How Passive Investors Can Be The Right Partner To Win In Today’s Economy

How Passive Investors Can Be The Right Partner To Win In Today's Economy

by John Casmon | Patrick Grimes

Transcript

Patrick Grimes: Don’t buy into the fear-mongering right now. Look for assets that can win in a down market, that can actually grow returns in a down market. Income-generating workforce housing multifamily is one of those, there are others.

Patrick Grimes: Welcome to Multifamily Insights, the show to help you succeed as an apartment investor. Listen in as John Casmon interviews experts to help you find the best places to invest, attract investors, and scale your portfolio. This is Multifamily Insights with your host, John Casmon.

John Casmon: Welcome to Multifamily Insights. I’m your host, John Casmon, and I want to thank you for joining us for another great episode. Now, if you enjoy the show, do me a quick favor and leave us that rating and review so we can hear what you love about the show and how to make it work a little harder for your investing goals. And if you haven’t done so already, be sure to hit that subscribe button so you don’t miss an episode. Now today we’re going to be talking to Patrick Grimes.

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Patrick Grimes: John, I’m excited to be here. It was a pleasure to meet you on the panel when I spoke on economics in Chicago. You did a great job moderating that guy and throwing out all the hard questions. It’s good to finally be on your show.

John Casmon: Listen, it’s great to have you on. I went over your bio at a very high level. Take two minutes and fill in some of those gaps.

Patrick Grimes: Sure. Well, I’m the CEO and founder of Invest on Main Street. I’ve been investing in real estate since 2007 so I’ve seen some downturns, seen some tough times in the market. Came crawling back out of that and I’ve done very low-risk investments in recession-resilient markets ever since. I started single-family and then worked my way up to multi and now we’re a private equity firm. I think we’ve got 500 million in management over 4,000 units and we’re making steady growth and very careful, thoughtful investments in great markets with our investors, and I think things are going really well.

We also launched a alternative assets division to help diversify completely different verticals other than multifamily so we launched a oil and gas side of our business so we are now currently syndicating. I just finished the close of a fund to syndicate 135 oil and gas wells in seven locations in five states. And so working on that extension of our business as well.

John Casmon: I love it, man. Listen, you’ve had some really good experience you just hit on there and talked about adding some alternative funds: oil and gas, other industries. You mentioned that coming out of the last academic downturn you focused more on low-risk assets. Explain exactly how you qualify that. When you say low-risk, what exactly do you mean?

Patrick Grimes: I mean, this is what we talked about in Chicago. You’re talking to a guy who lost everything one time, right? I actually come from machine design automation and robotics background so an exact thing industry and so very conservative. We are very careful and calculated in our motions and steps forward. But I came into real estate guns a blazing right off the bat and I invested in pre-development and non-existing construction. I invested in a hope that we would be able to build a building and sell it or rent it, that there would still be a market there on the other side of it instead of buying an existing cash flow and income-producing asset that’s already there. When the music stopped I didn’t have a seat at the table and I rode that down. I personally guaranteed it also, I had cross-collateralized my personal assets with that which meant a further dive.

And then after I negotiated debt forgiveness on the other side, they actually came after me for taxes on the debt forgiveness. It turns out there’s very risky ways. And the do-it-yourselfers out there doing this, putting properties in their own name, getting loans personally guaranteed when you can do lower-risk investments both financially and legally, which are larger assets that pay for themselves, commercial assets, multi-family, existing construction that cash flow on day one. I put a lot down so that you can allow for vacancies that have been in past recessions and ride it out. And you can do it in locations that aren’t so volatile even in recessions. Houston, for example, it raised and then leveled off and then went up again. Where places like Tucson, Phoenix, it took them 12 to 14 years. Las Vegas, Orlando … For them to recover after that. And so we’re looking at recession resilient markets, been resilient in past markets and downturns and have diversified employment makeups which support that insulation from market volatility.

Lots of industries that are not fleeting industries like healthcare and hospitality. And nothing really big like a tech. San Jose was the biggest loser during COVID. Value, vacancy, rent growth, all of that, right? So you got to be diversified. You can’t be an old-school Detroit, right? So we’re looking for those markets. And the thing is that when you go into the economics of these they can get quite complex, and that’s similar to the engineering models that we did when we were doing machine design. These models can be complex but they’re fairly simple and their understanding, there’s just many facets to them. When you zero in on those markets, those are the ones we chase.

