In this episode of the REI Marketing Secrets podcast, Phil Moeller shares his journey from engineering to real estate investing. He discusses his initial motivations for investing in single-family homes, the transition to multifamily properties, and the importance of effective property management. Phil emphasizes the significance of local market knowledge, the strategies for finding and financing deals, and the lessons learned from his experiences in both active and passive investing. He concludes with valuable advice for aspiring real estate investors, highlighting the need for clarity, education, and action.
Listen To The Podcast Here
Watch The Episode Here
What’s Covered In This Episode
- In this episode we’ll cover:
- Overanalyzing deals can lead to missed opportunities.
- The shift to multifamily was a strategic decision.
- Effective property management is crucial for success.
- Building relationships is key in real estate.
- Passive investing requires thorough due diligence.
- Understanding the capital stack is essential for investors.
- A growth mindset is important for aspiring investors.
- Taking action is necessary to achieve investment goals.
Connect with Josh:
Instagram: @phil@moellerre.com
Resources
Want to get booked on podcasts? 👇
https://realestateinvestors.podcastingyou.com/
~~~
Learn how to master podcasts for business growth 👇
https://realestateinvestors.podcastingyou.com/ebook
Read The Transcript Here
Trevor Oldham (00:01.24)
Hey everyone, welcome back to the REI Marketing Secrets podcast. Today on the show we have Phil Muller. And Phil for our audience out there who is just learning about yourself for the very first time, do you mind just going into a little bit about your background and how you got started in real estate?
Phil Moeller (00:16.588)
Yeah, that’d be great. So first, thanks for having me on from West Central Ohio, married to what my wife, Marsha, for I think 16 years now, we have five kids ages three to, or sorry, ages four to 13. So we’re very, very busy at home. Went to school to be an engineer, got out of that one in the corporate world, quickly realized I didn’t love engineering, went into the business side of the corporate world more, and in about
I would say a decade or so not quite into my career. was like, okay, is there anything else out there? And I was thinking about that, but also we bought a single family house in 2013. In reality, I actually really started thinking about it in 2011. just analysis paralysis and other things that kept me from doing it. The main or the first goal, first objective was because we started having kids around that time. My wife was a hairstylist.
And she had flexible hours, like it was just commission. So if she started to slow down how many hours she worked, like let’s say she didn’t want to work Saturday mornings. Well, if she made, I don’t know, I don’t know what she made on a Saturday morning. Well, let’s just say she made $200 on Saturday morning. Well, if I can buy a house that can replace that income or a couple of houses that can replace that income, maybe she can start to scale back her hours. So our first goal was to help my wife basically work less and be, be able to be home more with the kids.
Trevor Oldham (01:41.036)
Yeah, I like that a lot. find that that’s, I find that not a lot of people start off in real estate per se. It’s almost like you’re working out, you’re working. And that was for me as a passive investor, I’m working in my business and I’m like, I don’t want to be doing this business forever. How can I generate income that’s not coming directly from my business that could potentially replace the income that I’m getting from my business? And similar to the story that you were mentioning with your wife, like when I’m looking at a deal for me, I typically like to invest.
25K into a deal, get about 7 to 8 % return paid monthly. So I’m looking at about $200 a month just to make it pretty easy. And then you start to look over time like, okay, if I get into two deals a year, that’s $400 a month coming in. And then you start to do the math when you’re looking, you know, five to 10 years out, you’re like, okay, this could be actually enough money coming in and replacing that income. But when you’re going through and you’re looking at these different properties that are out there, did you stay?
Local to your area, were you looking at single family rentals, multifamily deals? What was that sort of initial process that you were going through?
