot of people who've neverinvested in mobile homes.
Aren't familiar with the twodifferent models.
So you've got park owned homeswhere the, tenants are moving in
and they're renting a house or amobile home that is owned by the
park.
Or you have tenant owned homeswhere they're just renting the
(25:54):
lot and they're bringing theirown mobile home in the tenant
owned home model is great as arecession resilient investment
because it costs a lot of moneyto move your mobile home.
And I was actually I actuallyhave the fresh numbers on this.
I was just doing research onthis a couple weeks ago for an
article that I was writing.
So the average cost to move us asingle wide mobile home in the
(26:17):
US is$6,500.
The average cost to move adouble wide mo mobile home is
$11,500.
Meanwhile, lot rents aretypically like 500 bucks, in, in
that, 600 bucks in that range.
So if you have a choice, let'ssay a recession hits, you're
feeling a little bit pinched andyou have a choice between paying
your$500 lot rent to keep yourhome where it is, or$6,500 to
(26:43):
move your mobile home to anotherpark to save.
What, 50 bucks a month?
A hundred bucks a month.
Like it's a no brainer.
You're just gonna stay where youare.
And you don't want to be, youdon't wanna stop paying your lot
rent'cause your entire mobilehome will be kicked off the
park.
So anyway it's a reallyrecession resilient investment.
Mobile home parks with.
Tenant owned homes.
(27:03):
Now, park owned homes is adifferent story.
Those still do have somerecession risk tenants
defaulting and that sort ofthing.
So yeah, I love raw land.
I love mobile home parks,especially with tenant owned
homes.
Certain types of industrialproperties I like a lot.
Some industrial real estate isrecession resilient.
Some of it is not.
You have to be somewhat carefulthere.
(27:24):
We did an industrial deal inJanuary.
That was, it was quite recessionresilient.
Let's say I don't know how muchyou wanna get in the weeds with
these things.
I'm a real estate geek myself.
I love stuff.
I find it.
Me too.
Okay, there you go.
Yeah, it's okay.
I love it.
This particular investment.
Yeah, so this was a sellerleaseback deal where it was an
industrial company.
(27:45):
They owned the real estatearound their factory, their
manufacturing plants, and theywanted capital to expand.
So they were selling off thereal estate.
While retaining, obviously theirownership of their business.
So the investment we made was.
Buying their land, their realestate, and then leasing it back
to them.
(28:06):
And, with an option for them tobuy it back, with a certain
premium and so forth.
But this had a coupleprotections in place.
One of those protections is justmaking sure that if they did
default and if we did have toevict them, that we could
re-rent that property.
For more than what they werepaying.
And having, some marketprotection in that sense.
(28:27):
But also this company was bookedout more than three years in
advance with backlogged orders.
So they were booked through theend of 2028 with a backlog of
orders.
And OA huge percentage of theircustomer base was actually the
US government was the, in theNavy in particular.
So they served a, they, it was aweldman company for.
(28:48):
Large steel products and, sothey're like building ships and
like other sort of stuff for theNavy.
Again, the US Navy's not goinganywhere.
Obviously there's been some,there's been more disruption
than anyone expected in the USgovernment.
Yeah.
But the US Navy is still.
Gonna be around.
Yeah.
Even in three years from now.
But yeah they're pre-booked outwith prepaid orders for years
(29:12):
into the future.
It's a very stable company, sovery recession resilient.
So yeah, like I like deals likethat.
So yeah those are a few examplesof more niche stuff that we
like.
And of course we do the moremainstream multifamily
syndications as well.
It's multifamily has had a bearmarket for the last few years,
so now is actually a pretty goodtime to invest in multifamily.
(29:34):
Yeah.
Even though all of the newsheadlines are awful and have
been awful for the last coupleyears, that's good to buy.
What makes it a.
Yeah, that makes now a good timeto buy.
So yeah.
A few weeks ago I wrote anarticle for BiggerPockets about
how multifamily valuations nowlook very similar to how single
family valuations looked in2012.
(29:55):
If, yeah.
So anyone who was in real estateback then remembers.
How low single family homeprices got.
They crashed 25 to 30%nationwide from 2008 to down to
2012.
And then of course, they turnedaround and had just a stellar,
decade plus since then.
But that's where multifamilyinvestments are right now.