John Casmon: Patrick, when you were doing the developments before, were those single-family developments, or what properties were those?

Patrick Grimes: So I launched into a pre-development so it was a residential single-family development.

John Casmon: Got it. Okay. So just to clarify then. So you were in pre-development building single-family homes when the economy crashed. You had cross collateralized which means that you had secured that with your own personal assets. Meaning that, if something were to happen you would give up your personal assets as collateral, and that ultimately is what happened and that was really what forced you to ride the wave down. As opposed to just having one deal go bad, that one deal really impacted your entire portfolio because of the way the collateral was positioned. Now you focus more on lower-risk deals in low-risk markets. So you talked about maybe Tucson, some of the challenges there, Detroit, some of the challenges there, and looking at a market like Houston, which is a little more stable.

When you look at what’s happened more recently, particularly when you mention Tucson, Arizona, which one of the hottest markets, especially next to Phoenix. Arizona, is one of the biggest markets over the last three, five years. When you compare that to say Houston and Texas has a larger market, give me a little bit more of your insight as you compare those things. What do you think is driving it? It sounds like you feel that maybe the Arizona market or Tucson, in particular, is less I don’t want to say stable but that it’s more susceptible to volatility. But maybe I’ll let you clarify that.

Patrick Grimes: Tuscon has been traditionally very sluggish but those markets have had their boom and bust characteristics over time, it’s just how those markets have been. There’s this departure from California, people moving out there, that drive it. Companies trying to get in a closer proximity will sometimes set up shop there. And back before the 2008, all of that was happening. The latest technologies were LED displays. That was one of the largest manufacturing locations for solar and LED displays was out there. Well, those were just the latest technologies. Other technologies are going there now. But in a downturn people can move those industries out very quickly and Silicon Valley’s experiencing that now, that was the biggest loser of being a high-cost place with a bunch of tech workers. Well, now they’re setting up shop all the places I’m investing, right?

So now they’re calling Phoenix the desert Silicon Valley. They’re just repositioning it to be another market very weighted in a volatile vertical, right, technology. There is some education as well which helps. But not as much of the healthcare, logistics, manufacturing, finance. All the different types of markets that you’re going to want to see that are a little harder that … First of all, you get the diversification across many different verticals and then you get challenges where you can’t move all of them out. And when all of them are diversified across that you have a more steady bedrock of a market.

If you’re going to invest somewhere, you’re going to invest passively with a guy like me. Why not do it when you can see the steady tried and true growth of the southeastern states and Texas, Northern and Southern Carolina, Georgia, Dallas, or Houston and phoenix? We’ve got a bunch of assets in Atlanta. Places like that where we’ve seen more steady growth, we’ve seen quick resilience, right, so you don’t lose it all. It’s about capital preservation, right? Instead of gamble big and lose it all, why not do steady tried and true path, a little more sure bet?

John Casmon: I think it’s really interesting because we always talk about these factors and a lot of times people look at population growth and stay there, right? Oh look, this market is on fire it’s growing. But we have to also dig deeper to understand well, why is it growing and is it sustainable. And you talked about that industry diversification and that is so key because jobs in the healthcare industry, logistics, finance, hospitality, these are jobs that really are recession resistant so they are still there. You can find these in a lot of the markets that you mentioned, particularly in southeast region.

Invest on Main Street coming out of all of the stuff you were doing, losing it all, you are now working with other people with Invest on Main Street. Just help me fill in the gap from being in the financial rough situation that you were in coming out of the last recession to today with Invest on Main Street where you’ve done over $400 million in real estate under your portfolio and 4,000 units. How did you get that going again? And what was the key steps to get you running with in Invest on Main Street?

Patrick Grimes: Well, a little preview at the end, I’ll offer a free copy to your listeners of the book where I tell it all, I tell the whole story. Persistence pivots and game changers. We’ll talk about this at the end but I’ll ship you a free copy of this side because I’m very passionate about sharing my story with people because I like adding value. I’ve been a community builder my whole life. I come from high tech, I’m an engineer, but I’m also a very social individual which is at odds I guess with the engineering background. When I got into real estate, I liked the community of investors just like I like the community of engineering nerds I hang out with. I’m not an engineer anymore per se.

