Patrick Featured on The Weiss Advice Podcast Hosted by Yonah Weiss

Audio Only: Patrick Featured on The Weiss Advice Podcast Hosted by Yonah Weiss

by Patrick Grimes | Yonah Weiss

Transcript

Yonah Weiss: Welcome back to another episode of Weiss Advice. I’m your host as always, Yonah Weiss. Excited to be here today with Patrick Grimes, the CEO and founder of Invest on Main Street. Guys, we’re not talking about Wall Street. Wall Street is been doing some really hard things to a lot of people’s portfolios. We’re going to talk about Investing on Main Street. What is that about and what is up with you, Patrick? How you doing today?

Patrick Grimes: Yonah, this is an exciting thing. I’ve been obviously on listening to tons of your podcasts, watching you and meeting up with you at events, and I know we’ve been toying with the idea of getting on this show together and getting some Weiss Advice out there, and I’m glad that we finally made it happen. This is exciting.

Yonah Weiss: Absolutely. It’s great to finally have you on the show and get in. Hopefully we’re going to dig a little deep. I would like to take the show in a little bit of a different direction than we’ve done most times. If guys, you listen to this, you’re like, oh yeah, we love the show. We love to listen to people’s stories and get in it. Well, Patrick, we’re not going to upset you. Patrick is an amazing story of going from a high paid tech career, doing that still and loving it, and simultaneously investing in multifamily real estate, being very successful in that and building a platform.

But you have a great take, something we discussed last when we met in person in Chicago, about what’s going on in the current environment. A lot of people, I’ve seen it myself, people are hesitant to invest in real estate at this point because there’s a lot of volatility. There’s a lot of things that are just doubtful. What is going to be uncertainty in the market and inflation, recession. All these words that are getting thrown out there and no one really knows what’s happening and no one has a crystal ball, except maybe on the top of your head there. Who knows, but no, seriously.

Patrick Grimes: [inaudible] Rub it and look real close. I’ll tell you.

Yonah Weiss: But in all seriousness, I’d love to get some of your perspective on that, so guys, stay tuned. We’re going to get into, that’s going to be a subject of conversation, but first, please give our listeners a little bit of a background in who you are and what you do.

Patrick Grimes: Yeah. My name’s Patrick Grimes. I am the CEO and founder of Invest on Main Street. We buy multifamily apartment communities, like many of Yonah’s, and we hire Yonah to do our cost segregation for those and provide extraordinary tax benefits. We buy properties in emerging markets with population and job growth, landlord friendly areas where we can buy under market and renovate, call it value add or adding value, make it a win for the tenants, cleaner, safer, improved living experience, as well as the communities that they’re in. And we provide excellent returns to our investors, not high risk returns, ones that potentially double your money, but if you’re interested in the tried and true sure path of low leveraged, fixed interest rates, inflation hedged journey that we can go on together and not lose it all and sleep well at nights, then we’re your guys.

Yonah Weiss: Pretty awesome because everyone’s looking for some way to invest in somehow or another. If you have any money that is, and a lot of people, especially in the circles you run in, I’m sure a lot of the colleagues that you’ve had over the years in these corporations have been high net worth people, people that are making six figures, high six figure income, and want to put money to work besides for their 401k, or maybe they just don’t know that something else is an option. Giving them the education and telling them about that is something that’s paramount, I think, nowadays more than ever.

Patrick Grimes: Absolutely. Yeah, the financial IQ in America is unfortunately weighted heavily towards their 401k plans. Maybe they’ve earned enough to graduate, to build a Roth in addition to that, maybe even enough to do a financial planner. Unfortunately, all three of these put them into what are traditional investments heavily weighted in the stock market, heavily affected by inflation, and they’re riding a ride of every time they watch the news in the morning, oh, what’s up, what’s down. And it’s terrible to do that because in addition to that wave, that’s not tax advantage on the back end, so you’re going to end up in some challenging times.
And it turns out the wealthy in this country are flocking towards the equity markets in large existing construction real estate, because they’re the haven that the ultra wealth have been using for centuries to store their cash in deals structured correctly, low leverage, right markets and tons of debt reserves and fixed interest rates and all these things with the macro and microeconomics in place by experienced operators. That’s where they’re flocking to and unfortunately, it’s the middle class that are scared because of the fear mongering on the news, they don’t know about these options that are tax advantage and inflation has to protect you from rising interest rates, and they’re the ones storing their capital, or leaving it in the stock market, leaving it in bonds and savings where they’re going to lose, now it’s 9% a year.