Phil Moeller (02:48.012)
Yeah, local, it was local for sure. I worked, I mean, I worked about 25 minutes or so from away from where I lived and there was a small town there. So that’s where I focused on. So I could leave at lunch, go in before work, after work, look at, look at houses at the time and, you know, try to underwrite them and value them see if they made sense. So we started with single family homes. That was, you know, I was very risk averse. So I like people would see me now and probably
Maybe they just have the perception of something different. don’t know. But at the time, I’m still that way. I just understand like how real estate works very well now. But initially I looked at a lot of deals. I didn’t pull the trigger. You know, I probably over negotiated on a couple hundred dollars or just stupid amounts of money that didn’t make, were irrelevant in the grand scheme of things. I, you know, if I probably lost a deal or two over a thousand or $2 ,000 when, you know, over the course of 10 years,
that’s not gonna really impact anything. So I just really overanalyze things early on. But when we bought the first single family house in 2013, I started, okay, rent’s coming in. Okay, I’m paying down the mortgage and I could really understand the different ways to make money in real estate. It just kinda clicked for me. Maybe it’s the engineering mind. I’m like, okay, I need to do this again.
Trevor Oldham (04:08.302)
And I agree with you there on the overanalyzing. Obviously, like I talked about, I haven’t done active, but just being a passive investor, I used to go on Marcus and Milichap’s website and download their offerings. About once a day, I would go find a new property, and that’s where I was practicing underwriting and analyzing these deals. For those listening, I don’t recommend it as the best practice, because you have to sign an NDA. And when you’re signing over the NDA, you give them your phone number. So now all of a sudden, they see someone wants this offering, and then you get…
you would get a call is quite frequently all the time. And when you’re looking at one deal a week, you’re looking at say 20 deals a month. If you’re just looking Monday through Friday, it was a, it was quite a lot of calls coming in. But when it came to these properties themselves, were you self managing? Did you bring in a property management company? Did you wait till you got to a certain unit account where before you, before you even brought the property management company and just curious what that looked like early on.
Phil Moeller (05:03.02)
Yeah, early on it was self -management. So in 2013, we bought our first single family house. The light bulb clicked. I kind of understood how to do it. I understood how to finance it using HELOC, the BRRR method, all those things we could talk about. But I started buying single family houses. And basically for the next four years on average, about every three to four months, I bought a single family house. like not crazy fast, like these people that buy a hundred in the first year, but also just relatively consistent using our own funds. And during that time,
my wife who was working less as we talked about less and less was helping run them. really focused on acquisitions and finding deals, but then I would help set up the systems for the management company. And really is what came to like our next shift in 2017 timeframe. we were having, would say calm discussion and she’s like, I didn’t sign up for this as in I didn’t sign up for like, I’m a hairstylist. That’s what I went to school for. I’m not a property manager. Now she was.
very, very good at it, which was great. But just, you know, some of the stresses that could come with it from time to time. So in 2017, we were like, do we sell we were at 20 or 25 doors at that time? Do we sell these properties? And just say, Hey, like, let’s just continue down the corporate path and do that. Or do we make a pivot? And we talked about it. And we said, Okay, let’s make a pivot to multifamily, where we can start to leverage the bigger management companies and things like that. So that was the plan. And and we
pivoted to multifamily in 2017.
Trevor Oldham (06:33.33)
And on the single fairly renty rental properties that you had, did you still hold on to them or did you sell them and get out of that and then take the proceeds from those to go into the multifamily deals?
Phil Moeller (06:43.232)
Great question. Basically, we have sold probably half of them at this point. Some of them are just so easy to run now. They’re long -term tenants. mean, the ones that have lasted or stuck are the brick ranch, like the single -family brick ranch with attached garages. People stay in there for a very long time, just small gradual rent increases. But they just stay in there. when people, either if people have moved out, we say, okay, let’s just flip this.
fix it up and sell it because we have the equity and we’ll roll that over to a multifamily or if there was a specific deal we had in contract or looking to buy on the multifamily side, we would maybe bridge the gap with a line of credit but then sell a house to recoup it. We did some 1031s from single family to multifamily. So it’s kind of been a mixed bag. What’s really nice about single family that we own 100 % of those is we have that equity there.
