Recession Resilient Investing: Strategies for Success in Challenging Times

Chris Voss: We have an amazing gentleman on the show and he is coming to us today with his immense knowledge and you’re going to learn about investing and what to do with your money and how to improve the quality of your life and all sorts of good stuff.

Patrick Grimes is on the show with us today. He’s the founder and CEO of investonmainstreet.com, a private equity firm that enhances busy professional’s quality of life by providing tax shielded and inflation hedge passive investments in alternative investments. He is the founder in withholdings that include a general partnership of multifamily real estate portfolio valued at $600 million plus, including about 5,000 units across the southeastern United States in Texas.

He’s been active in real estate investments since 2007. You’re going to learn a lot from him, including purchasing land and distressed assets, renovating them or sorry, stabilizing them. I was thinking about the 2008 thing for a second there, when I went to the destabilization. He’s been stabilizing them for a long-term cash flow, helps investors build wealth through tax advantage cash flow and appreciation while limiting their exposure to market volatility and inflation all in while providing safer, cleaner, improved living experiences for the residents. Welcome to the show, Patrick. How are you?

Patrick Grimes: I’m excited to be here, Chris. I’ve been listening to your show periodically on my morning runs and I’ve enjoyed your guests. Looking forward to it.

Chris Voss: There you go. And now you’re guesting on the show. So, here you are up on deck. Give us your dot-com so people can find you on the interwebs, please.

Patrick Grimes: Yeah, so we have two. We have investonmainstreet.com, investonmainstreet, all spelled out. And then passiveinvestingmastery.com, passiveinvestingmastery.

Chris Voss: And I know you’re doing a giveaway for the Chris Voss Show of your book. Should we get that plugin too right at the start of the show?

Patrick Grimes: Sure, yeah. If you’re interested in, I tell my whole story, I co-wrote a book and I have some other great people. It’s Persistence, Pivots and Game Changers: Turning Challenges into Opportunities. Persistence, Pivots and Game Changers. We got Phil Collen, lead guitarist of Def Leppard, me, NBA, NFL guys on here. It was a really fun. Brian Tracy did the Forward, really fun book to write. Tells my whole story and I’d be happy to send out a signed hard copy for free.

This was more of a mission of giving back for me than it is a profit. Go to investonmainstreet.com/book, investonmainstreet.com/book. Happy to and put in the promo code Chris Voss Show. Make sure you do that and my team will get a signed hard copy out to you.

Chris Voss: There you go. Is it Chris Voss Show with spaces or just one word?

Patrick Grimes: We’ll know what it is. We look at them one by one.

Chris Voss: You’ll be like, who are these people? There you go. Check that out, folks. You can get it. They’re free. A free signed copy too, autographed as well. I charge for mine, so that’s a good deal. Patrick, give us a 30,000 over foot of what you do and how you do it.

Patrick Grimes: Well, I started like many of your listeners, a hardworking professional. And in engineering, I did automation and robotics and invested a lot into, called the traditional path, the IRAs and 401(k)s. Didn’t see that getting me where I wanted to get as soon as I wanted to get there. So I started investing in alternative investments including real estate long, long time ago.

And from that, I kind of built a company, Invest on Main Street and Passive Investing Mastery, which educational content platform, where we provide passive investments to investors that allow them to diversify out of the stock market and a little bit of the non-traditional IRA, 401(k) sentiment rollercoaster of the stock market but into other investments which help to do things that are very useful today like inflation hedging and tax advantaged and protects from interest rates, that kind of thing.

Chris Voss: There you go. The state of the market in housing is kind of interesting right now and I’m sure a lot of people are really curious what your thoughts are being the professional you are, and the experience that you have in depth. What are your thoughts on where the market is going, what’s going on? We’ve had some people and we talked to recently about the BlackRock buying a lot of properties up, and I just saw a report this morning that housing starts are now up, so builders are trying to catch the wave of this limited inventory issue that we have.

There’s things going on in San Francisco where they’re talking about taking the downtown area of San Francisco that’s currently losing a lot of commercial real estate investors and emptying out and turning some of those buildings into residential. What are your thoughts on what’s going to happen, maybe what the Fed’s been doing recently? They just had their meeting, et cetera, et cetera. I threw a lot in there, so I gave you a lot to worry about.

