The Difference Between Investing and Speculating with Paul Moore

Paul Moore 0:00

We need to have a margin of safety and anything we’re doing, whether it’s time, whether it’s investing, whether it’s anything we do we need to think about, okay, what are several things that could go wrong? And if they all went wrong, what kind of what would be the effect?

Brittany Henderson 0:15

I’m Neil. And I’m Brittany,

Neil Henderson 0:17

we are a family on a journey towards financial and location independence. Each week, we interview successful real estate entrepreneurs about their chosen investment strategy, and rated based on how much money it took to get started, how long it took to educate themselves, how passive it is, and whether or not they could do it from anywhere in the world.

Brittany Henderson 0:34

Welcome to the road to family freedom. If you like our show, the easiest way for you to give back is to leave us a rating and review on iTunes, head on over to road to family freedom comm slash review for links and instructions on how to do that we would be so grateful. All right enough out of us. Let’s hit the road to family freedom.

Neil Henderson 1:03

Our guest this week is the founder of dwellings capital. He’s also the host of the outstanding how to lose money podcast, Paul more Welcome to the road to family freedom.

Paul Moore 1:12

Hey, glad to be here. Thank you for having me on. I’m honored.

Neil Henderson 1:16

You know, it’s great to have you. It’s good to see you again.

Brittany Henderson 1:19

So let’s get started. Would you tell us your story about how you got into real estate?

Paul Moore 1:23

Oh, okay. Well, it’s kind of a long story. But I’ll try to make it a little bit briefer, I got an engineering degree. And that was my first mistake. And then I actually went back for an MBA and at Ohio State, I went to Ford Motor Company. And I found myself a month or two into Ford, even though I really liked it trying to do different things on the side, I tried to start an oil change shop and I started a property tax consulting business, at least I got a business card. And as an aside, I mean evenings and weekends. And so about five years later, a buddy of mine and I left Ford, we started our own professional employer organization, which was an outsourced HR firm. And we did really well with that. And Wall Street got really enamored with that business type of business. And about five years later, we were able to sell to a publicly traded company, and my partner moved to Colorado Springs before that fact. And I moved to the Blue Ridge Mountains of Virginia and I thought, Hey, I’m going to be a great Dad, I’m going to raise my kids, we had to at the time we have for now we’ve got mountains, we moved to the top of a mountain with 120 acres, and I thought, I’m going to be a great Dad, I’m going to passively invest, I am going to just have a great time raising my kids and be involved with them. And I found out that I became the worst version of myself because I was mid 30s highly energized type A entrepreneur and I was sitting at home doing really nothing. We started a nonprofit organization for internet students, but that was just kind of slow moving. So I found myself confusing speculating and investing. Now, in my mind, investing is when you’ve got a fairly safe principal, fairly protected principal, and you got a chance to make a profit. speculating is when your principle is not at all safe, and you have a chance to make a profit. And so I confuse the two and I got involved in all kinds of high risk, highly leveraged things, I lost money in, like an investor in Charlotte, who was making 3% a month on my money trading forex or something. And you know, he still won’t tell the eight to the 2000 investors. He had where that 18 million he had offshore was, he’s in your 16 I think of his hundred 57 year sentence with the in the federal penitentiary. But I got involved in all kinds of stuff. By the way I was involved with him, I just invested passively with him. But I realized, Hey, I’m bored and real estate was seemed like a smart thing to do. So my buddy and I started flipping houses before the term flipping ever came into existence. And so we flipped dozens of homes, then we started flipping waterfront lots. And that’s how I got started.

Neil Henderson 4:18

So we’re big believers, and beginning with the end in mind when it comes to any sort of goal, like what’s your, what’s your destination? Where’s real estate? Taking you, Paul more?

Paul Moore 4:30

That’s a great question. And one thing I’ve learned over the years is, a lot of people who are chasing real estate part time, feel like they need to climb this ladder, you know, doing one flip house than two and then a wholesale or then a lease option. And I don’t know if that is I don’t know if that’s the best way to get to most people’s goal. I think a lot of people are frustrated because it is so hard to do part time. But I think goal for people would be to think ahead to when they don’t want to work full time anymore, or they can’t work full time anymore, they want to retire. And so I think the goal would be to create a, you know, multiple passive income streams. To me, that would be a great goal.

Neil Henderson 5:20

Well, we, I often talk about this about your W two job being a single point of failure, even even if it’s a nice, safe, secure job. Even if you’re a postal worker, even if you’re an IRS agent, we have an IRS agent friend right now who’s working without pay, because the government shut down. And you know, you even if you have a nice, safe, secure job, you’re one car accident away from losing the ability to work or one, cancer diagnosis, whatever. So it’s really so I completely agree with what you said,

Brittany Henderson 5:52

right? Do you feel like that’s kind of where you’re at already? Or is that kind of your goal? Pretty now,

Paul Moore 6:01

I actually, I slowed down once, as I said, in my mid 30s. And it was miserable. And I’ve seen some statistics pointing to the fact that when people slow down from their work, they tend to not do so well with their health. And there was some statistics at Ford Motor Company that I never saw in writing, so I won’t quote them. But they’re pretty shocking, about how soon people tend to pass away after they retire. And so I really don’t plan to slow down. I don’t really plan to stop working. But my goal is to create passive wealth for other people who do want to. So actually, I don’t really want to, I’m sure I’ll slow down at some point, I’m sure I’ll continue to narrow my focus. But I actually don’t really have a desire to stop working myself.