You know, it’s not 30 days liquid, but it’s probably 90 to 120 day liquid where we could sell those at any point in time. If we needed some cash for whatever reason, we haven’t needed that. So if it continues to be really easy, our return on our time for those is great between cashflow equity, buildup, principal, pay down, all that stuff. So we’ll just keep them unless there’s a reason for the cash or liquidity, or if someone moves out, we’ll probably say, okay, pay, we’ve done well. Let’s sell this and roll it to a multifamily. that’s kind of single family has been great and provided us a lot of.
flexibility as to what we can do with those.
Trevor Oldham (08:13.87)
Yeah, I like that story a lot. And I find it’s, it’s a common story I find for folks that start off in the single family rental space where you start to accumulate so many units where it becomes to it’s like, how can I make it a little bit easier instead of me owning necessarily 25 single family homes where do I want to keep scaling it to 50 or, or 75 or instead of going off and buying another 10 single family rentals, maybe I go off and buy a 10 unit apartment complex. And I think it’s just a natural progression for folks in the real estate space where
For me as a passive investor, I were to go active, it would be pretty daunting for me to go off and buy a 10 unit apartment complex. Even if talking a fourplex, if I’m not house hacking and I’m managing four different tenants, it seems easier to start off managing one tenant and one house and then maybe gradually adding them up over time. If you could go back to when you’re first starting this journey, would you want to keep it the way that it was where you progressed from the single family rentals to multi -family or would you rather just started
and gone off and buy a quadplex or a 10 unit, a 20 unit from the very beginning. Has that shifted or are you just, did it make more sense early on for you to get your learnings down, understanding the market, understanding how to manage your property before you went off and now you have these 10, 20 units and hiring a property management company where you could learn it all on your own and get that experience before necessarily scaling it up over time.
Phil Moeller (09:38.124)
Yeah. So first of all, I don’t regret how we did it. I mean, I, you know, we could have started earlier. We could have went faster. We could have done things different. I don’t regret it. But if I was telling someone that was, you know, around the age of 30 and wanting to get started, had a little bit of capital where they could invest, how, how, how might you go about doing it? I would still start with a single family. I think I would really just, you just, like I, I talked about a lot of things click. start to understand a lot of nuances of the business where that’s how the financials were.
how to work with banks, how to manage the property, setting up the systems. you know, if you manage one property, set up the systems like you are managing 20 or 50 properties. So I would buy one. Then I would maybe keep an eye on another one, but I’d look to go to four, a four unit next. And then I’d probably go maybe to an eight or a 16, but I’d make sure I’m kind of grounded in each step. I’m conservative by nature. So I’d make sure like I have each step figured out and solid.
And if I know how to do four really well, I probably know how to do eight or 16 really well. And if I know how to do eight or 16 really well, I can probably do 30 to 50 pretty well. Different numbers, different sizes, different personnel strategies, stuff like that. And then, you know, that’s now I’m stepping into the larger 70, 100, 150 unit properties over time. I don’t think newer operators should be jumping to…
you know, really large units, if they’ve just had some courses or not a lot of experience, I think, especially if they’re bringing on investor capital, I just think there can be a lot of exposure to risk. it’s, I think it’s good. And not just for investors for, for an invest for the person, the operator themselves, learning, you know, you can do one, four, eight, 16, you can do that relatively quickly in your, career span. You can do that in a relatively short period of time. So be patient, a little bit patient.
do it right and don’t get stuck, you know, putting yourself in a really bad situation that’ll set you back financially five or 10 years. So I think that’s how I would do it if I did, if I was telling someone how, how to approach it if they were 25, 30 years old.
