TGCI 209: Principles of Investing & Author of Perfect Investment

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Episode 209: Principles of Investing & Author of Perfect Investment

Copy of EP #18 - 2 Guests

Summary

In today’s show, Pancham interviews Paul Moore – founder and managing partner of Wellings Capital, and author of Storing Up Profits: Capitalize on America’s Obsession with STUFF by Investing in Self-Storage and The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing.

Paul began investing in real estate after selling his company to a publicly traded firm. From speculating transactions to going as a full-time investor, the two-time finalist for Michigan Entrepreneur of the Year has launched investment and development firms and has completed over 100 commercial and residential investments and exits!

The ultimate investing rock star is ready to unpack his wealth of knowledge as he explains how he started his investing journey and how he got to where he is today. Don’t miss out as he shares his life lessons, principles, and the perfect wealth-building opportunities to look out for!

PanchamHeadshotTGCI
Pancham Gupta
Screen Shot 2022-09-02 at 1.01.47 PM-removebg-preview
Paul Moore

Tune in to this show and enjoy!

Copy of Quote #00 - 1 Guest

Timestamped Shownotes:

  • 0:41 – Pancham introduces Paul to the show
  • 2:54 – From speculator to being a full-time real estate investor
  • 7:29 – Why he pivoted away from investing in multifamily properties
  • 15:48 – The perfect asset class for him that you can look out for
  • 18:28 – RV parks trends and why they are currently the best investment
  • 23:21 – On applying and learning from Warren Buffett’s principles
  • 28:27 – How his morning routine helped with his productivity
  • 32:46 – Taking the Leap Round
  • 32:46 – Coffee makers and house flipping as his first investments
  • 34:48 – His fears when he first started house flipping in 2000
  • 36:16 – Why his 3 mobile home park investments did not work out
  • 39:04 – Why you should stay focused and invest with the best experts
  • 42:05 – How you can connect and get your free resources from Paul

3 Key Points:

  1. Investing in real estate properties outside Wall Street is one way to build wealth and earn high returns.
  2. There are many asset classes to watch for and invest in because current trends indicate that they could generate a lot of wealth in the near future.
  3. There is a significant increase in the production of RV parks and people who want to go camping thus, investing in RV parks is expected to yield promising returns.

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Read Full Transcript

(intro)

Welcome to The Gold Collar Investor Podcast, with your host Pancham Gupta. This podcast is dedicated to helping the high-paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host, Pancham Gupta.

Russell Gray

Hi. This is Russell Gray, co-host of the Real Estate Guys Radio Show, and you are listening to The Gold Collar Investor Podcast.

Pancham Gupta

Welcome to The Gold Collar Investor Podcast. This is your host, Pancham. I really appreciate you for tuning in today. My guest is Paul Moore, and he is a rock star. Paul started at Ford Motor Company, his career there. Then he co-founded a staffing firm where he was twice finalist for Michigan Entrepreneur of the Year. After selling to a publicly traded firm, Paul began investing in real estate. He launched multiple investment and development companies, appeared on HGTV, and completed over 100 commercial and residential investments and exits. He has contributed to Fox Business and the Real Estate Guys Radio, and is a regular contributor to BiggerPockets, producing live shows, recorded video, and blog content. Paul also co-hosted a wealth-building podcast called How to Lose Money. He has been featured over 200 podcasts. Paul is the author of Storing Up Profits: Capitalize on America’s Obsession with STUFF by Investing in Self-Storage and The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing. Paul is the Founder and Managing Partner of Wellings Capital, a real estate private equity firm.

(interview)

Pancham Gupta

Paul, welcome to the show.

Paul Moore

I am so glad to be here. Thanks, Pancham.

Pancham Gupta

I’m super excited and honored to have you on the show. I first met you physically at one of the conferences, where you were humble enough to give me your book signed by you. The book was The Perfect Investment. It was an amazing book. I still have it. We’ll talk about it. So, I’m super excited to have you on.

Paul Moore

Yeah, I’m so glad to be here as well. I can’t wait to tell you about my journey since The Perfect Investment. It hasn’t been perfect.