Brittany Henderson 6:50

Yeah, I think a lot of times when people who are the most successful and do continue to have really fulfilling lives, they don’t ever really stop working, it’s just that their work sometimes become something that’s maybe not super monetarily lucrative necessarily, or is kind of hobby based or more about giving back to people I saw in your info sheet that you help fund fighting for human trafficking and victims of that. So it sounds like you know, that’s still work, it may be not something that is making you money, but it’s it’s a purpose, it’s something to keep you moving. And what’s amazing about real estate and passive income is that it allows you to to pursue those things that you couldn’t before, you know, if you’re having to work a nine to five job, sometimes you don’t have the option to work in that in a business that fulfills that part of you. And this allows you to do that. And that’s kind of I think, for us is really where we would like to go and kind of pursue some of those more outrageous wants and things that we can’t do right now.

Paul Moore 7:55

Yeah, absolutely. Can I mentioned something about how we get involved in trafficking, by the way?

Brittany Henderson 8:00

Yeah, I would love to hear about it.

Paul Moore 8:02

So I don’t know if you heard these statistics. But if you took the record your profits, not the average, the record profits of Nike, Starbucks, General Motors, and Apple added those together, doubled that number. That’s the estimated revenue generated by human trafficking in the world right now. Now, that’s a staggering number. And you know, Brittany, Neil, I like to believe that if I was alive in the mid 1800s, I’d be fighting against slavery, I’d be an abolitionist, or if I was an adult in the 1960s, I would have been fighting for civil rights in America. Well, this is a civil rights that’s been ripped away from 10s of millions of people. This is slavery. It’s not in the headlines. There’s no civil war being fought. But there is a war and it needs to be fought. And for the sake of these people who are enslaved my company, we are trying to devote a significant portion of our profits to fighting human trafficking and rescuing its victims. And I would love to raise awareness, and you know, ultimately raise about a billion dollars to help fight this this great evil. So that’s one of the things that passively investing in real estate, passive wealth generation with, you know, relatively stable streams of income can generate. And that’s one of the things I’m really excited about doing.

Neil Henderson 9:28

Well, while we’re on the subject is there somewhere people can go to learn more about what it is that you guys

Paul Moore 9:34

are doing? Well, you know, I would just recommend a couple organizations. One real obvious one is called Exodus that’s EXOD. us cry, cry, Exodus cried calm. They created an amazing documentary called nefarious or nefarious, however you want to say it, and they are well worthy of funding. And you really should, if you have this stomach for watch this amazing documentary To learn more, that’s what opened my eyes to this whole great evil.

Brittany Henderson: 10:06

Okay, we’ll make sure we put that in the show notes. Yeah, people to easily find and educate themselves. All right.

Neil Henderson: 10:13

Okay. So you have gone, you’ve been on a whole journey with real estate you started off? You said, with house flipping, things like that, how did you go about getting yourself educated in real estate.

Paul Moore: 10:26

So at first I went to a, you know, a couple different seminars, they were invitations by some of the Guru’s to come back and spend thousands and then ultimately would have been 10s of thousands to learn more. And I went to a couple of those. And I don’t know how I did it, but I was able to sniff out that this was not going to be good for me. And I found out, you know, years, actually, 15 years later, now that a lot of people felt really burned by their experience in some of those guru seminars. And I’m really glad that I didn’t do it. What I did do though, is when I was in my early 50s, I decided to do Class B value add multifamily full time, I realized, Hey, this is definitely what I want to do. But I don’t have decades to work my way slowly up the ladder. And so I’ve gotta get going. And so I convinced a friend of mine, and I, we spent $25,000, one time fee to join an organization that mentored us in class be value add multifamily. And there was never any additional fee unless we wanted to partner with them and a deal. And then there would be fees and costs. But we were so glad we did that we learned the ropes of syndication, we learned how to do our own deal. We we’ve just had such a good time with that organization. And we also never got up sold, you know, we never, there was never any additional seminar additional charge. And we still consult them pretty much every week now. And it’s been almost five years. And so I really recommend finding an organization, a mentor like that. And, Neil, I think you’re in one as well, that where there’s more, it’s not like a guru, slick selling effort, and I really appreciate the one you’re in as well. So

Brittany Henderson: 12:19

yeah, it’s really important to find a mentor that actually wants to mentor you instead of take your money.

Neil Henderson: 12:25

Well, and I think it’s important to the best mentor is a mentor who’s doing what you want to be doing. Right. Now, there’s a lot of mentors, you know, who are sort of, they retire from whatever it was they were doing. And now that’s all they do is they mentor, and I think a lot of times that their knowledge goes stale with what the market is doing. And it’s not necessarily they’re not quite as up to date on what’s going on in the market. And so I don’t think those always make the best mentors, right.