Trevor Oldham (11:44.398)
Yeah, that’s that’s perfect. And I really like that because I have seen these operators in the space where they I think to a certain degree you go on LinkedIn and it’s almost how to being financial freedom. It’s an easy way to make money. But I would imagine that it’s definitely not as easy as it seems to be out there. I think a lot of people have gravitated towards the real estate space thinking of it as an easy way to get out of a corporate gig where they could go off and buy 100 unit apartment complex or 200 unit or or even
a 50 unit, get a nice acquisition fee and then you get the monthly income coming in on top of that, depending on how you structure your deal and whatnot. I’m more than happy to pay an acquisition fee, especially as a past investor. mean, I’m not the one negotiating the deal, finding the deal, handling the deal. I understand there’s a time and place for that, but I find that these newer investors, they just scaled almost like too quickly where they go from zero units to 500 units within one year and
me being a passive investor, I don’t know if I necessarily want to invest with someone like that, rather invest with someone like yourself, Phil, where you, started small and then you gradually grew over time as you started to get an understanding of how everything worked. And I think if you look at any of these big sponsors and operators that grew so quickly, a lot of them aren’t having a really good time right now. And this isn’t to say that they’re not a good sponsor operator, but they just don’t have those learning experiences of how to have, how to manage tenants, how to run a property management team.
or higher property management team, on what your company does. So I think that’s very good explaining for us. And again, I can just think of so many instances within like the last year or so of sponsors that just grew so quickly and ended up not working out too well for them.
Phil Moeller (13:27.232)
Yeah, I’m, I’m, I’m, look, there’s a lot of work that goes into an acquisition, especially if done correctly. So I think acquisitions are fine. The nature of how we grew our businesses, the first several multifamily deals that we did was myself and another partner. And there was some different partners that came to me with deals and wanted to partner or we, you know, so I have different partnerships, but it was just us. So we didn’t have investors coming to those deals and we didn’t have an acquisition fee. So we just did that work and we were just trying to build.
equity and cashflow over time. And that’s how we did it. Now we’ve eventually gone to where we had a deal earlier this year. We brought in investor capital. It’s going great. We had an acquisition fee. I’ll just say that it also made me like understand acquisition fees for newer investors can be, I think, dangerous because that if people are working for acquisition fees, like if that’s the reason, the main reason is to work for acquisition fee. Like if I get this deal done,
I get this big acquisition fee. That’s true, by the way. People do get an acquisition fee. But if that’s why people are doing it, like that’s the job of the person evaluating the deals is make sure you really understand the sponsor’s intent and are they doing it for acquisition fees? Like how are they going to get paid? Are they going to get paid from the cash flows just on the exit? Like understanding that model is important because I think the fact that acquisition fees are attractive is why there’s a lot of people in real estate that
are finding themselves maybe in trouble.
Trevor Oldham (14:55.83)
Yeah, I agree. I agree with you there. And like I mentioned before, I totally get it. There’s a time and place. You’re the one going out there and doing all the legwork. We just want to make sure that the person is not just putting together these deals. And at least for me, what I can tell within the space is if I see a smaller sponsor or operator and they’re pumping a new deal every month or every two months and just just knowing the current marketplace, maybe it’s a big company. If it’s BlackRock that’s doing it, I understand that you have the resources, but if it’s
Phil Moeller (15:24.268)
Sure.
Trevor Oldham (15:25.654)
If it’s a small operator, they’ve only been around a year and they’re touting new deals every single month. I, it worries me a little bit. And as a passive investor, I just wouldn’t invest with them because I think that they’re scaling too quickly. And I, and I do wonder if they are going out there and just getting that acquisition fee. And then even then it’s looking at, you know, the, the memorandum that they put together is understanding like, okay, what happens to this particular deal? And not to digress too much further, but I,
I know Phil, you remember a Valafire or passive pockets and I think I saw someone in there where they invested in a deal and they didn’t read the PPM, private placement, random. And basically it said something to the long lines of if there’s a capital call and you don’t participate in this capital call, your shares are going to be diluted down to 0%. So they’re forcing your hand and to invest in these deals. So, and they weren’t sure whether or not it was either
Phil Moeller (16:15.31)
Trevor Oldham (16:23.31)
Could it be there’s an opportunity where the deal is going to be 100 % capital loss or do they make it 120 % capital loss by participating in the capital call? So you have to do. Yeah, exactly. You just have to make sure you’re doing your due diligence on the sponsors that are out there. And that’s, it’s really dry to read that to be honest. It’s no one wants to sit there and read the reader.