Patrick Grimes: I probably should have been taking notes. I have two master’s degrees, so I’m a fervent note taker, but I didn’t bring my number two.

Chris Voss: I’ll fall back anywhere you want me to. I’ll let you just take what’s going on in the housing market. Let’s just take a big-

Patrick Grimes: Well, we really got to rewind a little bit because you as well experienced some pain in the 2009 and ’10 downturn, right, Chris?

Chris Voss: Yeah, I did.

Patrick Grimes: My first real estate investment was actually in 2006 and 2007 and I did trying to get rich quick. I tried to double and triple my money. I was snot nose engineer out of college and I put everything I had into some pre-development, highly leveraged, personally guaranteed. And they raked me over the coals pretty bad in ’09 and ’10.

And so I got a lesson at the very beginning about the cyclic nature of the real estate market and other markets. And essentially the way capitalism is, is we go through these expansion and recession recovery phases and you’ve got to build an investment portfolio as I learned that is the tortoise, not the hare, that can ride out these recessions and win from the upside of the expanding markets.

My entire career when I talk about the book has been around building investment portfolios, which are hedges against recessions that are more likely to win in the upturn but ride out a downturn. And there’s a number of ways that we do that. And unlike how I was in 2009 and ’10 just recovering, trying to stay alive and ultimately losing it all. This time, I have a much more healthy portfolio and I am of the mind that, and we are seeing today with our Recessionary Acquisitions Fund, that there are incredible buys that provide returns like we saw in 2009 and ’10 and you just got to go find them.

They’re the off market, not struggling assets, not buildings that are dilapidated, falling apart. But as you say, there are owners of those buildings, there are the investors that purchase them that are struggling. It’s the distressed owner, not the operators. It’s not the distressed building.

The opportunity is Warren Buffett says, “When people are fearful, it’s time to be greedy.” Now is that time. And I am very much so happy to be positioned this time with the portfolio to ride this out and with the ability to create a fund to pick up, as you say like some larger funds are doing, some of the incredible buys that we’re seeing right now in the markets and we can get into more specifics if you’d like.

Chris Voss: There you go. You guys run, I believe two funds in a Recessionary Acquisitions Fund and a multifamily apartment community is basically people that want to do business with you. They’re looking to invest in your funds?

Patrick Grimes: Right. We actually have a number of funds that we will rise and set depending upon, help our investors build out a more diversified portfolio. We have about 26 properties on the multi-family apartment side. Those are that we’ve acquired. Those are throughout the landlord friendly areas in the southeastern states and a little bit in the Midwest. Most of those are one or two within a single fund. I think the most we have is a seven property fund.

There’s quite a few funds that we’ve put together over the years. The multifamily apartments, we tend to stand up a single deal for and you invest in maybe one or two properties as we pull them out. We do have one now. Those are very different than the investments of even two years ago because now is a very different landscape.

We have the Recessionary Acquisitions Fund, which is more of an open fund where we’re raising the capital to take down properties very quickly that we find operators needing to get out of for their many personal reasons. And we could go through those, but it’s a little bit like whack-a-mole in that fund, where as soon as you see it pop up, you got to hit it hard or else it disappears.

And so that fund is more use the cash heavy to acquire backfill with debt and use the cash heavy to acquire backfill with debt. And then since we made the money on the buy, we do a 1031 exchange forward within the fund to continue to raise our investor’s position. And so it’s really exciting way to build wealth in this recession.

Chris Voss: There you go. There you go. They can take a look at the different funds. This is kind of interesting. I was looking at your website and I think I can quote these without any sort of regulatory issue. These are projected returns we should specify I suppose, but your Recessionary Acquisitions Fund has a 20% annual average return. That’s pretty darn amazing.

Patrick Grimes: Well, like I said, we’re the four… And yes, we can talk about them because we file as a Reg D 506(c) with the SEC, which allows us to openly talk about our investments. And that is actually quite a bit underneath what we’ve achieved in the first four acquisitions using the strategy of the recessionary acquisition fund.