Yonah Weiss: That’s crazy.

Patrick Grimes: Right? And I feel for that because I didn’t come from an ultra wealthy background. And unfortunately, that’s how I was taught and I had to find my own way through the world, picking up little lamps, shedding my light on different things. And I arrived at this business strategy because it is that long term wealth building plan that I was looking for.

Yonah Weiss: One thing that I noticed, and you mentioned as you show me, I think I’m on your email list and you show me, but also you mentioned this in the [inaudible], you put in a line there in every deal that goes out, in every underwriting of the deal, as how this asset, how this property or investment will hedge against the downturn in the market or something along those lines.

Patrick Grimes: Yep. Mm-hmm.

Yonah Weiss: What’s the exact phraseology?

Patrick Grimes: Well, that was a really awesome opportunity, by the way, to speak on the… It was the economics, considerations for the current economic environment at a real estate conference. And there was a really great crowd there, a lot of good feedback and some brilliant people on that panel. I was honored to be a part of it. But yeah, if you look back at my past, I rode the typical, I came from a high tech machine design automation and robotics background, but then as soon as I started, the guy who is still investing with me in my deals today, who owned the company of the machine design firm said, hey, you got to start invested in real estate soon as you can and as much as you can.

And I went for the highest returning deal possible, pre-development, residential, personally guaranteed everything. I did all my analysis, nerded out on this stuff, and I just rode the ’08, ’09 down. Since I had there, it was fully recourse loan, so they came after me and I was able to avoid BK by negotiating debt forgiveness. But then turns out, the government actually taxes you on that debt forgiveness [inaudible] so I was paying not only credit penalties, but I was paying on actual payment tax to Uncle Sam for the forgiveness.

I’ve seen how those financial models break down and I know how the shifts and the demand can happen during recessions from a consumer or renter perspective, and what markets… There’s data out there to suggest diversified employment, the right kind of employment, job and income growth, how you choose the right location, macro and micro, the right economic cycles, and choose the right kind of asset that actually has more demand in a recession because there are a limited amount of the limited inventory of lower cost housing and how you structure that deal. And so yes, in those, every single one, I said this underwritten with an eye towards what happened in ’08 and ’09, because every year since then, I’ve been thinking, what if in 2019, what if 2020 is the year? What if?

How do we ride this out? How do we get low enough debt leverage? High down payments so that we can get a break even occupancy or an allowable vacancy that allow us to be below where the prior vacancies have dropped in the area, so we can still cashflow through that recession. Raising additional capital reserve so we have tons of money in the bank to survive a short blip, for natural disaster or economic disaster, and that’s happened. Extra million dollars in the bank for the deal we’re just closing on right now. It’s a lot. Lowers your return a little bit. All of those things lower your returns, but it’s capital preserved and safe, and that’s really the idea behind.

Yonah Weiss: It lowers the risk, and I think it answers the doubts and the questions that a lot of investors have. Well, what happens if this forecloses and these kind of things, because they’re not really thinking through the numbers to show that the rent, the cash flow from the rent, will outperform the debt service. And the lenders are only going to be lending on the property if there’s a certain multiple of that debt service coverage ratio, that you can have enough cash flow from the properties that can actually pay the mortgage. And so, having those reserves in the bank and making sure that the debt services is lower to ensure a lower risk investment, yeah, maybe the returns are going to be a bit lower, but again, that’s going to be much safer than just putting your money in the bank or in bonds or in CDs that it’s losing money.

Patrick Grimes: Well, like many things Yonah, it’s not the easy path. I’ll tell you what, my competitors out there that are leveraging it to the hill, putting these huge IRRs out there, north of 20, that are buying the shiniest newest object or doing new construction, man, those subscriptions fly off the shelf. But if they’re pretty, they got great amenities, well, there’s no value to add. They’re razor thin. A little blip in A class unit means they’re not paying their bills. Existing 20 to 50 years old, a little uglier. Maybe you don’t want to go home and introduce it to mom, but you’ll date it on the side, these properties, but they’re the tried and true wealth builders that, hey, Mr. Investor, it’s not the way it looks. It’s the way the numbers pan out. It’s the resilience of the asset. It’s what will drive you to wealth.

And so, we have to work a little harder, find the investors that are willing to look past maybe a 20 to 50 year old building, look past not a flashy IRR, but a sustained long term gaining resilient investment. That will drive legacy wealth over the long term and I think that’s a harder path.