Paul Moore: 12:57

Yeah, that’s true. I absolutely agree in some of the, you know, I think it’s also really good if you can find a mentor who’s lived through one or two recessions, you know, like to say that we don’t have a crystal ball. We don’t know when the markets going to turn, but there are going to be ups and downs. And it’s, I tried to coin a term on bigger pockets, recently called new rule was that would be a new guru, somebody who has not lived through the last recession and thrive through it and looking for mentors and I want to listen to people who have been through many recessions and have advice to give, for example, quote, I heard I might butcher it. I heard it this morning from Warren Buffett. He said, when the tide goes out, we’ll do we’ll know which swimmers have no bathing suits. I think, you know, I was at a seminar from one of the world’s most famous multifamily syndicators. I actually I was at a seminar in Miami, Florida in December, and this guy came on stage completely unexpectedly, I guess the host invited him but he I didn’t know he was there. He wasn’t on the agenda. And he said, it’s okay. He said, Hey, get into multifamily. It’s okay, if you overpay, it’s okay to overpay, just get in the game. And I thought there was going to be a punch line. Like it was a joke. He was serious. He has been on this guy has a you know, a Bentley car. He flies in his own Gulfstream jet. But he’s overpaying for multifamily. Well, you know what? He’s smart. And he’s very, very wealthy. And I started I went back to my hotel, and I started wondering, why have I been listening to the wrong mentors? Have we as our great caution these last five years, while he’s been making literally 10s of millions? Has it been ill founded? I don’t think so. Because Warren Buffett, and people like him said, that’s the exact opposite of their approach. You know, they’re buying, when other people are selling and you know, the rest. And this guy is saying, just keep buying, it doesn’t matter what you pay. I’m worried about that. And I’m worried about a lot of multifamily investors right now. And I think a lot of them are going to lose money, and it could happen anywhere in self storage and anywhere else as well. Yeah.

Neil Henderson: 15:11

Well, you wrote, you wrote an article, you wrote a great article on bigger pockets recently about margin of safety. And I’d like you to sort of touch on that briefly, because I think we’re sort of on that subject right now.

Paul Moore: 15:22

Yeah, you know, I had an engineering degree, and we had something called the safety factor. And basically, it said that we had to engineer bridges, roads, anything else to about three times what they would actually need to hold. So if the largest truck is 66,000 pounds, though, had to be engineered to about 200,000 pounds. I thought that was ridiculous. As a 19 year old, I knew so much. And but now I’m listening to I’m watching the video, the documentary series, the men who built America, you know, one out of every four bridges back in the 1800s used to fail, before they started doing that lots of lots of people died. And so the point is, we need to have a margin of safety and anything we’re doing, whether it’s time, whether it’s investing, whether it’s anything we do, we need to think about, okay, what are several things that could go wrong? And if they all went wrong, what kind of what would be the effect. And so the goal in the margin of safety idea, which was a buffet idea, by the way, Charlie Munger and Warren Buffett have used that term a lot. The goal is to think about several things that could go wrong, and then add those kind of together and then put a safety factor on So okay, if all these for not if all hundred things that could go wrong went wrong. But if four major things went really want wrong, would I be able to maintain this asset? And so that’s the goal is to buy at a price where you could say yes to that question, or leverage your assets 11 all that you were you could say yes to that question. You know, wellies, capital has a couple different funds. And we invest in self storage, mobile, home parks multifamily, and one of our operators that we invest in has under 50% leverage right now, you know, probably end up at 60. But the point is, he’s not up at 75 8085. You know, taking all these risks. He’s trying to build in a margin of safety, with his investments in a number of different ways. And that’s just one of them.

Neil Henderson: 17:29

Alright, so you talked about financing a lot of those early deals I with the money from the sale of your first business, but as I recall, you had sort of a riches to rags to riches story, is that correct?

Paul Moore: 17:44

Oh, yeah, absolutely. You want me to go into that? A little bit? A

Neil Henderson: 17:47

little bit? Yeah, I’m, we’re mainly trying to focus on more on now. And how you how you finance your deals, okay. On the on the upside upside? Okay,