Pancham Gupta

I am sure. So, before we get started here, Paul, are you ready to fire up my listeners break out of Wall Street investments?

Paul Moore

I’m ready.

Pancham Gupta

Let’s do this. I like that energy. Like I said, Paul, let’s talk about how you actually got into apartment investing that got you to actually write the book The Perfect Investment and your background, if you will, so that listeners who have never heard of you can know.

Paul Moore

Yeah. So, I sold my company in 1997 through a public firm. I was 33 years old. I had a few million dollars in the bank. I thought I’m a full-time investor now. You know what? After a couple huge losses, I realized I wasn’t a full-time investor. I was a part-time investor and a part-time speculator. The problem is, I didn’t understand the difference. Now I know that investing is when your principal is generally safe, and you’ve got a chance to make a return and speculate things when your principal is not at all safe. You’ve got a chance to make a return. It’s okay to speculate as long as you know the difference. But I believe that the greatest wealth-building opportunities are always to those who patiently invest.

Warren Buffett has been investing in companies since the 1950s. He actually agrees with this, and he’s proven out the model. Because if Berkshire Hathaway lost 99.4% of its value today, it would be equal to the S&P 500, over the same 56 years that Buffett’s been at the helm. So, he’s done okay for himself. Anyway, I got into residential real estate. After doing one commercial deal, I wish I’d stayed in it, but I got into residential. I flipped dozens and dozens of homes. I flipped a bunch of waterfront lots at Smith Mountain Lake in Virginia. I built some homes. I did a small subdivision.

The whole time, I wasn’t really building wealth. I was just doing transactions. I thought, “It looks like the wealthiest people in the world are involved in commercial real estate. How do I get in?” I found out that it was really hard to get in. There’s a lot of barriers to entry. As I talked about in chapter three of the book, that you referenced, it’s hard to get in. Who do you know? How do you get loan qualifications? How do you get a broker or seller’s attention, especially these days? Well, maybe right now, as we record this, it’s a little easier. But the last decade, it’s been really hard. So, I didn’t know any of that. But we ended up building a ground-up multifamily that we operate as an extended stay hotel in the Bakken, North Dakota oil boom over a decade ago. We operated that for years. After that, I decided to stay in multifamily. I eventually wrote The Perfect Investment. That’s how it got started.

Pancham Gupta

Awesome. So, there are so many questions I have there, but I’ll ask you only a few. Quickly, what company was it that you sold? What did you do in 1997?

Paul Moore

So, I worked at Ford Motor Company after my MBA, from ’88 to ’93. Then from ’92 — actually, there was a year crossover — I had a staffing firm. It was also called a PEO, a professional employer organization, that provided payroll, taxes, benefits, workers comps, unemployment insurance, and all kinds of different benefits to employees and owners of small companies to help them with administration. So, that crazy Wall Street — speaking of Wall Street — they went nuts, in ’96, and ’97 and ’98, about that industry. So, they gobbled up lots of companies. One of the companies that went public in ’97 acquired us later that year.

Pancham Gupta

Got it. Then after you sold it, you said a very important thing, that you thought that you were an investor. It was much later, you found out there is a difference between the investor and a speculator. At what point you actually started investing in real estate after you had sold your company? Was it right after? You were like, “Oh, now I have these couple of million, whatever, X million dollars. I’m going to start investing in real estate.”

Paul Moore

Yeah, right when I sold the company, I put some money on Wall Street and some in gold and silver because of the potential Y2K crisis. But shortly thereafter, I did a commercial deal in 1999. Then I dove headfirst into residential real estate in 2000. So, there was about a two-year gap to the commercial deal, three years total, till I really plowed in full time.

Pancham Gupta

Got it. Okay. So, now fast forward, you did the investment. I remember that because that’s in your book, too, The Perfect Investment. I highly recommend readers to get that book. So, you had written that book. You operated. After that book was written, I remember — this is even before the pandemic — that you actually said, “Oh, you know what? It’s no longer the perfect investment.” You shifted your focus away from multifamily. We all know, after the pandemic, the multifamily got that hockey stick appreciation. A lot of institutional capital started chasing multifamily. Since then, I don’t know how much you actually do multifamily. I know you’ve done self-storage and mobile home park. Tell our listeners. I’m curious myself. Why did you pivot away from multifamily when you did it?