So I got into that space, and I appreciated when I was doing single-family, I was doing everything myself. I was finding the deals, I was working at taking them down, I was putting up all my own cash, and I was renovating them, and I was holding them. And I did that for quite some time. After I came out of the downturn I came crawling back through that. And I was essentially looking for a place to invest my own cash for my bonuses for my engineering business which was going really well at the time. So I found recession-resilient markets, right? Ones where I felt safer bet. I found cash income-producing assets on day one where I could do high leverage, which means low down payment … High down payments so that I would be safer, right? A more assured calculated investments.

And then I traded up from there and I got to know the network of investors as our other active investors like yourself. I started learning that some of them were using other people’s money, some of them were syndicating and they were able to trade upwards. Now with my engineering business taking up the day, times I was moonlighting my real estate career at the time. And it was working, that was the problem, so why stop?

I just realized it wasn’t sustainable. And when I got married I said, “Hey, I got to stop doing single-family” so I started trade. I joined up, spent a couple years pressing a reset button, and went big in commercial, which has better tax advantages, it’s lower risk, securitized by the asset. We’re talking my first multifamily was 86 units so I went from three bedrooms two bath to 86 units and never looked back. By bringing in other investors, not only did I get to hang out with a bunch of excellent people like you, John on the … But now I get to talk and network with a bunch of passive investors, other busy professionals. High-tech doctors, dentist, attorneys. I’m talking to brain surgeon right now and I’m just fascinated by all the stories he has to tell me, right?

But these guys are busy, they need solutions to tax advantages and income. So now I get to be an active real estate investor, I get to be enjoying company like yourself. I get to change people’s lives from a passive investor perspective with fully managed real estate that doesn’t take away their family, friends, and hobbies. In the growth market, it’s very recession resilient. I’ve got a ton of my own money, I’m confident in those. Plus, with multifamily, there’s something really cool that you get to see at scale that you don’t get to see in the single-family world. You’re renovating one home and you get a family in there, maybe you renovate another home you get a family in there. But when you get into a community, these two to 300 unit communities we purchase … We walked to one of our assets when we were doing due diligence, we printed out a stack of unanswered maintenance requests, that was as thick as a ream of paper, and this guy had a 19% bad debt. I mean, people just stopped paying them.

We walked the units and some of them were black mold. This is a little heavier lift than we normally do but it was a C asset, I mean, it wasn’t super bad. There was some black mold, there was bugs, there was foundations, there was leaking. There was a lot of issues where the guy had just neglected and then he lost his building because of it because he became distressed. So we were able to get in there, do the heavy lifting to renovate those. We fixed the security, made it a safer place. We made it a cleaner living experience and improved life experience for the residents. Cleaner, safer, and improved living experience is what we put on all of our decks.

So you get to be a positive, you get to lift these communities up, these people up. You get to see them get the riff-raff out, live safer, happier lives and you get to do it with great people in a really good industry. And so that’s what brought me away, and that was what finally reeled me completely out of engineering. A nerd like me that’s hard because I mean, I was doing stuff for Tesla, SpaceX, Lockheed. Actually, I had two record years where COVID automated assembly test kits. I was living in Hawaii at the time flying out and working on COVID assembly test kit stuff because I was like “Hey, I want to be a part of the solution here.” Full-time real estate is something I’m real passionate about for a lot of different reasons.

John Casmon: Man, I love it. You talked about really just understanding exactly where you were. Using the engineering job and building on that, having success, and then being able to take bonuses, extra income, and using that to invest. And then it’s a key insight. First of all, if you’re in a rough spot or if you lose money, have some bad investments, go back to the basics, right? Focus on the day job, focus on whatever it is you’re really good to create money, and then start from there. That’s a great way to get going. Get some traction, get some wins going but then learn. And the lesson for you was, we need cash flow and assets, we need lower leverage. You focused on deals where you can get more equity going into it and really reduce your risk. From there you started to expand going into syndication, partnering with other people, and just networking and building relationships.

Some really key insights there from going from maybe having some bad deals in those pre-development to getting into single-family ultimately into multi-family and syndication deals, and then making that transition to focus on this holistically. We talked about low-risk a couple different times. I want to just put the final word together here. When you look at low-risk you talked about leverage, you’ve talked about markets. Just give me the context. I know you got to deal right now, you’re working on this, maybe that’s a good example. Give me the context of how you position low-risk on the deals you look for.