Paul Moore: 17:58

great. So in 19, 97, when I sold my company, we had almost $1.9 million in the bank, we actually did a lot with charity at that point. So we had less than that. But at any rate, 10 years later, I found myself going into a great recession, of course, not being able to see forward and knowing that we were going into this great recession, just knowing everything seemed to be grounding to all and I found myself a one Sunday morning sitting in my chair thinking okay, here I am two and a half million dollars in debt. What am I going to do now, thankfully, it was all tied to real estate. So there was all these credit cards, it’s not like i’d invested in some highly leveraged foreign exchange stuff, you know, thing that could go to zero. But it was real estate, and I had no idea how bad it was going to get. And I had this idea what would George Mueller do? Now, George Miller was a hell EN in Germany in the early 1800s. And he turned into sort of a saint, when he moved to England. And when he moved to England, he became a pastor. And he began trying to teach people to manage their finances, teach people to actually manage their time to build margin in their life. And he decided to start adopting orphans. And so he started adopting orphans off the street of Bristol, England, and he raised something like $200 million in today’s dollars, simply it should be more than that leaving because the house a total of 10,000 orphans over the years. And he did it all on faith. And he did it all without ever borrowing a penny. He was really against that. So I said, What would George Miller do? Well, first of all, he would not have been in debt. So I already failed. But if he inherited my situation, what would he do? He would have been really generous. And so I have a real desire to leave a legacy and involve my kids and my business. And I haven’t done a great job of involving the kids in the business. But I thought this is a golden opportunity. So I called my friend kids together and my wife together and I said, Hey, we’re going to do something really crazy. Starting January 1 2008, we are going to start giving our way out of debt. And of course, they didn’t know what I was talking about, because I knew that I didn’t feel like but we said we’re going to start setting aside a very generous amount we’re going to give to charities and church and things that we’re passionate about starting January 1, we’re going to give a certain amount every week. And we’re going to see where it leads us. It might end up in bankruptcy. But that’s already the path I’m on anyway. So I don’t know if that’ll be any worse. And if it goes well, well, we’ll see what happens. So we started that January 1, I’ll tell you on January 28. To shorten the story, I met a guy in a subway restaurant who was a very smart real estate developer, he gave me an idea. That idea turned into one of those light bulb, aha moments. I took it down to the county planning and zoning people and I said, Can I divide sub divide by three five acre waterfront property by doing this using your law? And they said, Well, that’s crazy. That law was meant to prevent you from and the lady was stunned. And she said, I’ve been working here for decades. Nobody’s ever had such an outlandish idea. And yes, you can do that. So we there was a lot more time there was bankers and lawyers and all kinds of things involved in a lot more hard work for the next 13 months. But I’ll tell you, 13 months later, we were debt free. And I can tell you that my kids got to watch that firsthand. So that is for as far as a family real estate story. That is one that I really cherish.

Brittany Henderson: 21:41

That’s awesome. It’s very much in line with a lot of the kind of the, in the in the room around the room, we will have like he had like the book, you are a badass with money and like all of you. Yeah, like, you know, you think your way into what you want, or you know, you put out what you need. And I know it’s amazing, though, it’s because it really when you give you you generally get back, it seems like karma

Paul Moore: 22:12

really are you know, some people call it karma, some people of sowing and reaping. Universal Law. Yeah.

Brittany Henderson: 22:22

I was trying to think of

Paul Moore: 22:23

not right, you know, and it’s it’s proven over and over through history, it doesn’t always play out the same because it’s not like there’s some vending machine in the sky. But you can always put a quarter in and always get a candy bar out of but I’ll tell you this, it really worked in that case. And it really taught me and my kids a lesson that I have seen played out over and over again, my son now who’s 25. He’s a real estate investor. And I’ve seen incredible generosity in him that that’s just amazing to me. So I’m really thrilled for the outcome of that what seemed to be a train wreck 10 years ago.

Brittany Henderson: 22:58

That’s all sounds great. How do you though about financing your deals now.

Paul Moore: 23:02

So we Wellington’s capital has made a shift from being a syndicators because we’ve been banging our head up against the wall not finding the margin of safety and multifamily for the last four or five years. And so we actually made a shift recently to a fund model. And our fund is actually looking to partner with operators who have deck years or decades of track record, who have access to off market deals that we would never see who have a great, proven team. And we’re actually you know, spending a lot of time getting to know these operators one on one, we’re meeting with them there, we’re going to their headquarters, we’re going to their assets. And then we’re actually trusting them to figure out the leverage, like the one I mentioned earlier is under 50% leverage right now. We’re trusting them to pull off the assets and the operations and everything else. And we are giving our investors sense to diversify their money by investing in a group of these assets through our fund. And we’re spreading it across different operator, asset classes, geographies and specific assets, of course, and so that diversification, doesn’t have any leverage with it. So the leverage is all at the operator level.

Brittany Henderson: 24:23

So just because I’m still learning as we go along this journey, if I’m understanding correctly, the difference between syndication and a fund is that with syndication, the investors are getting to you’re bringing them this syndication deal, and they can choose to invest with a fund or they given saying, I’m giving you X amount of dollars, and then you’re making more making decisions on where that’s going.

Paul Moore: 24:51

Yeah, a fund is just a syndication of a whole lot of deals, okay. Is it also called a blind fund, blind or semi blind pool, if I want to get into the technicality of a blind would be I can do anything with the money, you have to trust me. Semi blind, which is what we’re doing is we’re saying, here are the parameters, we’re going to do these real estate asset classes with this level of debt, this level of risk, and everything in here will fit into that box. So yeah, but it’s what you, it’s pretty much what you said.

Neil Henderson: 25:24

So now, with running your fund, how much time would you say your real estate endeavors take you per week nowadays?

Paul Moore: 25:34

I mean, I would guess, 50 hours a week, and I actually could put in a whole lot more if I was if I had the time and to create more content. So I mean, so yeah, it’s full time for sure.

Neil Henderson: 25:46

And what would you say is your highest ROI activity that you do?

Paul Moore: 25:52

So I’ve got four of them? Great question. One would be writing books, and I’ve written only two, but I’m working on two more. Number two, it’d be bigger pockets, posts, number three bigger pockets, video number for being a guest on podcasts like yours. And then I’d say five, and I’d say somewhat down the list would be hosting my own podcast. And our cast is called How to lose money. That’s right, how to lose money. And so we’re not talking about commercial real estate investing on there. Although we do get into it quite often. It’s not the topic, and we’re always talking about our guests stories. So we’re not talking about what we’re doing as much. So I don’t know, maybe I should start another podcast that’s focused on you know, real estate investing and, and that would be more profitable. And maybe we will at some point, gotcha.