(30:15):
They've fallen between 25 and30% since 2022.
And and they're poised for arebound and.
There's a graph that's that Iincluded in that article for
BiggerPockets, but if you canimagine the long term trend
line.
So in like in the pandemic in 2020, 20 21, multifamily
valuations jumped way high upabove that trend line.
(30:38):
And then in 2022, they crashedway down below that trend line
and have just started.
I.
Trending back upward toward thelong-term trend line.
Yeah.
So yeah, I actually think thatnow is a good time to invest in
multifamily not despite of thebad headlines, but because of
the bad headlines and, now isactually around that bottom, at
least in my personal opinion forthat.
(30:59):
Yeah, we like the mainstreammultifamily syndication stuff.
We also like the weird stuff,the land flipping stuff and the
industrial and the mobile homeparks and all that.
Do you look for stabilizedproperties or value add?
Both.
Again, core value isdiversification, so we do some
of both.
And a lot of the deals that wedo we like to see income
(31:21):
somewhat.
Post to when we invest, it makeseveryone just feel a little bit
more reassured about theinvestment, if it starts paying
income, within a few quarters ofinvesting.
But that being said, some of thebest returns out there are the
stuff where there is someheavier lift, of course.
So here's a quick example of akind of different deal that we
(31:42):
did where there's a longer delayon the income.
This company specializes in thisvery niche strategy called the
Section eight Overhang Strategy.
So they go out and they buylitech properties, the low
income housing tax creditproperties.
So you go to these tax benefitswith those, but they come with,
the big downside of, they'recapped at how much out of pocket
(32:03):
tenants can pay each month.
So what they do is they have aloophole that they use for that,
where.
As their cash tenants leasesend, they non-renew them and
then they refill those unitswith Section eight tenants
because the cap on Litech is howmuch the tenant is paying out of
their own pockets, not how muchyou as the owner is collecting
(32:26):
in rents.
So you, they can earn fullmarket rents.
By renting to Section eighttenants.
That's right.
While retaining their litech,their tax credit.
So they're able to add a hugeamount of value to these
properties.
By boosting the revenue andearning full market rents while
keeping the tax credit.
So it's a super niche and funand unique strategy, but it
(32:48):
takes time to implement that,right?
Sure.
It takes a couple years to fullyturn over all of those cash
tenants to section eighttenants.
So that one has not startedpaying distributions yet, but we
still like it.
As a niche and unique value addstrategy.
Yeah, that's inter I've done alot of work in the multifamily
affordable housing space and I,I never thought about that
strategy.
(33:08):
That's an interesting onebecause oftentimes the deed
restrictions require that theymaintain some kind of affordable
component, whether it be Litechor hud, section eight or what
have you.
And by doing that, you stillmaintain that.
But are able,'cause oftentimessection eight is higher rent and
it's usually the government whopays it, not the people.
So it's more dependable.
(33:29):
Yeah.
And there's some recessionresilience there too.
For sure.
For sure.
Because obviously thegovernment's paying the bulk of
the rent and Section eighttenants themselves, they don't
wanna lose their vouchers bydefaulting.
That's right.
That's right.
So there's some good recessionresilience there as well.
I like that.
Do you do project-basedbuildings in that or no.
We never have we never have justindividual section eights so
(33:52):
that, that property, they'rejust, they're renting to,
individual section eighttenants.
Yeah, no, we've never done anyproject based buildings.
One other kind of interestingand unique affordable housing
investment that we made lastyear.
The operator, when they bought aproperty, they partnered with
the local municipality to setaside half of the units for
(34:14):
affordable housing.
Yeah.
In exchange for getting a hugediscount on their property tax
bill.
So from day one, they added tothe NOI of the property.
Excuse me, because the lost rentfrom the units that were
designated for affordablehousing was the income, the loss
of income from that was waylower than the savings on the
(34:36):
property tax bill.
So right away they got a boostin NOI just from that alone.
And they are.
So they're going through andthey are renovating the market
based rent units, but they'releaving the affordable units
untouched.
But that too is a recessionresilient investment.
Because there's a waiting listfor those units that are marked
(34:59):
for affordable housing.
'cause they're a little bitunder market rents.
Yeah.
Even in a healthy economy, therewas a waiting list for those
units in a recession.
Those units have become evenmore.
Coveted, right?
Yeah.