But we like to, as you say, it seems very high, but right now we’re making that return on the buy. We’re not making that return by trying to buy something distressed and work hard to fix it up. That’s kind of value add that a little bit of a buzzword that was in a lot of the real estate deals where you buy something kind of little below market, you renovate over a long period of time, and then you build the yield.

We’re actually making that on the acquisition. We know before our earnest money goes hard, we have a high degree of confidence we’re going to get a large return if half or all of our capital back within 6 to 14 months. And that’s our strategy, and just to 1031 exchange those forward.

It does allow us to provide a lower risk approach, because we’re not hoping for a long-term hold. We’re not hoping rents are going to go up, we’re not hoping values will stay stable. We make it on the buy and then we trade it forward and we make it on the buy, and we trade it forward.

Chris Voss: There you go. The Fed just recently signaled that they probably are done with their federal rate increase that affects mortgage rates, and I think they may have come in for a somewhat soft landing. I think the jury is still out on the commercial real estate things because banks own a lot of that and there could be some issues there.

But for the most part, you’ve probably got a lot of people that, for mine, I don’t know how many people did, but there was a lot of homeowners that bought homes on adjustable rate mortgages back when rates were bottomed out. And they’re probably definitely in distress mode right now. I’ve seen some different reports, I think from the New York Times, where some of these smaller investors that they were, I don’t know what they were up to, but they’re in trouble now because they bought on adjustable rates and stuff like that.

And so it just kind of caught them because when the Fed started jacking those rates, and so there’s lots of different variances out there in the market. What are the benefits out there to real estate investing in investing with a company like yours?

Patrick Grimes: Well, it’s a really good point. Just like many of your listeners, I was once a working professional doing high-tech automation robotics. I worked on the rotating robotics that assembled the rotating part of Tesla’s motors, rockets, solar cells, Lockheed, Boeing. I worked on medical devices and I worked with some of the smartest people, much smarter than me, but some of the smartest people doing some of the coolest things and like them, I also was heavily invested in the stock market or in my company’s stock.

And I was a bit fearful, and I would listen to the fear-mongering on the news about inflation and looming recessions. And I knew that my retirement was all in, in this market. And even the financial advisors just had me more and the things that kept rising and falling with the news. And the benefit is like what I did was I tried to go do it myself back in 2007. I didn’t have any experience and not only… And I bought a land on my own and they came and took it out.

In fact, I was recourse since I personally guaranteed the loan like many people do on their single family home, their own homes. And I did it in my own name to get more favorable debt. They try to come after all my other assets because I cross-collateral. People don’t realize if you go about it yourself, you tend to be cross-collateralized and the asset…

So that is really risky. And if you do the American dream, which is climb the corporate ladder, put in stocks and then become a landlord, then you’re typically buying smaller properties you can control by yourself like I did. And that was what I did after 2009 and ’10, a bunch of single family homes, it was renovating. But I was moonlighting it while doing high tech and flying all over and getting a master’s in engineering and a master’s in business.

I was really good at making money, but I was trying to be really good at being a real estate investor through the night. And it was a big toll not only on my cash flow producing job, but it was a big toll on my family, friends and hobbies. And the real benefit with working with a company like us is you don’t have to do that. We come with decades of experience. You have dedicated acquisitions, asset managers, property managers, and we can pool capital to diversify throughout many different locations.

You get many of the benefits without personally guaranteeing that signing on properties in your own name, limiting your exposure to your invested capital without possible further recourse and you get better deals you wouldn’t have otherwise gotten because we have people scouring thousands of leads, and you can go enjoy your family, friends and hobbies.

Chris Voss: You don’t have to work at 24/7. I’ve got a friend who’s got a couple of rental properties and he posts some of his stuff on Facebook. It’s a nightmare. He’s got to go through the whole eviction process when they stop. He went in the other day and they torn out like everything but the toilet. They torn out the bathroom sink, they torn the handles off, the spigots off the bathtubs and stuff.

And so he’s having to do all this stuff and I’m just like, that sounds like a nightmare. My mother-in-law, she had to evict some people one time and they poured concrete down on the pipes.

Patrick Grimes: Wow, I have not heard that one. I heard a lot of stuff, but you know what? When I found my future wife, that’s when I realized I had to stop the single family moonlighting. In fact, she was there for my very last refinanced after we completed the renovation on my very last rental property. And I said, this is it.