Patrick Grimes: In every single one of my decks, master decks, I’ve always said underwritten with an eye towards what happened in 2008, ’09, and ’10 versus what happened in as I said 2015. Now I’m like 2015 through 2020, right? I’m not enthusiastic about flashy returns, that actually makes me take a step back, right? And this is what the panel we were talking about on economics. Oftentimes when you ask the questions to people who have not been in a recession, have not seen the way that the markets will shift, the demand will shift, the economic models break down, they don’t even understand the questions we’re asking. When we look at stress testing, when we look at pressure testing these deals to see what will happen. And we can step into them. From a lower-risk perspective, we got to be about capital preservation, right? Capital preservation means making sure that in a down market the deal keeps on chugging along.

In the stock market, in a down market, you’ve lost half your basis, right? But in our deals, we’re still cash flowing. In fact, during COVID we continued to cash on all of our deals, right? Why is that? How’s that even possible, right? We had some delinquency we vertically managed, we were able to cover more of it and limit the impact, and have more confidence but we focus on break-even occupancy. It means we structure deals. We only invest in places where the vacancies were not 70% in some dramatically affected areas, but the vacancies were 20 or 30%. Or sorry, the vacancies were under 20% in the areas in the worst days, in the darkest days of these markets, right? That means we have 30% plus vacancies allowable in our models, which means we buy for cash flow. We buy so it cash flows on day one, and then if the market falls out that’s okay, we’ll just ride it out.

John Casmon: And Patrick, let me just rephrase that to make sure everybody’s following, right? So what you’re saying is when you talk about breakeven occupancy and 20 to 30% vacancy, you’re saying if the building is 30% empty you are still able to pay all of the bills based on the folks who are there paying, right? That’s what he’s talking about when he says stress testing, and breakeven occupancy, and these things is making sure that the deal at least still works by itself in that worst-case scenario. We all love 95% accuracy, but if it dips to 75 to 80, what does that do to the deal? That’s what he’s really getting at.

Patrick Grimes: And there’s two parts to that, right, and this is where we get deals from. We get deals from individuals that highly leverage, got way too … Their loans were way too much, they didn’t put enough down. The deals were not good enough to put enough down and get a reasonable return, right, so they tried to squeeze every penny out of the deal. So we’ll get deals from distressed owners because they didn’t allow for enough vacancy, or they didn’t allow for enough vacancy, and then something to go wrong. For example, the deal we have right now is we had a 9% delinquency during COVID, 9% of people not paying. Plus, had a building burn down. Well, it’s a double whammy, right? Well, how are you going to survive that, right? Well, we save up. We raise enough capital for the down payment, closing costs, and our capital improvements, and our reserve account.

So we’ll store up six months worth in operating reserves and most stash it away in a bank account. What does that mean? That means even if we hit that 30 plus percent, which either looks like we’ve got 30% of all of our units not paying, or they’re empty, or we’ve just reduced our rents across the board by 30%, right, we still have occupancy. Somewhere in between one of those two, that’s very safe in workforce housing, right, because where you can see construction. But what happens if you have a temporary blip then? Well, you need to be well-capitalized because when a market’s down banks are just not going to give you short-term debt. Investors don’t want to pony up you don’t want them to. You don’t want to do a capital call and be calling people and saying, “We need more” so we save up an extra six months. It’s over a million dollars usually but sometimes two million on our deals.

And that means a temporary financial crisis like a temporary dip, we can ride it out. In fact, we can float the entire property for six months even if we don’t get a penny. One of my partners had a tornado hit and take out one of the 13 buildings. We’re first in line to rebuild because we have all the capital, we don’t have to wait for the insurance company, right? We don’t have to call people and secure it. And we can float our property in the meantime and we’re insured for loss of rents and replacement costs so it doesn’t take us down, we don’t go bankrupt. So the low-risk is first about capital preservation. It’s about giving a reasonable return, what’s called a high-risk adjusted return. That’s how we structure an investment. But you put that in economic-resilient markets, markets that fair well and you buy under market.