Yeah, we like that kind of stuffwhere there's some kind of
recession resilient component toit.
I love that.
We're in real danger of goingtoo far into the weeds here
(35:19):
because you, I know, right?
You triggered my real estategeek mind and I could go, but
we'll stay higher level.
How about, I'm wondering youmentioned you, you pretty much
believe in dollar cost averagingreal estate investment.
That's what your program allowsyou to do, right?
So is that how people treat it?
They just set up a fund withinyours and just dump money in
(35:41):
there every paycheck or?
Yeah.
So real quick, I just wannaspecify that we don't operate a
fund.
It's, we're not sellingsecurities ourselves.
Sorry.
Yeah.
We're just organizing aninvestment club for people to
vet deals on their own.
We, we get together and we vetdeals together, but but yeah,
that is how I approach my owninvestments on the stock side.
(36:02):
I just set up my RoboAdvisor topull money outta my checking
account every week on the realestate side.
Every month I'm putting fivegrand into a new real estate
investment, into an investment.
Regardless of what the market isdoing, regardless of, whether
everyone is freaking out aboutsomething or whether everyone
thinks it's a giant party inreal estate I just keep
investing every single monthbecause I.
(36:24):
I'm not smart enough to time themarket and every time that I
thought that I was gonna getreally clever in, in time in the
market or doing something likethat, I've gotten burned.
And of course I'm totallycontradicting the thing that I
just said five minutes ago abouthow now is a good time to invest
in multifamily.
Yeah.
But but no I truly believe indollar cost averaging, putting
relatively small amounts.
(36:46):
Into investments every week,every month.
Whether that's stocks, whetherthat's real estate, whatever
your strategy is, just put, keepinvesting every month.
Steady amounts.
Don't try to get cute or clevertiming the market because.
When it's a good time to buy iswhen no one thinks it's a good
time to buy, right?
(37:06):
It's when all the headlines aredoom and gloom and the sky is
falling, and the world isending, that's actually usually
the best time to buy, right?
That's right.
When there's blood in thestreets, as they say.
Yeah.
But it doesn't feel like a goodtime to buy.
It feels horrible.
You're laying awake at night,chewing on your fingernails,
worrying about what's going onworrying that the world's about
to end.
Yeah don't invest based on whatyou think is going on in the
(37:27):
market.
Just invest steadily month in,month out, as they say, time in
the market.
Way more important and valuablethan timing the market.
Yeah.
Very good.
I'm curious with all of thedeals that you see, I know you
only bring one a month, butyou're spending the rest of the
month vetting other deals.
You probably see dozens if nothundreds every month.
(37:48):
You see a lot.
Yeah.
So with that, you probablydevelop a really good radar for
who's, what's gonna be a goodinvestment, who's gonna be a
good operator, what's gonna be alower risk, a higher return kind
of thing, I would imagine.
Tell us a few of the things thatwe can look for in, maximizing
return and minimizing risk.
(38:10):
Yeah, so first things first,high level, the operator risk is
the most important thing to, tofocus on.
And I've had people push backagainst me for saying that I
100% stand by that I have seen.
Bad operators ruin perfectlygood deals, and I've seen good
(38:32):
operators salvage deals thathave gone sideways.
Always focus on the operatorfirst.
Vet them heavily first.
Look for, a lot of experience.
Not just in real estate ingeneral, but in that specific
market, in that specific assettype in that particular in
investing strategy.
Make sure that they have done alot of those.
(38:54):
Make sure this is not theirfirst rodeo.
So that's really important.
And of course you want to gaugetheir trustworthiness and that's
harder to do.
It's not as easily quantifiedbut.
Keep grilling an operator withquestions until you feel
satisfied that you can trustthem with your money.
On the deal level debt risk isone of the first things that we
(39:15):
look at.
What's the debt term?
Is there enough runway for theoperator to wait out a bad
market for selling a bad marketfor refinancing?
The longer the term on the debt.
The more runway they have, ifthings go against them, market
wise.
Also look at interest rate.
A lot of deals went belly up in20 22, 20 23, and even now when
(39:38):
interest rates shot through theroof in 2022, a lot of operators
had variable interest loans andtheir payments just.
Shot upward and all of a suddenthey were had, they had negative
cash flow every month.
Yeah.
Look at debt risk.
Look at construction risk.