Phil Moeller (16:31.307)
Right, right.
Phil Moeller (16:40.8)
Yeah, it is. and I, I, but I agree. It’s so important. I think back to just to kind of close out the, you know, a newer sponsor operator that’s scaling, growing really fastly. You know, you question that, okay, do they have the capacity to do the, to like really do acquisitions and underwriting and close deals properly? Or, and are they just attracted to the acquisition fee? But also there’s a lot of work to run these deals and operate these deals properly. And
If you’re growing too fast and you’re taking on a lot of new properties, whether you’re property managing or asset managing, but at really fast pace or their management company that their third party going to is taking on a lot of deals at a very fast pace. There’s so much dependence on the operating side of property management, leasing, marketing, all just your maintenance team, your capex plan. There’s so much operation. So if someone’s growing too fast and they’re not their mindset and skillset,
is not ready for that growth, it’s probably not going to go well. They need to grow their mindset, skill set with their business or ahead of their business, not your business way outgrowing your mindset and skill set. So I think that’s why a growth plan, slow, steady, is probably from an investor perspective, is probably the better route.
Trevor Oldham (17:59.148)
Yeah, it’s spot on and just add one last little tidbit in there. Something I take a look at is when it’s a new sponsor, are they staying in their local market or are they staying say, like I feel if you’re investing, you’re a newer investor. Obviously you’re, you’re, you’re experienced, but say you started in Ohio, then six months later you’re in Florida, then six months later you’re in Texas and Arizona and Georgia and the Carolinas. I how are you, how are you, how do you understanding of all these markets when you only been doing it for six months every year? And that’s something else I, I look at. Do they stay?
in their local market or their, I say local, let’s say three hours of their surrounding area. You know, they have a good idea of what’s going on. And speaking of that, when you’re going out there and you’re finding these multifamily properties, are you still staying local to your area or are you more expanding say into Indiana, Michigan, Pennsylvania, or are you more just staying in Ohio and in your surrounding areas?
Phil Moeller (18:49.868)
Yeah, for us, we’ve been fortunate to really be able to stay pretty local. looking, so we’re like in the Dayton, Ohio and surrounding markets now. Our management company that we’re really comfortable with and have partnered with a lot, you know, is in Columbus, Cincinnati, Indianapolis. So we’re looking for deals in those markets as well. so as deals get a little bit farther away, we’ll third party and if deals are closer to us within like a 45 minute radius or so, we’re self managing those.
So we’ve got kind of gone back and forth on that a little bit, depending on the type of deal and size of deal, because we had some stories, just our capital, but just in 2017, 2018, our first multifamily, the management company was, it did not go well. We had to change management companies, all kinds of stuff. But anyway, we’ve learned a lot from that. So because of that, the markets, like will we slowly expand? It’s just like how fast you grow.
how far you expand out geographically. think you could say the same kind of lessons because I’ve invested in lot of passive deals as well. And if I’m investing a deal in California or Texas or Georgia or Florida, I just don’t know those markets like I know Dayton, Ohio. In Cincinnati, I know, like I’ve been there many, many times, I know that market way better than I do somewhere further away. like slowly building that out, I think is the right approach versus jumping kind of all over.
place.
Trevor Oldham (20:13.23)
Yeah, I like that. I like that a lot. And for the deals that are going out there and finding, and I say like in my local area in New York, I’m not going to get a ton of appreciation on my deals, but I could go out and buy a $200 ,000 for unit and get $4 ,000 a month in rent. And after catbacks and vacancy make a nice month of cashflow, but in 10 years, a property might be worth 225 ,000. So there’s not a ton of, there’s not a ton of appreciation there when it comes to the deals that you’re going out there and finding.