Brittany Henderson: 26:45

What is the I’m just curious what your podcast is, is about.

Paul Moore: 26:51

Yeah, so how to lose money is, you know, I was tired, I used to go to these family conferences, those father and daughter retreats. Actually, it was in Callaway, gardens, Georgia and a beautiful garden and took my daughter every year for I think, seven straight years. And the panelists and the speakers would always talk about what great families they had, and you know, all the good things they were doing. And my daughter even admitted once she was a little jealous. She’s like, man, they’re doing such fun trips to Europe, and they even want to go on a space flight to the moon or something someday, and our family seems kind of boring by comparison. Of course, in my town, you know, our family seemed like we were the ones that were doing all the fun stuff. But I started asking these panelists, you know, I would ask you to tell us about your failures. Tell us about where you had problems, what went wrong? Because I could see the guys we had these tables of, you know, like, 10 people, father and daughters, and I could see the men were discouraged. They’re like, well, I’ll never be like them. So why try? That was the prevailing feeling in the room. And I don’t think the speakers realized they were causing this. So I started saying, Tell us about what went wrong. Tell us about your failure. deer in the headlights? how serious they would never be able to answer the question. And so are they were unwilling to well, we got to know one of the speakers pretty well, and their family, and their daughters were telling my daughters one day, man, we fight so much at home. We have arguments and fights, and we’re better now. But we used to, and I that just kind of opened my eyes, I thought, well, this is one of the most admirable families I know. And they used to fight. So I feel like there’s hope. And so all that is to say, when I started a podcast, I wanted to talk to entrepreneurs, investors, business owners, who had had failures along the way, and what they learned from them. And I think there’s so much to learn. And so much hope to be gained, knowing that I’m not alone, because every one of us know that we fail. And so knowing that we’re not alone, and knowing that there’s hope, was incredibly helpful to me, and I’m hoping it is to our audience as well. We’ve done about 150 shows, now we’re about two years into it, having a lot of fun.

Brittany Henderson: 29:03

That’s fantastic. I’m excited. I’m going to download that today. And and take a look. And I think that’s I mean, failure is kind of the it’s the human condition. But it’s it’s necessary. It’s how we learn. And I think that’s actually with the gurus out there. A lot of times they don’t talk about their failures. And so there’s no way to really replicate what they’re doing. Because they sure as hell failed at some point. And that’s what they built their empire off of, is those failures. Those are how we learn and figure out what to do better. And I think you’re exactly right. You know, when people don’t talk about that, that’s what’s so powerful. For a lot of people who are in any business, like I follow a lot of nutrition people as a nutritionist, and the people who just talk about what they do now, and they show, you know, pictures of the perfect food or the perfect workout, or it’s very discouraging. And that’s, you know, that’s a whole nother topic about social media and causing issues. But the people that follow and keep following are the ones that talk about where they are currently struggling or failing. They’re actually a lot of the nutritionists that have health problems, I follow several that have like autoimmune diseases, they are much more inspiring. I learned much more from them from their problems and failures than I do from someone just saying, well, this is what I do. And this is, you know, these are my successes. And I mean, that’s what I’m going through myself, I’m going through some health issues myself, and I had to go on to my audience and say, it feels shameful in here. But I’ll be able to help you more with this experience that is going to be hard for me and is hard for me and scary and you know, etc. But I’m going to learn so much. And now I can pass it on to you and not. It’s so much more valuable.

Paul Moore: 30:51

Absolutely agree.

Brittany Henderson: 30:54

There’s me

Neil Henderson: 30:54

No, no. And I also I also think it’s a great podcast and great subject matter. It’s also the idea of a close carrot. So many people start off in real estate investors, and they’re learning from somebody who has a billion dollars in real estate. And that person has forgotten what it was like to try and get that boulder moving. And it’s, you know, sometimes it’s one, I think you can learn more from failure and to sometimes I think it’s better to learn from somebody who’s maybe not, not at level 10. Somebody at a level four and right,

Paul Moore: 31:29

I agree with you to get a level two. I agree.

Brittany Henderson: 31:32

Yeah, definitely. It’s easier to sort of see yourself in them. Yeah. Yeah, I mean, I, again, go off on my own little tangent. But I’ve been, you know, reminding myself lately that whether even if it’s been said before, or done before, or any of those kinds of things like reiterating all of these things is so important, because someone is going to hear you that time, even if they didn’t, before it and hear it from someone else, they’re going to hear you. So all right, for timing, I’m going to kind of combine the next two questions and just for your business right now, you know, you’re working basically a full time job doing this Do you have any systems or employees or anybody anything that really helps you with your efficiencies and keeping your business running? I think the worst thing about having a business probably is employees.

Paul Moore: 32:24

Best thing about perhaps having a business is having a great employee. So I after years, a years of difficulties struggles and and a lot of success as well. I become really, really violent. I can’t think of the word violently committed to finding only fabulous employees. So I have a handful of people on our team, a guy named Ben who is amazing. He’s like a prodigy. He’s been working for us for three and a half years, right out of college at Liberty University in Virginia. So excited to have him on board, have another person who graduated high school only back in West Virginia 20. Well, I’d say 35 years ago, so and she’s in her 50s. And she’s incredibly, incredibly committed to our vision, and such a great employee, and so we love having her. And then we have an outsourced accountant, outsourced IT person, etc, that just do things for us as needed. So I think it’s really important as an entrepreneur to focus on your strengths and offload your weaknesses. I’m reading Ray Dalio, his book called principles. And he talks about the four ways you can approach things that you’re not good at. And that is number three, I think and that is what we are doing every chance we can.