Paul Moore

Honestly, there were two reasons. Either one was enough to pivot away from me. But first of all, we didn’t have a good acquisition team. That was just my mistake. I had the wrong person in the wrong seat. He wasn’t able to pull it off. He was just getting broker marketed deals. He wasn’t finding off market deals. So, that was one thing that led us that direction. But what really happened that ultimately caused me to say the perfect investment is no longer perfect — I didn’t mention this in the book, oddly enough. The perfect investment is not perfect if you have to way overpay to get it. I mean, if you buy a Lexus car that you really liked for $60,000, that’s great. But if it’s $600,000, that’s not a good deal. Anyway, I think that’s what happened in multifamily. It started to feel like speculating again. Once I realized the difference between investing and speculating, and looked back at my history of money I made but often lost, as well, I didn’t want to be a speculator again.

So, it started to feel that way. I was in my mid-50s, early-50s, mid-50s. I just said I’ve got to find something different. So, we started looking for asset classes that had a lot more mom-and-pop ownership, asset classes like self-storage, like mobile home parks. Later, we found other asset classes as well. But that’s why we pivoted. But there was a problem. I had never operated. I had 120 investors at the time that were following me, that I knew of. I had never operated a mobile home park, or a self-storage facility, or any of the other asset types we’re now involved in. But I realized my friend, Perry Marshall, wrote a book called 80/20 Sales & Marketing. He’s using the 80/20 principle. He said the 80/20 rule is fractal. Meaning, the top 20% of the top 20% — top 4% in this example — gain probably top 80% of the top 80% of results. I was like, yeah, that’s right. Well, what if we could go out and locate the top 4%? What if we could find those operators that were providing enormous safety cashflow and returns? But they might not be that well-known, because they may not be big promoters. That’s what we did. We started going out looking for them. We effectively went to our investors. We didn’t know if any of them would hang around. We said, “Hey, we’d like to be a due diligence partner for you. As a due diligence partner, we’d like to go out and find the best of the best deals.” Pretty soon we realized, “Hey, it’d be best if we put these in a portfolio to give our investors diversification across asset classes, geographies, operators, strategies, and of course, properties.” So, we started doing that. We’re now on our sixth fund that uses that strategy for investors. We have 600. We just crossed the 600 investor mark this month. We’re so happy that we did this. We don’t operate anything. But we have stakes in all these different assets — including, finally, multifamily again.

Pancham Gupta

Wow. Interesting. So, jumping back into multifamily you think it’s — So, let me ask you about, now that you’ve seen so many different operators, markets, and asset classes gone full circle on multifamily, given that you’re coming back to it, I’m assuming that’s also with some other partners. You’re not operating that yourself. Is that true?

Paul Moore

Yeah, we go out and find the very best operators we can. We partner with them by bringing them equity. We might bring them anywhere from 5%, for example, of the equity for a deal or maybe up to 40%.

Pancham Gupta

Got it. So, given where the market is today, we all know there is a lot of uncertainty with fed pivoting and whether they will start decreasing or increasing the rates further to control inflation. There are two camps to this. I have my own opinion. A lot of listeners may have their own opinion there. So, when you say that you got back into multifamily, like if the cap rates expand from here — even 50 to 100 BEPS — it doesn’t matter what value add you do, right? It’s going to be painful.

Paul Moore

It’s going to be consumed by the cap rate expansion. Yes, that’s true, unless you find an operator or an asset, specifically, that has so much upside that it can overcome the cap rate expansion. That’s all we’re looking for in our business now.

Pancham Gupta

Okay. When you say so much, do you have any objective numbers there that you’re looking for in terms of the upside?