Is it more say a class B property that you’re upgrading? Is it your typical multifamily value ad deal? Is it more cashflow with maybe a little bit of equity? Is it more like the burst strategy where you’re doing that force appreciation on a property? It’s just curious how you’re finding these deals and sort of what your strategy is as a company.
Phil Moeller (21:02.272)
Yeah, our best deals we found is generally direct to the principal, direct to the owner, direct to seller, but we certainly have great relationships with it. You mentioned Markets and Millichap, but there’s other brokers in the area too, and we have good relationships with them. So from a finding deals perspective, just staying connected, being responsive. Hey, yes, I’m interested in this deal. No, I’m not interested in this deal. Here’s why, or I’m focused on another deal, whatever it is. Just being communicative with them when you’re finding deals, I think, is
is really, really important. And then the types of deals we’re looking for is generally first value add. Historically, a lot of deals we’ve done are probably like C, C plus class properties that we can maybe elevate from a C to a C plus, or maybe we can get from a C plus to a B minus, I don’t know. We’d like to navigate more towards B class. We bought a B class and it’s running great. And the nature of the value add can be a lot of different things. I mean, it can be just a matter of
Hey, they really don’t spend any money on marketing and advertising and they’re just not very responsive. They don’t communicate very well. They have virtual showings only or somebody like they’re no one will pick up the phone. So we can do like it’s just the general marketing and sales approach to it. And then of course there’s capital value add exterior or internal. So we’ve done it. We’ve done a mix of them, but we’re definitely looking for value add deals in general B, C class.
C class, by the way, if it’s a C class, we want there to be a bigger lift on it if we’re gonna do a C class than a B class because of just the effort required to flip a C class, I would say.
Trevor Oldham (22:29.965)
Yeah.
Trevor Oldham (22:43.404)
Yeah, that definitely makes sense. And for the properties themselves, how are you financing them? Are you using seller financing? I know you mentioned early on maybe using a HELOC into the BRD method and pulling out the equity. Is it pulling out the equity from some of the single family? I know you mentioned you had raised some investor capital to purchase a deal not too long ago. Just curious how you’ve been able to structure them and really finance them.
Phil Moeller (23:09.482)
Yeah, I mean, so from an equity perspective for the structure is as of late and what we’ll be doing moving forward is unless it’s a smaller deal that we might just take down in house, we’ll allow our employees to invest by the way, which I think is beneficial and says something to our investors like, if we’re willing to have our employees investing in these deals, they’re going to own it, literally own it. They’re going to probably run it really well and we have a great team.
investors and then nothing fancy on the structure. then we typically, if it’s depending on the size of the deal, I like using bank debt to close the deal, repositioning it and then reassessing whether I want to go fanny freddy longer term to get to non recourse, but also generally a little bit lower rate, just less flexibility. in potentially downward trending rate environment, I like to have that flexibility, which is why I use bank and we can get really
just the nature of where we’re at, I can get really, really good bank debt terms. There’s just a lot of competition. And if you’re good operator and you present things well and you have a track record, you can also get good terms on the prepayment. know, rate modification terms, I want those written in right now so that in a year from now, if I want to do a rate mod, I know exactly what that rate is tied to and what I can do. And then once we repositioned it, okay, does it make sense? Do we have enough debt service coverage where we roll it into?
of Fannie, Freddie, non -recourse and knowing what our longer term plan is because of the prepayment penalties and the nature of those types of loans. So generally we close with local bank debt, but then like we’ve refied one or two properties to Fannie or Freddie.