And that’s really tough because it’s really easy to buy these brand new flashy objects. It’s really easy to raise capital for these brand new nice looking flashy objects. But you can’t get a good deal on these brand new openly marketed flashy objects so we buy value add ones that need work. The deal we’re working on right now is not unlike all the others, it’s a five-and-a-quarter million discount right off the bat. And the units haven’t been renovated for, just like our other deals, 10 to 15 years. They’re all brown ugly units. And because of that, the rents are between four and 800 below market, which they’re surrounded by properties getting those higher rents with better interiors. Similar in age, similar in size, similar amenities.

We just get to go to work, right? We’re just not going to buy a pretty object you can sit on, we’re going to go to work, buy it under market, go to work to raise that value over two years. Over two years means we slowly did it so we can still cash flow the whole time, we didn’t empty it out. And then now we’ve got all this value in there we return most of your capital to you.

That’s a risk play. Because when we raise the value of the property and then we do a cash-out refi we get your capital to you, your capital’s no longer at risk in that deal. You’re still cash flowing in that deal, but now you can reinvest it and do the Warren Buffet compounding interest, right? So now you’ve got capital into your six three deals and so on. So our investors are looking for us to compound the returns, recession resilient tax advantage. We haven’t even talked about the tax advantage assets. Ways where they can continue to recirculate it and build a diverse portfolio in cash flowing markets. There’s various layers to it but that’s a taste of it.

John Casmon: Patrick, listen, I think the way you’re structuring these deals and making sure that they are low-risk is really brilliant. And kudos to you for being able to take that approach and find these deals. Speaking of finding these deals, how are you coming across these deals, right, because I think everybody wants to find deals where you’ve got $5 million of equity day one. Give us a little insight here on how you’re finding these assets.

Patrick Grimes: Just like walking an apple orchard and eating the apple out of the tree. So that’s part of it. Deal flow is random. Basically what we get is we get a ton of offers coming through. We have lots of partners we’re working with to analyze deals and look at deals. We call up about two to 300 deals. Even then, most of the deals that … Virtually all of the deals that we actually move forward with, they’re either off-market or which we’ve heard of through a lender, an insurance agent, or a commercial broker. Or, they’re a pocket listing of a commercial broker that believes in trusts that we are a closer. Even this deal we’re working on now, and a lot of our … We’re not the highest bid. In fact, we’ll put an offer way below because that’s where our numbers pencil. I don’t care what they’re asking, where does the deal pencil, and we’ll float those ships out there.

Maybe the broker will go off another riskier path and tell the owner to go with somebody else and they can’t close because they’re not strong enough. Maybe they’ll come back to us. And maybe the lender won’t even lend with that guy because he paid too much, right? Typically, it’s well send these ships out, they’ll come back. Maybe we’re the second, sometimes we’re the third. It’s like finding that needle in a haystack and being like “Well, no, throw it back in,” and then somehow it comes back at you and you’re like, “Nope, throw it back in,” and sometimes it comes back at you. Most of the time it comes down to the fact that you’ve got decades-long experience, you’ve got relationships. Our partners that in various regions that we’re investing are very well tapped in and in tuned.

And quite honestly, when I was starting out, I would be visiting brokers monthly and I would be taking them out to lunch only to find out that that day they gave a pocket listing to one of my competitors. I would go over and sit with my competitor and I’d ask him that question, “How are you getting all these deals?” He is like “Look, I have bought and sold and bought and sold and bought and sold with this guy.” He’s like “The only way you’re going to get a deal from him is if you partner with me.” So the reality is there’s a little bit of an old boys club.

But eventually when you break in and you’re working with the right people, the right experience, and you deliver on the brokers because they’re … Providing for their family means they have to be a closer, and that means you have to be a closer. And that means your price that you give them, you can’t just constantly be re-trading and re-trading. That price you give them that’s what you need to hold to. So you need to do that work upfront and you need to make sure that you deliver.

We walk away a lot early. If we submit an LOI and things change … I’ve done red eyes out from Hawaii, landed in Tucson … I’m sorry, landed in Dallas, or Houston, or Jacksonville, and sometimes we just fold. Hey look, we’re not preceding. But once we say we’re in we’re all in, we’re going to make it happen. And I think that’s probably one of the most critical components there.