Yonah Weiss: It is a harder path, but it’s like you said, it’s a long term game. It’s not trying to get those fancy and high returns in a short period of time. Even though in the past couple years, obviously we’ve seen some great returns. We’ve seen the market, such an uptick that even properties where we projected very low and very conservatively did extremely well. We cannot project that or predict those kind of returns, so we have to be conservative in the underwriting and make sure that we’re being safe with those risk protections there. And I think having someone like you, who’s gone through that. I mean, having gone through what you went through in the 2008, 2009 downturn, you’re coming from a very different perspective than a lot of these newer syndicators and newer people who are just gung-ho to get out there and jump in and everything’s going to be hunky dory.

Patrick Grimes: And you know what? More power to them. I spent two and a half years when I transitioned from single family to multi-family before I ever got into a deal. And that may be the analysis paralysis, super nerd geek in me, but I was analyzing, analyzing, analyzing, but it is a long, long slog to find the right partners, the right markets, the right opportunities, the right situation to get going, and more power to the people that get through it. There’s always an easier route and I like to ply those people that get deals done, but I want to also caution getting the right deals with the right kind of sponsors.

And the interesting thing on that stage was all the panelists that were talking on economics, we had all been through a downturn. We had had hands on experience on what that even means. When I asked questions to some of the newer guys about economics, they don’t have any idea. They don’t even know what inflation… They don’t understand the questions I’m asking. It takes that kind of a dip for you to really appreciate and understand what is necessary to understand if a deal is good or not good.

Yonah Weiss: It does and it takes that experience. I mean, you said it. It just simply takes that experience. Tell me about Invest on Main Street. Obviously, it sounds like what it is. We’re talking about investing in real estate, on the market, not Wall Street. Where did you get the idea for this brand and this idea to build this platform?

Patrick Grimes: Well, really it has to do with the financial IQ of America being fully weighted in Wall Street, and then all of that came out of the Great Depression, trying to get people back into the stock market and 401ks and incentivizing. But then it became a cash flow business where all these people that manage all these plans get paid a lot of money to keep you there and they don’t practice trading away. They don’t practice selling away. And I get calls from financial planners all the time. They’re like, well, what are you going to pay me if I send you… But their livelihood, it’s their food for their family on their table. It’s like, hey, look, we don’t pay for our investors and syndications. That’s not how we do it. And then there’s no form for that, so just the straightforward Invest on Main Street instead of Wall Street was what we decided to try and be as explanatory as possible.

So far, it’s been… I mean, we’ve got lots of articles on Forbes on a lot of these topics. Asset protection, inflation, how multi families and inflation hedged, how to structure deals correctly. We’ve got a book out, I would love to offer free copy to your audience. The platform is really growing into an educational. Well, we’re doing deals on this side, but I have a passion for helping people because I used to be one of those busy professionals chasing working until I die and constantly I get people on the phone and I provide options they didn’t know they had.

We can help self-direct part of their IRA 401k into a diversified stream of income assets in the emerging markets and safe haven locations. We can help put their cash to work instead of in the stock market. We can help them 1031 exchange their rental properties, like I used to have. Landlording it up all over the place, chasing property managers, dealing with tenants [inaudible] and trash. I have all kinds of people. Well, 1031 exchange them as in partner in our deal or home equity. We have people that, hey, we’ve been listening to these courses and we’re almost done paying down our house. It’ll take 10 more years and then we’ll retire. Well, if they just took a million of that and invested it in several of my deals in a couple other deals and other places, they literally, that couple retired the following year.

And the whole time they had all that equity wrapped up in their property, it was at risk. It could be sued. It could be taken. It was in their own name. There was all this risk associated with this piggy bank they had out there, and now they’re in asset protected, legacy wealth building, tax advantage and inflation hedged assets. Those are the things that will help people and Invest on Main Street, we’ve been growing. We’ve been taking down assets. We have another asset coming up in Austin. We’re finishing out one right now in Atlanta. I’m speaking at the INFiN conference in Seattle this Saturday on wealth building strategies. That’ll be a really great opportunity. And I’m just really excited about finally getting my name out there, as Yonah knows, I’m that keep my head to the grinding stone, never talk to anybody, just get the work done and bang out the investments. But I finally decided, hey, I got to get out there and I got to meet people.

Yonah Weiss: That’s great.

Patrick Grimes: I’m doing that.