Brittany Henderson: 33:51

So with your fun now, are you investing in properties that are outside of the state you live in long distance investing?

Paul Moore: 34:00

Yeah, you know, I was on a webinar, we have the wedding’s Growth Fund and a weddings Income Fund. And the other night on the webinar, they said, well, what’s the geography you’re focused on? And I said this, I said, you know, we used to be focused in the Carolinas, Kentucky, Tennessee, Virginia looking for multifamily when we were going to be the syndicators because that’s where we are. But now we have a different task. We are trying to find world class, best in class operators, and we’re trusting them to pick the geographies that are near them or comfortable for them. And we’re counting on those guys to make decisions that, you know, that we are choosing to forego by trusting them. So for example, bigger pockets, just number 286. I think I won’t get any more detail on that he had an amazing podcast, July 4 of 2018. I think it came out. So I might as well just tell you his name. His name’s AJ Osborne. Some of our listeners might might know who that is because he took the Reno, Nevada, super Kmart, he bought it. And he has seven and a half million dollars in it. Two and a half million in cash, 5 million in loans. And he sold off the parking lot to an apartment developer. And he converted it to a self storage, he cut it in half. He was in a coma for months during this time. And he now says when it’s stabilized, it should be worth 21 to 24 million. That’s on a two and a half million dollar cash investment by friends and family around him now. He’s an Idaho, he’s doing this deal in your state. He’s in Reno. And I would never have thought to do a deal in Reno, or Idaho. But what I have loved to have been part of that deal where he’s going to get a 900% return in the end? I think it is. Yeah, I think I like to be part of that. So that’s a very long answer. But that’s why I’m not focused on geography. I’m trusting operators who are.

Neil Henderson: 36:03

That’s awesome. How often do you tend to do you ever visit these properties yourself?

Paul Moore: 36:10

Yeah, you know, I’m going to Lancaster, Ohio to view a mobile home park that was just acquired into the fund. I’m going to be there on Tuesday, I plan to be in Tennessee visiting to potential properties for the fund in a week after that around Nashville. I’ll be in Florida three weeks after that visiting two or three self storage facilities that were already acquired into the fun that we are investing with. So yeah, we think it’s absolutely crucial. There was a in November after I saw you last Neil, I visited two weeks after I saw you in fact, I visited a facility we were one day away from investing in and the timing worked out such that I it was just kind of a short notice thing. And I found that there were others self storage facilities being built the same area that the operator was not even aware of. And so we were kind of stunned. We called them we still looked at the deal’s off, it was painful, we are spent three or 4000. And attorneys fees, getting this all set up, getting the paperwork done, and we didn’t invest. And you know what, it was really, really good that we didn’t number one. But number two, the word got out completely unexpectedly To me, the word got out on these two investor forums that we had pulled the plug on this. And I’ve got at least a dozen or more investors who have contacted me and said, We heard what you did. We heard how you pulled the plug, we want to talk about investing with you in the future. So yes, going out to CDs is critical. Getting to know the operators is critical. Even though we’re never going to be the majority investor and being able to pull our weight, we will not be able to pull the strings on when they should buy and sell and we wouldn’t want to have having the relationship with them is going to be helpful and when times get tough, and they always get tough.

Brittany Henderson: 38:05

Yeah. So what do you believe is the most critical skill that a new investor looking to thrive in your niche would need to master

Paul Moore: 38:14

I think they need to know the difference between investing and speculating. And I mentioned it earlier. so critical, I think discipline to you know, the discipline, to not follow your heart to do something that you want to do that you already set in advance, you shouldn’t do so setting up rules, staying disciplined to those rules, and being accountable to yourself and those around you not to chase something because it feels like a good idea. Now there is a place for following your God. And if you have a bad feeling about something, but you can’t quantify it, you should listen to that bad feeling because it’s usually right.

Neil Henderson: 38:54

So if you could hit a magic reset button and go back and start your investing career all over again, is there anything that you would do differently?

Paul Moore: 39:03

Yeah, I would have started in commercial real estate right away, you know, and I think a lot of people work harder than they need to, to make less than they could and what I mean is people with a full time job, who are chasing all kinds of opportunities on the side hoping that that one house flip, or will be like the one on HGTV or that the key to freedom will come and it usually doesn’t in the part time realm. So honestly, if people would only realize, Neil, if they could take $100,000 if they had that much, and they could invest it right? With a passive commercial real estate investment, that that hundred thousand. And I know that sounds outrageous, but the math is very simple to prove that hundred thousand can grow to 234, even $5 million, over 20 or 30 years, especially if you can do it in attacks, avoided attacks beneficial way, hundred thousand into four or 5 million. Yeah, it’s absolutely provable on an Excel spreadsheet. And I actually ran this by a guy who’s been investing for decades. And he said, it’s absolutely true. And so here’s the thing, if I could keep my day job that I like, and just invest 50 100 200,000 on the side, and something like that, that’s a pretty good deal to retire with if you start young enough. So what I would do, if I was going to push restart is I would create opportunities for people to invest like that, which is exactly what I’m trying to do now in my mid 50s.