And then subsequently, we got married over the next couple of years, once in California, once in Beijing, and then I was ready to… And high-tech career was really doing well. And that’s when we decided this time we’re going to partner up, we’re going to get into larger assets, we’re going to build a private equity firm and we’re going to scale it where we don’t have to do it all on our own. And that’s when things took off for us and our investors.

Chris Voss: Yeah, that’s good. I see what he goes through and it’s insane. And then the other thing I’ll see is there’s these inspector TikTok videos and they show us some of these owners that are, you’re buying the home from some guy selling it, and the inspectors out there and he goes, “Yeah, look at this black mold job. Hey, you just painted right over it,” and holes in the ceiling and stuff that get covered with paint. And as an investor, you’re like, “Oh, I almost bought that. Wow.”

How do you guys evaluate your real estate deals?

Patrick Grimes: We have a long… First of all, we have a big acquisitions engine, like the Recessionary Acquisitions Fund is like a half dozen people sifting through thousands of leads just to find the deals. And we’re uncovering rocks. We’re not going to brokers, we’re not going to things that are on market, we’re doing direct to owner, medium sized, some large, different kinds of assets across the range.

We do a lot. The foundation of my theory, and I like to use that word foundation, is recession resilience. And it’s always been that way. If you look at, where I went wrong before was I didn’t buy for cash flow. I didn’t buy something that was producing income on day one. If something happened and the market fell, I couldn’t ride it out and I wasn’t buying in recession resilient markets. And you can look at the data online and you can see where some markets swung in 2009 and ’10 took 12 years, 14 years to recover.

Phoenix is one of those, Las Vegas, Orlando. But there are other markets which just kind of leveled out for a couple of years and then started up again like Houston, and some of the southeastern states that tend to be tax advantaged, landlord friendly and legislative friendly. And that means lots of jobs are moving there. It’s low cost of living, people are moving there and even in a recession, they’re still growing. They’re not the big losers like San Francisco and Silicon Valley.

And so you buying these areas where you see them on an expansion curve and the tides rising, a lot less likely to have dramatic vacancies than you are in some of these places that are taking a huge hit during COVID and took a similar hit back in 2009 and ’10.

Chris Voss: I know that the whole middle of America, I think, is doing well. Atlanta, I think, is growing pretty crazy in different places. The big remote work, the big great resignation, all that stuff has contributed to a lot of different places. And of course, people are always looking for inexpensive real estate that they can buy or rent because it’s competitive out there.

Now, what is a 1031 exchange? Let’s talk about this and how are users using this to build wealth? Are you guys a 1031 exchange?

Patrick Grimes: A 1031 exchange is a tool and I’ve actually searched for who made this quote and it turns out, I even asked ChatGPT when I couldn’t find it. Then I asked Google Bard, the AI platforms, the 1031 exchange is the most powerful wealth building tool still available to Americans, but apparently nobody said that. It’s just used a lot. I hope that doesn’t disempower it, but essentially-

Chris Voss: Maybe it’s just so common knowledge. It’s just common knowledge.

Patrick Grimes: Right. But you don’t know it until you know it, then you know it. But the government, and you didn’t mention this earlier, but we also invest in diversified energy funds. And it turns out that like in energy, oil and gas interests as well as the real estate space, those are tax advantaged assets. Why? Because the government wants us to feed, house and energize America. The government actually incentivizes the private sector to do that, and they’ll do that through giving tax advantages.

There are a number of ways, the reason being most of our cash flow from our real estate deals is non-tax for most of our investors. Sometimes their whole investment is a tax deduction. And when we sell an asset, the profit from that sale, if we do a 1031 exchange doesn’t get taxed either. It gets deferred into the next investment. For example, and it’s the same in the oil and gas funds.

We can do little unknown exception to the like kind rule in the 1031 which is in oil and gas interest. You can also exchange forward and defer your profits, which means that instead of… $27 million, we bought a property in Jacksonville, Florida. 10 months later, we sold it for $37 million. It’s a $10 million profit. The government’s going to take half that by the time you’re done.