Paul Moore

No, it’s different in every asset class. I mean, I wrote extensively on this in BiggerPockets. I argued. Unlike I said in The Perfect Investment book, I said, let’s be honest. If an asset has a 0% cap rate — I was using the extreme just to make a point — it doesn’t matter if you can get it to where it’s operating at 7%, 8%, 9%, 10% by pulling some levers that are within your control. I say within your control. Now, how could it have a 0% cap rate? Well, you know the cap rate is the net operating income divided by the price. If it’s run so poorly that it has zero income, well, I don’t care. What if the income is only, what if the cap rate is 3%, but it should be at 8%? That’s very possible. So, those are some real examples right there of some actual numbers we’ve seen. I mean, we’ve seen assets acquired at a —

Well, let’s put it this way. Here’s an example. Our operating partner acquired a Grand Junction, Colorado self-storage facility. I believe it had $190,000 in income, and the cap rate was really low. But get this. It had 80% occupancy. It should have had 90 something. But it had 80% delinquency, Pancham. Can you imagine that? So, that’s easy to fix in self-storage because we’ve got their stuff. So, he was able to get that delinquency fixed in a few months and get people paying again. Oh, and by the way, he raised the rates 20% or 30% to market level. Before you knew it, that $190,000 in income was in the $400,000 plus range. The value had doubled, if I’m not mistaken. But if you double the value of the asset, you potentially are quadrupling or even more the value of the equity. That’s the kind of deals we like to invest in.

Pancham Gupta

Got it. So, you’re really going after heavy value-add deals, where there is a lot of — could be hairy deals, and there’s a lot of meat on the bone. Okay. I’m going to ask you this question, but you may say this in any which way. What is your favorite asset class, if you have to pick one? I know that you’ve written Storing Up Profits: Capitalize on America’s Obsession with STUFF by Investing in Self-Storage. You’ve written multifamily book, which is The Perfect Investment. You have done now multifamily, mobile home parks, self-storage, RV parks, and all, maybe some more different things that I don’t even know about. What is your favorite?

Paul Moore

Okay. Can I answer it differently? Can I answer what’s my favorite this year?

Pancham Gupta

Okay. You can say that. Then you can say what’s your favorite until now, if you have one.

Paul Moore

My favorite, over 100 years, is multifamily. Because I don’t know how people are going to be storing their stuff in 100 years. I don’t know where people will be living, if they really will live in mobile home parks at 100 years. But I really do believe that the really nice solid apartments built today will still be in operation in 50 to 100 years, I would think. Okay. My favorite over the last 30 years as a whole, I’d say, would be self-storage because of a massive shift, an increase in people’s use of self-storage. We don’t have to go into that now, though we could if you want to jump back to that.

My favorite over the last five years has been mobile home parks. Because 10,000 people a day are turning 65, and 6 in 10 don’t have $10,000 saved for retirement. A lot of those can solve their housing problem at least by getting a mobile home and paying lot rent. That typically averages around $300 to $400 a month in most locations. So, mobile home parks have been my favorite investment over the last five or six years. I think, right now, if you had to look forward 5 or 10 years — of course, I can’t predict 10 years very well. But right now, with all the trends in the US, the way they’re going, my favorite investment at this moment going forward might and likely is RV parks, RV park campgrounds. We can talk about any of those four, if you wish.

Pancham Gupta

Cool. Absolutely. Great answer there. Let me ask you this. On RV parks, why do you think it would be in the next near future, they would be the best investment?

Paul Moore

There’s so much we could talk about here. You want to do another show on this? That’d be great.

Pancham Gupta

Yeah, just hit the highlights.

Paul Moore

There was a pretty significant trend increase of the purchase of RVs from 2000 to 2020. There was already a very significant increase in RV. I believe RV production, it nearly went from 250,000 to almost 600,000 before the pandemic. You had a four-fold increase in workers who worked remotely before the pandemic. You had significant increase in people wanting to get back to nature, other people who really were getting into camping and RVing and all these things before the pandemic. You had the Airbnb model for RVs finally get taking off, hitting into the RV space before the pandemic. Meaning that, somebody could turn their RV that’s used on average of 15 days a year into an actual rolling rental unit, and rent it out 10, 20, 30 times a year. I know people who are buying RVs just to rent them out for a profit. They’re doing that. There’s all kinds of models with that we can talk about. But that was before the pandemic.