Neil Henderson: 40:38

Yeah, it’s really it’s sort of where it’s exactly where we are. And it’s something I it’s a, I don’t know, an affirmation that I say to myself every morning, when I tell myself that look, one of the reasons I’m doing this is because so many of my friends and family have no idea that this is even possible, their idea of I talked to people about investing every day, and most of them want to ask them what they consider to be a good return, they go well, you know, six 7% on, you know, my mutual fund or my 401k. And, and I say, you know, have you ever done the math about what, you know, that’s a good term, you know, if you start early enough, but if you’re ever going to really, really like building the wealth, it’s not going to really build a whole lot of wealth, you got to get up into the 1012. Now, you know, start talking about 18% and things like that. And on hard assets, hard assets that are not not going to disappear out of one of my best friends invested $250,000 in oil company back in, you know, probably five years ago. And that investment went to zero. Yep. You know, so it’s, um, no, I mean, I love real estate. I love what real estate can do for me, but it’s more about what I want to spread the gospel. Yeah, so much of what it is.

Paul Moore: 41:53

It’s so true. And one of the reasons I was able to pull out of the two and a half million in debt is it was real estate. It wasn’t a the bottom of the oil. Well, that went to zero. And I’ve done that too, by the way.

Neil Henderson: 42:04

Yeah. All right, we have one more question, then we’ll let you go. Because I know you got to get moving. So I want you to imagine that you’re standing in front of a room full of aspiring real estate investors, who are they have full time jobs and families a lot like maybe when you were starting out, they’re battling the way through fears, doubts, a lack of time or money, what are two or three strategies that you could recommend for them that they could implement within a month that would help them along?

Paul Moore: 42:32

So, you know, My son was about 20 years old, and he wanted to get into house flipping. And so I said, you know, you could do a postcard campaign, but you’d be competing with guys like Mike, in my little town of Roanoke, Virginia, who spends $55,000 a month on letters and postcards. How are we going to compete with him? Well, you’re going to find a different way to do it. And so I said, Take the time, get in your car, I have around, if it’s summer, look for yards with weeds, where the grass is high, and the shutters are down, and look for opportunities to find those houses that maybe nobody else found online. And he made a list of about 25 or 30 homes, and about 10 hours of driving around not a bad investment. And then we started to follow up on those. And he actually ended up flipping three houses. Not out of that just that group. But we ended up flipping three houses together before you start investing in land. But so that’s one strategy drive around, look yourself. Number two, I would do lease options, sandwiches, I was on a bigger pockets live stream today. And somebody asked me what how can I get started? Actually, it was a separate question. But anyway, $5,000, I’m 19 years old. I said consider doing a lease option sandwich. And basically, that’s a way to get in get control of a house, on a rent own basis from an owner do a minor improvements, like maybe you know, cut the grass and paint it, change carpet or maybe nothing, and then turn around and rent to own it to somebody else. And you get in the middle. That’s why it’s a sandwich, you’re in the middle between the seller and the buyer. And you can make a substantial profit doing that with very little more than your time invested. Number three, and this is much harder. But you can wholesale people getting started, can find wholesale deals, even if they’re not ready to be chip and Joanna Gaines yet and do a beautiful restoration flip, or start in single family rentals, I’ll tell you what I probably wouldn’t do. And people often have to learn on their own. And that is try to build a stable of 50 100 200 single family homes, it’s very, very hard to not so much to build it. But to maintain a group of homes like that even if you have great property managers, it’s really hard, it’s much easier to get 100 unit multifamily than 100 single family homes as you can imagine,

Neil Henderson: 45:08

well, because eventually, as a good friend of mine talks about music, eventually, the phone call is eventually going to come to you. Even if you’ve got a property manager, the buck is eventually going to stop with you. You’re the property owner, and you’re the only one you can really count on. And so even if you’ve got a great property manager, that property manager could die, that property manager could retire a property manager could develop a drug problem, right now you can become lower on their priority list, you know, just eventually you’re going to be the one doing it.

Paul Moore: 45:39

Right? It’s absolutely true.

Neil Henderson: 45:41

Well, listen, Paul, we could talk for another hour, I’m sure. But you’re a busy guy. We’ve got four year olds to take care of. All right. I’ve really really enjoyed this and Brittany, Brittany did to Brittany had to step away to deal with the four year old but it’s been great talking to you. Hopefully we can do this again sometime.

Paul Moore: 45:58

It really has Neil, thank you you so much. I wish you the very best. It’s really been an honor to be on the show. Thanks.

Neil Henderson: 46:04

Alright. Thanks, Paul. Okay, well, that was Paul more. Paul, such a great guy. I was really wonderful to get to spend some time with him.

Brittany Henderson: 46:13

Yes, definitely. I enjoyed learning about all the other things he was doing. Now I like obviously talking about the real estate piece. I think it it’s much more interesting when we get into sort of the peripheral part of it.