John Casmon: And you just gave some great advice there. First and foremost, you have to have a lot of offers, right? You can’t look at one deal every two months and expect to get a great deal. You’ve got to look at a lot of deals, underwrite a lot of deals, make a lot of offers. Figure out how you can see more deals, more opportunities. Whether that’s through partnerships, other relationships, make sure you’re having the right deal flow. Second, building those broker relationships. Make sure you’re talking, you’re coming out, you’re meeting with them. Talk to your peers, your counterparts, right? Who are you losing deals to? Figure out what they’re doing. And really just grow from that standpoint.
But the third, and I think this is really, really key, you got to perform. When you have an opportunity, if you get a deal, deliver on what you say. Don’t spend all your time trying to re-trade. If you figure out something’s wrong with the deal or something you missed early on, the sooner you figure that out and the sooner you walk away or you let the broker know, the better it’s going to be. If you wait a month and a half into being under contract before you try to re-trade right before your money goes hard, that’s where you’re going to start to have some issues and develop a bit of a bad reputation. Figure it out as soon as you can. If you’re in the deal be in the deal. If it doesn’t work for you then back out.

But brokers get paid when a deal closes. This notion of trying to just tie up a deal, that’s really going to hurt your reputation if you don’t have the ability to actually close. Take the time now. Build your team, build the resources, get whatever you need to be able to find deals and close on deals. Whether that’s mentorship, partners, whoever it is you need but take the time to do that now so once you get a deal and you find a deal that you like you can actually close and move forward with it.

Patrick, we talked a little about the book. Your website is investonmainstreet.com/book. And I know you said if they use my promo code Casmon then they will get a chance to get that book shipped to them for free so check that out. Investonmainstreet.com/book. I want to ask one more question for you, Patrick here before we go to our round of insights. Obviously, you don’t have a crystal ball and you are I won’t say a pessimist because that’s not fair, but you have a… But your viewpoint is certainly not one that is rosy. You talk about hey, I want to always look at what happened in the last recession and make my numbers based on that. As you progress forward and look at this changing landscape, what advice would you give to investors who maybe haven’t been doing some of the things that you’ve been doing to be protective and focus on low-risk? Is there a piece of advice or something you could share with them that can help them either with deals they are currently already in or deals they’re looking at moving forward?

Patrick Grimes: Well, right now there’s a lot of fear-mongering on the news. In fact, my average investment skyrocketed, it almost tripled in my last deal. The more wealthy individuals are putting larger amounts faster into our investments. They’re investing in inflation-hedged assets, our returns grow with inflation. Interest rate protected assets, our interest rates are fixed, right? Don’t buy into the fear-mongering right now. Look for assets that can win in a down market, that can actually grow returns in a down market. Income-generating workforce housing multi-family is one of those, there are others. That’s actually why I started the alternative assets fund for direct oil and gas drilling. That would be my number one. Unfortunately, what we see is people just sitting on the sidelines with their cash in the bank or clinging onto their IRA or 401k that’s dropped again. They’re just at the wrong table. They’ve been at the wrong table. And if they were to transfer that to a self-directed variant they could start sitting at the right table winning with inflation, compounding interest, and growing cash flowing assets. And I think that’s probably my number one.

My number two would be … There’s a lot of single-family fix and flippers or single-family buying holders like I used to be thinking “Well, I can work my job and I can prepare for my retirement doing the single-family fix and flip and buy and hold it. I write for Forbes by the way, and I’ve got articles on all this stuff on Forbes on retirement accounts and on how multifamily and inflation, about the asset protection. That’s all good stuff if somebody was really interested. They’re on my website and just Google Forbes.

I like to share with individuals, you don’t have to invest in single-family. You can trade using a 1031 exchange as a partner into 300-plus unit large multifamily. Not nearby you because you’d have to be in control but in the emerging markets that are high growth and recession resilient. The second piece of advice would be, the sooner … After slogging along trading time for my family, friends, and hobbies, doing the night shift for my real estate career while this incredibly demanding engineering career doing machines and automation robotics, I learned that trying to control everything, trying to do everything all myself was the long hard road. The minute I partnered up and I trusted with other individuals who had superpowers in other areas than me and we were able to take down larger more sophisticated assets, that’s when life got easier, I had more fun with it, we were more successful, and I was able to escape the 8:00 to 5:00.