But if we did a 1031 exchange, which we did, we asked all the investors, “Hey, do you want to trade with us into our next asset?” I think there was 70 investors and a couple of them said, “Nah, I’ve got some family issues. We paid them off.” The rest of them traded with us into Life at Spring Estates in Houston. And we added about a hundred units. We traded up to a larger property and now they’re cash flowing and they didn’t pay any profits. All of the profits that were made in the first deal were exchanged, and now they’re cash flowing on a much larger number. And as long as we keep 1031 exchanging, they won’t have to pay taxes.

And it is incredible because unlike the stock market, everything you sell is immediately taxable. If you do get cash flow, everything’s immediately taxable. So, 1031 exchange is just incredible because you can take a hundred thousand dollars and you can continue to replicate it and increase it in a tax deferred manner.

Chris Voss: And you can do this as a passive investor. You just sit back, and let it grow, and let it accumulate, and let it compound. And that’s brilliant because like you mentioned, one of the problems is anytime if you’re an individual housing investor, you buy a house, you sell it subject to tax. And the power of using that taxed money that you would normally pay to the IRS, you’re now using to build more wealth and accrue more wealth. And of course, you’ll eventually pay them a lot more money but that’s beside the point. What’s the word I’m looking for, you’re…

Patrick Grimes: Compounding interest?

Chris Voss: You’re compounding that. You’re just using that as a tool to move to the next level, and that’s just brilliant and smart. And so people can do that with investing in your funds. Is that correct?

Patrick Grimes: Yeah. In fact, the Recessionary Acquisitions Fund is perhaps the most exciting 1031 opportunity because when you make your return on the acquisition, you buy and you buy quickly. There are assets which the day we closed appreciated for 25%, 50%, 75% more just on the day we acquired it. And then we put up essentially cash for the funds to close on it.

The ability for us to immediately just trade that into another investment without paying taxes and on that next investment within the fund, buy it right and then realize that gain, and then do it immediately again and buy it right and realize that gain. It allows you to rapidly grow your wealth through 1031 exchange. It’s perhaps the most, it’s the coolest implementation of that strategy and it’s only made possible by this recession.

I know that it takes a hit. And I think most people’s real estate portfolios, if they’re not in the growth states, at the very least, they’re either leveling off or they’re subsiding some. But if you’re not investing where the opportunities come in this recession, then you’re not winning. You’re not hedging. Any falls in your stock market portfolio, in your real estate portfolio as the tide lowers, you’re not hedging against that by investing into the upside of the downturn.

Chris Voss: Definitely makes sense to be diversified. There’s interesting things going on in the market right now, but if the Fed has soft landed the inflationary market, et cetera, et cetera, I think we’re always going to have high job demand because the boomers left the job market early in the early resignation and many Gen Xers did too, and they’re not coming back. And so it was purported, it’s been purported for 40 years. I’ve been reading about it forever in the Wall Street Journal about how when the baby boomers left, that we might have some issues with people not having enough workers and stuff.

And they’ve left, and that’s why we’re in this huge demand. And you see companies laying off and it doesn’t even matter. The job growth is still going on. I think the Fed has kind of realized now the way I’m reading the tea leaves, and I used to do this for 20 years owning a mortgage company, reading the tea leaves that they’ve probably soft landed the economy and they’re going to probably keep rates steady.

And then of course as we move to the next stages of this, I think there’s going to be some commercial and bank fallout of commercial real estate and hopefully, much of that’s going to just convert to residential because there is a really tight grip on residential right now. And so I think that will create some interesting opportunities for real estate investing if they convert those buildings and try and get some of these big downtown cities going again.

But the other thing too is if the Fed has soft landed it and we’re cool, you do have a lot of money that’s been printed $10 to $18 trillion I think it is that you’ve got to deal with and the inflationary cost of that. But if they’ve soft landed it, it’s possible they could start lowering the Federal Reserve rate. That’s what I’m getting to. And if they do that, then you’re going to have lower rates and you’ll be perfectly positioned to take advantage of those movements.