Yonah Weiss: I’m glad you did. I’m glad you’re getting out there and providing a lot of wealth of knowledge for so many people out there, and the way that you couched the description of these wealth building, inflation hedged, asset legacy building. People don’t realize what they have sometimes until they’re educated, until they’re given a different perspective outside of their own. I know for myself, my parents, and they won’t even listen to me, but my parents own five or six single family rentals and they’re just sitting on them and they’re a big risk. They’re not really cash flowing very much at all. They have property managers on there. And so, they’re not really doing much. Yes, they have some equity that has built up, they have appreciated over time, but they’re now retired. I’m trying to tell them, you got to put those into some cash flowing assets so you can live off of that and just having them sit there, what happens if there’s a fire? What happens if something happens and who knows what? One day I’ll get into them. One day I’ll…

Patrick Grimes: I’m going to send you two Forbes articles after this that address those two things, the acceleration outside of single family, and the risk associated with that whole model. And if they read them, they don’t, but they’re Forbes articles so at least they’re peer checked and reviewed and credible to some extent.

Yonah Weiss: For sure. For sure. One of these days we’ll get through to them. Anyways. Patrick, tell me, you mentioned briefly the book you wrote. What’s this book that you co-authored?

Patrick Grimes: Yeah, I did a really fun project as part of my, hey, let’s get my story out there and get out of my analytical hermit hole. I joined up with some really cool people. We’ve got Phil Collins, lead guitarist of Def Leppard is in here, right there. Russell Gray, real estate guys. Yonah Weiss. No, he’s not cool. I’m not cool enough to be in a book with Yonah yet. Plus I lost my hair and here I have a wig on, so now I got some nice looking hair. And you’ve got NFL, NBA athletes, coaches, with entrepreneurs, artists. We each did chapters in this book, Persistence, Pivots and Game Changers, turning challenges into opportunities. It is a fascinating lineup of stories from some incredible… I was so excited to be involved in this. It did make an Amazon number one bestseller, and I’m selling it for $990. No, I’m kidding. I love [inaudible]

Yonah Weiss: All you do is put $50,000 into syndication, right?

Patrick Grimes: Right. No, even less than that. Hey, or even more painful. You get on the phone with me and it’s like giving blood and I’ll give you the book to rejuvenate yourself. No, I’m kidding. If you’re interested at all in any of the content that we put out there, no, it’s not a high pressure. We don’t sell coaching packages. I just like talking to people and adding value to your journey. If you go investonmainstreet.com and you can see the book, or you can just set up a meeting with us right there, I’d be happy to, a signed hard copy of this show up, and I bet you these stories will be very interesting to you at the very least. I’d be happy to share that with your audience.

Yonah Weiss: Yeah, that’s awesome. I recognize this format. Kyle Wilson, he’s done a bunch of these. In fact, we had someone else on the show recently that also did a similar book and I’m totally blanking who that was, but they’re great books. They are a lot of stories that just inspire and totally an all star group of people that you got on there with. Kudos to you, and we’ll definitely put that in the show notes. If anyone wants to check out Patrick and all these other awesome people in the book, Persistence, Pivots and Game Changers. Patrick, I want to transition now, we call the Final Four. These are four questions I ask all my guests. First question to you is what is the worst job that you ever had?

Patrick Grimes: Cleaning up chips in my grandpa’s shop when I was in fourth grade and I made eight bucks a week. I mean, I started working young and I worked hard. I like to say the job where I literally had hundreds of thousands of dollars in virtually passive income heading our way from a contract we signed when one of the owners stepped in at the 11th hour while I was on a Mammoth ski trip to celebrate with my brothers and said all the wrong things and then the customer pulled out. And that was the worst and the best because at that moment I realized I can’t let other people in charge of my financial future. I’ve got to persist. Even though I’ve had failures, I’ve got to persist down this real estate path and make it not my side gig, but my primary gig. And that was that pivotable moment there.

Yonah Weiss: Wow. That’s pretty awesome. I mean, it does go to show you also, don’t celebrate before it’s over, right?

Patrick Grimes: Yeah. Yeah. Contract was signed. I was like, holy crap. Wow. Yeah. It’s never over until you’re financially self sufficient and that’s the real thing.

Yonah Weiss: Exactly.

Patrick Grimes: And corporate America will never get you there.