When the pandemic hit in April of 2020, a month later, RV usage went through the floor as the whole world was terrified. But within weeks after that, it shut up. New first-time RV and campers increased five-fold in 2020. In a year when most people were hiding in their bedrooms, the RV usage went up five-fold. A record 11.2 million people reportedly have an RV now. But get this, over 9 million people say they want to buy one in the next five years. So, even if RV production and even though RV production can no way keep up with that level of increase, the RV sharing model makes RV parks in incredibly high demand even if they didn’t make another RV.

Destination RV parks have the three types of major types of RV parks we could talk about. They are even exploding faster, because these were basically a theme park getaway, sort of an amusement park built into the RV park. I don’t mean a full-blown amusement park. But I mean water parks and lakes and fishing and dozens of activities. While mom or dad works from the living room or the porch, their kids can be out playing. So, these have just exploded. The problem is, hardly anybody knows how to do them well, except a few REITs. So, the question is, how do you get into that segment? That’s a mouthful, but there you go.

Pancham Gupta

Got it. I’ll tell you this, my personal experience. You can add one person to that list of people who actually tried RV for the very first time during pandemic. The summer of 2020, I actually rented RV for the very first time. I went to RV park, the one that you’re talking about where there was the pool and the lake. You can do kayaking and whole nine yards of activities, just golf. We rented an RV to went to Lake George, upstate New York. There were so many people. It was very hard to get even a spot in that RV park. To just dock our RV, it was pretty crazy. I can totally see why people love that kind of getaway. It’s very outdoorsy, very nature-friendly, and your whole family can go. They can sleep and all that stuff while traveling. Cool. Is that your only focus now for this year, remaining part of the year — RV?

Paul Moore

No, we have our new fund that just opened in June about three months ago. The fund has a cross section of RV parks, self-storage, mobile home parks, light industrial, occasional outdoor shopping centers, and occasional multifamily.

Pancham Gupta

Got it. Awesome. I probably have to invite you multiple times to talk about each asset class separately. This is just an introductory episode. So, let me ask you this question which we were talking right before we get caught onto the podcast. You’re in the middle of writing a book about principles on investing. You took some cues from Warren Buffet and his investors. Can you talk about that book, if you’re allowed to, and your principles that you’re talking about in that book?

Paul Moore

Yeah, like I said, Warren Buffett could lose 99% of his stock value and still beat the S&P 500 over the same period 56 years. So, he’s done something right. There’s so much we could say about this. But he has learned certainly the difference between investing and speculating. He’s got so many wonderful quotes. One really relevant for this time right now is we’ve seen, Pancham. You and I have seen in multifamily and mobile home parks, et cetera, that the rising tide has lifted all boats in these asset classes. But Buffett says, someday, that tide is going to go out and then we’ll see who’s skinny dipping. I don’t want to be a skinny dipper. I figure you don’t want to either.

So, the question is, how do we avoid that? We avoid that by all kinds of other Warren Buffett principles. For example, staying in our circle of competence. He says staying in your circle of competence or hitting in your strong, your strike zone, if you will — the Ted Williams’ strike zone, which we can get into in a minute. Staying focused is key. He actually says diversification is for people who don’t know what they’re doing.

Pancham Gupta

Exactly.

Paul Moore

That was really offensive to me because we have a diversified fund. But then I said, wait a minute. Buffett has 110 plus companies under his umbrella. He has massive diversification. Then I realized what he meant. He’s talking about those operators. He doesn’t want Dairy Queen, who is owned by Berkshire Hathaway, he doesn’t want them to go out and start a paper mill to make paper for the cardboard boxes for Dairy Queen’s products and cups and plastic and straws and all that. Dairy Queen is focused on ice cream. GEICO is focused on insurance, not making cars and all. He’s saying that every one of the operators should stay hyper focused. That’s one of the principles Wellings Capital, my company, believes as well.

The strike zone thing is Ted Williams. He divided up the entire every place a pitch could come in baseball in the 1950s and 60s into 96 strike zones. He said he only wanted to swing if the ball came into 1 of 3 out of 96 zones. That’s where he would potentially hit a homerun. He has one of the highest batting averages of all time. He wrote a book about it after he retired. But Buffett believes we need to stay swinging only in our strike zone. There are so many other things like his greatest rule, of course. Rule number one, don’t lose money. Rule number two, see rule number one. So, protection of principle is the main thing we need to focus on. There’s just so many wonderful, wonderful principles.