So if there is some heavy valueadd, if they're going in and
(40:00):
renovating properties how muchexperience do they have working
with the people who are actuallyswinging the hammers?
Whether they're outsourcing thator whether they have an in-house
construction team, that's notreally the big question.
The big question is.
How many deals has thatconstruction team worked on with
this operator?
(40:21):
And the same thing goes withproperty management.
Property management risk,another big one.
It's less about whether theproperty management team is
vertically integrated with theoperator, whether they're owned
together versus outsourced.
That's not the really the bigquestion.
Big question is how many deals.
Has this property managementteam worked on with this
operator?
If it's their first dealtogether, that's high risk.
(40:43):
If it's their 20th, very lowrisk.
Property management can make orbreak a deal.
There, there is a deal where alot went wrong in this deal.
This was an operator who did geta variable interest loan and
their payments, their monthlypayments went really high.
They were able to keep the dealalive and salvage it because the
(41:06):
property management was so good.
Like they were able to keep 94%,95% occupancy in this property
and just barely eke out, apositive cash flow in that deal.
And stayed alive with it becausethey had really good property
management.
So property management matters.
Regulatory risk is somethingthat we also look at.
We don't like to invest inresidential investments in areas
(41:29):
that have really tenant friendlylaws.
We'll invest in other types ofreal estate there.
For example we have invested ina deal in Southern California
that was it was a an Airbnb, itwas like a cabin resort kind of
property in an unincorporatedtown in the mountains a couple
hours to the east of LA and SanDiego.
(41:50):
I would be very nervous buyingor investing in multifamily
properties in SouthernCalifornia because it's so
tenant friendly.
That's right.
But this property, was finebecause it wasn't bound by those
landlord tenant laws.
We will make exceptionsoccasionally if there is a
really good like mitigatingfactor.
So for example.
We invested in a it was anapartment complex in outside of
(42:14):
Portland, Oregon.
Very tenant friendly market.
From a legal standpoint.
But this operator they actuallystarted 20 years ago as a
property management company.
So they have deep localexperience in property
management.
They know the regulations insideand out.
They have deep experience withit.
They have obviously managed alltheir own properties over the
(42:35):
decades, so we thought that wasa mitigating factor.
With that.
But yeah, so regulation riskthere's market risk is of course
a thing.
You don't wanna be puttingyourself in a position where
you're trying to predict themarket in any sense.
And then lastly, concentrationrisk.
You don't want to have too muchmoney in one asset class in one
(42:55):
city with one operator, right?
And that's part of why we dowhat we do.
We wanna spread our money acrossall of these different axes,
right?
Different geographical markets,different operators, different
asset types, differenttimelines, investment timelines.
So yeah, watch out forconcentration risk as well.
Yeah.
That's interesting.
Very good.
Brian, we're at that point wherewe'd like to go over our world.
(43:17):
Famous.
And since you're from Peru inPeru, there you go.
We are now world.
It's the way, world famousWayfinder four.
So are you ready?
I'm ready.
Let's do it.
All right.
Gimme a hack that you use, likea life hack you use all the
time.
So my favorite life hack isworking out in the middle of the
day.
So I work out right beforeeating lunch, and that gives me
(43:41):
a boost of energy andconcentration for the afternoon,
when otherwise I'd be lagging alittle bit.
And just not operating at fullsteam.
But working out midday it givesyou that, that recharge for the
afternoon.
I love that.
I just moved into a new officeand we have a gym downstairs.
I'm about to join it becauseyeah, that's exactly what I'm
gonna do.
I love that.
(44:01):
How about a favorite, this couldbe anything, an activity, a
book, a child.
I only one time only, so thatone, that's an easy one.
I knew you did.
That's why I let you, becauseyeah, my, I'm very intentional
about how I consume news.
For daily business news.
I love Morning Brew as anewsletter.
(44:23):
I also for a weekly politicalpodcast, I like left and center.
Which is hosted on NPR, but theythe center, the political center
is the host of the show.
And there's a guest whorepresents the left and there's
a guest who represents theright.
And they just talk through, the,that week's news, that week's
current events and so forth.
And you get to hear thedifferent perspectives all
(44:44):
across the political spectrum.
And it's a thoughtful andrespectful conversation that
they're having from people whoactually represent.
The philosophical Right.
And the philosophical left.