Yonah Weiss: Unfortunately, that’s the case. Second question. What’s a book you’ve read that’s given you a paradigm shift?
Patrick Grimes: Well, aside from my book. Not being cliche, but my father has three masters, or PhDs. And so, I come from that highly ed- More Rich Dad, Poor Dad, to the T situation. That book, and not to be cliche, was what did in a very early sense, affect me. But I think, and more recently, not so cliche would be the book Traction because that one has changed our company and allowed our company to align our objectives and allowed us to scale and get everybody on the same page, beating to the same drum. And even through the mas- I have a masters in business administration and masters engineering, but for some reason that book really just sharpened that focus for me.

Yonah Weiss: Absolutely. No, and that’s been one that has come up quite often on this show in terms of book that has changed people’s minds, at least a few times. I don’t know the exact number, but Traction is one. Obviously, Rich Dad, Poor Dad many, many, many times. Guys, go and listen, go and read or listen to that book. It’ll change the way you look at things. At least I hope so. [inaudible]

Patrick Grimes: But since I’m on the podcast with Yonah, I got to have a shout out for… I mean, because we’re talking on the non-spiritual books because to some degree, Yonah and I, we can have some great conversations. I mean, I’ve traveled the world twice, been to a lot of the countries and I did a whole year of a spiritual [inaudible] through Egypt during Ramadan, and I went to Israel and climbed Mount Sinai, stayed in Buddhist temples in Asia and hiked the [inaudible] Mount Everest. And there has been a ton of spiritual books that I’ve read that have been a strong influence in me. And one of these days, we’re going to have that chat at a deeper level. Aside from that spiritual journey, since we’re on a real estate podcast, that’s the direction that we’ll go.

Yonah Weiss: Well, good. Well, we’ll have to hash that out one time. Next time we meet up. We’ll schedule that in. That sounds like a fun conversation to have. Third question, what is a skill or talent that you would like to learn? And this could be anything.

Patrick Grimes: Yeah. I tend to be an adventurous sports enthusiast. I spent my formative years up in the mountains, rock climbing and back country backpacking, and that’s continued mountaineering, but I developed this affinity for wanting to fly and I did kite surfing in Oahu while we were living there, my wife and I, but I want to pick up paragliding or being a pilot. One of those two, because my father did paragliding for a while. It’s easy, light on your feet. You can just launch off and hang with the clouds for a little bit. And I want to pick up something like that in the short term.

Yonah Weiss: Sounds like a plan. Listen, being a pilot and just getting up in the sky, it sounds pretty awesome.

Patrick Grimes: Mm-hmm.

Yonah Weiss: Very cool. Fourth and final question. What does success mean to you?

Patrick Grimes: Well, I’ve always been a bit of a community builder. As far back as I was always having friends, hey mom, I got a new friend, mom. Even 12 years before COVID, I had a wine road trip I was taking up to this Sonoma County area and anywhere from 30 to 40, 50 people in a bus for three nights and we would go wine tasting for the weekend. I just love building communities. And so, I think that aligning success and having that as a positive impact for my family and my friends is such a critical thing for me. And I’m finding that a little bit in multifamily because we have partners, we have investors and we have residents and we’re being a positive impact on this friends community that you’re a part of, Yonah. We’re on that road together.

Yonah Weiss: A hundred percent. It is an incredible community and I feel grateful to be a part of it and grateful to you for joining me today on the show. It’s been a lot of fun, Patrick, and…

Patrick Grimes: Absolutely. I’m glad we finally made it happen. I know we had several cancellations in there on both sides.

Yonah Weiss: Yeah. There’s been a few back and forth [inaudible]

Patrick Grimes: Yeah. Mm-hmm.

Yonah Weiss: Where can our listeners find you? What’s the best way for them to reach out to you or find you, Patrick?

Patrick Grimes: [email protected] [email protected] You can shoot me an email. You go to investonmainstreet.com. There’s a contact button. Again, or you’ll see our phone number on the site there. Shoot me a call. I’d love to meet you wherever you’re at. We’re not selling anything. Happy to get you on the right path to meet whatever goals you have.

Yonah Weiss: That’s awesome. Well, I hope everyone does take you up on that opportunity and checks that out and gets a copy of the book because everyone needs to be inspired. Everyone likes to see these stories and looking forward to the next time we meet up in person.

Patrick Grimes: Me too, Yonah. Until then.

Yonah Weiss: And to our listeners, thank you guys for listening all the way to the end. Again, you guys make this podcast happen. I’m very grateful to you. And remember, the best advice comes only when you ask.

tax advantaged cash flow

How to Build Tax-Advantaged Legacy Wealth

The Smart Investors Guide to Passive Real Estate Investing

Pin It on Pinterest