Pancham Gupta

Absolutely. I’m a big fan of his quotes. What’s the title of the book?

Paul Moore

Warren Buffett’s Rules for Real Estate Investors

Pancham Gupta

Got it. That’s awesome.

Paul Moore

We got 24 principles and quotes that we’ve turned into chapters.

Pancham Gupta

Wow, that’s awesome. So, I also want to touch on — I don’t know if you still do this. But you have a podcast, How Not to Lose Money.

Paul Moore

No, it’s called How to Lose Money.

Pancham Gupta

How To Lose Money. Yes, How to Lose Money. Do you still do it?

Paul Moore

I did it for four years. Pancham, I think we’ve figured out almost every way to lose money, at least, in the last 30 years. So, we pulled the plug on it. We’re trying to figure out what to do next. But we’ve had 238 wonderful guests who told us how they had pain, suffering, loss of money, relationships, health, et cetera on their way to the top.

Pancham Gupta

Wow. I’m sure it’s in the archives. If someone wants to listen to it, it’s a wealth of knowledge. They can go to iTunes and still listen to you, to any one, or all of the 238 guests that you have had on. So, there is a lot of life lessons in there. It’s a treasure wealth of different stories and things you can learn from each one of them. So, this has been great, Paul. I actually would want to dig into some of these asset classes, but we are running out of time. I’m going to invite you back and talk about that specific asset class and specific episode, to discuss that.

So, I want to ask you one question before we move on to the second part of the show. This is a completely different question from investing. Do you have a morning routine that you follow? If so, what is it? Do you think it attributes to your success?

Paul Moore

Yeah, funny you should ask. I do. I don’t have a specific time. I get up every morning. I really try to set my alarm for exactly eight hours. I used to do 5, then 6, then 7. I realized, what am I doing? The sleep studies — I took that masterclass from that sleep expert, Matthew. I’m forgetting his last name. But anyway, he convinced me I really need eight hours of sleep. So, I’m operating better with 8. My morning routine, I tried to pray in the shower. I tried to make declarations as I’m getting ready in the morning. I usually go out, sit in the sun on the back porch, as long as it’s not too cold. I have a journal, and I have two books I’m working through. I actually journal. I read. I read from the scriptures. I also read from these books I’m going through, and then I journal on my thoughts on those. So, that’s the typical. My goal is to take a solid hour to do that. Yesterday it was an hour and 15. Today it was 45 minutes.

Pancham Gupta

Got it. Wow. It resembles a lot more like Miracle Morning. I’m sure it’s different. The SAVERS routine, that’s what I follow. What are the books, the two books, that you’re reading right now? Not your books. But are you reading other books too?

Paul Moore

Yeah, the pair of books I’m using for my morning time are called The Forgotten Way by Ted Dekker. Ted Dekker has written over 40 novels. But some of the principles in the novels, he pulled out. It’s basically a lot of his beliefs on how the world works. Very powerful stuff. I’m also reading one of his novels right now at night called The 49th Mystic.

Pancham Gupta

Got it. Cool. Thank you, Paul, for sharing all that. We’ll be back after this message.

(break)

Do you ever feel overwhelmed by the thought that you have no time after work and find no time to learn about investing? Do you feel left behind that you are not putting your money to work for you? Do you want to create passive income, but you do not know where to start? If so, I have good news for you. I have created an investor club which I call the Gold Collar Investor Club for Accredited Investors. I will be putting together investing opportunities exclusively for this group. These are the opportunities where I have done my part of the due diligence for you and will be investing my own money alongside you.

If you are interested, please sign up on thegoldcollarinvestor.com/club. I repeat, thegoldcollarinvestor.com/club. I will reach out to schedule a 30-minute phone conversation to discuss your investing goals once you sign up. This can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some cash flow. In case you are wondering what is an accredited investor, accredited investor is someone who has earned more than $200,000 as filing single or more than $300,000 filing jointly for the last two years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million, excluding your personal home. It includes your stocks, 401Ks, IRAs, cars, et cetera—just not the equity in your personal home. If this is you, I would highly encourage you to sign up.