Trevor Oldham (24:49.058)
Yeah, that was something that was always something that was interesting to me was the prepayment penalties and what comes with that. Because I mean, if I pay off my house, then my house is paid off for. But when you start to get into the commercial properties, I mean, I guess it makes sense from the bank standpoint, they want to make their money on the interest that they’re getting. But that was something I thought was interesting, where if you pay off the property early, not to say that you would, but you know, potentially having that prepayment penalty out there, I think that was something that was pretty interesting to me. As you’ve been
growing your portfolio are certain things that you could look back on that you wish you would have known. Now, whether it was hiring a property management company that maybe, let’s just say they just didn’t do a good job. Early on after I graduated college, rented a couple different apartments and I could tell you a good property management company from a bad one just based on my experiences and how they manage things. it maybe how you financed the deals? Maybe it was a deal itself, maybe you overpaid or maybe you…
Thought you got a good deal and it ended up being a lot more work than you anticipated it being just curious some of the learning experiences you’ve had over the last seven to 10 years or so.
Phil Moeller (25:58.8)
How long do we have, Trevor? Look, I’m not gonna deny that we’ve made plenty of mistakes and I think we’ve learned a lot. I management, we’ve gone back and forth on in -house versus third party management. So now any smaller properties that aren’t big enough for like a really good third party professional management company and more local, we’re gonna manage those in -house and we have a great team that does that really well. We built the systems and processes. We use Appfolio, which is a great software.
So from a property management perspective, we’ve learned so much. think, you know, we talked about it, but how you finance the deals needs to align with your business plan. whatever your, you know, whatever, if it’s a value add reposition would like to sell in three, but want to have the option to hold for five or 10, like make sure your debt structure supports your business plan. So critical. had a property that we refinanced three years ago. We paid a pretty big prepayment penalty on it to roll it. It still made sense to do, but I wish we would have had that discussion earlier with the bank.
to maybe negotiated that prepayment penalty a little bit differently, because I think we could have. So, and then, yeah, I’d say those are the biggest things is how you manage and operate is so important. And we’ve just learned a lot how you finance things on finding deals, relationships. Relationships are just everything and building your platform.
around who you are and what you represent. I heard something like, you willing to put your last name on your business? And I was like, okay, that makes sense. And we are, we’re doing that. And it means a lot to me, it means a lot to us. So we’re gonna do things the right way, we’re gonna operate the right way, we’re gonna treat investors correctly, all those things.
Trevor Oldham (27:44.908)
Yeah, that’s spot on. And I know we’ve been talking very much about the active side, but I know you’ve done a little bit of passive investing and I’m just curious how that experience has been. Have you also been a passive investor in multifamily deals? Have you done any other assets? And yeah, just curious how your experience has been being a passive investor.
Phil Moeller (28:04.396)
Yeah. So, kind of the story there is in 2022, you know, we’re, we’re, think we’re self managing and I don’t, I think there’s a property, I was kind of a pain in the, you know what? And we’re like, okay, let’s refinance this. Let’s hand this off and, and then let’s roll some of this money into passive deal. So that’s kind of the nature of how I got into passive investing. And, you know, in hindsight, this is one of those things where maybe like,
The verdict’s still out on how those deals end up. Like I haven’t had to do any capital calls or anything like that on deals, so that’s been good. But time will tell as the market comes back. I’ll just say that our deals that we’ve been managing, been running, even been buying, have been running and growing up and to the right. So I’ve learned a ton from it. We’ve invested in multifamily. We’ve invested in land. We’ve invested in self storage. We’ve invested in mobile home parks. We’ve invested in development deals. We’ve invested
in quite a few different types of asset classes. And I was doing that alongside like with a small group of people that were evaluating deals together. So I learned a ton from them. So again, fortunately, it’s gone pretty well. The cash on cash is just tight right now. We didn’t invest in any deals that have floating debt, which has probably been a lifesaver because of the taxes and insurance and some other things that happen throughout the country. And really just, I learned a lot about
trusting and betting on myself maybe and what we’re doing here and we feel good about it. So that’s how we’ll be focused moving forward. But I would just say be really thorough, really diligent if you are passive investing. You talk about that a lot, you know that yourself really, really well, but just be thorough, especially on who the operator is and their background and track record responsiveness, all those types of things.