Patrick Grimes: Well, yeah. So I follow the economics. I actually talked on a panel recently in Chicago kind of bantering with some other investors at a conference about this. Right now, depending upon how you, I think inflation’s 5% or 6%, and they’re saying that if the down curve matches the up curve, then in eight or nine months we’ll be totally out of this. And I do see that. I do think that they will. They’ve at least said that they would space out any continued upticks because they’re seeing momentum in the right direction, which is really great.

And I think it’s such a good feeling because in some countries, not to get too far off in the weeds like Japan are in the situation where they can’t get out of it, they’ve lost control. And the fact that we still have control over inflation builds that market confidence that we needed, and that we can use the knobs that we have to keep the dollar under control, I think, is incredible.

To your point about commercial, there’s a word commercial used a lot. And I think that it’s important today to break that into its parts that are not equal, because there’s commercial retail like malls, which during COVID took a colossal dive. But then there’s commercial multifamily, large apartment buildings, which in our area, in our markets where people flocked to because we’re in Atlanta, as you said, Texas, Houston, Dallas, Austin. We’re in some Cincinnati, Columbus, we’re in Jacksonville. We’re in north, a lot of cities. We’re in cities where people are flocking to. And while commercial retail was tanking, we were doing amazing. We were doing 5% and 10% rent growth a year, which cut turns out to be very large gains for our investors.

Now what we’re going to see now is to your point, commercial office tanked. But within the commercial office sector, you still have some essential needs. Like medical office buildings, they’re not going to go anywhere.

Chris Voss: Yeah, they’re not, not with the boomers retiring.

Patrick Grimes: But I’m a perfect example like to your point because my wife and I have got to the point now where we have freedom and we live in a beautiful place. But my wife came and said during COVID, hey… She does production management for feature-length films, by the way. And they all went home like overnight.

And she came out a week or two later and said, “Hey, I think we should move to Hawaii.” Two and a half weeks later, we were part of the exodus. We actually packed up and landed in Lanikai on Oahu. And my wife was tearing while we watched the sunrise over the Moku Islands. It was pretty fantastic.

But there’s so much of that going on to your point in the commercial office space. It’s not CRE. It’s not commercial real estate overall. There are these individual and the commercial office space. I think what the numbers I’m looking at is there’s 20% to 30% in some areas, and it’s not equally distributed of course, but in some areas where that’s their occupancy. And so there is a trillion dollars in real estate debt that is up for renewal if it was a short-term debt, just in the next year.

There will be an extraordinary fallout in commercial office, and there is nobody to replace those. For example, where my wife worked at Dreamworks, when they left, very few came back. She’s now at Nickelodeon actually. And now, a lot of people are remote and they’re working remotely from just a server room.

The office space emptied out and now they’re working from… They’re positioned locally is just a CPU in Iraq. And now they’re all working from home throughout the United States, and that is proliferately the case. There’s lots of companies trying to claw them back. The ones that have, have not done so well.

Chris Voss: Yeah, they’re not doing well.

Patrick Grimes: To your point, I do think an incredible opportunity can be had in an office space conversion to residential. There will be a lot of that. And I think it’s potentially a really good opportunity. I’m not currently looking at that right now because I think it’s highly variable and speculative exactly how much you can populate those, especially in cities like San Francisco. The people just aren’t there. The quality of life isn’t the same. It’s not necessarily if you build it, they will come. The city is not the same city.

Chris Voss: Yeah, it’s definitely, and that’s what I was referring to earlier, so I’m glad you made that distinction, is the big tall commercial real estate building for offices and stuff. And I’ve been watching how they’ve been talking, reporters are working that beat down there. They’ve been talking about converting those buildings. But you’re right. Will people stay there? Will people come? It’s interesting.

It’s interesting how remote work has just changed everything, but I think it’s been good for residential real estate, as you say. People are moving about the country trying to find higher quality of life rather than places such as San Francisco. I hate to kick San Francisco around, but I mean it is what it is. I saw the rents go through the roof there before COVID.

And so it’s great opportunity for everything that’s going to go on and hopefully, the rates won’t still keep going up and all those things, but people have to live somewhere. That’s the one thing that used to be a constant in the mortgage business. We always used to say the last thing people use default on is their home because they got to live somewhere. You got to sleep somewhere at night.