(interview)

Pancham Gupta

So, Paul, let’s move on to the second part of the show. I call this Taking the Leap Round. I ask these four questions to every guest on my show. My first question for you is, when was the first time you invested outside of Wall Street?

Paul Moore

Well, I could joke around a little bit and tell you about during college when I bought a coffee maker. I’d never tasted coffee, but I bought these eight coffee makers to put around campus at Ohio State University. It was a disaster. Well, no, it’s not true. I made $.50 in total. Somebody asked for a quarter of it back. So, I guess that’s pretty bad. But seriously—

Pancham Gupta

How much you paid for this? Do you remember?

Paul Moore

I think I had like $800 for the machines. They were 10 years old. The problem was — I hope I don’t get sued for saying this. Actually, the coffee that came with them was also about eight years old, and it was freeze dried. I thought it would be fine. But that’s why half of my users, 1 out of 2, asked for a refund.

Pancham Gupta

It’s not a 50% refund.

Paul Moore

It’s true. That’s a true story. That was 1986.

Pancham Gupta: Got it. All right.

Paul Moore: When did I really invest out of Wall Street? I’m going to say, although there were little investments along the way, I am going to say, basically, the first time I flipped a house would be when I really got serious. I pulled my money out of Wall Street, the little investment I had done, and got serious about real estate. That was in December of 2020.

Pancham Gupta

2020?

Paul Moore

No, 2000. What am I saying? It was December 20 of 2000.

Pancham Gupta

Okay. Got it.

Paul Moore

What time is it now?

Pancham Gupta

I’m like, what? I think you’ve mentioned before that.

Paul Moore: That’s so funny. December 20 of 2000 for the record.

Pancham Gupta

Got it. Awesome. Let me ask you this. Not for the coffee makers but for this one that you did in 2000. Did you have any fears that you had to overcome when you invested in that?

Paul Moore

Yeah. So, we had heard about fixer uppers as they were called at the time. We should have had a lot more fear. If we didn’t know more, we’d have been a lot more afraid than we were. But basically, the house was sold on the courthouse steps. We went down and looked in the windows and saw, we heard that the appliances are usually ripped up. It’s usually trashed. We looked in the windows, the appliances were all there. The heating and air conditioning, at least, on the outside was still there. The roof looked like it was intact. We could see in all the windows and everything looked perfectly broom swept.

But we were still afraid. What was wrong? What if the water pipes didn’t work? What if the electricity didn’t work? What if the heating and air didn’t work? What if the roof really did leak, and we just couldn’t see it? So we had fears like that. I paid cash for it. It was $33,000, I think. All we did is paint a few rooms and put it back on the market three weeks later with a ‘for sale’ by the owner sign and sold it for $65,000. We thought this is easy. Of course, we lost money on two of the next four houses. But we went ahead and did about 50 or 60 anyway. We had a great time.

Pancham Gupta

That’s awesome. Cool. My third question, can you share with us one investment that did not go as expected?

Paul Moore

So, you have an hour or two or what? I’ll tell you this. Okay. Since we’re talking about mobile home parks, let’s talk about my worst investment. My worst investment — though there’s been several, honestly — I invested in four different mobile homes over the years. Three turned out to be disastrous. I can tell you that one was actually on a piece of land, on an acre and a half with a creek, way down in the mountains, in the Blue Ridge Mountains of Virginia. We took a year and a half, because we didn’t know what we were doing, to remodel this almost new doublewide and get it into perfect shape. Then we had a hard time selling it. So, we put it on a lease to own. Well, the lease to own tenant was fantastic. She was supposed to close and buy out the lease in three years. But in three years, she didn’t have a credit score that would work. So, we waited till four, then five, then six, then seven, eight. We were just getting a regular stream of payments from her. So, we thought this is a pretty good rental. Then we didn’t hear from her for a while. She didn’t make a few payments. I called her. She said, “Yeah, I moved back home. My boyfriend and I broke up, and we subleased it to somebody on Section 8.” I said, “Wait, what?”