Trevor Oldham (29:58.412)
Yeah, that’s spot on and sometimes when you’re online it makes it seem easier than is. Everyone talks about alternative to investing in the stock market. But for me, if I invest in an index fund, let’s just say total stock market index fund, the likelihood of that going down to zero is probably next to nothing because that means the entire economy would be blown up and every single business in America would be out of business. But I know I’m not going to make as much money necessarily there as I would investing.
passively in real estate. But the consequence of that is I could potentially lose all my money investing in real estate. Not that I ever go into any investment deal thinking I’m going to lose all my money, but you just want to make sure you’re vetting the sponsor. Make sure you’re doing your due diligence, making sure that, Hey, if I’m going to have this money tied up for five to seven years, is that going to be okay with me where I could go off and sell some stock and get some cash? I think those are just questions you need to ask yourself as a passive investor.
Phil Moeller (30:51.552)
Right. Yep. And I think it’s important to know the debt structure, the capital stack. Like those things are really important from just to understand the downsides. Like if there’s a hard pref equity group that’s involved in it, you know, and then like what’s the LTV, all that type of stuff, could they force something? Like there’s just a lot of questions to ask and to understand, yeah, about both the operator, the debt structure, things like that.
Trevor Oldham (31:17.964)
Yeah, that’s that’s but on and like you mentioned the capital stack that’s been another area where you have to know like where do you sit with the debt? When are you gonna get paid back? Are you gonna be the last person to get paid back just in the event that? Hopefully doesn’t but the property gets foreclosed on and there’s they get some money out of the property Who’s that who’s gonna be getting paid first and how much so I think that’s an important part of it as well but Phil I wanted to ask you if there is someone that is investing in real estate maybe
They’re starting their journey as an active investor. Maybe they’ve done a little bit of passive investing, looking to get more active. What’s the best piece of advice that you’d give them?
Phil Moeller (31:55.326)
Yeah, I think the two things, you know, two things I would talk about is first get clear on what you want out of it. I’m going say three things, get clear on what you want out of it, clear on what you’re doing and why that’s number one. Number two is have a growth mindset around educating yourself and associating with others. It’s just so important to learn, learn from books, learn from podcasts, learn from others, you know, whether that be a business coach, mentors, whomever, but like,
Try to get yourself in rooms where you don’t know if you belong there because if that’s the case, you’re going to learn from the people around you. They’re going to elevate you. So just having a growth mindset is the second one. And the third one is you got to have the courage to take action. You got to go do it and do that. You know, taking action doesn’t mean I’m going to, have never done real estate deal. Now I’m going to go buy a hundred unit property, but it means go buy a single, you know, just a single family house or go buy a quad.
or go invest a small chunk of money into a passive deal that you’ve vetted really well. Don’t invest your life savings all at once. Take your time and if you do those things in parallel, it’ll also, they all work together. So if you get clear on what you want, you start to educate yourself and then you take action, you’re gonna learn what you liked and didn’t like and you might change what you wanted. Like realize, okay, that’s not what I wanted, I wanted something different and that’s okay. That means you’re growing, right? So just.
Those three things I think have, they’re kind of a continuous cycle of growth that you can get from those. And you’ll probably have success by doing those things over and over again.
Trevor Oldham (33:29.932)
Yeah, I think that’s all spot on advice. But Phil, I just wanted to say I really enjoyed our conversation today. And if there is someone looking to learn more about you or your company, where should they go to?
Phil Moeller (33:41.152)
Yeah, thanks for that. You know, we have a podcast, the Mueller Real Estate and Business Podcast. So excited to have you on as well, Trevor. But the Mueller Real Estate and Business Podcast, you can check us out, our website, molarre .com, LinkedIn, you can find us there. We’ll post stuff there on different social platforms. That’s probably the common one that we like to. So whatever’s easiest for people to go about finding us.
Trevor Oldham (34:06.668)
Awesome. I’ll make sure to include that in the show notes of today’s episode. And again, Phil, thanks so much for coming onto the show today.
Phil Moeller (34:13.014)
Thanks for having me. really appreciate it.