Patrick Grimes: I couldn’t agree more. However, during COVID, it’s so funny because people for the first time didn’t have to pay their rent checks. And it’s a good thing that… To ride out recessions, we have fixed our long-term interest rates. So I’ll be by so that we don’t have to deal with the fluctuating interest rates. We also do low leverage so that we can cash flow at very, very low debt. We put up a lot of capital, lowers our investors’ return but it gives us protection and that’s kind of our foundation.

But a lot of people stop paying their rents because the government was paying during COVID. And then when the government stopped, they still stopped.

Chris Voss: Really?

Patrick Grimes: Yeah. It’s rough on us because we’re having to evict now. And that did result in where you could usually evict in a month. In Texas, couple weeks or in a month, in month and a half in Atlanta. It actually rose to two, four months because the courts finally came back online and were flooded with these past evictions.

But the good news is that the fundamentals of the deals were we cash flow well on those deals, even at recessionary occupancies, as I was saying like what we expect to be the vacancy to be, because we put a lot of capital down. We fixed the interest rates. The good news is, although it slowed us down right now, just in the last six months, we’re getting out all those people that are not the right tenants, which allow us, we’re markets where people are moving to allow us to bring in to renovate, improve the quality of life for these residents in the community, bring in better residents that will pay and catch up to the local market rates.

And so if you structured your deal, if you structured the investment to be recession resilient, you got long-term interest, got to be reasonable, didn’t put too much debt on it and you’ve got capital reserves on the sidelines, you’re going to do great right now.

It’s the people that got a little over their skis, as you say, and they got short-term debt. They got that high, leveraged it to the hilt. They didn’t put a couple million, six months in reserves in the bank. Those are the places we’re buying from. Those are the operators that we are acquiring from right now. And I was there once, I did it in 2007 and ’08 and I lost it all in ’09 and ’10. I totally get-

Chris Voss: You learned. You learned. One other factor that’s coming up here that I think is going to have some impact and probably some repossessions and some distressed homeowners that you’ll be able to buy and put your portfolio for people that invest with you is the expiration of the COVID student loan program. And evidently, that expires in October and the Supreme Court hasn’t agreed that that’s legal to do or whatever their thing is.

And so you’ve got people that they usually would be paying $300, $500 a month and they haven’t paid that for years. And they probably acquired more debt and I don’t know, buying crap on Amazon and more credit cards. And when that kicks in, there’s probably going to be some available real estate opportunities there too as well.

Patrick Grimes: Yeah, possibly. I think the aggregate issue being that there’s going to have to be a coming to Jesus, that people are going to pay their bills. We did see in the last couple reports that individuals that for the first time essentially in decades, investors or America did not pay down their credit card debt with their tax return. That is a sign that people, one, they’re fearing they want to keep capital for a potential fallout. And two, they’re not paying attention to their debt obligations.

And so there’s going to be a bit of a commercial reckoning and, sorry, a consumer reckoning. That means that what are they going to need? They’re going to need more affordable housing. They’re going to need B and C class apartment buildings. That’s why I don’t buy the luxury brand new high-rise stuff. But yeah, I hear you. There’s a number of things that are going to happen, credit card debt, people going back to work, people finally paying their rent checks again.

And people did get a little bit lazy over COVID. It was very clear because we used to walk units. We would walk a hundred, 200, 300 individuals homes. We’d walk into their apartment buildings doing due diligence, me personally. And for the most part, people were at work when we would do that prior to COVID. Kids were at school. And during COVID, nobody was at work. We were having a hard time getting in the buildings because they were all there. It made it much more difficult to walk through the buildings. It was much tougher.

And we’re going to have to see people go back to work again, and we’re going to see those kids get back into school again. And I think the country’s going to be better off once we see all that happen.

Chris Voss: Once we get through this whole, I can’t wait till we’re years beyond COVID, at least I think we can’t wait. I don’t want to tempt fate, knock on wood. We don’t want to do that whole thing ever again. Let’s just skip that whole COVID from happening. Anything more we need to tease out on you guys and how you guys do it?

Patrick Grimes: Well, I think this has been a great conversation and I’m happy to be here. I’d love to chat with anybody. I think that most of your listeners are on a path right now. They’re probably very successful. They’re investing in themselves just by listening to your show, getting inspiration from the entrepreneurs and business owners.