As opposed to just, whatever theparties happen, the party Yeah.
To be doing in that moment,which don't necessarily align
with philosophical conservatismor philosophical liberalism.
That's right.
(45:05):
That's right.
Do, yeah.
Check out left and center.
I will.
And if you're looking for abusiness book, check out, buy
Back Your Time by Dan Martel.
Okay.
Thank you.
What about a piece of advice foryour younger self?
I.
I would tell my arrogant,younger self to go out and get
(45:25):
help from mentors, coaches, joincommunities of people who are
further ahead than I am.
And don't, avoid that trap ofhubris thinking that you can
just figure it out all on yourown.
You can really compress yourtimeline by leveraging other
people's mindsets.
And other people's knowledge.
(45:47):
What about either a bigopportunity or a limiting
belief?
Yeah, so you know, some, one ofit is, you can, that notion of
compressing your timeline by,leveraging other people who have
gone ahead of you and donewhatever it is that you are
trying to do.
For example, I joined amastermind group this past year
for the first time ever.
(46:08):
And it was not cheap.
It was five grand to, to join itfor a year.
And I was pretty nervous aboutmaking that investment.
It took me a few months to buildmy courage up to take that leap
of faith, not knowing what Iwould actually get outta that.
And it has been.
Fantastic.
It really has.
I've have a coach through thatnow, and that, that coach has
actually been working me forfree as he's building up his
(46:30):
book of business.
I have I've had the courage tomake a lot of changes in my
business, based on, talking thatthrough with my pod of people
who I meet with every week.
There's just all of these these.
Not obvious benefits that youget by joining a community of
people who share your ambitionsand, share your goals and maybe
(46:53):
are a little bit further downthe path than you are.
That's really useful.
So I would highly recommendthat.
Because you don't, bydefinition, limiting beliefs.
You think they're real, butthey're not actually real.
That's right.
So you, we all have these blindspots and getting help from a
community, from a coach or amentor or a therapist or someone
(47:13):
else, they can help you spotthese blind spots that you can't
see'cause you're just too closeto it.
You're trying to read theprescription from inside the
bottle right in your own life,as they say.
But you can't do it.
You need some outsideperspective to help you see
those blind spots.
So anyway, yeah that's what Iwould, that's what I would tell
people or my younger selfrather.
Thank you Brian.
(47:33):
If people wanna know a littlebit more about you, maybe join
the community, the investingclub and such a, how can we find
you?
Check out spark rental.com.
We're also on all the majorsocial platforms, LinkedIn,
Facebook at Spark Rental, andyou can also email us
support@sparkrental.com.
We are very much a mom and popcompany, so you know, my, my
(47:55):
co-founder, her daughter is ouronly full-time employee.
Yeah we are a small business,very much mom and pop.
And, we're out there investingour own money in these deals
every month.
This is my own strategy forfinancial independence.
Yeah.
We're in the weeds with you.
I love what you're doing, Brian.
I thank you for it because Ithink a lot of people who wanna
get involved in real estateinvesting on a bigger scale,
(48:17):
with the big investments nowhave a chance to do it without
having big investment.
I.
Money to do so it, it's great.
And also that, that mind sharethat you have, I can only, I'm
gonna join because I just wannabe there every month and review
the deals and have that mindshare.
I just think it's amazing.
Just that alone.
I feel like even if I don't putin five grand.
Sometimes I can do it, sometimesI can't.
But that 59 bucks of, to havethat mind share, I think will,
(48:41):
alone would be worth it for me.
It, it's a huge education.
Being able to hear everyoneelse, vetting these deals
totally alongside of you.
I've mean, I've been in realestate investing for over 20
years.
Yeah.
And every month when we vetthese deals together.
Our club members are askingquestions that would never have
occurred to me, but they'rereally good questions.
Yeah.
So you know, that's the beautyof betting these deals together
(49:05):
as a community and having 50sets of eyeballs on these and
then talking it all overtogether.
I love it, man.
Thank you.
All right.
Thank you very much, Brian.
Luis, thank you so much forhaving me.
This was a lot of fun.
We hope you've enjoyed theWayfinder Show.
If you've got value from thisepisode, please take a few
seconds to leave us a five starrating and review.
(49:27):
This will allow us to help morepeople find their way to live
more authentic and excitinglives.
We'll catch you on the nextepisode.
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