One way the individuals like yourself can do that today is just take your single families and 1031 them into partnerships in a larger multifamily and will continue to trade up that asset working for you 24/7. And I think that would probably be the second thing. It’s most common questions that come up when I’m talking to thousands of investors, those are probably the two things.

John Casmon: There you go, Patrick, love it. Again, the website is investonmainstreet.com/book use promo code Casmon to get your free copy right now. Now, if you’re interested in multifamily and you want to review a sample deal you are in luck. We have a special download on our website of a sample deal package. Just go to casmoncapital.com/sampledeal and you’ll also join our mailing list to get tips and exclusive investment opportunities. Again, that’s casmoncapital.com/sample deal. All right Patrick, give me a failure or an apparent failure that set you up for later success.

Patrick Grimes: Well probably when I lost it all in 2008, that definitely was one of many failures. Maybe probably the second failure was when I got close to a multiple $100,000 a year contract in the engineering business and we signed the contract. I was on a celebratory trip to Mammoth, and it was on that weekend that I got a call from … We had an emergency phone call. The owner of the company I was working for got cold feet, got the customer on the line, completely destroyed the relationship and it all came crumbling. And that failure was the failure that I realized I can’t put my financial future in my engineering career I got to take control over it. And I think that’s probably the most powerful one.

John Casmon: Give me a digital or mobile resource to recommend for your business.

Patrick Grimes: I would say the combination of using Asana and Slack would be the most important resources. Being able to use a tool outside of Microsoft where it works with any contractor, it’s using any software and computer, allows us to command and control. That’s probably been the two most powerful tools for us.

John Casmon: Give me the book you’ve recommended or gifted the most in the last year.

Patrick Grimes: Well, gifted the most, obviously, mine because I believe in that content. Other than that. The one thing really sharpened the focus of our company. Second would be traction. That allowed me to focus on the things that would move us forward.

John Casmon: What’s a daily habit that helps you stay focused on your goals?

Patrick Grimes: I run every single morning. Maybe seven days a year that I’m sick or something like that. This morning I was running around that lake right there with my puppy in tow.

John Casmon: All right, love it. All right. Give me your number one insight for investing.

Patrick Grimes: Don’t do the short-term flip thing especially now. When values are waning you need to buy for cash flow, you need to buy for long-term growth, and you need to invest with people who have been through a downturn.

John Casmon: Love it. All right. You are in Orange County now but you were in Hawaii not too long ago so let’s lighten the mood and let’s talk about the best place to grab a bite to eat. And I’ll let you pick. Either the OC or Hawaii.

Patrick Grimes: So in Hawaii, we’re on Oahu and Lanikai. Buzz’s Steak House with the nearest place to us and Obama and Clinton both have a table there with a seat on a plaque. Because Obama’s literally from there. That was probably definitely one of our favorite places. Haleiwa Joe’s out there. There’s a lot of hidden little nooks in those tropical mountains that were pretty magical.

John Casmon: I love it, man. Well, we’ll make sure we put those on the list, and hopefully, we get to check those out soon. I may actually be going to Hawaii very soon here, so I’ll make sure I definitely pick your brain in case there’s some other places I should check out. But Patrick, listen, great insights, man, I really enjoyed our conversation. I love the way you framed up low-risk, and great markets, and what you look for. It’s one thing to understand population growth it’s another thing to dive deep into the various industries and how these industries are impacted when the market changes. Just something to look into.

But just make sure you, obviously, understand and learn from the things that Patrick’s talking about here. But also making sure that when we talk about risk we’re looking at things like not just occupancy and vacancy but break-even occupancy and different factors like that which can have an impact on your deal as well as leverage, and then ultimately your reserves as well. Again, if you want to check out that book that Patrick referenced you can go to investonmainstreet.com/book and use my promo code Casmon. Patrick, thank you again for coming on Multifamily Insights, we look forward to staying in touch, and hope you have a great day.

Patrick Grimes: A pleasure to be here, John, thanks so much.

John Casmon: Thank you for listening to this episode of Multifamily Insights, the podcast to help you become a better apartment investor. If you like this show I need you to do three easy things. One, hit that subscribe button so you don’t miss an episode. Two, leave us a rating and review so we can learn what you love about the show and how to make it better. And three, just chill until the next episode.

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