The traditional path that I took, which is kind of the revered path in the American dream and I’m writing a TED Talk on this right now, but the idea is that I believe that there is a fallacy out there in the American dream. And that is working, climbing the ladder at some kind of revered career, whether you’re working at Tesla or Apple or trying to reach partner at a law firm or residency as a surgeon somewhere. The challenge is, what is being told is you need to climb that ladder at that profession and you need to make all the money that you can along the way.

And what the government wants you to do is to continue to do that. But what they don’t incentivize as America is for each individual to become the financial manager of their own financial future, because in some ways, you are the chief investment officer of yourself and of your family’s financial future. And when you look at what makes up… And they don’t incentivize identifying as that as well as an engineer like I was, or a doctor or a dentist.

And so what I try and do is help people realize that they’re fearful. You know that you are. You’re fearful because you’re watching the news. You’ve got most of your income and it may get robbed by a bank collapse. It’s dwindling down because inflation is increasing. Maybe your real estate deals are at risk because of interest rates and your whole retirement account’s on this roller coaster swing.

And it turns out that the wealthy are not as afraid. Why? Because 8% of the middle class’s portfolio is in what are called traditional investments, those that your employer, your financial planner, all are pointing you towards. But the high income earners and the ultra-wealthy are 25% and 50% of their assets in alternative investments.

This is what I learned when I was hardworking 24/7, high tech professional doing robotics and automation, some of the coolest projects, is that I didn’t have to be on the roller coaster and I could reach out to diversified energy funds. I could get into different kinds of commercial real estate assets that are hedged against inflation, protected from interest rates and where you can win in a downturn. And all those market cycles are not all down at one time.

And so I like to promote that individuals take a step back and until you really can build that financial foundation to ensure your security and ensure your safety even in an economic downturn, which is what we help our investors do, how are you going to rise to self-actualization from Maslow’s hierarchy of needs if you’re waking up in fear every day, that you may lose your only income source, that your portfolio might take a hit and it’s all in one index.

And I like to just share that with investors because I think it’s a good message to get out there that there’s other ways. And we can help. Anybody who’s interested, happy to chat with them.

Chris Voss: There you go. Is there a minimum investment to working with you folks?

Patrick Grimes: Yeah. Our investments are a hundred thousand dollars, and we do take qualified retirement funds. If you’re heavily indexed in your IRA, 401(k), you can self-direct that. Or you can 1031 exchange a rental property that you have into a partner position with us as well. There are creative ways that individuals make that work.

Chris Voss: Okay. The best thing to do is to reach out to you and talk to you guys about how to do it?

Patrick Grimes: Mm-hmm.

Chris Voss: There you go. And give us that plugin for the book so people have it, if you would please.

Patrick Grimes: Yeah. Persistence, Pivots and Game Changers: Turning Challenges Into Opportunities. And I’m here, I still had hair back then, not that long ago during COVID. But yeah, I’ve got Phil Collen, the guitarist of Def Leppard, NFL, NBA players, coaches with some really amazing people. I had such a great time. It was really fun. They would tell our whole stories. Hopefully, it adds and contributes to the journey of your listeners.

I talk about my journey through high tech and real estate, losing it all, getting it back and then trading up and then founding Invest on Main Street in there. We send a signed hard copy out to all of our investors, but I’m happy to offer it to your listeners as well, and just an opportunity to give back. We’re doing this now, not because we have to but because we like it. We like the impact that we have on society and we like the relationships we have with our investors.

Chris Voss: There you go. There you go. Well, it’s been wonderful to have you on. Give us your dot-com one more time if you would.

Patrick Grimes: Yeah. So we have investonmainstreet.com. And if you want the book, you go to investonmainstreet.com/book and then type in the promo code, Chris Voss Show. Once you’ve done that, make sure you set up a call. I’d love to chat with you. And we’re building out an educational platform, it’s called passiveinvestingmastery.com. Passiveinvestingmastery.com, and we’re building that out right now. I’d be happy to see you there as well.

Chris Voss: There you go. Thanks for coming on, Patrick, we really appreciate it.
Patrick Grimes: Thanks, Chris.