I didn’t even know how bad that really was. So, I drove down there, an hour and a half into the mountains. I don’t know what happened, Pancham. But I know that this drama involved a dog or dogs. It involved children. It involved alcohol or alcoholics. It was an absolute mess. This place was so trashed in just a few months she had subleased it. The people were brutal. They had destroyed everything, left horrible things on the floor, and then stolen the appliances, and left it standing open. I had to haul it away to a dump and sell the land for $15,000 instead of closing on it with her for the $60,000 we were contracted for. The problem is, the second and third mobile home went much the same. So, I highly recommend, people, do not invest in mobile homes. But all day long, I recommend leasing dirt and infrastructure through mobile home parks.

Pancham Gupta

That’s quite a story. You do these things and you learn, right? That’s the name of the game. So, my last question for you is, what is one piece of advice would you give to people who are thinking of investing in Main Street that is outside of Wall Street?

Paul Moore

So, I’m going back to Buffett here. I’m talking about, again, investing with experts. I do not believe, after years of trying it and watching literally hundreds of people or talking to hundreds of people who have tried it, I don’t believe most people can be experts in multiple things. I mean, let’s take Michael Phelps, the greatest Olympian of all time. When Michael Phelps was a kid, if he would have set his sights on 23 gold medals, he might have thought, “Well, to get 23 medals, I’m going to have to be good in the high jump, the long jump, the pole vault, the shot put, the javelin, the 200-meter, 400-meter, 1000-meter run, whatever they do, and the pool.” But he didn’t say any of that. He said no, I’m going to hyper focus. He is speaking of morning routines. His routines are epic and legendary. He knew at 6:03 AM, every single day, seven days a week, exactly what he would be doing at that moment every single day. He hyper focused and he became the greatest Olympian of all time, winning 28 total medals over five Olympics.

Well, I would say this, if he would have diversified, we never would have heard of him. But he hyper focused, like Buffett said we should. But here’s the thing, we got to watch the Olympics and see all kinds of other people from our country went in all kinds of other sports. So, we, as Americans, got to enjoy the labors of all kinds of experts, hundreds of experts who focused really well on their one thing.

So, my advice would be do the same. I do not believe you can — in general, I don’t believe most people can hold down a career, a family, a social life, a retirement, and invest in real estate on the side. I think it’s okay to do that. I think you can do it if you want to have a handful of rental homes, but I think you’ll eventually regret it. Almost every single person I talked to who tries this makes some money along the way and gets exhausted dealing with toilets, tenants, and trash. They realize some of these doctors who are making, let’s say, $400,000 a year, they might make $10 an hour dealing with the plumbing, or the phone calls, or the painters at their rental unit. Does that make sense for him? My advice after saying all that is to find the best expert you can, and invest heavily with them. Trust them to do the heavy lifting, especially if it’s in real estate where there’s so much potential cash flow, appreciation, and tax benefits.

Pancham Gupta

Awesome. Awesome advice. Thank you, Paul, for your time here. How can people connect with you if they want to reach out and learn more about your company, on what you do?

Paul Moore

I said at the beginning, Pancham, that I spent years wondering how to get involved in commercial real estate. I think a lot of other people wonder where the on ramp is as well. So, I’ve written an e-course, an e-book, and an audio, an audible, called Investing in Commercial Real Estate. You can get that by going to my website, which is wellingscapital.com/resources. You can get that and some other e-books on storage, mobile home parks, and other investing topics there.

Pancham Gupta

Awesome. Thank you for sharing your time and your knowledge, Paul, here with us.

Paul Moore

It was great to be here, Pancham. Thank you so much.

Pancham Gupta

Thanks. Thank you for tuning in today and listening to Paul’s amazing story. He is a rock star when it comes to investing. He has done a lot of investing. If you have, I would highly recommend his books to you. Definitely check them out. If you have any questions, do not hesitate to reach out to me at p@thegoldcollarinvestor.com. That’s P—as in Paul—@the gold collar investor.com. This is Pancham signing off. Until next time. Take care.

(outro)

Thank you for listening to The Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com and follow us on Facebook @thegoldcollarinvestor. The information on this podcast are opinions. As always, please consult your own financial team before investing.

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