Neil Henderson: 46:26

Sure. You’re saying Real Estate’s boring? No,

Brittany Henderson: 46:29

no, I’m just saying that like it can be a little bit repetitive. And that’s okay. As I said in the actual interview, that saying the same things over and over again, are important because someone will hear them at some point and that haven’t heard it before. And I think that the extras are more helpful, just like with the failure, you know, chat that we had, and all that kind of stuff I think they make these people seem like are not seem but they make them real people not unattainable.

Neil Henderson: 47:01

Goal. Yeah.

Brittany Henderson: 47:03

Something like that.

Neil Henderson: 47:04

So where would you say how much knowledge Do you think he started off with?

Brittany Henderson: 47:10

Well, I don’t know that he necessarily started off with a ton of knowledge. He kind of he was flipping so that doesn’t really require a lot. It sounds like he’s kind of just assuming Hemet MBA is probably kind of a smart guy, generally speaking, and had a lot of like generalist knowledge and then kind of, you know, funneled that into experiences and learning from those

Neil Henderson: 47:34

experiences. Yeah. He mentioned using a he did sign on with a mentor. Yeah. Once you decided to go into multifamily spent, he said about $25,000. On the mentor. Yeah. I’m actually going to go with like three to six years. I think he was like, really? Yeah, I think he was pretty well educated. Going. He had a lot of business success experience. Yeah. You had experience running his own business. It wasn’t just you decided woke up one day and decided real estate?

Brittany Henderson: 48:08

Yes, yes, definitely. And I he kind of mentioned or insinuated that that path isn’t necessarily necessary.

Neil Henderson: 48:19

He did. He actually he did. He talked about that quite a bit. He said, he said, tends to kind of think that people who are, you know, maybe trying to build up one house at a time and buy the single family home and the duplex and then the quad Plex and move out. He sort of felt like you’re better off just sort of jumping right into commercial real estate.

Brittany Henderson: 48:39

Yeah, yeah. or jump into what you’re interested in. Just find that mentor that person to help you take those leaps. Alright, so money. We didn’t really talk about specifics on money during this interview too much. As far as like what he invests. How much money does it require to start it this? Yeah, he was complicated, because he started off with quite a bit of money very long with the sale of his company.

Neil Henderson: 49:08

Let’s talk about what like a fun a bond fund. Yeah, how much do you need? And one of those really do anything? I would say? Most of the more that would probably be dependent on the individual operators, the sponsors of the syndicators that you’re working with? And I would say, as a general rule, most of them would want you coming with at least $500,000. Okay, so if Paul’s primary thing if Paul just had his own money, and he wanted to just invest with us indicator, that’s a that’s a different ballclub is probably talking them about 50 to $100,000. And he even mentioned that at the end. But if you’re somebody who wants to build a fund, a semi blind fund, like Paul has, I would say probably $500,000 is going to be a minimum. Okay? How much time as you recall how much time he’s so he was working on this,

Brittany Henderson: 50:01

know, he works a full time job with this. And I will mention that he also, especially because he’s doing a fund, even if he was working as us indicator, he is basically building a thought leadership platform, correct, which increases the amount of time that he is working on it. So if that’s not really what you want, within your real estate investing to be a thought leader, then that could maybe go down depending on what you’re doing. Now, if you want to run a blind fund, you sort of do have to have a thought leadership platform, or at least a business platform, which nowadays, a business platform is essentially a thought leadership platform, whether you’re Nike or you know, a shop on the corner, you tend to have a social media presence and different things that help you market. So I guess it just maybe depends on how you’re doing it. But he it’s a full time job. Yeah, it’s a full time job.

Neil Henderson: 50:56

location. Do you think this is the kind of thing where he could do anywhere in the world?

Brittany Henderson: 51:01

Oh, yeah. Yeah, I think especially once you build the relationships with the different operators, when you I think, if you’re, you know, obviously, you’re buying, doing property stuff in your geographic area, or geography as he was calling it isn’t the United States, then you need to, like establish those contacts in the United States before you start traveling the world. Or you’re not going to, but like once things are established, it sounds like it’s pretty location, it varies depending on where you want to be that where that location would be.

Neil Henderson: 51:35

Well, he sort of talked about he that he’s not really tied in big by geography. He’s primarily focused on finding the good sponsors, and then letting them

Brittany Henderson: 51:46

they worry about that. They’re worried about the Joe. Yeah, yeah. Like I said, Really? What I mean, is that he couldn’t find these operators, it’s probably unlikely to find these operators and establish a relationship with them. If he wasn’t in the same country, I agree. Yes, absolutely.

Neil Henderson: 52:04

So he has to he has to be in he mentioned that he’s been traveling a lot lately and that T, he has visited several of the investments that they’re working on, and I’m sure he has been sitting down to meet with the operators as well. Okay, well, that was Paul Moore, the operator of dwellings capital. A semi blind real estate fund focused on self storage, mobile home parks and mobile multifamily, and we appreciate his time again.

Brittany Henderson: 52:32

It’s really good talking to him. Neil, find all the information from Paul in Asia.

Neil Henderson: 52:39

And if you like this podcast, we would really appreciate it if you take just a few minutes and leave a review for us on iTunes. It’s really simple to do. Just go to road to family freedom comm slash review for links and instructions. Thanks for listening. We’re doing this all again next week. Until then, safe travels.